SCHEDULE 14A
(RULE 14A - 101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] CONFIDENTAL, FOR THE USE OF THE
[X] Definitive Proxy Statement COMMISSION ONLY (AS PERMITTED BY
[ ] Definitive Additional Materials RULE 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
PICO HOLDINGS, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: ______
_____________________________________________
(2) Aggregate number of securities to which transaction applies: _________
_____________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ___________
_____________________________________________
(4) Proposed maximum aggregate value of transaction: _____________________
(5) Total fee paid: ______________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ______________________________________________
(2) Form, Schedule or Registration Statement No.: ________________________
(3) Filing Party: ________________________________________________________
(4) Date Filed: __________________________________________________________
PICO HOLDINGS, INC.
875 PROSPECT STREET, SUITE 301
LA JOLLA, CALIFORNIA 92037
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of PICO Holdings, Inc., a California
corporation (the "Company"), will be held at the Museum of Contemporary Art,
Coast Room, 700 Prospect Street, La Jolla, California 92037 on Monday, August 1,
2005 at 9:00 a.m. (PDT) for the following purposes:
1. To elect three directors, for which positions the Board of Directors has
nominated Ronald Langley, John R. Hart, and John D. Weil to serve for three
years until the annual meeting of shareholders in the year 2008 and until
their respective successors have been duly elected and qualified.
2. To transact such other business as may be properly brought before the
meeting and any adjournment thereof.
Shareholders of record at the close of business on June 2, 2005 will be entitled
to notice of and to vote at the Annual Meeting and any adjournment thereof.
By Order of the Board of Directors
/s/ Ronald Langley
-----------------------------------------
Ronald Langley
Chairman of the Board
Dated: June 10, 2005
TO ASSURE YOUR REPRESENTATION AT THE MEETING, WHETHER OR NOT YOU PLAN TO ATTEND,
PLEASE VOTE BY TELEPHONE OR THE INTERNET, OR FILL IN, SIGN AND DATE THE ENCLOSED
PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE AS PROMPTLY AS POSSIBLE. THE GIVING
OF A PROXY WILL NOT AFFECT YOUR RIGHT TO REVOKE SUCH PROXY BY APPROPRIATE
WRITTEN NOTICE OR BY VOTING IN PERSON AT THE MEETING. PLEASE NOTE THAT IF YOUR
SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO
VOTE AT THE MEETING, YOU MUST BRING TO THE MEETING A LETTER FROM THE BROKER,
BANK OR OTHER NOMINEE CONFIRMING YOUR BENEFICIAL OWNERSHIP OF THE SHARES AND YOU
MUST OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
[THIS PAGE INTENTIONALLY LEFT BLANK]
PICO HOLDINGS, INC.
875 PROSPECT STREET, SUITE 301
LA JOLLA, CALIFORNIA 92037
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 1, 2005
The proxy accompanying this Proxy Statement is solicited by the Board of
Directors of PICO Holdings, Inc., a California corporation (the "Company"), to
be voted at the Annual Meeting of Shareholders of the Company (the "Annual
Meeting") to be held at the Museum of Contemporary Art, Coast Room, 700 Prospect
Street, La Jolla, California at 9:00 a.m. (PDT) on Monday, August 1, 2005 and at
any postponement or adjournment thereof. The proxy may be revoked by appropriate
written notice at any time before it is exercised or by voting in person at the
meeting.
GENERAL INFORMATION
A copy of the Company's Annual Report to Shareholders for 2004 accompanies this
Proxy Statement. The Annual Report and these proxy solicitation materials are
being mailed on or about June 10, 2005 to all shareholders entitled to vote at
the meeting.
As of June 2, 2005, the record date for the determination of shareholders
entitled to vote at the Annual Meeting, 12,366,440 shares of Common Stock of the
Company were issued and outstanding, excluding 3,228,261 treasury shares. Each
share of Common Stock entitles the holder to one vote on all matters brought
before the Annual Meeting, except for the 3,228,261 shares held by the Company
and subsidiaries of the Company which may not be voted. Our Bylaws provide that
the presence in person or by proxy of the holders of a majority of the shares
entitled to vote shall constitute a quorum for the transaction of business at
the Annual Meeting of Shareholders.
In voting for the election of directors, shareholders have cumulative voting
rights. Accordingly, each shareholder may cumulate such voting power as such
shareholder possesses and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of shares held by the
shareholder, or distribute such shareholder's votes on the same principle among
two or more candidates, as such shareholder sees fit. However, no shareholder is
entitled to cumulate votes (in other words, cast for any candidate a number of
votes greater than the number of shares of stock held by such shareholder)
unless at least one shareholder has given notice, at the Annual Meeting prior to
the voting, of the shareholder's intention to cumulate votes. If any shareholder
has given such notice, all shareholders may cumulate their votes for nominated
candidates.
The proxy, if returned properly executed and not subsequently revoked by written
notice delivered to the Secretary of the Company or by the shareholder voting in
person at the Annual Meeting, will be voted in accordance with the choice made
by the shareholder thereon. If a choice is not made with respect to any issue,
the proxy will be voted in favor of the items described in this Proxy Statement.
If cumulative voting is permitted in the election of directors at the Annual
Meeting, the proxy holders shall have discretion as to the manner in which votes
represented by the proxy are to be cumulated, unless the proxy indicates the
manner in which such votes shall be cumulated.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by the
inspector of election appointed for the meeting who will also determine whether
or not a quorum is present. The inspector of election will treat abstentions,
and any shares as to which a broker or nominee has indicated that it does not
have discretionary authority to vote on a particular matter, as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum for the election of directors.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of March 31, 2005, with respect
to the beneficial ownership of the Company's Common Stock by (i) each person
known by the Company to be the beneficial owner of more than 5% of Common Stock,
(ii) each director and director nominee, (iii) each Named Officer (as defined in
Executive Compensation and Other Matters), and (iv) all executive officers and
directors as a group. Except as otherwise indicated, each person has sole
investment and voting power, subject to community property laws. Unless
otherwise indicated, the business address for each person is 875 Prospect
Street, Suite 301, La Jolla, CA 92037.
NUMBER OF SHARES
AND NATURE OF PERCENTAGE OWNERSHIP
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OF SHARES
------------------------------------ ----------------------- --------------------
Ronald Langley(2) 3,432,225 27.7%
John R. Hart(3) 3,355,455 27.1%
Robert R. Broadbent(4) 14,007 *
Carlos C. Campbell(5) -0- *
S. Walter Foulkrod, III, Esq. 2,903 *
Richard D. Ruppert, MD (6) 6,298 *
John D. Weil(7) 4,243,332 34.3%
Richard H. Sharpe (8) 8,504 *
Maxim C. W. Webb(9) 1,875 *
W. Raymond Webb 20 *
PICO Equity Investors, L.P. (10) 3,333,333 26.9%
Dimensional Fund Advisors Inc. (11)
1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401 717,476 5.8%
Artisan Partners Limited Partnership, Artisan Investment Corporation,
Andrew A. Ziegler, and Carlene Murphy Ziegler (12)
1000 N. Water Street, Suite 1770, Milwaukee, WI 53202 1,759,931 14.2%
Executive Officers and Directors as a Group (12 persons) 4,403,633 35.6%
----------
* Less than one percent (1%)
(1) Sole voting and investment power unless otherwise indicated.
(2) 15,072 of these shares are held in the Company's 401(k) Plan. Mr. Langley
owns a membership interest in PICO Equity Investors Management, LLC, which
has voting control of 3,333,333 shares of the Company.
(3) 16,422 of these shares are held in the Company's 401(k) Plan. Mr. Hart owns
a membership interest in PICO Equity Investors Management, LLC, which has
voting control of 3,333,333 shares of the Company. The number of shares
shown above does not include 19,940 shares of the Company held in a
deferred compensation plan Rabbi Trust for Mr. Hart.
2
(4) The number of shares shown above does not include 8,183 shares of the
Company held in a deferred compensation plan Rabbi Trust for Mr. Broadbent.
(5) 2,644 shares of the Company are held in a deferred compensation plan Rabbi
Trust for Mr. Campbell.
(6) Dr. Ruppert shares voting and investment power with his wife. The number of
shares shown above does not include 2,505 shares held in a deferred
compensation plan Rabbi Trust for Dr. Ruppert.
(7) Of these shares 909,999 are owned by a partnership which Mr. Weil controls.
Mr. Weil owns a membership interest in PICO Equity Investors Management,
LLC, which has voting control of 3,333,333 shares of the Company. The
number of shares shown above does not include 8,084 shares of the Company
held in a deferred compensation plan Rabbi Trust for Mr. Weil.
(8) The number of shares shown includes 3,586 shares held in the Company's
401(k) Plan.
(9) The number of shares shown includes 1,494 shares held in the Company's
401(k) Plan.
(10) Pursuant to a rights offering conducted by the Company in March 2000, an
investment partnership named PICO Equity Investors, L.P. acquired on March
28, 2000, 3,333,333 newly issued shares which were not subscribed for in
the rights offering. PICO Equity Investors, L.P. is managed by PICO Equity
Investors Management, LLC. PICO Equity Investors Management, LLC is owned
by Mr. Langley, Mr. Hart and Mr. Weil. PICO Equity Investors Management,
LLC will exercise all voting and investment decisions with respect to these
3,333,333 shares for up to ten years. The interest of PICO Investors
Management, LLC in any profits and losses earned on this investment will be
proportional to the capital contributions made to PICO Equity Investors,
L.P. by the partners, i.e., 1,000/50,001,000. There are no other fees or
other management compensation of any kind payable to Mr. Langley, Mr. Hart,
and Mr. Weil.
(11) The Company received a Form 13-G filing from Dimensional Fund Advisors Inc.
in 2005 for calendar year 2004.
(12) The Company received a Form 13-G filing from Artisan Partners Limited
Partnership, Artisan Investment Corporation, Andrew A. Ziegler, and Carlene
Murphy Ziegler in 2005 for calendar year 2004.
1. ELECTION OF DIRECTORS
NOMINEES AND CONTINUING DIRECTORS
The Board of Directors is divided into three classes, with the terms of office
of each class ending in successive years. Pursuant to Section 3.2 of the
Company's Bylaws, the total number of directors has been established as seven.
Three directors of the Company are to be elected for terms ending at the Annual
Meeting of Shareholders in the year 2008 or until their respective successors
have been duly elected and qualified. Pursuant to Nasdaq listing standards, the
Board of Directors has determined that Carlos C. Campbell, S. Walter Foulkrod,
III, Esq., Richard D. Ruppert, MD, and John D. Weil are independent directors as
defined by listing standards for the Nasdaq National Market.
Unless otherwise instructed, the proxy holders named on the enclosed form of
proxy intend to distribute the votes represented by proxies in such proportions
as they deem desirable to elect the three nominees named below or their
substitutes. Although it is not contemplated that any nominee will decline or be
unable to serve, if either occurs prior to the Annual Meeting, a substitute
nominee will be recommended to the Board of Directors by the Nominating
Committee. See "Stock Ownership of Certain Beneficial Owners and Management" for
the number of shares of Common Stock beneficially owned by these nominees.
The Nominating Committee has recommended that Ronald Langley, John R. Hart, and
John D. Weil be nominated for election as directors at the Company's Annual
Meeting of Shareholders on August 1, 2005 for terms ending in 2008. A majority
of the independent directors approved the nomination for election to the Board
of Directors of Ronald Langley, John R. Hart, and John D. Weil. The following
table sets forth information regarding the nominees for election as directors
and the other directors whose terms of office as directors will continue after
the Annual Meeting, 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.
If a quorum is present and voting, the nominees for election as directors
receiving the highest numbers of votes shall be elected. Abstentions and broker
non-votes have no effect on the vote.
3
THE COMPANY'S BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE NOMINEES FOR
ELECTION LISTED BELOW.
NOMINEES STANDING FOR TERMS ENDING IN 2008:
DIRECTOR NAME BUSINESS EXPERIENCE AGE SINCE
------------- ------------------- --- -----
John R. Hart Director of Physicians Insurance Company of Ohio since 1993 and 45 1996
President and CEO since 1995; Director, President and CEO of Global
Equity Corporation from 1995 to 1998 when it was combined with PICO
Holdings, Inc.; Director, Chairman, President and CEO of Vidler Water
Company, Inc. since 1995; Director, President and CEO of PICO
Holdings, Inc. since 1996; Director and Chairman of Citation Insurance
Company since 1996; Director, Chairman, President and CEO of Nevada
Land & Resource Company, LLC since 1997; Director of HyperFeed
Technologies, Inc. since 1997.
Ronald Langley Director of Physicians Insurance Company of Ohio since 1993 and 60 1996
Chairman since 1995; Director and Chairman of Global Equity
Corporation from 1995 to 1998 when it was combined with PICO Holdings,
Inc.; Director of HyperFeed Technologies, Inc. since 1995 and Chairman
since 2004; Director of Vidler Water Company, Inc. since 1995;
Chairman and Director of PICO Holdings, Inc. since 1996; Director of
Citation Insurance Company since 1996; Director of Nevada Land &
Resource Company, LLC since 1997; Director of Jungfraubahn Holding AG
since 2000.
John D. Weil President, Clayton Management Company, an investment company; Director 64 1996
of Allied Health Products, Inc. and Baldwin & Lyons, Inc.; Director of
Physicians since 1987.
DIRECTOR WITH TERM ENDING IN 2007:
Carlos C. Campbell President, C. C. Campbell & Co.; Director of Resource America, Inc.; 67 1998
Director of Netwolves, Inc.; Director of Herley Industries, Inc.
Robert R. Broadbent is currently a member of the class of directors with terms ending in 2007. Mr. Broadbent has
been a Director of PICO Holdings, Inc. since 1996; however, he has notified the Company that he intends to retire
from the Board of Directors on August 1, 2005. Pursuant to Section 3.4 of the Company's By-Laws, the Nominating
Committee is currently searching for a candidate to complete Mr. Broadbent's unexpired term on the Board of
Directors. Such candidate must be recommended by the Nominating Committee and approved by a majority of the
Board's independent directors.
DIRECTORS WITH TERMS ENDING IN 2006:
S. Walter Foulkrod, III, Attorney; owner of one third of the issued and outstanding capital 63 1996
Esq. stock of Foulkrod Ellis Professional Corporation, Attorneys at Law,
Harrisburg, PA; sole owner of S. Walter Foulkrod, III & Associates,
Attorneys at Law, Harrisburg, PA from 1994 through 2000; 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; 74 1996
President of American Society of International Medicine from 1992 to
1993; Director of Physicians since 1988.
4
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has an Audit Committee, a Compensation
Committee, and a Nominating Committee.
The Audit Committee consists of Dr. Ruppert (Chairman) and Messrs. Campbell and
Foulkrod, none of whom has been or is an officer or employee of the Company.
Each member of the Committee in the judgment of the Board is independent as that
term is defined in the listing standards for the Nasdaq National Market. In
2004, this Committee met eight times. The functions of the Audit Committee
include reviewing the accounting principles and practices employed by the
Company and its subsidiaries; meeting with the Company's independent auditors to
review their reports on their audits of the Company's financial statements,
their comments on the internal accounting controls of the Company and the action
taken by management with regard to such comments; reviewing auditor
independence; issuing an Audit Committee report to shareholders; and the
appointment of the Company's independent auditors. The Audit Committee has the
authority, in its discretion, to order interim and unscheduled audits and to
perform such other duties as may be assigned to it from time to time by the
Board of Directors.
The Compensation Committee consists of Messrs. Weil (Chairman) and Campbell, and
Dr. Ruppert. None of its members is or has been an officer or employee of the
Company and the Board of Directors has determined that each member of the
Committee is independent as that term is defined in the listing standards for
the Nasdaq National Market. The Compensation Committee met one time in 2004. The
functions of the Compensation Committee include reviewing and approving the
overall executive compensation program for officers of the Company and its
subsidiaries, considering and reviewing compensation levels for services as a
member of the Board of Directors, approving individual executive officer
compensation packages and recommending to the Board of Directors modifications
of the compensation package for the Chief Executive Officer. The Compensation
Committee's goals are to attract and retain qualified directors and key
executives critical to the long-term success of the Company, to reward
executives for the long-term success of the Company and the enhancement of
shareholder value, and to integrate executive compensation with both annual and
long-term financial results of the Company.
The Nominating Committee met one time in 2004. Its members consist of Messrs.
Langley (Chairman), Broadbent, and Campbell. Mr. Broadbent and Mr. Campbell are
not and have not been officers or employees of the Company. In the judgment of
the Board of Directors, Mr. Broadbent and Mr. Campbell are independent as that
term is defined in the listing standards for the Nasdaq National Market. Mr.
Langley is an employee of the Company. The Committee will consider nominees
recommended by shareholders; such recommendations must be submitted in writing
to the Committee. A copy of the Nominating Committee's Charter was included as
Appendix I to the Company's May 28, 2004 proxy statement.
AUDIT COMMITTEE FINANCIAL EXPERT
Pursuant to Section 407 of the Sarbanes-Oxley Act of 2002, the Board of
Directors of the Company has determined that Richard D. Ruppert, MD is qualified
as an audit committee financial expert as defined in Regulation S-K, Section
401(h) of the Securities Exchange Act of 1934. Dr. Ruppert is independent as
that term is defined pursuant to Nasdaq listing standards.
DIRECTORS' ATTENDANCE
In 2004, there were four meetings of the Board of Directors of the Company. All
of the directors attended 75% or more of the aggregate of their respective Board
of Directors and Committee meetings.
It is the policy of the Board of Directors that each director, in the absence of
extenuating circumstances, should attend the Company's Annual Meeting of
Shareholders in person. All directors attended the Company's 2004 Annual Meeting
of Shareholders.
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, 2004.
5
SHAREHOLDER NOMINATION OF DIRECTORS
Nominations other than those made by the Directors of the Company must be in
writing and be delivered or mailed to the Secretary of the Company not less than
60 days prior to the Annual Meeting. Such nominations must include the
information regarding each nominee required by the Bylaws of the Company.
Nominations not made according to these procedures will be disregarded.
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth information concerning the compensation for the
fiscal year ended December 31, 2004 of the (i) Chief Executive Officer of the
Company and (ii) the four other most highly compensated executive officers of
the Company as of December 31, 2004, whose salary and bonus exceeded $100,000.
(Messrs. Langley, Hart, Sharpe, Maxim C. W. Webb, and W. Raymond Webb are
sometimes hereinafter referred to as "Named Officers".) Amounts under the
caption "Bonus" are amounts earned for performance during the fiscal year
indicated including amounts paid after the end of the year.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION SECURITIES
------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS/SARS COMPENSATION
--------------------------- ---- -------- -------- ------------ ------------
Chief Executive Officer:
John R. Hart(1)(2) 2004 $908,460 $619,094 -0- $29,250(7)
President and Chief 2003 $882,000 $467,435 838,356(8) $28,000(7)
Executive Officer 2002 $840,000 $730,934 -0- $22,421(7)
Executive Officers:
Ronald Langley(2)(3) 2004 $908,460 $619,094 -0- $29,250(7)
Chairman of the 2003 $882,000 $467,435 752,395(8) $28,000(7)
Board of Directors 2002 $840,000 $730,934 -0- $22,421(7)
Richard H. Sharpe(4) 2004 $283,909 $193,477 -0- $26,603(7)
Chief Operating Officer 2003 $275,640 $146,081 135,268(8) $25,539(7)
2002 $262,512 $228,427 -0- $20,077(7)
Maxim C. W. Webb(5) 2004 $196,730 $134,066 -0- $25,948(7)
Chief Financial Officer 2003 $190,999 $101,224 71,137(8) $24,580(7)
and Treasurer 2002 $178,500 $155,323 -0- $19,602(7)
W. Raymond Webb(6) 2004 $154,500 $ 52,644 -0- $20,378(7)
Vice President, Investments 2003 $150,000 $ 39,748 40,000(8) $19,044(7)
----------
(1) Mr. Hart became President and CEO of the Company on November 20, 1996. He
became President and CEO of Physicians Insurance Company of Ohio on July
15, 1995.
(2) On January 1, 2002, Mr. Langley and Mr. Hart each signed employment
agreements with the Company. Each employment agreement provides for annual
compensation of $800,000, subject to annual adjustment in January of each
year in the same percentage applicable to the Company's other staff members
in an amount deemed adequate to provide for inflation, cost of living, and
merit increases based on the Consumer Price Index and major compensation
studies; see Report of the Compensation Committee.
6
(3) Mr. Langley became Chairman of the Board of Directors of Physicians
Insurance Company of Ohio on July 15, 1995. He became Chairman of the Board
of Directors of the Company on November 20, 1996.
(4) Mr. Sharpe became Chief Operating Officer of Physicians Insurance Company
of Ohio on June 3, 1994. He became Chief Operating Officer of the Company
on November 20, 1996.
(5) Mr. Maxim C. W. Webb became Chief Financial Officer and Treasurer on May
14, 2001. Prior to that he was Vice President, Investments of the Company.
(6) Mr. W. Raymond Webb became Vice President, Investments of the Company on
April 18, 2003. Prior to that he was Chief Investment Analyst.
(7) This 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) This represents stock appreciation rights granted on July 17, 2003 pursuant
to the PICO Holdings, Inc. 2003 Stock Appreciation Rights Program (the "SAR
Program"), a cash-only stock appreciation rights plan, as approved by the
Company's shareholders on July 17, 2003.
DIRECTORS' COMPENSATION
Directors who are not officers or employees of the Company or its subsidiaries
receive an annual retainer of $30,000. For calendar year 2004, each Director who
was not an officer or employee of the Company or its subsidiaries received a
$2,000 fee for each Board and Committee meeting attended in person or by
telephone. There is a limit of $4,000 per day in Board and Committee fees to any
one Director. Any Director attending an educational activity or seminar on
behalf of the Company receives a fee of $1,000 per day plus expenses.
At its March 14, 2005 meeting, the Board of Directors increased Board and
Committee compensation as follows, retroactive to January 1, 2005. Directors who
are not officers or employees of the Company or its subsidiaries receive an
annual retainer of $35,000. The Chairman of the Audit Committee receives an
additional annual retainer of $10,000, and the other members of the Audit
Committee each receive an additional annual retainer of $5,000. Each Director
who is not an officer or employee of the Company or its subsidiaries also
receives a $2,000 fee for each Board and Committee meeting attended in person or
by telephone. There is a limit of $4,000 per day in Board and Committee fees to
any one Director. Any nonemployee Director attending an educational activity or
seminar on behalf of the Company receives a fee of $1,000 per day plus expenses.
OPTION GRANTS/STOCK APPRECIATION RIGHTS ("SAR") GRANTS IN LAST FISCAL YEAR
None of the Named Officers received or was granted stock options or stock
appreciation rights in the year ended December 31, 2004.
7
OPTION AND SAR EXERCISES AND FISCAL 2004 YEAR-END VALUE
The following table provides information concerning stock appreciation rights
held during December 31, 2004 by the Named Officers. The Company had no
outstanding stock options at any time during 2004.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR-END SAR VALUES
NUMBER OF SARS
EXERCISED
IN NUMBER OF SECURITIES VALUE OF UNEXERCISED
2004 UNDERLYING UNEXERCISED IN-THE-MONEY SARS
-------------------- SARS AT 12/31/04(1) AT 12/31/04(1)(2)
VALUE --------------------------- ---------------------------
NAME EXERCISED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------- -------- ----------- ------------- ----------- -------------
Ronald Langley(1) -0- -0- 752,395 -0- $6,250,237 -0-
John R. Hart(1) -0- -0- 838,356 -0- $7,405,926 -0-
Richard H. Sharpe(1) -0- -0- 135,268 -0- $ 873,680 -0-
Maxim C. W. Webb(1) -0- -0- 71,137 -0- $ 429,123 -0-
W. Raymond Webb(1) 8,000 $32,000 32,000 -0- $ 184,640 -0-
----------
(1) This applies to stock appreciation rights in the SAR Program approved by
the Company's shareholders on July 17, 2003 and granted by the Company on
that date. No stock options or call options were outstanding after July 17,
2003.
(2) Based on the closing price of the Company's Common Stock on December 31,
2004 on the Nasdaq National Market of $20.77 per share.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT, AND CHANGE IN CONTROL
ARRANGEMENTS
Mr. Langley and Mr. Hart entered into new employment agreements effective
January 1, 2002 with the Company for an additional four years for a base salary
of $800,000 each annually, subject to adjustment in January of each year. This
cash compensation was based on an amount approximately equal to 80% of peer
group salary levels. The current employment agreements provide that if the
employee is terminated without cause on or after January 1, 2003 and prior to
December 31, 2005, the employee shall be paid a lump sum of $2.4 million minus
the amount paid to the employee as base salary after January 1, 2003 to the date
of termination. In addition, the employee shall be paid the pro rata portion of
any annual incentive award payable to the employee for the year in which the
employee was terminated.
These employment agreements also include a change in control clause providing
that if there was a change in control before January 1, 2004, the Company was
required to 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. These change in control clauses expired on January 1,
2004; see Report of the Compensation Committee.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to a rights offering conducted by the Company in March 2000, an
investment partnership named PICO Equity Investors, L.P. acquired on March 28,
2000, 3,333,333 newly issued shares which were not subscribed for in the rights
offering. PICO Equity Investors, L.P. is managed by PICO Equity Investors
Management, LLC. PICO Equity Investors Management, LLC is owned by Mr. Langley,
Mr. Hart and Mr. Weil. PICO Equity Investors Management, LLC will exercise all
voting and investment decisions with respect to these 3,333,333 shares for up to
ten years. The interest of PICO Investors Management, LLC in any profits and
losses earned on this investment will be proportional to the capital
contributions made to PICO Equity Investors, L.P. by the partners, i.e.,
1,000/50,001,000. There are no other fees or other management compensation of
any kind payable to Mr. Langley, Mr. Hart, and Mr. Weil.
8
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
Messrs. Weil and Campbell, and Dr. Ruppert, serve as members of the Compensation
Committee. None of these individuals is, or has been, an employee or officer of
the Company.
REPORT OF THE COMPENSATION COMMITTEE
COMMITTEE MEMBERS
The three-member Compensation Committee of the Board of Directors is a standing
committee. Mr. Weil is the chairman and Mr. Campbell 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 portion 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.
The Compensation Committee also reviews the level of compensation paid to
nonemployee members of the Company's Board of Directors and makes
recommendations to the Board of Directors to modify the level of nonemployee
directors' compensation when appropriate.
EXECUTIVE COMPENSATION PHILOSOPHY
The Board of Directors of the Company's predecessor 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:
- 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.
- 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
competition for senior executives with the skills, expertise and talent
demonstrated by the Company's top two executives.
- 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 used to determine the most relevant
marketplace compensation levels and to compare actual Company compensation
levels.
- 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:
- To provide a total compensation package that:
- is competitive with market rates for executives with similar skill,
talent and job requirements.
9
- 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.
- 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.
- To link executive rewards to shareholder interests by:
- tying incentive awards to growth in book value and increased market
price per share.
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 Company utilized stock option grants at various times beginning in 1995 to
incentivize directors, officers, consultants, and certain employees. The primary
purpose of these options plans was to encourage the option holders to increase
shareholders equity, by providing a mechanism whereby the option holders could
participate in increased shareholders equity.
However, the Compensation Committee reached the conclusion that the stock
options previously granted by the Company were no longer as favorable to the
Company or as desirable to the option holders as stock appreciation rights, due
to a number of factors. These factors are: (1) the accounting treatment for
stock appreciation rights is more transparent to shareholders than for stock
options; (2) the Company has a relatively small average daily trading volume,
which could act to discourage option holders from exercising options at what the
option holder might deem to be an appropriate time; (3) option holders are
frequently subject to legal restrictions preventing the exercise of stock
options due to the possession of material, non-public information by an option
holder; (4) there is substantial doubt about the continued availability of
same-day, "cashless" exercises due to the enactment of the Sarbanes-Oxley Act of
2002. The end result is that due to the above factors, the stock options
previously granted by the Company have not provided the liquidity to option
holders that was envisioned when those stock options were granted by the
Company; and (5) since no new shares of stock are issued when a stock
appreciation right is exercised, stock appreciation rights are not dilutive to
existing shareholders, unlike the exercise of stock options where new shares of
stock are issued.
After review and consideration of several alternatives, and after consultations
with the Company's professional advisors, the Compensation Committee recommended
and the Board of Directors approved the PICO Holdings, Inc. 2003 Stock
Appreciation Rights Program (the "SAR Program"). The Company's shareholders
approved the SAR Program on July 17, 2003. The Compensation Committee believes
that the SAR Program will provide a comparable incentive while providing
increased liquidity to participants in the SAR Program. Under the SAR Program as
approved by the Company's shareholders on July 17, 2003, all outstanding stock
options and call options previously granted by the Company were irrevocably and
unconditionally surrendered. Each former option holder (except one employee who
had 100,000 stock options and who received 20,000 stock appreciation rights) and
each call option holder received on July 17, 2003 an equivalent number of stock
appreciation rights. Each stock appreciation right has the same exercise price
as the stock options and call options. The stock appreciation rights have no
expiration date. All stock appreciation rights were fully vested on July 17,
2003. Only 20% of each participant's initial number of stock appreciation rights
may be exercised in any twelve month period; however, the Compensation Committee
can authorize the holder of a stock appreciation right to exercise more than 20%
in a twelve month period for good cause shown, in the Committee's sole
discretion. Upon exercise of a stock appreciation right, the participant will
receive in cash from the Company an amount equal to the excess of the fair
market value of the Company's stock over the exercise price.
The Compensation Committee believes that stock appreciation rights provide an
incentive to participants to increase the Company's shareholders equity while
providing liquidity to the participants in the SAR Program.
10
The Compensation Committee has considered the provisions of Section 162(m) of
the Internal Revenue Code and related income tax regulations which restrict the
deductibility of certain compensation paid to the Company's Chief Executive
Officer and each of the four most highly compensated officers holding office at
the end of any year, to the extent such compensation paid to any of these
officers exceeds $1,000,000 in any year and fails to qualify for an exemption
from the restriction. In view of the Company's compensation structure, the
Committee believes it is unlikely that this will impact the Company in the near
future. The Compensation Committee will continue to monitor this.
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. The base compensation was
established based on 80% of peer group cash compensation levels.
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 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 2004 was
approximately -1.84%.
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 long-term incentives 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.
DISCUSSION OF 2004 COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
As stated above, the Compensation Committee believes the interest of the
Company's shareholders is best served by aligning the CEO's short-term
compensation, over and above a competitive fixed annual rate of pay, which was
based on 80% of peer group cash compensation levels in 1996, with an increase in
the Company's book value per share and higher market value per share.
Specifically, a threshold was set at 80% of the S&P 500's annualized total
return for the five previous calendar years, including 2004. For 2004, this
threshold was approximately -1.84%. Since the Company's book value per share
increased by 5.4% in 2004 prior to the accrual of bonus incentive compensation,
a bonus of $619,094 will be paid for calendar year 2004.
The Committee believes that the compensation provided by this combination of
fixed annual compensation and short-term and long-term incentives provides a
mechanism to fairly compensate the CEO while providing the CEO with a strong
incentive to maximize shareholder value.
Mr. Langley and Mr. Hart each entered into new employment agreements effective
January 1, 2002 with the Company for an additional four years. Total
compensation to Mr. Langley and Mr. Hart under these employment agreements is
$800,000 each on an annual basis, subject to adjustment in January of each year.
The $800,000 base salary in each employment agreement is subject to annual
adjustment in January of each year in the same percentage applicable to the
Company's other staff members in an amount deemed adequate to provide for
inflation, cost of living, and merit increases based on the Consumer Price Index
and major compensation studies.
The current employment agreements provide that if the employee is terminated
without cause on or after January 1, 2003 and prior to December 31, 2005, the
employee shall be paid a lump sum of $2.4 million minus the amount paid to the
employee as base salary after January 1, 2003 to the date of termination. In
addition, the employee shall be paid the pro rata portion of any annual
incentive award payable to the employee for the year in which the employee was
terminated.
11
These employment agreements also include a change in control clause providing
that if there was a change in control before January 1, 2004, the Company was
required to 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. These change in control provisions expired on January 1,
2004.
Compensation Committee
John D. Weil, Chairman
Carlos C. Campbell
Richard D. Ruppert, MD
REPORT OF THE AUDIT COMMITTEE
The following is a report of the Audit Committee with respect to the Company's
audited financial statements for the fiscal year ended December 31, 2004.
The Audit Committee of the Board of Directors assists the Board in fulfilling
its responsibility for oversight of the quality and integrity of the accounting,
auditing and reporting practices of the Company. The Audit Committee operates
pursuant to a written Charter adopted by the Board. A copy of this Charter was
included as Appendix II to the Company's May 27, 2003 proxy statement. The
members of the Committee as of December 31, 2004 are listed at the end of this
report. The Audit Committee has discussed with the Board the level of financial
expertise of its members and the Board has determined that the Committee
possesses the requisite expertise in the interpretation of financial statements.
Pursuant to Section 407 of the Sarbanes-Oxley Act of 2002, the Board of
Directors of the Company has determined that Richard D. Ruppert, MD, is
qualified as an audit committee financial expert as defined in Regulation S-K,
Section 401(h) of the Securities Exchange Act of 1934.
Management is responsible for the Company's internal controls, the financial
reporting process and the representations set forth in the statements regarding
the financial condition of the Company. The independent auditor of the Company
is responsible for both auditing the financial statements presented by
management and verifying that such statements are produced in accordance with
generally accepted accounting principles. The Committee is responsible for those
matters set forth in its Charter. In this regard, the Committee meets separately
with management, including the Chief Financial Officer, and the auditor.
In the foregoing context, the Committee has reviewed with the auditor both the
engagement letter and its fees. The Committee has also discussed with the
auditor, with and without management present, the auditor's evaluations of the
Company's internal accounting controls and the Company's financial reporting
systems, policies, procedures and processes. The Committee also discussed with
the auditor other matters required by the Statement on Auditing Standards No.
61, Communication with Audit Committees, as amended by SAS No. 90, Audit
Committee Communications and Rule 207of Regulation S-X. The Committee has also
reviewed and discussed the Company's audited financial statements with
management.
In 2004, the Committee continued to pay particular attention to the
implementation dates and the requirements of the Sarbanes-Oxley Act of 2002.
The auditor provided to the Committee the written disclosures and the letter
required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees. The Committee discussed the auditor's
independence with both management and the auditor.
Based upon the independent representations of management and the auditor, the
Committee's review of such representations and the report of the auditor to the
Committee, the Committee's review of the audited financial statements of the
Company and its discussions with management and the auditor, the Committee
recommended to the Board that the audited financial statements be included in
the Company's annual report on Form 10-K for the fiscal year ended December 31,
2004.
The undersigned members of the Audit Committee have submitted this Report of the
Audit Committee:
Richard D. Ruppert, MD, Chairman
Carlos C. Campbell
S. Walter Foulkrod, III, Esq.
12
FEES PAID TO DELOITTE & TOUCHE LLP
Aggregate fees billed to the Company for the fiscal years ended December 31,
2003 and December 31, 2004 by the Company's principal accounting firm, Deloitte
& Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective
affiliates were as follows. Fees for 2004 include fees billed by Deloitte &
Touche LLP to HyperFeed Technologies, Inc. since Deloitte & Touche LLP was the
principal accounting firm for HyperFeed Technologies, Inc. in 2004. In 2003 KPMG
LLP was the principal accounting firm for HyperFeed Technologies, Inc.
2003 2004
-------- --------
Audit Fees (a) $469,733 $959,772
Tax Fees (b) $323,514 $327,630
Audit-Related Fees (c) $ 10,914 $ 43,305
All Other Fees -0- -0-
(a) Fees for audit services billed in 2003 consisted of:
- Audit of the Company's annual financial statements
- Reviews of the Company's quarterly financial statements
- Statutory and regulatory audits and consents
Fees for audit services billed in 2004 consisted of:
- Audit of the Company's annual financial statements
- Reviews of the Company's quarterly financial statements
- Statutory and regulatory audits, consents and other services
related to Securities and Exchange Commission matters
- Audit of internal control over financial reporting, as
required by the Sarbanes-Oxley Act of 2002, Section 404
(b) Fees for tax services billed in 2003 and 2004 consisted of tax
compliance and tax planning and advice:
- Fees for tax compliance services totaled $233,983 and
$136,107 in 2003 and 2004, respectively. Tax compliance
services are services rendered based upon facts already in
existence or transactions that have already occurred to
document, compute, and obtain government approval for
amounts to be included in tax filings and consisted of:
i. Federal, state and local income tax return assistance
ii. Assistance with tax return filings in certain foreign
jurisdictions
iii. Assistance with tax audits and appeals
- Fees for tax planning and advice services totaled $89,531
and $191,523 in 2003 and 2004, respectively. Tax planning
and advice are services rendered with respect to proposed
transactions or that alter a transaction to obtain a
particular tax result. Such services consisted of :
i. Tax advice related to structuring certain proposed
mergers, acquisitions and disposals
ii. Tax advice related to the alteration of employee
benefit plans
iii. Tax advice related to an intra-group restructuring
(c) This represents audit-related fees for the PICO Holdings, Inc.
Employees 401(k) Retirement Plan and Trust.
In considering the nature of services provided by the independent auditor, the
Audit Committee determined that such services are compatible with the provision
of independent audit services. The Audit Committee discussed these services with
the independent auditor and Company management to determine that they are
permitted under the rules and regulations concerning auditor independence
promulgated by the U. S. Securities and Exchange Commission (the "SEC") to
implement the Sarbanes-Oxley Act of 2002, as well as the American Institute of
Certified Public Accountants.
INDEPENDENT AUDITOR
Deloitte & Touche LLP was the Company's independent auditing firm (Independent
Registered Public Accounting Firm) for fiscal year 2004. Representatives of
Deloitte & Touche LLP are expected to be present at the meeting, will have the
opportunity to make any statements they desire, and will be available to respond
to appropriate questions from shareholders.
13
The Audit Committee has not selected or appointed an independent auditing firm
for the fiscal year ending December 31, 2005. The Audit Committee customarily
makes this selection and appointment in the third quarter.
PRE-APPROVAL POLICY
Pursuant to Sections 201 and 202 of the Sarbanes-Oxley Act of 2002, the Audit
Committee has recommended and the Board of Directors has approved pre-approval
guidelines for all audit and non-audit services to be provided by the Company's
independent auditing firm. These pre-approval guidelines are:
(1) At the earliest possible date, management shall inform the Audit Committee
of each audit or non-audit service which management desires the Company's
independent auditing firm to perform.
(2) Management shall promptly provide to the Audit Committee detailed
information about the particular services to be provided by the Company's
independent auditing firm.
(3) The supporting documentation provided to the Audit Committee by management
shall be sufficiently detailed so that the Audit Committee knows precisely
what services it is being asked to pre-approve.
(4) As permitted by Section 202(3), the Audit Committee has delegated
pre-approval authority to the Chairman of the Audit Committee. All such
pre-approvals shall be presented to the full Audit Committee at the Audit
Committee's next scheduled meeting.
(5) Approval by the Audit Committee of all non-audit services shall be
disclosed by the Company in its 10-Q and 10-K filings, as required by
Section 202(2).
STOCK PRICE PERFORMANCE GRAPH
The graph below compares cumulative total return of the Company, the S&P 500
Index, and the Russell 2000 Index for the period December 31, 1999 through
December 31, 2004.
COMPARISON 5-YEAR CUMULATIVE TOTAL RETURN
AMONG PICO HOLDINGS, INC., S&P 500 INDEX, AND RUSSELL 2000 INDEX
(PERFORMANCE GRAPH)
Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04
------ ------ ------ ------ ------ ------
PICO Holdings 100.00 101.02 101.52 107.54 127.27 168.69
S&P 500 Index 100.00 90.97 80.19 62.57 80.32 88.94
Russell 2000 Index 100.00 97.14 99.62 79.36 116.58 137.89
ASSUMES $100 INVESTED ON DEC. 31, 1999
FISCAL YEAR ENDING DEC. 31, 2004
The graph assumes $100 was invested on December 31, 1999 in the Company's Common
Stock, the S&P 500 Index, and the Russell 2000 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.
14
CODE OF ETHICS
The Company has adopted a Code of Ethics applicable to all directors, officers,
and employees. A copy may be obtained without charge by writing to the Secretary
of the Company.
PROCESS FOR SHAREHOLDERS TO COMMUNICATE WITH BOARD OF DIRECTORS
The Board of Directors of the Company has established the following process
whereby shareholders may communicate with the Board of Directors. Any
shareholder wishing to communicate with the Board of Directors as a whole, or
with a specific director or directors, may send a letter or communication to the
Secretary of the Company. The Secretary will immediately forward said letter or
communication to the Board of Directors, or to the directors or director
specified. If no director is specified, the Secretary of the Company will
immediately forward said letter or communication to the Chairman of the Board of
Directors.
SOLICITATION OF PROXIES
The Board of Directors is not aware of any matters other than those specifically
stated in the Notice of Annual Meeting which are to be presented for action at
the meeting. However, should any further matter requiring a vote of the
shareholders arise, it is the intention of the persons named in the proxy to
vote the proxy in accordance with their judgment.
The cost of this solicitation of proxies is being borne by the Company. In
addition to the solicitation of proxies by use of the mail, the Company may use
the services of one or more directors, officers or other regular employees of
the Company (who will receive no additional compensation for their services in
such solicitation) to solicit proxies personally and by telephone. Arrangements
will be made with brokerage firms and other custodians, nominees and fiduciaries
to forward solicitation material to the beneficial owners of the stock held of
record by such persons, and the Company will reimburse such firms or persons for
reasonable expenses actually incurred by them in so doing.
SHAREHOLDER PROPOSALS TO BE PRESENTED
AT NEXT ANNUAL MEETING
Proposals of stockholders intended to be presented at the next annual meeting of
the stockholders of the Company must be received by the Company at its offices
no later than January 27, 2006, and satisfy the conditions established by the
Securities and Exchange Commission for stockholder proposals to be included in
the Company's Proxy Statement for that meeting.
TRANSACTION OF OTHER BUSINESS
At the date of this Proxy Statement, the only business that the Board of
Directors intends to present or knows that others will present at the meeting is
as set forth above. If any other matter or matters are properly brought before
the meeting, or any adjournment thereof, it is the intention of the persons
named in the accompanying form of proxy to vote the proxy on such matters in
accordance with their best judgment.
June 10, 2005
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PICO HOLDINGS, INC. MMMMMMMMMMMM
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MR A SAMPLE
DESIGNATION (IF ANY)
ADD 1
ADD 2
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ADD 6 C 1234567890 J N T
[ ] Mark this box with an X if
you have made changes to your
name or address details above.
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ANNUAL MEETING PROXY CARD
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PLEASE REFER TO THE REVERSE SIDE FOR TELEPHONE AND INTERNET VOTING INSTRUCTIONS.
A ELECTION OF DIRECTORS
1. The Board of Directors recommends a vote FOR the listed nominees.
For Withhold
01 - John R. Hart [ ] [ ]
02 - Ronald Langley [ ] [ ]
03 - John D. Weil [ ] [ ]
B AUTHORIZED SIGNATURES - SIGN HERE - THIS SECTION MUST BE COMPLETED FOR YOUR INSTRUCTIONS TO BE EXECUTED.
Note: Please sign exactly as name appears on this card. Joint owners should each sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title.
Signature 1 - Please keep signature within the box Signature 2 - Please keep signature within the box Date (mm/dd/yyyy)
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1 U P X HHH P P P P 005725
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PROXY - PICO HOLDINGS, INC.
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PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John R. Hart and James F. Mosier, or either of
them acting alone, as proxies, each with the power to appoint his substitute,
and hereby authorizes them to represent, and to vote as designated below, all
the shares of Common Stock of PICO Holdings, Inc. (the "Company") held of record
by the undersigned on June 2, 2005 at the Annual Meeting of Shareholders of the
Company to be held at the Museum of Contemporary Art, Coast Room, 700 Prospect
Street, La Jolla, California 92037 on August 1, 2005 at 9:00 a.m. (PDT), and at
any adjournment thereof.
(The Board of Directors recommends a vote FOR Item 1.)
1. Election of three Directors for terms of three years ending in 2008. The
nominees are John R. Hart, Ronald Langley and John D. Weil.
2. To transact such other business as may be properly brought before the meeting
and any adjournment thereof.
WHEN PROPERLY EXECUTED, THESE INSTRUCTIONS WILL BE VOTED IN THE MANNER DIRECTED
ON THE REVERSE SIDE OF THIS CARD; IF YOU DO NOT PROVIDE DIRECTION, THIS PROXY
WILL BE VOTED FOR ITEM 1.
YOUR VOTE IS IMPORTANT!
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
SEE REVERSE SIDE
TELEPHONE AND INTERNET VOTING INSTRUCTIONS
YOU CAN VOTE BY TELEPHONE OR INTERNET! AVAILABLE 24 HOURS A DAY 7 DAYS A WEEK!
Instead of mailing your proxy, you may choose one of the two voting methods
outlined below to vote your proxy.
To vote using the Telephone (within U.S. and Canada)
o Call toll free 1-877-785-2638 in the United States or Canada any time on a
touch tone telephone. There is NO CHARGE to you for the call.
o Follow the simple instructions provided by the recorded message.
To vote using the Internet
o Go to the following web site:
WWW.COMPUTERSHARE.COM/US/PROXY
o Enter the information requested on your computer screen and follow the simple
instructions.
C0123456789 12345
IF YOU VOTE BY TELEPHONE OR THE INTERNET, PLEASE DO NOT MAIL BACK THIS PROXY
CARD.
PROXIES SUBMITTED BY TELEPHONE OR THE INTERNET MUST BE RECEIVED BY 1:00 A.M.,
CENTRAL TIME, ON AUGUST 1, 2005.
THANK YOU FOR VOTING