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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 17, 1999
REGISTRATION NO. 333-70377
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 3
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PICO HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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CALIFORNIA 94-2723335
(State or Other Jurisdiction (IRS Employer Identification Number)
of Incorporation or Organization)
875 PROSPECT STREET, SUITE 301
LA JOLLA, CALIFORNIA 92037
(619) 456-6022
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
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JAMES F. MOSIER
875 PROSPECT STREET, SUITE 301
LA JOLLA, CALIFORNIA 92037
(619) 456-6022
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent for Service)
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COPIES TO:
DOUGLAS J. REIN, ESQ.
GRAY CARY WARE & FREIDENRICH LLP
4365 EXECUTIVE DRIVE, SUITE 1600
SAN DIEGO, CA 92121
TELEPHONE: (619) 677-1400
FACSIMILE: (619) 677-1477
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Effective Date of this Registration statement.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SHARES TO BE AGGREGATE PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT (1) OFFERING PRICE FEE (2)
---------------- ---------- ------------ -------------- -------
<S> <C> <C> <C> <C>
Common Stock, ($0.001 par value) 672,517 $18.50 $12,441,565 $3,459
</TABLE>
(1) Estimated, pursuant to Rule 457(c), solely for the purpose of
calculating the registration fee based on the average of the high and
low prices for the Common Stock, as reported on the Nasdaq National
Market on August 16, 1999.
(2) $13,031 was paid with the original filing of this Registration
statement.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT
THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN
ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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The information in the prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities Exchange Commission is effective. This prospectus is not an offer to
sell these securities and it is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
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PROSPECTUS
PICO HOLDINGS, INC.
672,517 SHARES OF COMMON STOCK
The shareholders of PICO Holdings, Inc. listed within this prospectus
are selling shares of PICO common stock under this prospectus.
Our common stock is quoted on the Nasdaq National Market under the
symbol "PICO". On August 16, 1999, the last sale price of our common stock as
reported on the Nasdaq National Market was $18.375.
THIS INVESTMENT INVOLVES A HIGH Neither the SEC nor any state
DEGREE OF RISK. YOU SHOULD PURCHASE securities commission has approved
SHARES ONLY IF YOU CAN AFFORD A or disapproved of these securities
COMPLETE LOSS OF YOUR INVESTMENT. or passed upon the adequacy or
accuracy of this prospectus. Any
SEE "RISK FACTORS" BEGINNING ON PAGE representation to the contrary is a
2. criminal offense.
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The date of this prospectus is August 17, 1999.
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RISK FACTORS
In addition to the other information in this prospectus, the following
risk factors should be considered carefully in evaluating PICO and our business.
This prospectus contains forward-looking statements that involve risks and
uncertainties. The statements contained in this prospectus that are not purely
historical are forward-looking statements within the meaning of Section 27A of
the Exchange Act, including statements regarding our expectations, beliefs,
intentions, plans or strategies regarding the future. All forward looking
statements included in this document are based on information available to us on
the date thereof, and we assume no obligation to update any such forward-looking
statements.
IF WE DO NOT SUCCESSFULLY LOCATE, SELECT AND MANAGE INVESTMENTS AND ACQUISITIONS
OR IF OUR INVESTMENTS OR ACQUISITIONS OTHERWISE FAIL OR DECLINE IN VALUE, OUR
FINANCIAL CONDITION COULD SUFFER
We invest in businesses that we believe are undervalued or that will
benefit from additional capital, restructuring of operations or improved
competitiveness through operational efficiencies.
Failures and/or declines in the market values of businesses we invest in
or acquire, as well as our failure to successfully locate, select and manage
investment and acquisition opportunities, could have a material adverse effect
on our business, financial condition, results of operations and cash flows. Such
business failures, declines in market values, and/or failure to successfully
locate, select and manage investments and acquisitions could result in inferior
investment returns compared to those which may have been attained had we
successfully located, selected and managed new investments and acquisition
opportunities, or had our investments or acquisitions not failed or declined in
value. We could also lose part or all of our investments in these businesses and
experience reductions in our net income, cash flows, assets and shareholders'
equity.
We will continue to make selective investments, and endeavor to enhance
and realize additional value to these acquired companies through our influence
and control. This could involve the restructuring of the financing or management
of the entities in which we invest and initiating and facilitating mergers and
acquisitions. Any acquisition could result in the use of a significant portion
of our available cash, significant dilution to you, and significant acquisition
related charges. Acquisitions may also result in the assumption of liabilities,
including liabilities that are unknown or not fully known at the time of the
acquisition, which could have a material adverse effect on us.
We do not know of any reliable statistical data that would enable us to
predict the probability of success or failure of our investments or to predict
the availability of suitable investments at the time we have available cash. You
will be relying on the experience and judgment of management to locate, select
and develop new acquisition and investment opportunities. Sufficient
opportunities may not be found and this business strategy may not be successful.
We have made a number of investments in the past that have been highly
successful, such as Fairfield Communities, Inc., which we sold in 1996 and
Resource America, Inc., which we sold in 1997. We have also made investments
that have lost money, such as our approximate $4 million loss from Korean
investments in 1997 and approximately $5 million in investments written down in
1998. We reported net realized investment gains in 1997 of $27.1 million and in
1996 of $21.4 million; however, we reported a net realized investment loss of
$4.4 million for 1998. Our financial statements indicated net unrealized
investment gains, before taxes, of $18.6 million at December 31, 1996 and $6.3
million at December 31, 1997, and net unrealized investment losses of $5.3
million at December 31, 1998.
Our ability to achieve an acceptable rate of return on any particular
investment is subject to a number of factors which are beyond our control,
including increased competition and loss of market share, quality of management,
cyclical or uneven financial results, technological obsolescence, foreign
currency risks and regulatory delays.
Our investments may not achieve acceptable rates of return and we may
not realize the value of the funds invested; accordingly, these investments may
have to be written down or sold at their then-prevailing market values.
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We may not be able to sell our investments in both private and public
companies when it appears to be advantageous to do so and we may have to sell
these investments at a discount. Investments in private companies are not as
marketable as investments in public companies. Investments in public companies
are subject to prices determined in the public markets and, therefore, values
can vary dramatically. In particular, the ability of the public markets to
absorb a large block of shares offered for sale can affect our ability to
dispose of an investment in a public company.
To successfully manage newly acquired companies, we must, among other
things, continue to attract and retain key management and other personnel. The
diversion of the attention of management from the day-to-day operations, or
difficulties encountered in the integration process, could have a material
adverse effect on our business, financial condition, results of operations and
cash flows.
WE MAY MAKE INVESTMENTS AND ACQUISITIONS THAT MAY YIELD LOW OR NEGATIVE RETURNS
FOR AN EXTENDED PERIOD OF TIME, WHICH COULD TEMPORARILY OR PERMANENTLY DEPRESS
OUR RETURN ON INVESTMENTS
We generally make strategic investments and acquisitions that tend to be
long term in nature. We invest in businesses that we believe to be undervalued
or may benefit from additional capital, restructuring of operations or
management or improved competitiveness through operational efficiencies with our
existing operations. We may not be able to develop acceptable revenue streams
and investment returns. We may lose part or all of our investment in these
assets. The negative impacts on cash flows, income, assets and shareholders'
equity may be temporary or permanent. We make investments for the purpose of
enhancing and realizing additional value by means of appropriate levels of
shareholder influence and control. This may involve restructuring of the
financing or management of the entities in which we invest and initiating or
facilitating mergers and acquisitions. These processes can consume considerable
amounts of time and resources. Consequently, costs incurred as a result of these
investments and acquisitions may exceed their revenues and/or increases in their
values for an extended period of time until we are able to develop the potential
of these investments and acquisitions and increase the revenues, profits and/or
values of these investments. Ultimately, however, we may not be able to develop
the potential of these assets that we anticipated.
IF MEDICAL MALPRACTICE INSURANCE CLAIMS TURN OUT TO BE GREATER THAN THE RESERVES
WE ESTABLISH TO PAY THEM, WE MAY NEED TO LIQUIDATE CERTAIN INVESTMENTS IN ORDER
TO SATISFY OUR RESERVE REQUIREMENTS
Under the terms of our medical malpractice liability policies, there is
an extended reporting period for claims. Under Ohio law the statute of
limitations is one year after the cause of action accrues. Also, under Ohio law
a person must make a claim within four years; however, the courts have
determined that the period may be longer in situations where the insured could
not have reasonably discovered the injury in that four-year period. Claims of
minors must be brought within one year of the date of majority. As a result,
some claims may be reported a number of years following the expiration of the
medical malpractice liability policy period.
Physicians Insurance Company of Ohio and The Professionals Insurance
Company have established reserves to cover losses on claims incurred under the
medical malpractice liability policies including not only those claims reported
to date, but also those that may have been incurred but not yet reported. The
reserves for losses are estimates based on various assumptions and, in
accordance with Ohio law, have been discounted to reflect the time value of
money. These estimates are based on actual and industry experience and
assumptions and projections as to claims frequency, severity and inflationary
trends and settlement payments. In accordance with Ohio law, Physicians
Insurance Company of Ohio and The Professionals Insurance Company annually
obtain a certification from an independent actuary that their respective
reserves for losses are adequate. They also obtain a concurring actuarial
opinion. Due to the inherent uncertainties in the reserving process, there is a
risk that Physicians Insurance Company of Ohio's and The Professionals Insurance
Company's reserves for losses could prove to be inadequate. This could result in
a decrease in income and shareholders' equity. If we underestimate our reserves,
they could reach levels which are lower than required by law.
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Reserves are money that we set aside to pay insurance claims. We strive
to establish a balance between maintaining adequate reserves to pay claims while
at the same time using our cash resources to invest in new companies.
IF WE UNDERESTIMATE THE AMOUNT OF INSURANCE CLAIMS, OUR FINANCIAL CONDITION
COULD BE MATERIALLY MISSTATED AND OUR FINANCIAL CONDITION COULD SUFFER
Our insurance subsidiaries may not have established reserves adequate to
meet the ultimate cost of losses arising from claims. It has been, and will
continue to be, necessary for our insurance subsidiaries to review and make
appropriate adjustments to reserves for claims and expenses for settling claims.
Inadequate reserves could have a material adverse effect on our business,
financial condition, results of operations and cash flows. Inadequate reserves
could cause our financial condition to fluctuate from period to period and cause
our financial condition to appear to be better than it actually is for periods
in which insurance claims reserves are understated. In subsequent periods when
we discover the underestimation and pay the additional claims, our cash needs
will be greater than expected and our financial results of operations for that
period will be worse than they would have been had our reserves been accurately
estimated originally.
The inherent uncertainties in estimating loss reserves are greater for
some insurance products than for others, and are dependent on:
- the length of time in reporting claims;
- the diversity of historical losses among claims;
- the amount of historical information available during the
estimation process;
- the degree of impact that changing regulations and legal
precedents may have on open claims; and
- the consistency of reinsurance programs over time.
Because medical malpractice liability and commercial casualty claims may
not be completely paid off for several years, estimating reserves for these
types of claims can be more uncertain than estimating reserves for other types
of insurance. As a result, precise reserve estimates cannot be made for several
years following the year for which reserves were initially established.
During the past several years, the levels of the reserves for our
insurance subsidiaries have been very volatile. As a result of our claims
experience, we have had to significantly increase these reserves in the past
several years.
Significant increases in the reserves may be necessary in the future,
and the level of reserves for our insurance subsidiaries may be volatile in the
future. These increases or volatility may have an adverse effect on our
business, financial condition, results of operations and cash flows.
THERE HAS BEEN A DOWNTURN IN THE PROPERTY & CASUALTY INSURANCE BUSINESS WHICH,
IN THE SHORT TERM, HINDERS OUR ABILITY TO PROFIT FROM THIS INDUSTRY
The property and casualty insurance industry has been highly cyclical,
and the industry has been in a cyclical downturn over the last several years.
This is due primarily to competitive pressures on pricing, which has resulted in
lower profitability for us. Pricing is a function of many factors, including the
capacity of the property and casualty industry as a whole to underwrite
business, create policyholders' surplus and generate positive returns on their
investment portfolios. The level of surplus in the industry varies with returns
on invested capital and regulatory barriers to withdrawal of surplus. Increases
in surplus have generally been accompanied by increased price competition among
property and casualty insurers.
The cyclical trends in the industry and the industry's profitability can
also be affected by volatile and unpredictable developments, including natural
disasters, fluctuations in interest rates, and other changes in the investment
environment which affect market prices of investments and the income generated
from those investments. Inflationary pressures affect the size of losses and
court decisions affect insurers' liabilities. These
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trends may adversely affect our business, financial condition, results of
operations and cash flows by reducing revenues and profit margins, by increasing
ratios of claims and expenses to premiums, and by decreasing cash receipts.
Capital invested in our insurance companies may produce inferior investment
returns during periods of downturns in the insurance cycle due to reduced
profitability.
STATE REGULATORS COULD REQUIRE CHANGES TO THE OPERATIONS OF OUR INSURANCE
SUBSIDIARIES AND/OR TAKE THEM OVER IF WE FAIL TO MAINTAIN ADEQUATE RESERVE
LEVELS
In the past few years, the National Association of Insurance
Commissioners has developed risk-based capital measurements for both property
and casualty and life and health insurers. These measurements prescribe the
reserve levels that insurance companies must maintain. The Commissioners have
delegated to the state regulators varying levels of authority based on the
adequacy of an insurer's reserves. The insurance companies' reserve levels are
reported annually in their statutory annual statements to the insurance
departments.
Failure to meet one or more reserve levels may result in state
regulators requiring the insurance company to submit a business plan
demonstrating achievement of the required reserve levels. This may include the
addition of capital, a restructuring of assets and liabilities, or changes in
operations. At or below certain lower reserve levels, state regulators may
supervise the operation of the insurance company and/or require the liquidation
of the insurance company. Such insurance department actions could adversely
affect our business, financial condition, results of operations and cash flows
and decrease the value of our investments in our insurance subsidiaries. If the
insurance departments were to require changes in the operations of our insurance
subsidiaries, we may incur additional expenses and we may lose customers. If the
insurance departments were to require additional capital in our insurance
subsidiaries or a restructuring of our assets and liabilities, our investment
returns could suffer. If the insurance departments were to place our insurance
companies under their supervision, we would lose customers, our revenues may
decrease more rapidly than our expenses, and our investment returns would
suffer. We may even lose part or all of our investments in our insurance
subsidiaries if our insurance subsidiaries are liquidated by the insurance
departments.
WE MAY BE INADEQUATELY PROTECTED AGAINST MAN MADE AND NATURAL CATASTROPHES,
WHICH COULD REDUCE THE AMOUNT OF CAPITAL SURPLUS AVAILABLE FOR INVESTMENT
OPPORTUNITIES
As with other property and casualty insurers, operating results and
financial condition can be adversely affected by volatile and unpredictable
natural and man made disasters, such as hurricanes, windstorms, earthquakes,
fires, and explosions. Our insurance subsidiaries generally seek to reduce their
exposure to catastrophic events through individual risk selection and the
purchase of reinsurance. Our insurance subsidiaries' estimates of their
exposures depend on their views of the possibility of a catastrophic event in a
given area and on the probable maximum loss created by that event. While our
insurance subsidiaries attempt to limit their exposure to acceptable levels, it
is possible that an actual catastrophic event or multiple catastrophic events
could significantly exceed the maximum loss anticipated, resulting in a material
adverse effect on our business, financial condition, results of operations and
cash flows. Such events could cause unexpected insurance claims and expenses for
settling claims well in excess of premiums, increasing cash needs, reducing
surplus and reducing assets available for investments. Capital invested in our
insurance companies may produce inferior investment returns as a result of these
additional funding requirements.
We insure ourselves against catastrophic losses by obtaining insurance
through other insurance companies known as reinsurers. The future financial
results of our insurance subsidiaries could be adversely affected by disputes
with their reinsurers with respect to coverage and by the solvency of the
reinsurers.
OUR INSURANCE SUBSIDIARIES COULD BE DOWNGRADED WHICH WOULD NEGATIVELY IMPACT OUR
BUSINESS
Our insurance subsidiaries' ratings may not be maintained or increased,
and a downgrade would likely adversely affect our business, financial condition,
results of operations and cash flows. A.M. Best and Company's ("A.M. Best")
ratings reflect the assessment of A.M. Best of an insurer's financial condition,
as well as the expertise and experience of its management. Therefore, A.M. Best
ratings are important to policyholders. A.M. Best ratings
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are subject to review and change overtime. Failure to maintain or improve our
A.M. Best ratings could have a material adverse effect on the ability of our
insurance subsidiaries to underwrite new insurance policies, as well as
potentially reduce their ability to maintain or increase market share.
Management believes that many potential customers will not insure with an
insurer that carries an A.M. Best rating of less than B+, and that customers who
do so will demand lower rates.
Our insurance subsidiaries are currently rated as follows:
<TABLE>
<S> <C>
- Sequoia Insurance Company B++ (Very Good)
- Citation Insurance Company B+ (Very Good)
- Physicians Insurance Company of Ohio NR-3 (rating procedure inapplicable)
- The Professionals Insurance Company NR-3 (rating procedure inapplicable)
</TABLE>
POLICY HOLDERS MAY NOT RENEW THEIR POLICIES, WHICH WOULD UNEXPECTEDLY REDUCE OUR
REVENUE STREAM
Insurance policy renewals have historically accounted for a significant
portion of our net revenue. We may not be able to sustain historic renewal rates
for our products in the future. A decrease in renewal rates would reduce our
revenues. It would also decrease our cash receipts and the amount of funds
available for investments and acquisitions. If we were not able to reduce
overhead expenses correspondingly, this would adversely affect our business,
financial condition, results of operations and cash flows.
IF WE ARE REQUIRED TO REGISTER AS AN INVESTMENT COMPANY, THEN WE WILL BE SUBJECT
TO A SIGNIFICANT REGULATORY BURDEN
We at all times intend to conduct our business so as to avoid being
regulated as an investment company under the Investment Company Act of 1940.
However, if we were required to register as an investment company, our ability
to use debt would be substantially reduced, and we would be subject to
significant additional disclosure obligations and restrictions on our
operational activities. Because of the additional requirements imposed on an
investment company with regard to the distribution of earnings, operational
activities and the use of debt, in addition to increased expenditures due to
additional reporting responsibilities, our cash available for investments would
be reduced. The additional expenses would reduce income. These factors would
adversely affect our business, financial condition, results of operations and
cash flows.
SUBSTANTIAL REGULATION MAY PREVENT US FROM REALIZING A PROFIT FROM OUR WATER
RIGHTS
The water rights held by us and the transferability of these rights to
other uses and places of use are governed by the laws concerning water rights in
the states of Arizona, California, Colorado and Nevada. The volumes of water
actually derived from these rights may vary considerably based upon physical
availability and may be further limited by applicable legal restrictions. As a
result, the amounts of acre feet anticipated do not in every case represent a
reliable, firm annual yield of water, but in some cases describe the face amount
of the water right claims or management's best estimate of such entitlement.
Legal impediments exist to the sale or transfer of some of these water rights,
which in turn may affect their commercial value. If we were unable to transfer
or sell our water rights, we will not be able to make a profit, we will not have
enough cash receipts to cover cash needs, and we may lose some or all of our
value in our water rights investments.
WE ARE DIRECTLY IMPACTED BY INTERNATIONAL AFFAIRS, WHICH DIRECTLY EXPOSES US TO
THE ADVERSE EFFECTS OF ANY FOREIGN ECONOMIC OR GOVERNMENTAL INSTABILITY
As a result of global investment diversification, our business,
financial condition, results of operations and cash flows may be adversely
affected by:
- exposure to fluctuations in exchange rates;
- the imposition of governmental controls;
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- the need to comply with a wide variety of foreign and U.S.
export laws;
- political and economic instability;
- trade restrictions;
- changes in tariffs and taxes;
~ volatile interest rates;
- changes in certain commodity prices;
- exchange controls which may limit our ability to withdraw money;
- the greater difficulty of administering business overseas; and
- general economic conditions outside the United States.
Changes in any or all of these factors could result in reduced market
values of investments, loss of assets, additional expenses, reduced investment
income, reductions in shareholders' equity due to foreign currency fluctuations
and a reduction in our global diversification.
OUR COMMON STOCK PRICE MAY BE LOW WHEN YOU WANT TO SELL YOUR SHARES
The trading price of our common stock has historically been, and is
expected to be, subject to fluctuations. The market price of the common stock
may be significantly impacted by:
- quarterly variations in financial performance;
- shortfalls in revenue or earnings from levels forecast by
securities analysts;
- changes in estimates by such analysts;
- product introductions;
- our competitors' announcements of extraordinary events; such as
- acquisitions;
- litigation; and
- general economic conditions.
Our results of operations have been subject to significant fluctuations,
particularly on a quarterly basis, and our future results of operations could
fluctuate significantly from quarter to quarter and from year to year. Causes of
such fluctuations may include the inclusion or exclusion of operating earnings
from newly acquired or sold operations. At December 31, 1996, the closing price
of our common stock on the Nasdaq National Market was $20.63 per share, compared
to $13.25 at December 31, 1998. On a quarterly basis between these two dates,
closing prices have ranged from a high of $32.19 at December 31, 1997 to a low
of $13.25 at December 31, 1998.
Statements or changes in opinions, ratings, or earnings estimates made
by brokerage firms or industry analysts relating to the markets in which we do
business or relating to us specifically could result in an immediate and adverse
effect on the market price of our common stock.
WE MAY NOT BE ABLE TO RETAIN KEY MANAGEMENT PERSONNEL WE NEED TO SUCCEED, WHICH
COULD ADVERSELY AFFECT OURS ABILITY TO MAKE SOUND INVESTMENT DECISIONS
We have several key executive officers. If they depart, it could have a
significant adverse effect. In particular, Ronald Langley, our Chairman, and
John R. Hart, our President and Chief Executive Officer, play key roles in
investment decisions. Messrs. Langley and Hart have entered into employment
agreements with us dated as of December 31, 1997, for a period of four years.
Messrs. Langley and Hart are key to the implementation of our strategic focus,
and our ability to successfully develop our current strategy is dependent upon
our ability to retain the services of Messrs. Langley and Hart.
OUR CHARTER DOCUMENTS MAY INHIBIT A TAKEOVER, PREVENTING YOU FROM RECEIVING A
PREMIUM ON YOUR SHARES
The Board of Directors has authority to issue up to 2 million shares of
preferred stock and to fix the rights, preference, privileges and restrictions,
including voting rights, of those shares without any further vote or action by
the shareholders. Your rights as common stock holders will be subject to, and
may be adversely affected by, the
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rights of the holders of the preferred stock. The issuance of preferred stock,
while providing desirable flexibility in connection with possible acquisitions
and other corporate purposes, could have the effect of making it more difficult
for a third party to acquire a majority of our outstanding voting stock, thereby
delaying, deferring or preventing a change in control of PICO. Furthermore, such
preferred stock may have other rights, including economic rights senior to the
common stock, and, as a result, the issuance thereof could have a material
adverse effect on the market value of the common stock.
WE ARE SUBJECT TO YEAR 2000 RISKS FOR WHICH WE MAY NOT BE PREPARED, WHICH COULD
CREATE INTERNAL ADMINISTRATIVE PROBLEMS REQUIRING COSTLY, INEFFICIENT REMEDIAL
MEASURES
Many currently installed computer systems and software products are not
capable of distinguishing 20th century dates from 21st century dates. As a
result, in less than one year, computer systems and/or software used by many
companies in a very wide variety of applications may experience operating
difficulties unless they are modified or upgraded to adequately process
information involving, related to or dependent upon the century change.
Significant uncertainty exists in the software and information services
industries concerning the scope and magnitude of problems associated with the
century change. In light of the potentially broad effects of the year 2000 on a
wide range of business systems, we may be affected.
We continue to progress in our efforts to define the scope and magnitude
of the Year 2000 ("Y2K") problem and to execute our plans to ensure information
technology and non-information technology systems are Y2K compliant.
The initial phase of planning, inventorying and evaluating all
information technology systems, and non-information technology systems and their
components, for Y2K compliance is complete. The evaluation has not disclosed any
significant Y2K processing difficulties or concerns. The focus has primarily
been on the insurance operations of Vista because of the custom applications
software used to process insurance policies, policy claims, and insurance
underwriting. Fortunately, the majority of the non-insurance information and
non-information technology systems are deemed Y2K compliant and do not require
any significant alterations. The focus of remediation is on the insurance
specific applications.
The second phase of the project, which primarily includes implementing
corrections to remedy Y2K deficiencies, is approximately 95% complete. As noted
above, the insurance systems software has been the primary focus of the efforts.
To renovate the insurance systems to a Y2K ready state, our internal information
systems staff is re-writing lines of existing code to function with a four-digit
date field. We have also replaced existing DOS software with a current Y2K
compliant version.
Phase three pertains to testing and validation of each system. As
hardware and software changes are made to the systems, they are tested for
compliance. This phase will continue as each insurance application is
reprogrammed. Despite the best efforts by management, problems will arise
requiring us to quickly respond while there is still time. Phase four, when
completed, will set forth contingency plans addressing potential business
interruption and failure, is expected to be finalized during the last half of
1999.
We have relationships with several banks and other financial
institutions and service providers that provide business information to us on a
regular basis. In addition, we report financial results on a regular basis to
state and federal agencies. While these relationships are important to our
business, should any third party be adversely affected by the Y2K problem, the
resulting risk of business interruption should not be significant to us.
However, the inability of those parties to complete their Y2K readiness process
could materially impact us in a manner that we have not foreseen.
The likely worst case scenario is a partial failure of some accounting
and reporting functions that could be corrected by manually recording and
delivering the required information.
The foregoing factors, individually or in the aggregate, could
materially adversely affect our operating results and could make comparison of
historic operating results and balances difficult or not meaningful.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Commission. You may read and copy any document we
file at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the Regional Offices of the
Commission at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and at 75 Park Place, New York, New York 10007. You can obtain
information on the operation of the public reference room by calling the SEC at
1-800-SEC-0330. Our common stock is traded on The Nasdaq National Market.
Reports and other information concerning us can also be inspected at the offices
of the National Association of Securities Dealers, Inc., Market Listing Section,
1735 K Street, N.W., Washington, D.C. 20006. Such reports and other information
may also be inspected without charge at a Web site maintained by the Commission.
The address of the site is http:\www.sec.gov.
The Commission allows us to "incorporate by reference" the information
we file with them, which means that we can disclose important information to you
by referring you to those documents. The information incorporated by reference
is considered to be part of this prospectus, and information that we file later
with the Commission will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the Commission under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934. This prospectus is part of a registration
statement filed with the Commission.
(1) Our Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 filed with the Commission on March 30, 1998
(File No. 000-18786).
(2) Our Quarterly Report on Form 10-Q for the quarter ended March
31, 1999 filed with the Commission on May 17, 1999 and amended
on May 19, 1999 (File No. 333-36383).
(3) Our Quarterly Report on Form 10-Q for the quarter ended June 30,
1999 filed with the commission on August 13, 1999 (File No.
033-36383).
We will provide without charge to each person to whom this prospectus is
delivered, upon oral or written request, a copy of any or all of the foregoing
documents incorporated herein by reference (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference into
the information that this prospectus incorporates). Written or telephone
requests should be directed to James F. Mosier at PICO Holdings, Inc., 875
Prospect Street, Suite 301, La Jolla, California 92037, telephone number (619)
456-6022.
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. The selling shareholders will
not make an offer of these shares in any state where the offer is not permitted.
You should not assume that the information in this prospectus or any supplement
is accurate as of any date other that the date on the front of those documents.
9
<PAGE> 12
PICO HOLDINGS, INC.
We are a diversified holding company with operations in wholesale water
and storage through our subsidiary Vidler Water Company, Inc.; real estate and
minerals through its subsidiary Nevada Land and Resource Company, LLC; insurance
through its subsidiaries Sequoia Insurance Company and Citation Insurance
Company; and investment management though its subsidiary Summit Global
Management, Inc. In addition, we have a number of strategic value investments.
Our objective is to use our resources to increase shareholder value through
investments in businesses which we believe are undervalued or will benefit from
additional capital, restructuring of operations or management, or improved
competitiveness through operational efficiencies with our existing operations.
This business strategy was implemented beginning in 1994 and was not fully in
place until 1996.
We were incorporated in 1981 and began operations in 1982 as an
insurance holding company. We were known as Citation Insurance Group prior to
the November 20, 1996 reverse merger between a wholly-owned subsidiary and
Physicians Insurance Company of Ohio. Our principal executive office is located
at 875 Prospect Street, Suite 301, La Jolla, California 92037, and our telephone
number is (619) 456-6022.
SUBSIDIARIES
Unless otherwise indicated, each subsidiary is directly or indirectly
wholly-owned by us. Our operating subsidiaries and their principal subsidiaries
or affiliates are as follows:
GLOBAL EQUITY CORPORATION
In September 1995, we acquired approximately 38.2% of Global Equity
Corporation. In July 1997, we purchased an additional 11.7% of Global Equity
Corporation from the Mackenzie Fund, increasing our holdings to approximately
49.9%. On August 18, 1997, Global Equity Corporation issued shares through a
secondary public offering and we subscribed additional shares increasing our
ownership of Global Equity Corporation to approximately 51.2%. For a number of
reasons, including the simplification of the structure of the combined
companies, on December 16, 1998, we acquired the remaining 48.8% minority
interest of Global Equity Corporation through a combination in exchange for our
common stock. We refer you to the PICO and Global Equity Corporation Joint
Management Information Circular and Proxy Statement dated October 13, 1998 filed
with the Commission with Form DEFM14A on October 16, 1998 for additional
information regarding the combination with us and Global Equity Corporation
approved by shareholders on November 20, 1998.
Incorporated under the laws of the Province of Ontario, Canada, Global
Equity Corporation operates primarily, both directly and indirectly through its
various subsidiaries, as an international investment and operating company. The
emphasis of Global Equity Corporation's investment strategy is to increase
shareholder value through the long-term appreciation of its assets. Global
Equity Corporation's investment portfolio comprises holdings in public equity
securities, strategic investments and convertible instruments in North American,
Asian and European corporations, as well as a diversified portfolio of surface,
water and mineral rights in the western United States, and oil and gas lease
interests in North America.
VIDLER WATER COMPANY, INC.
Effective November 14, 1995, a wholly-owned subsidiary of Global Equity
Corporation acquired all of the outstanding common stock of Vidler Water
Company, Inc. The purchase price was $5.8 million in cash. Vidler Water Company,
Inc., a corporation formed under the laws of the state of Colorado, changed its
state of domicile to Delaware in 1998. Vidler Water Company, Inc. is engaged in
the water marketing and transfer business. The business plan calls for Vidler
Water Company, Inc. to identify areas where water supplies are needed in the
southwestern United States and then facilitate the transfer from current
ownership to Vidler Water Company, Inc., and subsequently to municipalities,
water districts, developers and others. This process requires knowledge and
skills in the identification, certification, upgrading, managing, transfer,
marketing and financing of water projects. Vidler Water Company, Inc. has
created opportunity through its ability to aggregate water supplies from
disparate
10
<PAGE> 13
owners and locations and redirect the water to its highest and best use. In
1998, a former employee of Vidler Water Company, Inc. exercised stock options to
purchase approximately 1.9% of Vidler Water Company, Inc.
As a comprehensive provider of water services, Vidler Water Company,
Inc. performs the following functions:
- Water asset acquisitions, purchasing appropriate water rights,
upgrading the priority and functionality wherever possible, and
marketing the product to the end-user; and
- Development and operation of water recharge (storage) facilities
directed to municipalities and water districts in the
southwestern United States. Storage provides flexibility.
Surplus supplies can be stored inexpensively and can be sold and
delivered to meet peak demands.
Since its acquisition by Global Equity Corporation, Vidler Water
Company, Inc. and its immediate parent company have made further acquisitions of
water rights through the purchase of additional properties with appurtenant
water rights in Arizona, California, Colorado, and Nevada. In October 1998,
Vidler Water Company, Inc.'s Arizona groundwater recharge pilot program
construction was completed and recharging began on schedule. Vidler Water
Company, Inc.'s underground water storage facility is located adjacent to the
Central Arizona Project in Arizona. Vidler Water Company, Inc. has begun
implementing the full-scale design and permitting process and will be meeting
with potential state and federal recharge customers. Vidler Water Company, Inc.
estimates that the total storage capacity of the aquifer underlying this
property is in excess of 1,000,000 acre-feet (one acre of water one foot deep)
and the "put" and "take" recharge/recovery capacity of the aquifer to be in
excess of 100,000 acre-feet per year. In November 1998 Vidler Water Company,
Inc. reached an agreement with the Semitropic Water Storage District to acquire
185,000 acre-feet of underground water storage and associated rights to recharge
and recover water at Semitropic Water Storage District located near the
California Aqueduct northwest of Bakersfield, California. The strategic location
of Semitropic Water Storage District relative to other water delivery systems
and storage facilities will enable Vidler Water Company, Inc. to complete
exchanges and water transfers in California.
NEVADA LAND AND RESOURCE COMPANY, LLC
On April 23, 1997, we, along with Global Equity Corporation, acquired a
100% membership interest in Nevada Land and Resource Company, LLC. The total
purchase price for Nevada Land and Resource Company, LLC was $48.6 million.
Nevada Land and Resource Company, LLC's principal asset consists of
approximately 1.3 million acres of deeded land located in northern Nevada,
together with appurtenant water and mineral rights. Nevada Land and Resource
Company, LLC is actively engaged in maximizing the property's value in relation
to water rights, mineral rights and land sales, exchanges and development.
Nevada Land and Resource Company, LLC is the largest private landowner in the
state. Nevada Land and Resource Company, LLC anticipates that revenues will be
generated from the asset by land sales, exchanges and development and
exploration of mineral and water rights. Nevada Land and Resource Company, LLC's
mineral exploration strategy is to identify potential gold discoveries (or other
high unit resources), develop them to the point where a meaningful data set can
be established and then to vend the properties to advanced stage exploration or
production companies.
CITATION INSURANCE COMPANY
Citation Insurance Company is a California-domiciled insurance company
licensed to write property and casualty insurance in Arizona, California,
Colorado, Nevada, Hawaii, New Mexico and Utah. Citation Insurance Company
primarily writes commercial property and casualty insurance. Citation Insurance
Company has also written Workers Compensation insurance; however, Citation
Insurance Company sold that line of business through a transfer to and sale of
its wholly-owned subsidiary, Citation National Insurance Company, effective June
30, 1997. Citation National Insurance Company wrote no new business in 1997
prior to its sale.
SEQUOIA INSURANCE COMPANY
Sequoia Insurance Company is a California-domiciled insurance company
licensed to write insurance coverage for property and casualty risks within the
State of California and Nevada. Sequoia Insurance Company
11
<PAGE> 14
writes business through independent agents and brokers covering risks located
primarily within northern and central California and Nevada. Although multiple
line underwriting is conducted and at one time or another all major lines of
property and casualty insurance except workers' compensation and ocean marine
have been written, Sequoia Insurance Company has transitioned from writing
primarily personal lines of business (automobile, homeowners, etc.) to
commercial lines.
PHYSICIANS INSURANCE COMPANY OF OHIO
Physicians Insurance Company of Ohio, an Ohio licensed insurance
corporation, operates primarily as a diversified investment and insurance
company. Its operations and those of its direct and indirect subsidiaries
include investment operations, property and casualty insurance, the wind down of
the settlement of insurance claims liabilities arising from Physicians'
terminated medical professional liability insurance business (the "runoff"), and
other. Through December 4, 1998, an indirect subsidiary of Physicians Insurance
Company of Ohio, American Physicians Life Insurance Company, engaged in life and
health insurance. Physicians Insurance Company of Ohio has been licensed as a
property and casualty insurer by the Ohio Department of Insurance since 1976 and
is also licensed by the Kentucky Department of Insurance. During 1995, there was
another overall shift in the strategic direction of Physicians Insurance Company
of Ohio when it sold its existing medical professional liability insurance
business. Physicians Insurance Company of Ohio continues to administer and
adjust its remaining claims and loss adjustment expense reserves. Based upon
careful analysis of various alternative scenarios for handling the runoff of the
remaining claims reserves, management determined that the best option was to
process the existing claims internally with existing staff, rather than through
a third party administrator or through an outright sale of the claims and loss
adjustment expense reserves. In addition, although there can be no assurance, it
is expected that shareholders' equity may be better served by retaining the
investments necessary to fund the payment of these claims and loss adjustment
expense reserves, managing them along with the rest of the Company's investment
holdings, as opposed to selling or fully reinsuring these reserves and giving up
the corresponding funds.
PHYSICIANS INVESTMENT COMPANY
Physicians Investment Company is a holding company that owned 100% of
American Physicians Life Insurance Company prior to its sale on December 4,
1998. The Company entered into an agreement to sell American Physicians Life
Insurance Company and their wholly-owned subsidiary, Living Benefit
Administrators Agency, Inc. On June 16, 1997, American Physicians Life Insurance
Company offered critical illness insurance through "Survivor Key" policies as
well as other life and health insurance products. Physicians Insurance Company
of Ohio owns approximately 65.1% of Physicians Investment Company. Sequoia
Insurance Company and Citation Insurance Company own approximately 9.1% and
25.8%, respectively.
THE PROFESSIONALS INSURANCE COMPANY
The Professional Insurance Company is an Ohio domiciled insurance
company first licensed to write property and casualty insurance in Ohio in 1979.
It is also licensed in Kentucky, West Virginia and Wisconsin. The Professional
Insurance Company primarily offered medical professional liability insurance to
doctors, dentists and other medical professionals in Ohio until the sale of its
medical professional liability business in 1995.
SUMMIT GLOBAL MANAGEMENT
Summit Global Management is a Securities and Exchange Commission
registered investment advisor that offers investment management services in a
number of states including California, Florida, Kansas, Iowa, Louisiana, Oregon,
Virginia and Wisconsin. Summit provides investment management services to us.
Summit Global Management also offers its services to other individuals and
institutions in the jurisdictions in which it is registered as an investment
adviser and in other states where registration is not required. As a registered
investment adviser, Summit Global Management is subject to regulation by, and
files annual reports with, the Commission and the securities administrators in
some of the jurisdictions in which it is registered to do business.
12
<PAGE> 15
SELLING SHAREHOLDERS
The table below sets forth certain information regarding the selling
shareholders. The shares are being registered to permit public sales of the
shares, and the selling shareholders may offer the shares for resale from time
to time. See "Plan of Distribution."
The table below sets forth the names of the selling shareholder and the
number of shares owned by such shareholder.
<TABLE>
<CAPTION>
Selling Shareholder Shares of Common Stock
------------------- ----------------------
<S> <C>
Ronald L. Jensen 325,717
Protective Insurance Company 150,000
PSCO Partners Limited Partnership 100,000
Capital Indemnity Corporation 70,000
Pacific Pioneer Insurance Company 8,000
James R. Winn 6,000
Neal Kay 5,000
Marvin D. Gill 3,800
Ernest & Co. 2,000
John A. Lawler 2,000
-------
Total 672,517
=======
</TABLE>
Each of the selling shareholders represented that it was acquiring the
shares for investment and with no present intention of distributing such shares.
In recognition of the fact that investors, even though purchasing common stock
without a view to distribution, may wish to be legally permitted to sell their
shares when they deem the sale to be appropriate, we have filed with the
Commission a registration statement, with respect to the resale of the shares
from time to time and we have agreed to prepare and file such amendments and
supplements to the Registration statement as may be necessary to keep the
Registration statement effective until the shares are no longer required to be
registered for the sale by the selling shareholders.
13
<PAGE> 16
PLAN OF DISTRIBUTION
We have been advised that the selling shareholders may sell shares from
time to time in transactions in the Nasdaq National Market, through negotiated
transactions or otherwise, at fixed prices that may be changed, at prevailing
market prices or at negotiated prices.
Sales may be made pursuant to this prospectus to or through
broker-dealers who may receive compensation in the form of discounts,
concessions or commissions from the selling shareholders or the purchasers of
common stock for whom such broker-dealer may act as agent or to whom they may
sell as principal, or both (which compensation as to a particular broker-dealer
may be in excess of customary commissions). The selling shareholders and any
broker-dealers or other persons acting on their behalf in connection with the
sale of shares may be deemed to be "underwriters" within the meaning of the
Securities Act, and any commissions received by them and any profit realized by
them on the resale of the shares as principals may be deemed to be underwriting
commissions under the Securities Act. No period of time has been fixed within
which the shares may be offered or sold.
We have not received any part of the proceeds of any sales of shares
pursuant to this prospectus. We will pay all the expenses of registering the
shares, except for selling expenses incurred by the selling shareholders in
connection with this offering, including any fees and commissions payable to
broker-dealers or other persons, which will be borne by the selling
shareholders.
USE OF PROCEEDS
We will not receive any proceeds from sales of the shares.
LEGAL MATTERS
The validity of the shares is being passed upon by Gray Cary Ware &
Freidenrich, LLP, San Diego, California.
EXPERTS
The consolidated financial statements and financial statement schedules
incorporated in this prospectus by reference to our annual report on Form 10-K
for the year ended December 31, 1998 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports, which are incorporated herein
by reference, and have been so incorporated in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
The consolidated financial statements and consolidated financial
statement schedules of PICO for the year ended December 31, 1996, incorporated
by reference herein and included in our annual report on Form 10-K for the year
ended December 31, 1998, have been audited by PricewaterhouseCoopers LLP,
independent accountants, as set forth in their reports dated April 7, 1997,
accompanying such financial statements and financial statement schedules. The
financial statements and financial statement schedules referred to above have
been so incorporated in reliance upon the reports of such firm, which reports
are given upon their authority as experts in accounting and auditing.
The consolidated financial statements for the year ended December 31,
1997 for Global Equity Corporation and incorporated in this registration
statement by reference from the annual report on Form 10-K of PICO Holdings,
Inc. have been audited by KPMG LLP, chartered accountants, as stated in their
report, which is incorporated herein by reference, and has been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
14
<PAGE> 17
================================================================================
No dealer, salesman or other person has been authorized to give any information
or to make any representations other than those contained or incorporated by
reference in this prospectus in connection with the offering described herein,
and, if given or made, such information or representation must not be relied
upon as having been authorized by the company. This prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, any
securities other than the registered securities to which it relates, or an offer
to sell, or a solicitation of an offer to buy, in any jurisdiction in which it
is unlawful to make such offer or solicitation. Neither the delivery of this
prospectus nor any sale made hereunder shall, under any circumstances, create an
implication that there has been no change in the affairs of the company since
the date hereof or that the information contained herein is correct as of any
time subsequent to the date hereof.
SUMMARY TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Where You Can Find More Information....... 9
Risk Factors...............................2
The Company...............................10
Selling Shareholders......................13
Plan of Distribution......................14
Use of Proceeds...........................14
Legal Matters.............................14
Experts...................................14
</TABLE>
================================================================================
================================================================================
672,517 SHARES
COMMON STOCK
------------------
PROSPECTUS
------------------
August 17, 1999
================================================================================
15
<PAGE> 18
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Other expenses in connection with the registration of the common stock
hereunder will be substantially as follows:
<TABLE>
<CAPTION>
Company
Item Expense
---- -------
<S> <C>
SEC Registration Fee................. $ 13,031
Printing and engraving expenses...... $ 1,000
Legal fees and expenses.............. $ 10,000
Accounting Fees and expenses......... $ 10,000
Miscellaneous........................ $ 1,969
Total......................... $ 36,000
</TABLE>
- ----------------
* Estimated for purposes of this filing.
Item 15. Indemnification of Directors and Officers.
Pursuant to provisions of the California General Corporation Law (the
"CGCL"), Registrant's Articles of Incorporation include a provision which
eliminates the personal liability of its directors to Registrant and its
shareholders for monetary damages to the fullest extent permissible under
California law. This limitation has no effect on a director's liability (i) for
acts or omissions that involve intentional misconduct or a knowing and culpable
violation of law, (ii) for acts or omissions that a director believes to be
contrary to the best interest of Registrant or its shareholders or that involve
the absence of good faith on the part of the director, (iii) for any transaction
from which a director derived an improper benefit, (iv) for acts or omissions
that show a reckless disregard for the director's duty to Registrant or its
shareholders in circumstances in which the director was aware, or should have
been aware, in the ordinary course of performing a director's duties, of a risk
of serious injury to Registrant or its shareholders, (v) for acts or omissions
that constitute an unexcused pattern of inattention that amounts to an
abdication of the director's duty to Registrant or its shareholders, (vi) under
Section 310 of the CGCL (concerning contracts or transactions between the
corporation and a director) or (vii) under Section 316 of the CGCL (concerning a
director's liability for improper distributions, loans and guarantees). The
provision does not eliminate liability of a director for any acts or omissions
which occurred prior to November 18, 1988, the effective date of Registrant's
amended Articles of Incorporation including such provision, and it does not
eliminate or limit the liability of an officer for any act or omission as an
officer, notwithstanding that the officer is also a director or that his or her
actions, if negligent or improper, have been ratified by the Board of Directors.
Further, the provision has no effect on claims arising under federal or state
securities laws and does not affect the availability of injunctions and other
equitable remedies available to Registrant's shareholders for any violation of a
director's fiduciary duty to Registrant or its shareholders. Although the
validity and scope of the legislation underlying the provision have not yet been
interpreted to any significant extent by the California courts, the provision
may relieve directors of monetary liability to Registrant for grossly negligent
conduct, including conduct in situations involving attempted takeovers of
Registrant.
Registrant's Articles of Incorporation also include a section
authorizing Registrant to indemnify its officers, directors and other agents
through bylaw provisions, agreements with such agents, vote of shareholders or
otherwise in excess of the indemnification permitted by Section 317 of the CGCL,
subject only to the limits set forth in Section 204 of the CGCL with respect to
actions for breach of duty to the corporation and its shareholders. The By-Laws
expressly provide that Registrant shall have the right to purchase and maintain
insurance against any
16
<PAGE> 19
liability asserted against or incurred by officers, directors and other agents,
whether or not Registrant would have the power to indemnify such person against
the liability insured against.
The Registrant has obtained directors and officers liability and company
reimbursement insurance pursuant to three policies currently in effect (the "D &
O Policies") with underwriters at Lloyd's, London-SPMI ("Lloyd's"), Lloyds of
London and Executive Risk Indemnity, Inc., the limit of coverage is $7 million
with a retention of $500,000. Pursuant to the D & O Policies, Lloyd's will pay
on behalf of directors and officers of the Registrant, certain losses (a "Loss")
incurred as a result of a wrongful act (a "Wrongful Act") by such persons, for
which they are not being indemnified by the Registrant. In addition, Lloyd's
will reimburse the Registrant for Losses over $1,000,000 incurred as a result of
Registrant's indemnification of an officer or director in connection with a
Wrongful Act. However, the D & O Policies provide that Lloyd's aggregate
liability to the Registrant with respect to a single policy year shall not
exceed $2,000,000. The D & O Policies are subject to customary exclusions.
The Registrant has entered into agreements with its executive officers
and directors to provide indemnity to such persons to the maximum extent
permitted under applicable law.
Section 317 of the California General Corporation law makes provisions
for the indemnification of officers, directors and other corporate agents in
terms sufficiently broad to indemnify such persons, under certain circumstances,
against such liabilities (including reimbursement of expenses incurred) arising
under the Securities Act.
Item 16. Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
5.1** Opinion of Gray Cary Ware & Freidenrich LLP.
23.1 Independent Auditors' Consent - Deloitte & Touche LLP.
23.2 Consent of Independent Accountants - PricewaterhouseCoopers LLP.
23.3 Accountants' Consent - KPMG LLP.
23.4** Consent of Gray Cary Ware & Freidenrich LLP (Included in Exhibit 5.1).
24** Power of Attorney (included in the Signature Page contained in Part II of the
Registration statement).
</TABLE>
- ----------
** Incorporated by reference to exhibit of same number filed with the
initial registration statement on Form S-3.
17
<PAGE> 20
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post- effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. The undersigned Registrant hereby undertakes to deliver or cause to
be delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
D. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a
18
<PAGE> 21
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
E. The undersigned Registrant hereby undertakes that:
(1) For the purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
19
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing on Form S-3 and has duly caused this amended Registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of San Diego, State of California, on August 17, 1999.
PICO Holdings, Inc.
By: /s/ John R. Hart
---------------------------------
John R. Hart
Chief Executive Officer,
President and Director
(Principal Executive Officer)
20
<PAGE> 23
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
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<S> <C>
5.1** Opinion of Gray Cary Ware & Freidenrich LLP.
23.1 Independent Auditors' Consent - Deloitte & Touche LLP.
23.2 Consent of Independent Accountants - PricewaterhouseCoopers LLP.
23.3 Accountants' Consent - KPMG LLP.
23.4** Consent of Gray Cary Ware & Freidenrich LLP (Included in Exhibit 5.1).
24** Power of Attorney (included in the Signature Page contained in Part II of the
Registration statement).
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** Incorporated by reference to exhibit of same number filed with the
initial registration statement on Form S-3.
21
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 3 to
Registration statement No. 333-70377 of PICO Holdings, Inc. on Form S-3 of our
reports dated March 26, 1999, appearing in the Annual Report on Form 10-K of
PICO Holdings, Inc. for the year ended December 31, 1998 and to the reference to
us under the heading "Experts" in the Prospectus, which is part of this
Registration statement.
Deloitte & Touche LLP
San Diego, California
August 17, 1999
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration
statement on Form S-3 of our reports dated April 7, 1997 on our audits of the
consolidated financial statements and consolidated financial statement schedules
of PICO Holdings, Inc. for the year ended December 31, 1996 included in the
Annual Report on Form 10-K for the year ended December 31, 1998. We also consent
to the reference to our Firm under the caption "Experts".
PricewaterhouseCoopers LLP
San Diego, California
August 17, 1999
<PAGE> 1
EXHIBIT 23.3
ACCOUNTANTS' CONSENT
KPMG LLP
The Board of Directors
Global Equity Corporation
We consent to the incorporation by reference in the Registration statement on
Form S-3 of PICO Holdings, Inc. of our report dated March 17, 1998 relating to
the consolidated statement of financial position of Global Equity Corporation as
at December 31, 1997, and the related consolidated statements of operations,
deficit and changes in financial position for the year then ended, which report
appears in the Annual Report on Form 10-K of PICO Holdings, Inc. dated March 31,
1998 and to the reference to us under the heading "Experts" in the prospectus,
which is part of this registration statement.
"KPMG LLP"
Chartered Accountants
Toronto, Canada
August 17, 1999
