<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A
(MARK ONE)
AMENDMENT NO. 1 TO
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER 0-18786
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PICO HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 94-2723335
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
875 PROSPECT STREET, SUITE 301
LA JOLLA, CALIFORNIA 92037
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (619) 456-6022
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $.001 PAR VALUE
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III or this Form 10-K or any amendment to this
Form 10-K. [X]
Approximate aggregate market value of the registrant's common stock held by
nonaffiliates of the registrant (based on the closing sales price of such stock
as reported in the Nasdaq National Market) on March 20, 1998 was $118,539,069.
Excludes shares of common stock held by directors, officers and each person who
holds 5% or more of the registrant's common stock.
Number of shares of common stock, $.001 par value, outstanding as of March 20,
1998 was 32,591,718. As of such date, 4,572,015 shares of common stock were held
by subsidiaries of the registrant.
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<PAGE> 2
PICO HOLDINGS, INC.
ANNUAL REPORT ON FORM 10-K/A
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
No.
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<S> <C>
PART III............................................................................................................ 3
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.................................................... 3
Item 11. EXECUTIVE COMPENSATION................................................................................ 4
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT....................................................................................... 9
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........................................................ 11
PART IV............................................................................................................. 12
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K...................................... 12
SIGNATURE........................................................................................................... 23
</TABLE>
2
<PAGE> 3
FORM 10-K/A
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items of its Annual
Report on Form 10-K for the fiscal year ended December 31, 1997 as set forth in
the pages attached hereto:
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
The Board of Directors is divided into three classes, with the terms of office
of each class ending in successive years.
The following table sets forth information regarding the Company's directors,
including their ages, a brief description of their business experience, certain
directorships held by each of them and the year in which each became a director
of the Company.
<TABLE>
<CAPTION>
DIRECTOR NAME BUSINESS EXPERIENCE AGE SINCE
------------- ------------------- --- -----
<S> <C> <C> <C>
DIRECTORS WITH TERMS ENDING IN 2000:
S. Walter Foulkrod, III, Esq. Attorney; owner of S. Walter Foulkrod, III & Associates, Attorneys at 56 1996
Law, Harrisburg, PA, since 1994; President and Chairman of Foulkrod,
Reynolds & Havas, PC, from 1984 to 1994; Director of Physicians
since 1988.
Richard D. Ruppert, MD Physician; President of Medical College of Ohio from 1978 to 1993; 67 1996
President of American Society of Internal Medicine from 1992 to 1993;
Director of Physicians since 1988.
Dr. Gary H. Weiss(1) Barrister and Solicitor; Executive Director of Guinness Peat Group 44 1996
plc, an international investment company, since 1992; Director of
Turnbull & Partners, Ltd., an investment bank, from 1990 to 1992;
Director of Physicians since 1993.
DIRECTORS WITH TERMS ENDING IN 1999:
John R. Hart President of Quaker Holdings Limited, an investment company, since 38 1996
1991; Partner with Detwiler, Ryan & Company, Inc., an investment
bank, from 1982 to 1991; Director of Physicians since 1993; President
and CEO of Physicians since 1995; President and CEO and Director of
Global Equity Corporation since 1995; Director of PC Quote, Inc.
Ronald Langley Director and officer of Pacific Southwest Corporation, a strategic 53 1996
investment company, from 1989 to 1992; Director of Physicians since
1993; Chairman of Physicians since 1995: Chairman and Director of
Global Equity Corporation since 1995; Chairman of Summit Global
Management, Inc. since 1994; Director of PC Quote, Inc.
John D. Weil President, Clayton Management Company, a strategic investment 57 1996
company; Director of Todd Shipyards Corporation, Cliffs Drilling
Company, CleveTrust Realty Investors, Oglebay Norton Company,
Southern Investors Service Company, Inc., Allied Health Products,
Inc., and Baldwin & Lyons, Inc.
DIRECTORS WITH TERMS ENDING IN 1998:
Robert R. Broadbent Retail consultant since 1989; Chairman of Higbee Company from 1984 to 76 1996
1989; President, CEO, Director and Vice Chairman of the Higbee
Company from 1979 to 1984; President and Chief Executive Officer of
Liberty House - Mainland from 1976 to 1978; Chairman and CEO of
Gimbel's from 1973 to 1976; Director of Physicians from 1993 to 1995.
Dr. Marshall J. Burak Professor of Finance and Dean of the College of Business of San Jose 61 1995
State University since 1981.
</TABLE>
- -----
(1) Dr. Weiss resigned as a Director of PICO on April 6, 1998.
For information on the executive officers of Registrant, see Part I, Item 1.,
"Executive Officers."
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who beneficially own more than 10% of
the Company's Common Stock to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission ("SEC"). Such
persons are required by SEC regulations to furnish the Company with copies of
all Section 16(a) forms filed by such persons.
Based on a review of the copies of these reports received by the Company and
written representations from certain reporting persons that they have complied
with the relevant filing requirements, the Company believes that all filing
requirements have been complied with on a timely basis for the fiscal year ended
December 31, 1997.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation for
fiscal year 1997 of the (i) Chief Executive Officer of the Company (ii) the
executive officers of the Company as of December 31, 1997 (Messrs. Langley,
Hart, Sharpe, Burchfield and Mosier are sometimes hereinafter referred to as
"Named Officers"). Amounts under the caption "Bonus" are amounts earned for
performance during the year including amounts paid after the end of the year.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
------------------- ------
Securities
Underlying
NAME AND PRINCIPAL POSITION Options All Other
Year Salary Bonus (Shares) Compensation
---- ------ ----- -------- ------------
<S> <C> <C> <C> <C> <C>
Chief Executive Officer:
------------------------
John R. Hart(1)(2) 1997 $800,000 -0- -0- -0-
President and Chief 1996 $300,000(3) $450,000 876,733(4) -0-
Executive Officer 1995 $197,000 -0- -0- -0-
Executive Officers(2):
----------------------
Ronald Langley(5) 1997 $800,000 -0- -0- -0-
Chairman of the 1996 $300,000(3) $450,000 876,733(4) -0-
Board of Directors 1995 $197,000 -0- -0- -0-
Richard H. Sharpe(6) 1997 $165,317 $18,340 -0- $18,743(7)
Chief Operating Officer 1996 $139,264 $28,000 300,594(4) $14,362(7)
1995 $139,376 -0- -0- $ 7,590(7)
Gary W. Burchfield(8) 1997 $135,000 $13,500 -0- $15,618(7)
Chief Financial Officer 1996 $102,170 $35,000 210,416(4) $10,506(7)
and Treasurer 1995 $ 92,084 -0- -0- $ 9,338(7)
James F. Mosier(9) 1997 $113,017 $12,570 -0- $12,796(7)
General Counsel and 1996 $ 82,835 $27,000 210,416(4) $ 8,497(7)
Corporate Secretary 1995 $ 80,952 -0- -0- $ 8,807(7)
</TABLE>
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(1) Mr. Hart became President and CEO of Physicians on July 15, 1995. Prior
to that time he was not an officer of Physicians. He became President
and CEO of the Company on November 20, 1996.
(2) Includes compensation received from Physicians prior to the Merger, as
well as compensation received from the Company.
4
<PAGE> 5
(3) Mr. Langley and Mr. Hart were each compensated $533,328 by the Company
for consulting services in 1997 in the areas of investment banking,
investment portfolio analysis, and analysis of operations. In addition,
Mr. Langley and Mr. Hart entered into consulting agreements with a
subsidiary of Global Equity Corporation for annual compensation of
$266,672 each for consulting services in the areas of investment
banking, investment portfolio analysis, and analysis of operations. On
December 31, 1997, Mr. Langley and Mr. Hart each signed employment
agreements with the Company and a subsidiary of Global Equity
Corporation on terms substantially similar to the consulting
agreements.
(4) Options issued by Physicians prior to the November 1996 Merger under
the Physicians Insurance Company of Ohio 1995 Non-Qualified Stock
Option Plan and assumed by the Company upon the Merger. All options are
fully vested.
(5) Mr. Langley became Chairman of the Board of Directors of Physicians on
July 15, 1995. Prior to that time he was not an officer of Physicians.
He became Chairman of the Board of Directors of the Company on November
20, 1996.
(6) Mr. Sharpe became Chief Operating Officer of Physicians on June 3,
1994. He became Chief Operating Officer of the Company on November 20,
1996.
(7) Represents amounts contributed by the Company to the PICO Holdings,
Inc. Employees 401(k) Retirement Plan and Trust. This retirement plan
conforms to the requirements of the Employee Retirement Income Security
Act.
(8) Mr. Burchfield became Chief Financial Officer and Treasurer of
Physicians on November 3, 1995. He became Chief Financial Officer and
Treasurer of the Company on November 20, 1996.
(9) Mr. Mosier has been Secretary of Physicians since 1982 and General
Counsel since 1984. He became General Counsel and Secretary of the
Company on November 20, 1996.
OPTION GRANTS IN LAST FISCAL YEAR
No grants of options to purchase the Company's Common Stock were made during the
year ended December 31, 1997 to any of the persons named in the Summary
Compensation Table.
.
OPTION EXERCISES AND FISCAL 1997 YEAR-END VALUE
The following table provides information concerning options held as of December
31, 1997 by the persons named in the Summary Compensation Table. No options were
exercised in 1997 by such individuals.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Value of Unexercised
Number of Securities Underlying Unexercised In-the-Money-Options
Options at 12/31/97 At 12/31/97(1)
------------------- --------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
John R. Hart 876,733 -0- $3,285,556 -0-
Ronald Langley 876,733 -0- $3,285,556 -0-
Richard H. Sharpe 300,594 -0- $1,126,476 -0-
Gary W. Burchfield 210,416 -0- $ 788,533 -0-
James F. Mosier 210,416 -0- $ 788,533 -0-
</TABLE>
- ----------------------
(1) Based on the closing price of the Company's Common Stock on December
31, 1997 on the Nasdaq National Market of $6.4375 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Weil and Foulkrod, and Dr. Ruppert, serve as members of the Compensation
Committee. Mr. Langley and Mr. Hart have been directors and executive officers
of GEC since September 5, 1995.
5
<PAGE> 6
REPORT OF THE COMPENSATION COMMITTEE
This report of the Compensation Committee (the "Compensation Committee"), and
the Stock Price Performance Graph set forth below, shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933, as
amended (the "Securities Act") or under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under the Securities Act or the Exchange Act.
COMMITTEE MEMBERS
The three-member Compensation Committee of the Board of Directors is a standing
committee composed entirely of outside Directors. Mr. Weil is the chairman and
Mr. Foulkrod and Dr. Ruppert are the other members.
COMMITTEE FUNCTIONS
The Compensation Committee is responsible for assuring that all of the executive
compensation programs of the Company are developed, implemented, and
administered in a way that supports the Company's fundamental philosophy that a
significant proportion of executive compensation should be effectively linked to
company performance.
The Compensation Committee meets on a regularly scheduled basis. It reviews and
approves the overall executive compensation program which includes both base pay
and incentive compensation. It considers and approves individual executive
officer compensation packages based on recommendations of the Company's Chief
Executive Officer. It recommends, for the approval of the full Board, any
modification to the compensation package of the Company's Chief Executive
Officer.
EXECUTIVE COMPENSATION PHILOSOPHY
The Board of Directors of Physicians retained an independent compensation
expert, William M. Mercer, Incorporated ("Mercer"). In 1996, Mercer conducted an
analysis of marketplace executive compensation levels. The scope of Mercer's
study covered the Company's Chairman and President and Chief Executive Officer.
The objectives of Mercer's study were as follows:
o Analyze the scope, responsibilities and skill requirements of the jobs
performed by Messrs. Langley and Hart and compare and contrast to
comparable benchmark executive positions found in the marketplace.
o Develop an appropriate methodology for selecting comparable benchmark jobs,
industry categories and a peer group of companies comparable to the Company
in terms of business focus, industry classification and size; and competing
for senior executives with the skills, expertise and talent demonstrated by
the Company's top two executives.
o For the appropriate benchmark jobs, industry category and peer company
group, collect information on marketplace compensation levels and practices
from compensation surveys and peer company proxy statements. The companies
included in the peer company group are not necessarily those included in
the Nasdaq Insurance Stock Index. Determine the most relevant marketplace
compensation levels and to compare actual Company compensation levels.
o Develop alternate approaches for structuring the total compensation package
for the Company's top two executives, in terms of compensation elements to
be used, the mix of total pay and how short and long term incentive
compensation might be structured to accurately reflect performance.
Mercer's study recommended to the Compensation Committee a compensation strategy
with the following objectives:
o To provide a total compensation package that:
- is competitive with market rates for executives with similar skill,
talent and job requirements.
- is closely linked to the Company's strategy and the role of covered
executives in building shareholder value through growing the book value
and, ultimately, the market value of the Company.
6
<PAGE> 7
o To retain critical executive talent by:
- providing a reasonable and competitive level of current income
(cash flow).
- providing for loss of future incentive opportunity if an executive
terminates employment before unrealized investment gains are realized.
o To link executive rewards to shareholder interests by:
- tying incentive awards to growth in book value which ultimately
translates into increased market price per share (as investments are
liquidated for gains, and the Company grows earnings).
- granting additional stock options in the future once current options are
exercised or expire.
The Compensation Committee believes that to accomplish these goals, the
executive compensation program should be based on three distinct components:
base pay, annual incentives, and long-term incentives. The Company obtains
industry and peer group surveys, and consults with independent experts, to
evaluate the Company's executive compensation programs in comparison with those
offered by its comparable competitors.
The Compensation Committee has considered amendments to the Internal Revenue
Code denying deductions for annual compensation to certain executives in excess
of $1 million, subject to certain exceptions. The Company's compensation
structure has been such that it does not believe that it is likely that the $1
million cap will affect the Company in the near future. The Internal Revenue
Service has issued proposed regulations which, among other things, provide for a
transition period of three years for plans previously approved by shareholders.
The Company is studying the proposed regulations, but has not yet determined
what steps may be required or desirable with respect to its existing plans.
EXECUTIVE COMPENSATION PROGRAM
The features of the executive compensation program as recommended by Mercer and
approved by the Compensation Committee are:
BASE COMPENSATION. A fixed rate, to be reviewed annually. Future adjustments
will take into account movement in executive compensation levels, changes in job
responsibilities, and the size of the Company and GEC. Two-thirds of base
compensation is to be paid by the Company and one-third by GEC.
INCENTIVE AWARDS. Based on growth of book value per share in a fiscal year.
Awards are earned when a pre-determined threshold is surpassed. If book value
per share of the Company or GEC exceeds this threshold, the incentive award is
equal to 5% of the increase in book value per share multiplied by the number of
shares outstanding at the beginning of the fiscal year. The threshold for 1998
is 16%.
In addition, the Board of Directors of Physicians granted options under the
Physicians Insurance Company of Ohio 1995 Non-Qualified Stock Option Plan. The
options granted under said option plan were designed to reinforce the
relationship between the Company's future performance and the executive's
potential future financial rewards. These options were assumed by PICO Holdings,
Inc. on November 20, 1996.
GOALS OF COMPENSATION COMMITTEE
The Compensation Committee attempts to align executive compensation with the
value achieved by the executives for the Company's shareholders. The Company's
compensation program for executives emphasizes a combination of base salary,
discretionary bonuses, and stock options designed to attract, retain, and
motivate executives who will maximize shareholder value. The Compensation
Committee considers individual and Company performance, as well as compensation
paid by comparable companies.
Executives also participate in other employee benefit programs, including health
insurance, group life insurance, and the Company's 401(k) Plan.
7
<PAGE> 8
DISCUSSION OF 1997 COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
As discussed above, in 1997 the Chief Executive Officer received fixed
consulting fees from Physicians Insurance Company of Ohio and a subsidiary of
GEC. No bonus was paid with respect to the Company's performance in 1997 and no
new options were granted in 1997. The Compensation Committee recommended to the
Board of Directors, and the Board of Directors accepted the recommendation, that
it was appropriate for the chief executive officer and the chairman to be
compensated as employees, rather than as consultants. Accordingly, effective
December 31, 1997, the chief executive officer and chairman entered into
employment agreements with the Company and a wholly-owned subsidiary of Global
Equity Corporation. The terms of these employment agreements are substantially
similar to the terms of the consulting agreements.
April 15, 1998 Compensation Committee
John D. Weil, Chairman
S. Walter Foulkrod, III, Esq.
Richard D. Ruppert, MD
8
<PAGE> 9
STOCK PRICE PERFORMANCE GRAPH
The graph below compares cumulative total return of the Company, the Nasdaq
Insurance Stocks Index, and the Nasdaq Stock Market (U.S. Companies) for the
period January 1, 1993 through December 31, 1997.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG PICO HOLDINGS, INC., NASDAQ MARKET-
U.S. COS. AND NASDAQ INSURANCE STOCK INDEX
<TABLE>
<CAPTION>
Fiscal year ending December 31,
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Pico Holdings, Inc. 100 130 30 50 65 99
Nasdaq Insurance Stock Index 100 110 100 145 165 235
Nasdaq Market - U.S. Con. 100 115 115 165 195 235
</TABLE>
The graph assumes $100 was invested on January 1, 1993 in the Company's Common
Stock, the Nasdaq Stock Market (U.S. Companies) Index, and the Nasdaq Insurance
Stocks Index, and that all dividends were reinvested. The performance of PICO
Holdings, Inc. stock on this graph represents the historical performance of
shares of Citation Insurance Group, which was renamed PICO Holdings, Inc. on
November 20, 1996. It does not represent the historical stock performance of
Physicians Insurance Company of Ohio.
EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS
Mr. Langley and Mr. Hart each entered into employment agreements effective
December 31, 1997 with the Company and a wholly-owned subsidiary of Global
Equity Corporation. Total compensation to Mr. Langley and Mr. Hart under these
employment agreements is $800,000 each on an annual basis. These employment
agreements include a change in control clause providing that if there is a
change of control before December 31, 1999, the Company shall immediately pay
each employee a total lump sum of $2.4 million and an amount equal to three
times the highest annual bonus paid to the employee in the last three years.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of April 8, 1998, with respect to
the beneficial ownership of the Company's Common Stock entitled to vote by each
person known by the Company to be the beneficial owner of more that 5% of Common
Stock, and by each director, each Named Officer (as defined below) and all
executive officers, former chief executive officers, and directors as a group.
Except as otherwise indicated, each person has sole investment and voting power,
subject to community property laws. As of April 8, 1998, there were 32,591,718
shares of the Company issued and outstanding. 4,572,015 of these shares are held
by subsidiaries of the Company, and may therefore not be voted under California
law.
9
<PAGE> 10
<TABLE>
<CAPTION>
NUMBER OF SHARES AND NATURE PERCENTAGE OWNERSHIP OF
NAME AND ADDRESS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(1) VOTING SHARES
------------------------------------ --------------------------- -------------
<S> <C> <C>
Guinness Peat Group plc(2) 5,745,225 20.50%
21-26 Garlick Hill, 2nd Floor
London EC4V 2AU
England
Global Equity Corporation(3)(4) 4,258,415 15.20%
30A Hazelton Avenue, 4th Floor
Toronto, Ontario
Canada M5R 2E2
John R. Hart(5) 1,908,848 6.81%
Ronald Langley(5) 1,908,848 6.81%
Robert R. Broadbent 20,039 *
Dr. Marshall J. Burak -0- *
S. Walter Foulkrod, III, Esq. 12,524 *
Richard D. Ruppert, MD(6) 34,868 *
John D. Weil(7) 2,389,915 8.52%
Dr. Gary H. Weiss(8) 8,863 *
Richard H. Sharpe(9) 316,423 *
Gary W. Burchfield(10) 221,477 *
James F. Mosier(10) 219,574 *
Executive Officers and Directors as a Group (11 persons) 7,041,377 25.13%
*Less than one percent (1%)
</TABLE>
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(1) Sole voting and investment power unless otherwise indicated.
(2) Guinness Peat Group plc ("GPG") has an option to purchase $1,175,000 of
newly issued shares of the Company's stock. The purchase price would be
the average of the closing bid prices for the Company's stock on Nasdaq
for the 20 trading days immediately preceding the date when GPG gives
notice of purchase. This option will expire if GPG's ownership of shares
of the Company's stock becomes less than 7.5%. The Company has a first
right to purchase any stock which GPG desires to sell, except for sales
to Ronald Langley and John R. Hart (see note 5 below). This does not
include shares beneficially owned by Dr. Weiss, who is a director of GPG.
The numbers in the above table do not include shares issuable pursuant to
the options described in this footnote.
(3) Global Equity Corporation ("GEC") has an option to purchase $825,000 of
newly issued shares of the Company's stock. The purchase price would be
the average of the closing bid prices for the Company's stock on Nasdaq
for the 20 trading days immediately preceding the date when GEC gives
notice of purchase. This option will expire if GEC's ownership of the
Company's stock becomes less than 7.5%. The Company has a first right to
purchase any stock, which GEC desires to sell. Approximately 51.2% of
GEC's outstanding shares are owned by subsidiaries of the Company and
accordingly, pursuant to California law, GEC cannot vote any of its
shares of the Company's stock. The numbers in the above table do not
include shares issuable pursuant to the options described in this
footnote.
(4) The Company and its subsidiaries own approximately 51.2% of the issued
and outstanding shares of GEC. Since September 5, 1995, Mr. Langley has
been Chairman and a Director of GEC. Mr. Hart has been President and CEO
and a Director of GEC since September 5, 1995.
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<PAGE> 11
(5) Mr. Langley and Mr. Hart each hold currently exercisable options to
purchase up to 876,733 shares of the Company's shares under the
Physicians Insurance Company of Ohio 1995 Non-Qualified Stock Option
Plan. In addition Mr. Langley and Mr. Hart each hold currently
exercisable options to purchase up to 1,032,144 shares of the Company's
stock presently owned by GPG.
(6) Dr. Ruppert shares voting and investment power with his wife.
(7) Of these shares 2,284,708 shares are owned by a partnership which Mr.
Weil controls, and voting control 105,207 shares are held by family
members.
(8) Does not include shares held by GPG. Dr. Weiss is a Director of GPG. Dr.
Weiss resigned as a Director of PICO on April 6, 1998.
(9) Includes currently exercisable options to purchase up to 300,594 shares
of the Company's stock under the Physicians Insurance Company of Ohio
1995 Non-Qualified Stock Option Plan.
(10) Includes currently exercisable options to purchase up to 210,416 shares
of the Company's stock under the Physicians Insurance Company of Ohio
1995 Non-Qualified Stock Option Plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Langley and Mr. Hart entered into employment agreements with PICO and a
wholly-owned subsidiary of Global Equity Corporation, effective December 31,
1997. See Part II, Item 8., Note 17. Mr. Langley and Mr. Hart are entitled to
receive 50% of the first $1 million of the profits of Summit Global Management,
Inc. See Part II, Item 8., Note 17.
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FORM 10-K/A
AMENDMENT NO. 1
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS.
<TABLE>
<CAPTION>
<S> <C>
1. FINANCIAL STATEMENTS.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Reports.................................. *
Consolidated Balance Sheets as of December 31, 1997 and 1996... *
Consolidated Statements of Income for the Years
Ended December 31, 1997, 1996 and 1995................... *
Consolidated Statement of Changes in Shareholders' Equity
for the Years Ended December 31, 1997, 1996, and 1995.... *
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1997, 1996 and 1995................... *
Notes to Consolidated Financial Statements..................... *
---------------
* Filed with original Form 10-K on March 31, 1998
2. FINANCIAL STATEMENT SCHEDULES.
Independent Auditors' Reports.................................. 15-16
Schedule I - Condensed Financial Information of Registrant..... 17-18
Schedule II - Valuation and Qualifying Accounts................ 19
Schedule V - Supplementary Insurance Information............... 20-22
3. EXHIBITS
</TABLE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
+ 2.2 Agreement and Plan of Reorganization, dated as of May 1, 1996, among PICO,
Citation Holdings, Inc. and Physicians and amendment thereto dated August 14, 1996
and Related Merger Agreement.
+++++ 2.3 Second Amendment to Agreement and Plan of Reorganization dated November 12, 1996.
# 2.4 Agreement and Debenture, dated November 14, 1996 and November 27, 1996,
respectively, by and between Physicians and PC Quote, Inc.
# 2.5 Purchase and Sale Agreement by, between and among Nevada Land and Resource Company,
LLC, GEC, Western Water Company And Western Land Joint Venture dated April 9, 1997.
+++++ 3.1 Amended and Restated Articles of Incorporation of PICO.
+ 3.2.2 Amended and Restated By-laws of PICO.
+++++ 4.2 First Amendment to Rights Agreement dated April 30, 1996.
+++++ 4.3 Second Amendment to Rights Agreement dated November 20, 1996.
-* 10.7 Key Officer Performance Recognition Plan.
* 10.8 Flexible Benefit Plan
-* 10.9 Amended and Restated 1983 Employee Stock Option Plan.
-**** 10.10 Salary Reduction Profit Sharing Plan as amended and restated effective January 1, 1994
and Amendments Nos. 1 and 2 thereto dated March 13, 1995 and March 15, 1995, respectively.
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
<S> <C>
-* 10.11 Employee Stock Ownership Plan and Trust Agreement.
-*** 10.11.1 Amended Employee Stock Ownership Plan and Trust Agreement.
-***** 10.11.2 Amendment to Employee Stock Ownership Plan dated October 1, 1992.
-**** 10.11.3 Amendment to Employee Stock Ownership Plan dated March 15, 1995.
* 10.16 Office Lease between CIC and North Block Partnership dated July, 1990.
*** 10.16.1 Amendments Nos. 1 and 2 to Office Lease between CIC and North Block Partnership
dated January 6, 1992 and February 5, 1992, respectively.
**** 10.16.2 Amendments Nos. 3 and 4 to Office Lease between CIC and North Block Partnership
dated December 6, 1993 and October 4, 1994, respectively.
-* 10.22 1991 Employee Stock Option Plan
-***** 10.23 PICO Severance Plan for Certain Executive Officers, Senior Management and Key
Employees of the Company and its Subsidiaries, including form of agreement.
-10.55 Consulting Agreements, effective January 1, 1997, regarding retention of Ronald
Langley and John R. Hart as consultants by Physicians and GEC.
++ 10.57 PICO 1995 Stock Option Plan
-+++ 10.58 Key Employee Severance Agreement and Amendment No. 1 thereto, each made as of
November 1, 1992, between PICO and Richard H. Sharpe and Schedule A identifying
other substantially identical Key Employee Severance Agreements between PICO and
certain of the executive officers of PICO.
+++ 10.59 Agreement for Purchase and Sale of Shares, dated May 9, 1996, among Physicians,
GPG and GEC.
++ 10.60 Agreement for the Purchase and Sale of Certain Assets, dated July 14, 1995 between
Physicians, PRO and Mutual Assurance, Inc.
++ 10.61 Stock Purchase Agreement dated March 7, 1995 between Sydney Reinsurance
Corporation and Physicians.
++ 10.62 Letter Agreement, dated September 5, 1995, between Physicians, Christopher Ondaatje
and the South East Asia Plantation Corporation Limited.
++++ 10.63 Amendment No. 1 to Agreement for Purchase and Sale of Certain Assets, dated July 30,
1996 between Physicians, PRO and Mutual Assurance, Inc.
+++++ 16.1. Letter regarding change in Certifying Accountant from Deloitte & Touche LLP,
Independent auditors.
# 21. Subsidiaries of PICO.
23.1. Independent Auditors' Consent - Deloitte & Touche LLP.
23.2. Consent of Independent Accountants - Coopers & Lybrand, L.L.P.
27. Financial Data Schedule.
27.1. Restated Financial Data Schedule.
27.2. Restated Financial Data Schedule.
### 28. Form S-8, Registration Statement under the Securities Act of 1933, for the PICO
Holdings, Inc. Employees 401(k) Retirement Plan and Trust, Registration No. 333-36881.
#### 29. Form S-8, Registration Statement under the Securities Act of 1933, for the Physicians
Insurance Company of Ohio 1995 Non-Qualified Stock Option Plan and assumed by
PICO Holdings, Inc., Registration No. 333-32045.
----------
* Incorporated by reference to exhibit of same number filed with Registration Statement on Form S-1 (File
No. 33-36383).
*** Incorporated by reference to exhibit of same number filed with 1992 Form 10-K.
**** Incorporated by reference to exhibit of same number filed with 1994 Form 10-K.
***** Incorporated by reference to exhibit bearing the same number filed with Registration Statement on Form
S-4 (File No. 33-64328).
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
<S> <C>
+ Filed as Appendix to the prospectus in Part I of Registration Statement on Form S-4 (File No. 333-06671)
++ Incorporated by reference to exhibit filed with Physicians' Registration Statement No. 33-99352 on
Form S-1 filed with the SEC on November 14, 1995.
+++ Incorporated by reference to exhibit filed with Registration Statement on Form S-4 (File no. 333-06671).
++++ Incorporated by reference to exhibit filed with Amendment No. 1 to Registration Statement No. 333-06671
on Form S-4.
+++++ Incorporated by reference to exhibit of same number filed with Form 8-K dated December 4, 1996.
- Executive Compensation Plans and Agreements.
# Incorporated by reference to exhibit of same number filed with Form 10-K dated April 15, 1997.
## Incorporated by reference to exhibit * of same number filed with 10-K/A dated April 30, 1997.
### Incorporated by reference to Form S-8 filed with the Securities and Exchange Commission
(File No. 333-36881).
#### Incorporated by reference to Form S-8 filed with the Securities and Exchange Commission
(File No. 333-32045).
</TABLE>
(b) REPORTS ON FORM 8-K.
None.
14
<PAGE> 15
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of
PICO Holdings, Inc.:
We have audited the consolidated financial statements of PICO Holdings, Inc. and
subsidiaries (the "Company") as of December 31, 1997 and for the year ended
December 31, 1997, and have issued our report thereon dated March 27, 1998; such
report has previously been filed as part of the Company's Annual Report on Form
10-K for the year ended December 31, 1997. Our audit also included the 1997
financial statement schedules of the Company, listed in the accompanying index
at Item 14. These 1997 financial statement schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion based on
our audit. We did not audit the 1997 consolidated financial statements of Global
Equity Corporation (all expressed in Canadian dollars), a 51.17% owned
consolidated subsidiary, which constitutes 42% of the Company's consolidated
total assets as of December 31, 1997. Those statements were audited by other
auditors whose report has been furnished to us, and our opinion, insofar as it
relates to the amounts included in the Company's financial statement schedules
for Global Equity Corporation (all expressed in Canadian dollars), is based
solely on the report of such other auditors. The consolidated financial
statements and the related financial statement schedules of the Company as of
December 31, 1996 and for the years ended December 31, 1996 and 1995 were
audited by other auditors whose reports, dated April 7, 1997, expressed an
unqualified opinion on those financial statements and schedules. In our opinion,
based on our audit and the report of the other auditors, such 1997 financial
statement schedules, when considered in relation to the basic 1997 consolidated
financial statements of the Company taken as a whole, present fairly in all
material respects the information set forth therein.
DELOITTE & TOUCHE LLP
San Diego, California
March 27, 1998
15
<PAGE> 16
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
PICO Holdings, Inc.
Our report on the consolidated financial statements of PICO Holdings, Inc. and
subsidiaries (the "Company") as of December 31, 1996 and for each of the two
years in the period ended December 31, 1996 is included on page 48 of the
Company's previously filed Form 10-K. In connection with our audits of such
financial statements, we have also audited the financial statement schedules
listed in the index on page 2 of this Form 10-K/A.
In our opinion, these financial statement schedules referred to above, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND, L.L.P.
San Diego, California
April 7, 1997
16
<PAGE> 17
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY ONLY)
On November 20, 1996, Physicians Insurance Company of Ohio ("Physicians")
consummated a transaction (the "Merger") pursuant to which Citation Holdings,
Inc. ("Holdings"), a wholly owned subsidiary of Citation Insurance Group
("CIG"), merged with and into Physicians pursuant to an Agreement and Plan of
Reorganization dated as of May 1, 1996 with Physicians being the accounting
acquiror. Pursuant to the Merger, each outstanding share of the common stock of
Physicians was converted into the right to receive 5.0099 shares of CIG's common
stock. Upon the consummation of the merger, CIG changed its name to PICO
Holdings, Inc., which is the continuing registrant. The Merger was accounted for
under the purchase method of accounting. Financial results for the year ended
December 31, 1996 include the operations of CIG as if the Merger had occurred on
November 1, 1996. Financial activity for the period November 1, 1996 through
November 20, 1996 was not significant.
Due to the structure of this reverse merger transaction as described above,
there was no holding company for the accounting acquiror prior to the November
20, 1996 merger date. Accordingly the only condensed financial statements
presented herein are the condensed balance sheets as of December 31, 1997 and
1996 and the condensed statements of income and cash flows for 1997 and the
two-month period ended December 31, 1996.
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS
December 31, December 31,
1997 1996
------------- ------------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 81,820 $ 12,658,537
Investments in subsidiaries 108,378,841 96,629,262
Short-term investments, at cost 3,035,002
Deferred income taxes 1,924,453 3,627,667
Other assets 1,226,566 818,836
------------- -------------
Total assets $ 114,646,682 $ 113,734,302
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued expense and other liabilities $ 2,495,944 $ 3,530,722
------------- -------------
Preferred stock, $.01 par value, authorized 2,000,000 shares; none issued
Common stock, $.01 par value, authorized 100,000,000 shares: issued
32,591,718 and 32,486,718 in 1997 and 1996, respectively 32,592 32,487
Additional paid-in capital 43,147,105 42,965,063
Net unrealized appreciation (depreciation) on investments (2,717,248) 11,837,511
Cumulative foreign currency translation adjustment (2,201,093) (27,159)
Equity changes of investee company (986,361)
Retained earnings 83,718,335 64,226,714
------------- -------------
121,979,691 118,048,255
Less treasury stock, at cost (2,492,631 in 1997 and 1,940,315 in 1996) (9,828,953) (7,844,675)
------------- -------------
Total shareholders' equity 112,150,738 110,203,580
------------- -------------
Total liabilities and shareholders' equity $ 114,646,682 $ 113,734,302
============= =============
</TABLE>
This statement should be read in conjunction with the notes to the consolidated
financial statements included in the Company's 1997 Form 10-K
17
<PAGE> 18
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY ONLY)
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF INCOME
For the Two-
For the Year Month Period
Ended Ended
December 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Investment income, net $ 648,229
Equity in earnings of subsidiaies 20,457,718 $ 19,596,074
------------ ------------
Total revenues 21,105,947 19,596,074
Expenses 2,874,895 928,288
------------ ------------
Income from continuing operations before income taxes 18,231,052 18,667,786
Benefit for income taxes (804,285)
------------ ------------
Income from continuing operations 19,035,337 18,667,786
Income from discontinued operations of subsidiaries, net of federal
income tax provisions of $2,201,010 in 1997 and $653,975 in 1996
and minority interest of $764,418 in 1997 456,283 3,097,307
------------ ------------
Net income $ 19,491,620 $ 21,765,093
============ ============
CONDENSED STATEMENTS OF CASH FLOWS
Cash flow from operating activities:
Net income $ 19,491,620 $ 21,765,093
Adjustments to reconcile net income to net cash used in operating
activities:
Equity in earnings of subsidiaries (20,457,718) (19,596,074)
Income from discontinued operations of subsidiaries, net of tax (456,283) (3,097,307)
Changes in assets and liabilities
Accrued expenses and other liabilities (1,040,789) 811,638
Other assets 1,295,484 (437,405)
------------ ------------
Net cash used in operating activities (1,167,686) (554,055)
------------ ------------
Cash flow from investing activities:
Dividends from subsidiary 22,152,608 13,212,592
Purchase of investments (33,561,639)
------------ ------------
Net cash (used in) provided by investing activities (11,409,031) 13,212,592
------------ ------------
Increase (decrease) in cash and cash equivalents (12,576,717) 12,658,537
Cash and cash equivalents, beginning of period 12,658,537
------------ ------------
Cash and cash equivalents, end of period $ 81,820 $ 12,658,537
============ ============
</TABLE>
This statement should be read in conjunction with the notes to the consolidated
financial statements included in the Company's 1997 Form 10-K
18
<PAGE> 19
SCHEDULE II
PICO HOLDINGS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
------------------------------
(1) (2)
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
Description of Period Expenses Accounts Deductions of Period
----------- ------------ -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Year-end December 31, 1997
Allowance for Doubtful Accounts, net $ 116,917 $ 142,789 $ (140,682) $ 119,024
Valuation Allowance for
Deferred Federal Income Taxes $ 6,664,000 $ 136,000 $6,800,000
Year-end December 31, 1996
Allowance for Doubtful Accounts, net $ 78,000 $ (117,470) $ 156,387 $ 116,917
Valuation Allowance for
Deferred Federal Income Taxes $ 6,664,000 $6,664,000
Year-end December 31, 1995
Allowance for Doubtful Accounts, net $ 196,000 $ (11,385) $ (106,615) $ 78,000
Valuation Allowance for
Deferred Federal Income Taxes $10,772,320 $ (8,922,371) $(1,849,949)
</TABLE>
(1) Increases and decreases in provisions for the allowance for doubtful
accounts are charged to expense accounts. Changes in the allowance for
deferred federal income taxes are charged to provision (benefit) for
federal, foreign and state income taxes except for amounts relating to
unrealized investment gains and losses.
(2) Changes in the valuation allowance relating to unrealized investment gains
and losses are netted against the net unrealized appreciation
(depreciation) on investments account. The change in the valuation
allowance recorded in 1996 occurred prior to the Merger and was acquired in
the Merger.
19
<PAGE> 20
SCHEDULE V
PICO HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED SUPPLEMENTARY INSURANCE INFORMATION
(In thousands)
December 31, 1995
<TABLE>
<CAPTION>
Future
Policy
Benefits, Amortization
Deferred Losses, Losses of Deferred
Policy Claims Net and Policy Other
Acquisition and Loss Unearned Premium Investment Loss Acquisition Operating Premiums
Costs Expenses Premiums Revenue Income Expenses Costs Expenses Written
----- -------- -------- ------- ------ -------- ----- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Medical
professional
liability $ 272 $168,485 $ 12,985 $17,120 $ 5,928 $21,247 $ 723 $ 1,053 $13,079
Other property
and casualty 510 61,312 17,702 2,421 170 1,925 4,282 10,755
------ -------- -------- ------- ------- ------- ----- ------- -------
Total medical
professional
liability and
property and
casualty 782 229,797 30,687 19,541 6,098 23,172 723 5,335 23,834
Other operations 5,980 5,110 9,916
------ -------- -------- ------- ------- ------- ----- ------- -------
Total continuing
operations 782 229,797 30,687 $25,521 $11,208 $23,172 $ 723 $15,251 $23,834
======= ======= ======= ===== ======= =======
Discontinued life
and health * 2,113 47,553 171
------ -------- --------
Total $2,895 $277,350 $ 30,858
====== ======== ========
</TABLE>
* Amounts needed to reconcile to balance sheet accounts from
discontinued life and health insurance segment not reclassified for
1995. In 1997, the Company entered into a definitive agreement to sell
its indirectly wholly-owned life and health insurance subsidiary,
American Physicians Life Insurance Company and its wholly-owned
subsidiary. The Company's 1997 life and health insurance operations
have been classified as discontinued operations in accordance with
Accounting Principles Board Opinion No. 30, "Reporting the Results of
Operations--Reporting the Effects of Disposal of a Segment of a
Business." Net income for 1996 and 1995 has also been reclassified for
comparative purposes to reflect the discontinued operations. See Note 6
to the Consolidated Financial Statements, "Discontinued Operations."
20
<PAGE> 21
SCHEDULE V
PICO HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED SUPPLEMENTARY INSURANCE INFORMATION
(In thousands)
December 31, 1996
<TABLE>
<CAPTION>
Future
Policy
Benefits, Amortization
Deferred Losses, Losses of Deferred
Policy Claims Net and Policy Other
Acquisition and Loss Unearned Premium Investment Loss Acquisition Operating Premiums
Costs Expenses Premiums Revenue Income Expenses Costs Expenses Written
----- -------- -------- ------- ------ -------- ----- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Medical
professional
liability $142,965 $ 7,362 $4,881 $ 2,605 $ 272 $ 1,010 $ 28
Other Property
and Casualty $5,421 109,058 $34,808 31,399 2,540 20,328 1,603 10,100 37,529
------ -------- ------- ------- ------ ------- ------ ------- -------
Total medical
professional
liability and
property and
casualty 5,421 252,023 34,808 38,761 7,421 22,933 1,875 11,110 37,557
Other operations 665 7,855
------- -------- ------- ------- ------ ------- ------ ------- -------
Total continuing
operations 5,421 252,023 34,808 $38,761 $8,086 $22,933 $1,875 $18,965 $37,557
======= ====== ======= ====== ======== =======
Discontinued life
and health* 2,501 45,516 489
====== ======== =======
$7,922 $297,539 $35,297
======= ======== =======
</TABLE>
* Amounts needed to reconcile to balance sheet accounts from
discontinued life and health insurance segment not reclassified
for 1996. In 1997, the Company entered into a definitive agreement
to sell its indirectly wholly-owned life and health insurance
subsidiary, American Physicians Life Insurance Company and its
wholly-owned subsidiary. The Company's 1997 life and health
insurance operations have been classified as discontinued operations
in accordance with Accounting Principles Board Opinion No. 30,
"Reporting the Results of Operations--Reporting the Effects of
Disposal of a Segment of a Business." Net income for 1996 and 1995
has also been reclassified for comparative purposes to reflect the
discontinued operations. See Note 6 to the Consolidated Financial
Statements, "Discontinued Operations."
21
<PAGE> 22
SCHEDULE V
PICO HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED SUPPLEMENTARY INSURANCE INFORMATION
(In thousands)
December 31, 1997
<TABLE>
<CAPTION>
Amortization
Deferred Losses, Losses of Deferred
Policy Claims Net and Policy Other
Acquisition and Loss Unearned Premium Investment Loss Acquisition Operating Premiums
Costs Expenses Premiums Revenue Income Expenses Costs Expenses Written
---------- -------- -------- ------- ---------- -------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Medical
professional
liability $108,926 $ 239 $ 4,867 $ 1,244 $ 1,887 $ 240
Other Property
and Casualty $5,321 87,170 $21,635 49,637 5,614 33,086 $10,069 7,959 39,453
------ -------- ------- ------- ------- ------- ------- ------- -------
Total medical
professional
liability and
property and
casualty 5,321 196,096 21,635 49,876 10,481 34,330 10,069 9,846 39,693
Other operations 1,205 9,831
------ -------- ------- ------- ------- ------- ------- ------- -------
Total $5,321 $196,096 $21,635 $49,876 $11,686 $34,330 $10,069 $19,677 $39,693
====== ======== ======= ======= ======= ======= ======= ======= =======
</TABLE>
In 1997, the Company entered into a definitive agreement to sell its
indirectly wholly-owned life and health insurance subsidiary, American
Physicians Life Insurance Company and its wholly-owned subsidiary. The
Company's 1997 life and health insurance operations have been
classified as discontinued operations in accordance with Accounting
Principles Board Opinion No. 30, "Reporting the Results of
Operations--Reporting the Effects of Disposal of a Segment of a
Business." Net income for 1996 and 1995 has also been reclassified for
comparative purposes to reflect the discontinued operations. See Note 6
to the Consolidated Financial Statements, "Discontinued Operations."
22
<PAGE> 23
FORM 10-K/A
AMENDMENT NO. 1
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
PICO HOLDINGS, INC.
By: /s/ Gary W. Burchfield
---------------------------------------
Gary W. Burchfield,
Chief Financial Officer and Treasurer
Date: April 30, 1998
23
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
333-36881 and 333-32045 of PICO Holdings, Inc. on Form S-8 of our reports dated
March 27, 1998, appearing in this Annual Report on Form 10-K/A of PICO Holdings,
Inc. for the year ended December 31, 1997.
DELOITTE & TOUCHE LLP
San Diego, California
April 30, 1998
24
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements on
Form S-8 (File Nos. 333-36881 and 333-32045) of our reports dated April 7, 1997
on our audits of the consolidated financial statements and consolidated
financial statement schedules of PICO Holdings, Inc.
COOPERS & LYBRAND, L.L.P.
San Diego, California
April 29, 1998
25
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THESE SCHEDULES ARE BEING RESTATED IN ACCORDANCE WITH REGULATION S-K 229.601 TO
REFLECT THE RESTATEMENT OF CERTAIN BALANCE SHEET AND INCOME STATEMENT ITEMS AS A
RESULT OF THE ADOPTION OF DISCONTINUED OPERATIONS ACCOUNTING FOR THE COMPANY'S
LIFE AND HEALTH INSURANCE OPERATIONS BEGINNING WITH THE SECOND QUARTER OF 1997;
AS WELL AS TO RESTATE EARNINGS PER SHARE IN ACCORDANCE WITH SFAS 128, "EARNINGS
PER SHARE". THE INFORMATION BEING RESTATED IS FOR 1997 AND FOR THE COMPARATIVE
ANNUAL AND INTERIM PERIODS OF 1996 WITH REGARD TO FINANCIAL INFORMATION
PREVIOUSLY FILED ON FORMS 10-K AND 10-Q. THE REGISTRANT WAS NOT REQUIRED TO FILE
ELECTRONICALLY FOR THE YEAR 1995; THEREFORE, RESTATED 1995 FINANCIAL INFORMATION
IS NOT BEING SUBMITTED. THESE SCHEDULES CONTAIN SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED INCOME
STATEMENTS OF PICO HOLDINGS, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS. ALSO SEE EXHIBIT 27.1 OF THIS 10-K/A.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C> <C> <C>
<PERIOD-TYPE> 9-MOS 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-END> SEP-30-1997 JUN-30-1997 MAR-31-1997
<EXCHANGE-RATE> 1 1 1
<DEBT-HELD-FOR-SALE> 0 0 108,252
<DEBT-CARRYING-VALUE> 0 0 0
<DEBT-MARKET-VALUE> 0 0 0
<EQUITIES> 0 0 94,250
<MORTGAGE> 0 0 0
<REAL-ESTATE> 0 0 0
<TOTAL-INVEST> 0 0 204,102
<CASH> 0 0 54,941
<RECOVER-REINSURE> 0 0 0
<DEFERRED-ACQUISITION> 0 0 4,860
<TOTAL-ASSETS> 0 0 404,309
<POLICY-LOSSES> 0 0 239,446
<UNEARNED-PREMIUMS> 0 0 30,000
<POLICY-OTHER> 0 0 0
<POLICY-HOLDER-FUNDS> 0 0 0
<NOTES-PAYABLE> 0 0 0
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> 0 0 0
<TOTAL-LIABILITY-AND-EQUITY> 0 0 404,309
0 0 14,502
<INVESTMENT-INCOME> 0 0 3,374
<INVESTMENT-GAINS> 0 0 2,834
<OTHER-INCOME> 0 0 340
<BENEFITS> 0 0 11,519
<UNDERWRITING-AMORTIZATION> 0 0 3,356
<UNDERWRITING-OTHER> 0 0 3,932
<INCOME-PRETAX> 0 0 2,774
<INCOME-TAX> 0 0 934
<INCOME-CONTINUING> 0 0 1,840
<DISCONTINUED> 0 0 152
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 0 0 0
<EPS-PRIMARY> 0.67 0.12 0.06
<EPS-DILUTED> 0.64 0.11 0.05
<RESERVE-OPEN> 0 0 0
<PROVISION-CURRENT> 0 0 0
<PROVISION-PRIOR> 0 0 0
<PAYMENTS-CURRENT> 0 0 0
<PAYMENTS-PRIOR> 0 0 0
<RESERVE-CLOSE> 0 0 0
<CUMULATIVE-DEFICIENCY> 0 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THESE SCHEDULES ARE BEING RESTATED IN ACCORDANCE WITH REGULATION S-K 229.601 TO
REFLECT THE RESTATEMENT OF CERTAIN INCOME STATEMENT AND BALANCE SHEET ITEMS AS A
RESULT OF (1) THE ADOPTION OF DISCONTINUED OPERATIONS ACCOUNTING FOR THE
COMPANY'S LIFE AND HEALTH INSURANCE OPERATIONS BEGINNING WITH THE SECOND QUARTER
OF 1997; (2) TO RESTATE EARNINGS PER SHARE IN ACCORDANCE WITH SFAS 128,
"EARNINGS PER SHARE"; AND (3) TO PRESENT THE FINANCIAL INFORMATION OF PHYSICIANS
INSURANCE COMPANY OF OHIO AND SUBSIDIARIES, THE ACCOUNTING ACQUIROR AND
SURVIVING ENTITY FOLLOWING THE NOVEMBER 20, 1996 REVERSE MERGER OF THAT COMPANY
AND A SUBSIDIARY OF CITATION INSURANCE GROUP, FOR THE FIRST THROUGH THIRD
QUARTERS OF 1996. THE REGISTRANT WAS NOT REQUIRED TO FILE ELECTRONICALLY FOR THE
YEAR 1995; THEREFORE, RESTATED 1995 FINANCIAL INFORMATION IS NOT BEING
SUBMITTED. THESE SCHEDULES CONTAIN SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED INCOME STATEMENTS OF PICO
HOLDINGS, INC. (AND PHYSICIANS INSURANCE COMPANY OF OHIO AND SUBSIDIARIES FOR
THE FIRST THREE QUARTERS OF 1996) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS. ALSO SEE EXHIBIT 27.2 OF THIS 10-K/A.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-END> DEC-31-1996 SEP-30-1996 JUN-30-1996 MAR-31-1996
<EXCHANGE-RATE> 1 1 1 1
<DEBT-HELD-FOR-SALE> 0 93,810 83,397 74,688
<DEBT-CARRYING-VALUE> 0 0 0 0
<DEBT-MARKET-VALUE> 0 0 0 0
<EQUITIES> 0 133,255 133,448 120,863
<MORTGAGE> 0 0 0 0
<REAL-ESTATE> 0 1,623 1,602 1,625
<TOTAL-INVEST> 0 239,857 230,660 210,243
<CASH> 0 19,482 38,786 54,023
<RECOVER-REINSURE> 0 298 3,866 1,008
<DEFERRED-ACQUISITION> 0 5,123 4,955 4,427
<TOTAL-ASSETS> 0 385,143 404,318 401,756
<POLICY-LOSSES> 0 257,326 268,194 269,009
<UNEARNED-PREMIUMS> 0 21,262 22,312 26,558
<POLICY-OTHER> 0 0 0 0
<POLICY-HOLDER-FUNDS> 0 0 0 0
<NOTES-PAYABLE> 0 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 0 5,476 5,476 5,476
<OTHER-SE> 0 73,950 74,889 74,969
<TOTAL-LIABILITY-AND-EQUITY> 0 385,143 404,318 401,756
38,761 21,450 13,740 6,628
<INVESTMENT-INCOME> 8,086 5,319 3,371 1,765
<INVESTMENT-GAINS> 27,080 2,798 596 445
<OTHER-INCOME> 2,809 2,606 2,356 1,725
<BENEFITS> 22,932 15,542 9,097 2,772
<UNDERWRITING-AMORTIZATION> 1,875 2,527 992 519
<UNDERWRITING-OTHER> 17,506 10,530 7,301 3,424
<INCOME-PRETAX> 33,977 3,090 5,381 2,651
<INCOME-TAX> 12,958 739 1,659 889
<INCOME-CONTINUING> 21,019 2,351 3,722 1,762
<DISCONTINUED> 3,301 204 94 209
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 0 2,555 3,816 1,971
<EPS-PRIMARY> 0.87 0.09 0.04 0.07
<EPS-DILUTED> 0.84 0.09 0.04 0.07
<RESERVE-OPEN> 0 0 0 0
<PROVISION-CURRENT> 0 0 0 0
<PROVISION-PRIOR> 0 0 0 0
<PAYMENTS-CURRENT> 0 0 0 0
<PAYMENTS-PRIOR> 0 0 0 0
<RESERVE-CLOSE> 0 0 0 0
<CUMULATIVE-DEFICIENCY> 0 0 0 0
</TABLE>
