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                                                                  Exhibit 10.59





                            STOCK PURCHASE AGREEMENT

                                 BY AND BETWEEN

                   STRONGWOOD INSURANCE HOLDINGS CORPORATION,

                      PHYSICIANS INSURANCE COMPANY OF OHIO

                                       AND

                               PICO HOLDINGS, INC.

                                    Regarding

                            Sequoia Insurance Company

                                OCTOBER 21, 2002


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                                TABLE OF CONTENTS

                                                                          Page
                                                                          ----

1.   INTERPRETATION.........................................................2

2.   SALE AND PURCHASE OF SHARES............................................8

3.   CLOSING................................................................9

4.   CONDITIONS PRECEDENT..................................................13

5.   REPRESENTATIONS AND WARRANTIES OF PHYSICIANS..........................15

6.   REPRESENTATIONS AND WARRANTIES OF PICO................................34

7.   REPRESENTATIONS AND WARRANTIES OF STRONGWOOD..........................35

8.   PRE-CLOSING CONDUCT OF THE BUSINESS...................................37

9.   ADDITIONAL AGREEMENTS.................................................40

10.  INDEMNIFICATION.......................................................45

11.  GUARANTEE BY PICO.....................................................49

12.  FEES AND OTHER EXPENSES...............................................50

13.  DELEGATION AND ASSIGNMENT.............................................50

14.  AMENDMENTS............................................................51

15.  NOTICES...............................................................51

16.  DISPUTE RESOLUTION....................................................52

17.  SEVERABILITY..........................................................54

18.  WAIVER, RIGHTS AND REMEDIES...........................................54

19.  COUNTERPARTS..........................................................54

20.  GOVERNING LAW.........................................................54

21.  FURTHER ASSURANCES....................................................54

22.  TERMINATION...........................................................55




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                                TABLE OF CONTENTS

                                   (continued)

                                                                          Page
                                                                          ----

23.  NAME..................................................................56

24.  ENTIRE CONTRACT.......................................................56

















                                       ii
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                            STOCK PURCHASE AGREEMENT

         THIS STOCK PURCHASE AGREEMENT (the "AGREEMENT")is made on October 21,
2002 by and between STRONGWOOD INSURANCE HOLDINGS CORPORATION, a Delaware
corporation ("STRONGWOOD"), PHYSICIANS INSURANCE COMPANY OF OHIO, an Ohio
corporation ("PHYSICIANS"), and PICO HOLDINGS, INC., a California corporation
("PICO"), collectively, the "PARTIES."

                                    RECITALS

         A. PHYSICIANS owns all of the issued and outstanding shares of capital
stock of Sequoia Insurance Company, a California corporation ("SEQUOIA" or the
"COMPANY").

         B. Sequoia is a licensed property and casualty insurer domiciled in
California and licensed to transact the business of insurance by the state
insurance departments of California and Nevada. Sequoia owns all of the issued
and outstanding shares of Personal Express Insurance Services Inc.

         C. STRONGWOOD wishes to buy, and PHYSICIANS wishes to sell, all the
issued and outstanding shares of Sequoia subject to the provisions of this
Agreement.

         D. It is the further intention of STRONGWOOD and PHYSICIANS that as a
result of the purchase of the shares of capital stock of Sequoia pursuant to
this Agreement, STRONGWOOD will acquire at closing, in essence, a corporation
(Sequoia) that consists of or holds title to (i) certain licenses allowing it to
continue to do business as a property and casualty insurance company in
California and Nevada, (ii) certain existing contracts, including a lease for
certain office space in Monterey, California currently used by Sequoia, and the
contracts between Sequoia and its independent insurance agents, (iii) employees,
and (iv) all the issued and outstanding shares of Personal Express Insurance
Services, Inc.

         E. STRONGWOOD and PHYSICIANS desire to make certain representations,
warranties, covenants and agreements in connection with STRONGWOOD's acquisition
of the capital stock of Sequoia pursuant to this Agreement and to prescribe
various conditions to such acquisition.

         F. As an inducement to STRONGWOOD to enter into this Agreement, PICO
will guarantee the obligations of PHYSICIANS hereunder.

         G. As an inducement to PHYSICIANS and PICO to enter into this
Agreement, J.P. MORGAN PARTNERS, LLC, a New York limited liability company
("JPMP"), has delivered to STRONGWOOD an Equity Commitment Letter dated
concurrently with this Agreement, in the form attached to this Agreement as
EXHIBIT A (the "EQUITY COMMITMENT LETTER").

         H. As an inducement to STRONGWOOD entering into this Agreement and JPMP
to deliver the Equity Commitment Letter, Charles Bancroft has entered into a
Non-Solicitation Agreement with Sequoia, dated October 4, 2002 (the "BANCROFT
NON-SOLICITATION AGREEMENT").



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         I. The parties do not intend the foregoing recitals to be terms and
conditions of the agreements or to alter the terms and conditions of the
agreements.

                                    AGREEMENT

         NOW THEREFORE, in reliance on the foregoing and in and for the
consideration and the mutual covenants set forth in this Agreement, the parties
agree as follows:

1.       INTERPRETATION

         1.1 In this Agreement, unless the context otherwise requires:

         "AFFILIATES" means with respect to the Parties:

                  (a) another organization of which the Parties or their
respective Subsidiaries, as the case may be, own in excess of 10% of the
outstanding capital stock;

                  (b) another organization of which such first organization may
be deemed to be in control as defined in section 1215 of the Code;

                  (c) another organization directly or indirectly controlling,
controlled by or under common control with any such first organization or

                  (d) any director or employee of any such organization.

         "AFFILIATED INVESTMENTS" as defined in Section 2.2.

         "AGENT" any current insurance agent, general agent, managing general
agent, broker, or other similarly situated person with respect to Sequoia or of
any organization with which Sequoia has or had a marketing relationship.

         "BANCROFT NON-SOLICITATION AGREEMENT" shall have the meaning ascribed
to such in term Recital H.

         "BUSINESS" means the property-casualty insurance business and related
activities conducted by Sequoia and its Subsidiaries.

         "BUSINESS DAY" means a day other than a Saturday, Sunday, any legal
holiday in California or New York, or any other day when most commercial banks
in New York or California are not open to the public to transact business.

         "CERCLA" means the Comprehensive Environment Response, Compensation and
Liability Act, as amended, 42 U.S.C.ss.9601 et seq.

         "CLOSING" and "CLOSING DATE" shall have the meanings ascribed to such
terms, respectively, in Section 3.1.



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         "CLOSING BALANCE SHEETS," "CLOSING GAAP BALANCE SHEET," "CLOSING
STATUTORY BALANCE SHEET," "CLOSING STATUTORY CAPITAL AND SURPLUS," AND "CLOSING
TANGIBLE NET WORTH" shall have the meaning ascribed to such terms, respectively,
in Section 3.4.

         "CLOSING FINANCIAL STATEMENTS" shall have the meaning ascribed to such
term in Section 3.5.

         "CODE" means the California Insurance Code and related regulations
thereunder.

         "COMPANY INTELLECTUAL PROPERTY" shall have the meaning ascribed to such
term in Section 5.19(b).

         "CONSENT" any consent, approval, authorization, waiver, permit, grant,
franchise, concession, agreement, license, certificate, exemption, order,
registration, declaration, filing, report or notice of, with or to any Person.

         "DAMAGES" means any loss, damage, injury, decline in value, liability,
claim, demand, settlement, judgment, award, fine, penalty, Tax, fee (including
reasonable attorneys', expert witness, accountant's and similar fees), charge,
cost or expense (including costs of investigation and the cost and expense of
any legal proceeding relating to any liability or other matter giving rise to a
meritorious claim for breach of any representation or warranty or breach of any
covenant made in or pursuant to this Agreement) of any nature, less any
insurance proceeds actually received by a party being indemnified pursuant to
Section 10.

         "DISCLOSURE SCHEDULE" shall have the meaning ascribed to such term in
Section 5.

         "DISPUTE NOTICE" shall have the meaning ascribed to such term in
Section 3.5.

         "ENVIRONMENTAL LAWS" shall have the meaning ascribed to such term in
Section 5.24.

         "ERISA" the Employee Retirement Income Security Act of 1974, as
amended.

         "ESCROW ACCOUNT," "ESCROW AGENT," "ESCROW AGREEMENT" and "ESCROW
AMOUNT" shall have the meanings ascribed to such terms, respectively, in Section
2.3.

         "EQUITY COMMITMENT LETTER" shall have the meaning ascribed to such term
in Recital G, above.

         "EXCHANGES" means the New York Stock Exchange or the National
Association of Securities Dealers Automated Quotation System ("NASDAQ").

         "FINANCIAL STATEMENTS" means the consolidated balance sheets, income
statements and cash flow statements of Sequoia and its Subsidiaries at and for
the years ended December 31, 2000 and 2001 and for the quarters ended March 31
and June 30, 2002 prepared in accordance with GAAP consistently applied.

         "GAAP" means U.S. generally accepted accounting principles.



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         "GAAP BALANCE SHEET" means a balance sheet of Sequoia that is prepared
in accordance with GAAP applied on a basis consistent with that used in
preparing Sequoia's unaudited GAAP balance sheet for the period ending June 30,
2002 and Sequoia's audited Dec 31, 2001 GAAP financial statements.

         "GOVERNMENTAL APPROVAL" any Consent of, with or to any Governmental
Authority.

         "GOVERNMENTAL AUTHORITY" any nation or government, any state or other
political subdivision thereof; any entity, authority or body exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including, without limitation, any government
authority, agency, department, board, commission or instrumentality of the
United States, any State of the United States or any political subdivision
thereof; any court, tribunal or arbitrator; and any self-regulatory
organization.

         "INDEBTEDNESS" as applied to any Person, means, without duplication,
(a) all indebtedness for borrowed money, (b) all obligations evidenced by a
note, bond, debenture, letter of credit, draft or similar instrument, (c) that
portion of obligations with respect to capital leases that is properly
classified as a liability on a balance sheet, (d) notes payable and drafts
accepted representing extensions of credit, (e) any obligation owed for all or
any part of the deferred purchase price of property or services, which purchase
price is due more than six months from the date of incurrence of the obligation
in respect thereof, (f) all guarantees, obligations to purchase or otherwise
provide credit support in respect of obligations of third parties of the types
described in clauses (a) through (e) above, and (g) all indebtedness and
obligations of the types described in the foregoing clauses (a) through (f)
above to the extent secured by any Lien on any property or asset owned or held
by that Person regardless of whether the indebtedness secured thereby shall have
been assumed by that Person or is nonrecourse to the credit of that Person.

         "INDEMNITEE" shall have the meaning ascribed to such term in Section
10.

         "INTELLECTUAL PROPERTY" means United States and foreign trademarks,
service marks, trade names, trade dress, domain names, copyrights, internet
websites (and content thereof) and similar rights, including registrations and
applications to register or renew the registration of any of the foregoing,
United States and foreign letters patent and patent applications, inventions,
processes, designs, formulae, trade secrets, know-how, confidential information,
computer software, data and documentation, and all similar intellectual property
rights, tangible embodiments of any of the foregoing (in any medium including
electronic media), and licenses of any of the foregoing.

         "INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended.

         "INVESTMENTS" shall have the meaning ascribed to such term in Section
5.6(a).

         "INVESTMENT GUIDELINES" shall mean the guidelines set forth on EXHIBIT
N hereto.

         "IRS" means the Internal Revenue Service.

         "JPMP" shall have the meaning ascribed to such term in Recital G,
above.



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         "LAW" means all applicable provisions of all (a) constitutions,
treaties, statutes, laws (including the common law), codes, rules, regulations,
ordinances or orders of any Governmental Authority, (b) Governmental Approvals
and (c) orders, decisions, injunctions, judgments, awards and decrees of or
agreements with any Governmental Authority.

         "LEASED REAL PROPERTY" means all interests leased pursuant to the
Leases.

         "LEASES" means the real property leases, subleases, licenses and
occupancy agreements pursuant to which the Company or any of its Subsidiaries or
PHYSICIANS is the lessee, sublessee, licensee, user or occupant of real property
used in or held for use in connection with, necessary for the conduct of, or
otherwise material to, the Business.

         "LIEN" means any mortgage, pledge, deed of trust, hypothecation, right
of others, claim, security interest, encumbrance, burden, title defect, title
retention agreement, lease, sublease, license, occupancy agreement, easement,
covenant, condition, encroachment, voting trust agreement, interest, option,
right of first offer, negotiation or refusal, proxy, lien, charge or other
restrictions or limitations of any nature whatsoever, including but not limited
to such Liens as may arise under any Material Contract.

         "LITIGATION" means any action, cause of action, claim, demand, suit,
proceeding, citation, summons, subpoena, inquiry or investigation of any nature,
civil, criminal, regulatory or otherwise, in law or in equity, pending or
threatened, by or before any court, tribunal, arbitrator or other Governmental
Authority.

         "MATERIAL ADVERSE EFFECT" means any (a) event, occurrence, fact,
condition, change, development or effect that is or may be materially adverse to
the business, operations, results of operations, condition (financial or
otherwise), properties (including intangible properties), assets (including
intangible assets) or liabilities of Sequoia and its Subsidiaries, taken as a
whole, or (b) material impairment of the ability of PHYSICIANS or PICO to
perform their respective obligations hereunder; provided that for purposes of
Section 4.2(c), a Material Adverse Effect shall be deemed to have occurred if an
event, violation, inaccuracy, circumstance or other event (considered together
with all other matters that would constitute exceptions to the representations
and warranties set forth in this Agreement but for the presence of a "Material
Adverse Effect" or other materiality or knowledge qualifications, or any similar
qualifications, in such representations and warranties) has resulted or could
reasonably be expected to result, individually or in the aggregate, in Damages
or diminution in value of the Business to STRONGWOOD in excess of $1,000,000.

         "MATERIAL CONTRACT" shall have the meaning ascribed to such term in
Section 5.10(a).

         "NON-COMPANY AFFILIATE" any Affiliate of PICO or PHYSICIANS (other than
Sequoia and its Subsidiaries).

         "ORDINARY COURSE OF BUSINESS" shall mean the usual, regular and
ordinary course of business of Sequoia and its Subsidiaries consistent with the
past custom and practice thereof.



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         "ORGANIZATIONAL DOCUMENTS" as to any Person, its certificate or
articles of incorporation, by-laws or code of regulations, limited liability
company agreement and other organizational documents .

         "OWNED INTELLECTUAL PROPERTY" as defined in Section 5.19(a).

         "OWNED SOFTWARE" shall have the meaning ascribed to such term in
Section 5.19(g).

         "OWNED REAL PROPERTY" the real property owned by Sequoia or any
Subsidiary, together with all structures, facilities, improvements, fixtures,
systems, equipment and items of property presently or hereafter located thereon
or attached or appurtenant thereto or owned by Sequoia or any Subsidiary and
located on Leased Real Property, and all easements, licenses, rights and
appurtenances relating to the foregoing.

         "PERMITTED LIENS" (a) Liens reserved against in the Closing Balance
Sheet, to the extent and in the amount so reserved, (b) Liens for Taxes not yet
due and payable or which are being contested in good faith and by appropriate
proceedings, (c) statutory Liens of carriers, warehousemen, mechanics and
materialmen and other like Liens arising in the ordinary course of business and
not delinquent, (d) easements, rights of way, title imperfections and
restrictions, zoning ordinances and other similar encumbrances affecting the
Real Property, (e) statutory Liens in favor of lessors arising in connection
with any Leased Real Property, and (f) Liens that individually and in the
aggregate do not and will not materially detract from the value of any of the
property, assets or rights of Sequoia or any of its Subsidiaries, or materially
interfere with the use thereof as currently used or contemplated to be used.

         "PERSON" any natural person, firm, partnership, association,
corporation, company, limited liability company, trust, business trust,
Governmental Authority or other entity.

         "PHYSICIANS' KNOWLEDGE" or any similar expression means to the
knowledge of PHYSICIANS after reasonable inquiry of the senior officers of
PHYSICIANS and Sequoia.

         "PRE-CLOSING BALANCE SHEETS," "PRE-CLOSING GAAP BALANCE SHEET,"
"PRE-CLOSING STATUTORY BALANCE SHEET," "PRE-CLOSING STATUTORY CAPITAL AND
SURPLUS" and "PRE-CLOSING TANGIBLE NET WORTH" shall have the meaning ascribed to
such terms, respectively, in Section 3.3(a).

         "PURCHASE PRICE" shall have the meaning ascribed to such term in
Section 2.1.

         "REAL PROPERTY" the Owned Real Property and the Leased Real Property.

         "REGULATORY STATEMENTS" the quarterly and annual balance sheet, income
statement, statement of capital and surplus and other schedules of Sequoia in a
form consistent with the National Association of Insurance Commissioners' Annual
Convention Blank, prepared in accordance with Statutory Accounting Principles
for the three years ended December 31, 2001 and subsequent periods, as
applicable and as filed with the State of California and all other applicable
regulatory authorities.



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<PAGE>

         "RELEASE" any releasing, disposing, discharging, injecting, spilling,
leaking, leaching, pumping, dumping, emitting, escaping, emptying, seeping,
dispersal, migrating, transporting, placing and the like, including without
limitation, the moving of any materials through, into or upon, any land, soil,
surface water, ground water or air, or otherwise entering into the environment.

         "REPRESENTATIVES" as to any Person, its accountants, actuaries,
counsel, consultants (including actuarial, environmental and industry
consultants), officers, directors, employees, agents and other advisors and
representatives.

         "SELLER GROUP" means PHYSICIANS and its Affiliates, including (with
respect to any period on or prior to the consummation of the Closing) the
Company and its Subsidiaries.

         "SEQUOIA" shall have the meaning ascribed to such term in Recital A,
above.

         "SHARES" means the 400,000 issued and outstanding shares of Sequoia's
common stock, which represents 100% of the equity capital of Sequoia.

         "STATUTORY ACCOUNTING PRINCIPLES" the accounting procedures and
practices prescribed or permitted by the National Association of Insurance
Commissioners and adopted or promulgated by the State of California or other
relevant jurisdiction, as the case may be, and applied in a consistent manner
throughout the periods involved.

         "STATUTORY BALANCE SHEET" means a balance sheet of Sequoia prepared in
accordance with Statutory Accounting Principles applied on a basis consistent
with that used in preparing Sequoia's unaudited June 30, 2002 statutory balance
sheet and Sequoia's audited Dec 31, 2001 statutory financial statements which
have been filed with the California Department of Insurance.

         "SUB" as defined in Section 13.2.

         "SUBSIDIARY" means ownership or control of at least 50% of the issued
and outstanding shares of any class of any corporation.

         "TANGIBLE NET WORTH" when used within the defined terms of Closing
Tangible Net Worth and Pre-Closing Tangible Net Worth, means the amount
determined by (1) subtracting the value of Sequoia's intangible assets from (2)
Sequoia's stockholders' equity.

         "TAX" means all federal, state, local, and foreign taxes, customs
duties, fees, levies, assessments or charges of any kind whatever, including
without limitation, income, alternative, minimum, franchise, profits, windfall
profits, gross receipts, excise, sale, use, license, lease, service, service
use, transaction, occupation, severance, stamp, premiums, energy, environmental
(including taxes under section 59A of the Internal Revenue Code), withholding,
payroll, employment, unemployment, social security, workers' compensation, ad
valorem, real or personal property, accumulated earnings, value added, transfer,
registration, disability, occupancy, estimated, personal holding company,
intangibles, retaliatory, maintenance and capital taxes, and any interest
penalties, additions to tax or other additional amounts with respect thereto.



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<PAGE>

         "TAX ALLOCATION AGREEMENT" shall have the meaning ascribed to such term
in Section 5.11(d).

         "TAX LOSS" shall have the meaning ascribed to such term in Section
10.2(a).

         "TAX RETURNS" means all returns, amended returns, declarations,
reports, statements, information statements, declarations of estimated tax,
back-up withholding returns or reports and other documents required to be filed
in respect of Taxes.

         "THIRD PARTY CLAIM" as defined in Section 10.7(a).

         "TREASURY REGULATIONS" the regulations prescribed under the Internal
Revenue Code.

         "STRONGWOOD" as defined in the recitals hereto.

         1.2 Words used in the singular will include plural and vice versa and
grammatical forms of the same word have a corresponding meaning.

         1.3 References to statutes, statutory instruments, rules or regulations
are to such statutes, statutory instruments, rules or regulations as amended,
replaced or re-enacted from time to time.

         1.4 References to "writing" or "written" include facsimile.

         1.5 References to a section, schedule or exhibit are to sections,
schedules or exhibits to this Agreement unless specified otherwise.

         1.6 Headings are inserted for convenience only and will not affect the
construction of this Agreement.

2. SALE AND PURCHASE OF SHARES

         2.1 Cash Consideration.

         At the Closing, PHYSICIANS will sell and STRONGWOOD will purchase, free
and clear of all Liens, claims, options, charges, security interests,
encumbrances and restrictions, the Shares for a purchase price in the amount of
$40,000,000 (the "PURCHASE Price"), minus the fair market value of the
Affiliated Investments (determined by the closing sales price for equity-based
investments on the business day immediately preceding the Closing Date and the
face value of the debt security), and as adjusted in accordance with Section 3.

         2.2 Dividend of Affiliated Investments.

         Subject to any prior insurance regulatory approval, STRONGWOOD agrees
that on the Closing Date and immediately prior to Closing, Sequoia shall pay a
dividend to PHYSICIANS consisting of all equity securities in the investment
portfolio on the Closing Date and the debt instrument listed on EXHIBIT B
(collectively, the "AFFILIATED INVESTMENTS").




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         2.3 Escrow Agreement.

         At Closing, STRONGWOOD shall deposit a portion of the Purchase Price
equal to $1,500,000 (the "ESCROW AMOUNT") in escrow with a bank or trust company
mutually approved by PHYSICIANS and STRONGWOOD (the "ESCROW AGENT") by wire
transfer of immediate available funds to the Escrow Agent to be held by the
Escrow Agent in an account (the "ESCROW ACCOUNT") pursuant to the terms of an
escrow agreement in the form of EXHIBIT C hereto (the "ESCROW AGREEMENT"). All
disbursements from the Escrow Account shall be made in accordance with the
provisions of the Escrow Agreement.

3. CLOSING

         3.1 The consummation of the transactions contemplated by this Agreement
(the "CLOSING") shall take place at the offices Gray Cary Ware & Freidenrich
LLP, 4365 Executive Drive, Suite 1100, San Diego, CA 92121-2133 at 10:00 a.m.
local time on the date that is the tenth Business Day after the date that all of
the conditions precedent in Section 4 (other than those which can reasonably be
expected to be fulfilled at Closing) have been satisfied or waived (the "CLOSING
DATE"), or such other date, time and place as PHYSICIANS and STRONGWOOD may
mutually agree in writing.

         3.2 At the Closing:

                  (a) PHYSICIANS shall deliver to STRONGWOOD one or more
certificates representing the Shares, free and clear of any Liens, duly endorsed
in blank or accompanied by stock powers or other instruments of transfer duly
executed in blank, and bearing or accompanied by all requisite stock transfer
stamps.

                  (b) STRONGWOOD shall pay, in cash by wire transfer in
compliance with Section 3.8, to PHYSICIANS a portion of the Purchase Price equal
to the Purchase Price, minus the sum of (i) the value of the Affiliated
Investments plus (ii) the Escrow Amount.

                  (c) STRONGWOOD shall deposit the Escrow Amount in escrow with
the Escrow Agent pursuant to the terms of the Escrow Agreement.

         3.3 (a) PHYSICIANS shall prepare and deliver to STRONGWOOD not less
than seven days prior to the Closing: (i) an unaudited GAAP Balance Sheet as of
the most recent month-end occurring at least ten days prior to the Closing Date
(the "PRE-CLOSING GAAP BALANCE SHEET"); (ii) a certificate of PHYSICIANS setting
forth the tangible net worth of Sequoia as reflected on such Pre-Closing GAAP
Balance Sheet (the "PRE-CLOSING TANGIBLE NET WORTH"); (iii) an unaudited
Statutory Balance Sheet as of the most recent month end preceding the Closing
Date (the "PRE-CLOSING STATUTORY BALANCE SHEET" and together with the
Pre-Closing GAAP Balance Sheet the "PRE-CLOSING BALANCE SHEETS"); and (iv) a
certificate of PHYSICIANS setting forth the capital and surplus of Sequoia as
reflected on such Pre-Closing Statutory Balance Sheet (the "PRE-CLOSING
STATUTORY CAPITAL AND SURPLUS"). Notwithstanding the foregoing: (i) the amount
of any accrual or accruals in respect of underfunding of Sequoia's Employee
Retirement Plan appearing on the Pre-Closing GAAP Balance Sheet and the
Pre-Closing Statutory Balance Sheet shall be equal to the amount of the accrual
or accruals for such item respectively appearing on EXHIBIT I and EXHIBIT J
hereto, the June 30, 2002 GAAP Balance Sheet and the June 30, 2002 Statutory
Balance Sheet; (ii) any accrual for payments under the agreement between Sequoia
and Mr. Charles Bancroft dated March 6, 1996 appearing on the Pre-Closing GAAP
Balance Sheet and the Pre-Closing Statutory Balance Sheet shall be calculated in
a manner consistent with the calculation of the accruals for such item appearing
respectively on EXHIBIT I and EXHIBIT J hereto, the June 30, 2002 GAAP



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Balance Sheet and the June 30, 2002 Statutory Balance Sheet (but the accrual
shall not, for the avoidance of doubt, include any accrual in respect of the
increased payment that may be due Mr. Bancroft in respect of the Purchase Price
payable hereunder); (iii) notwithstanding the disclosure contained in Section
5.6(c) of the Disclosure Schedule, any amounts allocated as "Reserves" appearing
on the Pre-Closing GAAP Balance Sheet and the Pre-Closing Statutory Balance
Sheet shall be calculated in accordance with GAAP or Statutory Accounting
Principles, as the case may be, and in a manner consistent with the calculation
of the amounts for such item appearing respectively on EXHIBIT I and EXHIBIT J
hereto, the June 30, 2002 GAAP Balance Sheet and the June 30, 2002 Statutory
Balance Sheet; (iv) notwithstanding the disclosures contained in Sections
5.7(a), 5.7(b) and 5.7(c) of the Disclosure Schedule, any amounts allocated as
"Net Operating Losses" appearing on the Pre-Closing GAAP Balance Sheet and the
Pre-Closing Statutory Balance Sheet shall be calculated in accordance with GAAP
or Statutory Accounting Principles, as the case may be, and in a manner
consistent with the calculation of the amounts for such item appearing
respectively on EXHIBIT I and EXHIBIT J hereto, the June 30, 2002 GAAP Balance
Sheet and the June 30, 2002 Statutory Balance Sheet; and (v) notwithstanding the
disclosure contained in Section 5.7(c) of the Disclosure Schedule, any amounts
allocated as "Deferred Acquisition Costs" appearing on the Pre-Closing GAAP
Balance Sheet and the Pre-Closing Statutory Balance Sheet shall be calculated in
accordance with GAAP or Statutory Accounting Principles, as the case may be, and
in a manner consistent with the calculation of the amounts for such item
appearing respectively on EXHIBIT I and EXHIBIT J hereto, the June 30, 2002 GAAP
Balance Sheet and the June 30, 2002 Statutory Balance Sheet.

                  (b) In preparing and delivering the Pre-Closing Balance
Sheets, PHYSICIANS shall regularly consult with STRONGWOOD regarding, and shall
provide to STRONGWOOD the estimates of the value of the securities, mortgages
and other investments comprising Sequoia's investment portfolio used in
preparing the Pre-Closing Balance Sheets. PHYSICIANS shall also notify
STRONGWOOD of any changes in accounting estimates in the Pre-Closing Balance
Sheets from accounting estimates in Sequoia's June 30, 2002 GAAP Balance Sheet
or June 30, 2002 Statutory Balance Sheet, as the case may be, and provide
justification for any such changes. Notwithstanding the preceding sentence, the
Pre-Closing Balance Sheets shall (i) not include any asset or liability, such as
prepaid insurance, that will not be available to, or payable by, Sequoia or its
Subsidiaries after the Closing and (ii) be adjusted by PHYSICIANS in
consultation with STRONGWOOD to reflect as appropriate, the fair market value of
the investments as of the most recent date practicable prior to Closing.

                  (c) In the event the Pre-Closing Tangible Net Worth is greater
than $34,976,763 and the Pre-Closing Statutory Capital and Surplus is greater
than $30,671,332, then the Purchase Price shall be increased by an amount equal
to two-thirds (2/3) of the lesser of (i) the increase in Pre-Closing Statutory
Capital and Surplus, over $30,671,332 and (ii) the increase in Pre-Closing
Tangible Net Worth, over $34,976,763. In the event the Pre-Closing Tangible Net
Worth is less than $34,976,763 or the Pre-Closing Statutory Capital and Surplus
is less than $30,671,332, then the Purchase Price shall be decreased by an
amount equal to the greater of (i) the decrease, if



                                       10
<PAGE>

any, in Pre-Closing Tangible Net Worth below $34,976,763 or (ii) the decrease,
if any, in Pre-Closing Statutory Capital and Surplus below $30,671,332.

         3.4 As promptly as practical, but no later than 30 days after the
Closing Date, PHYSICIANS, with the assistance of any STRONGWOOD employees
necessary including Bob Erickson, shall prepare and deliver, or shall cause to
be prepared and delivered, to STRONGWOOD (i) a GAAP Balance Sheet as of the
Closing Date (the "CLOSING GAAP BALANCE SHEET"), which shall be prepared without
giving effect to the Closing, including, but not limited to, the dividend of
Affiliated Investments to be paid by Sequoia to PHYSICIANS on the Closing Date,
provided that the amount payable by Sequoia pursuant to the Tax Allocation
Agreement set forth on the Closing GAAP Balance Sheet shall reflect the
realization of gains and/or losses of Sequoia on the dividend of the Affiliated
Investments pursuant to Section 2.2; and further, provided, that such Affiliated
Investments shall be valued as provided in Section 2.1 hereof; (ii) a
certificate of PHYSICIANS (the "GAAP ADJUSTMENT CERTIFICATE"), setting forth the
tangible net worth of Sequoia as reflected on the Closing Balance Sheet (the
"CLOSING TANGIBLE NET WORTH"); (iii) a Statutory Balance Sheet as of the Closing
Date (the "CLOSING STATUTORY BALANCE SHEET"), which shall be prepared without
giving effect to the Closing including, but not limited to, the dividend of
Affiliated Investments to be paid by Sequoia to PHYSICIANS on the Closing Date,
provided that the amount payable by Sequoia pursuant to the Tax Allocation
Agreement set forth on the Closing Statutory Balance Sheet shall reflect the
realization of gains and/or losses of Sequoia on the dividend of the Affiliated
Investments pursuant to Section 2.2 and, further, provided, that such Affiliated
Investments shall be valued as provided in Section 2.1 hereof (the Closing
Statutory Balance Sheet together with the Closing GAAP Balance Sheet, are
referred to herein as the "CLOSING BALANCE SHEETS"); and (iv) a certificate of
PHYSICIANS (the "STATUTORY ADJUSTMENT CERTIFICATE" and, together with GAAP
Adjustment Certificate, the "ADJUSTMENT CERTIFICATES"), setting forth the
capital and surplus of Sequoia as reflected on the Closing Statutory Balance
Sheet (the "CLOSING STATUTORY CAPITAL AND SURPLUS"). Notwithstanding the
foregoing: (i) the Closing Balance Sheets shall not reflect any asset or
liability, such as prepaid insurance, that will not be available to, or payable
by, Sequoia or its Subsidiaries after the Closing; (ii) the amount of any
accrual or accruals in respect of Sequoia's Employee Retirement Plan appearing
on the Closing Balance Sheets shall be equal to the amount of the accrual or
accruals for such item appearing on EXHIBIT I and EXHIBIT J hereto, the June 30,
2002 GAAP Balance Sheet and the June 30, 2002 Statutory Balance Sheet, as
applicable; (iii) any accruals for payments under the agreement between Sequoia
and Mr. Charles Bancroft dated March 6, 1996 appearing on the Closing Balance
Sheets shall be calculated in a manner consistent with the calculation of the
accruals for such item appearing on EXHIBIT I and EXHIBIT J hereto, the June 30,
2002 GAAP Balance Sheet and the June 30, 2002 Statutory Balance Sheet (but the
accrual shall not, for the avoidance of doubt, include any accrual in respect of
the increased payment that may be due Mr. Bancroft in respect of the Purchase
Price payable hereunder); (iv) notwithstanding the disclosure contained in
Section 5.6(c) of the Disclosure Schedule, any amounts allocated as "Reserves"
appearing on the Closing Balance Sheets shall be





                                       11
<PAGE>

calculated in accordance with GAAP or Statutory Accounting Principles, as the
case may be, in a manner consistent with the calculation of the amounts for such
item appearing respectively on EXHIBIT I and EXHIBIT J hereto, the June 30, 2002
GAAP Balance Sheet and the June 30, 2002 Statutory Balance Sheet; (v)
notwithstanding the disclosures contained in Sections 5.7(a). 5.7(b) and 5.7(c)
of the Disclosure Schedule, any amounts allocated as "Net Operating Losses"
appearing on the Closing Balance Sheets shall be calculated in accordance with
GAAP or Statutory Accounting Principles, as the case may be, in a manner
consistent with the calculation of the amounts for such item appearing
respectively on EXHIBIT I and EXHIBIT J hereto, the June 30, 2002 GAAP Balance
Sheet and the June 30, 2002 Statutory Balance Sheet; and (vi) notwithstanding
the disclosure contained in Section 5.7(c) of the Disclosure Schedule, any
amounts allocated as "Deferred Acquisition Costs" appearing on the Closing
Balance Sheets shall be calculated in accordance with GAAP or Statutory
Accounting Principles, as the case may be, in a manner consistent with the
calculation of the amounts for such item appearing respectively on EXHIBIT I and
EXHIBIT J hereto, the June 30, 2002 GAAP Balance Sheet and the June 30, 2002
Statutory Balance Sheet. STRONGWOOD shall ensure that PHYSICIANS and their
accountants are provided full access to the books and records of Sequoia in
connection with the preparation of the such financial statements referenced in
this Section 3.4.

         3.5 STRONGWOOD shall have 30 days from the date on which the Closing
Balance Sheets and the Adjustment Certificates are delivered to review such
documents (the "REVIEW PERIOD"). If STRONGWOOD disagrees in any respect with any
item or amount shown or reflected in the Closing Balance Sheets or the
Adjustment Certificates (collectively, the "CLOSING FINANCIAL STATEMENTS"),
STRONGWOOD may, on or prior to the last day of the Review Period, deliver a
notice to PHYSICIANS setting forth, in reasonable detail, each disputed item or
amount and the basis for STRONGWOOD's disagreement therewith, together with
supporting calculations (the "DISPUTE NOTICE"). The Dispute Notice shall set
forth STRONGWOOD's position as to the Closing Tangible Net Worth and Closing
Statutory Capital and Surplus. If PHYSCIANS does not receive a Dispute Notice on
or prior to the last day of the Review Period, the Closing Balance Sheets and
the Adjustment Certificates shall be deemed accepted by STRONGWOOD.

         3.6 (a) If within 15 days after PHYSICIANS' receipt of a Dispute Notice
the Parties have not resolved each dispute set forth in the Dispute Notice, then
STRONGWOOD and PHYSICIANS shall jointly contact KPMG's office in San Francisco,
California (the "Accountant") to resolve the issues set forth in the Dispute
Notice that have not been resolved by mutual written agreement of STRONGWOOD and
PHYSICIANS prior to such date. If KPMG is not available, STRONGWOOD and
PHYSICIANS shall each submit the name of one independent accounting firm of
international reputation that satisfies the qualifications set forth in this
Section 3.6 and the Accountant shall be selected by lot from those two firms;
alternatively if either STRONGWOOD or PHYSICIANS fail to make such submission,
the accounting firm submitted by the other party shall be the Accountant. The
Accountant shall consider the Closing Financial Statements, the Dispute Notice,
any supporting documentation and any related analyses as the Accountant in its
sole discretion deems necessary to resolve the remaining unresolved issues
identified in the Dispute Notice. The Accountant shall conduct such hearings or
hear such presentations by the parties as the Accountant in its sole discretion
deems necessary to resolve such issues.

                  (b) The Accountant shall, as promptly as practicable and in no
event later than 30 days following the date of its retention, deliver to
PHYSICIANS and STRONGWOOD a report (the "ACCOUNTANT'S REPORT"), in which the
Accountant shall, after considering the remaining unresolved issues identified
in the Dispute Notice, determine what adjustments, if any, should be made to the
Closing Balance Sheets in order for such Closing Balance Sheets to




                                       12
<PAGE>

comply with Section 3.4, and shall determine the Closing Tangible Net Worth and
Closing Statutory Capital and Surplus on that basis. The Accountant's Report
shall set forth, in reasonable detail, the Accountant's determination with
respect to each of the disputed items or amounts specified in the Dispute
Notice, and the revisions, if any, to be made to the Closing Balance Sheets, the
Adjustment Certificates, the Closing Tangible Net Worth or the Closing Statutory
Capital and Surplus, as applicable, together with supporting calculations.
PHYSICIANS shall pay one-half, and STRONGWOOD shall pay one-half of the fees and
expenses of the Accountant incurred in connection with the matters referred to
in this Section 3.6. The Accountant's Report shall be final and binding upon
STRONGWOOD and PHYSICIANS, and shall be deemed a final arbitration award that is
enforceable pursuant to the terms of the Federal Arbitration Act, 9 U.S.C.
ss.ss. 1 et seq. that may be enforced in any court of competent jurisdiction
thereof or over the relevant parties or assets.

         3.7 Within 10 business days following the first to occur of (i) the end
of the Review Period (if a timely Dispute Notice is not delivered), or (ii) the
resolution of all matters set forth in the Dispute Notice (if a timely Dispute
Notice is delivered) by agreement of the parties or (iii) the issuance of the
Accountant's Report (if a timely Dispute Notice is delivered and the parties do
not resolve all matters by written agreement prior to issuance of the
Accountant's Report), the calculations made pursuant to Section 3.3(c) shall be
repeated, replacing Pre-Closing Tangible Net Worth with Closing Tangible Net
Worth and replacing Pre-Closing Statutory Capital and Surplus with Closing
Statutory Capital and Surplus, and the Purchase Price shall be adjusted
accordingly. STRONGWOOD shall pay PHYSICIANS or PHYSICIANS shall pay STRONGWOOD
the resulting net adjustment to the Purchase Price, together with interest on
the amount of such payment at an annual rate of 5% for the period of time
beginning on the Closing Date and ending on the day prior to the date of such
payment. In addition to the resulting net adjustment to the Purchase Price,
including interest, Sequoia shall pay PHYSICIANS or PHYSICIANS or any of its
Affiliates shall pay Sequoia any amounts required for a complete settlement of
all intercompany balances, including, without limitation, pursuant to the Tax
Allocation Agreement listed on EXHIBIT M (as such balances are reflected on the
Closing Balance Sheets) plus or minus any adjustments, if applicable, resulting
from The Accountant's Report.

         3.8 All cash payments at the Closing and at such other times as may be
required under this Agreement shall be made by wire transfer of immediately
available funds. Each party receiving cash at the Closing and at such other
times as may be required under this Agreement shall provide written wire
transfer instructions to the party transferring cash with respect to such
payment not less than three business days prior to the date of the applicable
payment.

4. CONDITIONS PRECEDENT

         4.1 The obligation of PHYSICIANS to sell the Shares is subject to the
satisfaction or waiver by PHYSICIANS in writing in its sole and absolute
discretion prior to or upon Closing of each of the following conditions
precedent:

                  (a) All necessary insurance regulatory approvals, including
without limitation from the California, Ohio and Nevada Insurance Commissioners
where required pursuant to this



                                       13
<PAGE>

Agreement, including without limitation approval of the Form A filed with the
California Department of Insurance;

                  (b) All other necessary approvals to enable PHYSICIANS to
carry out its obligations under this Agreement as set forth in EXHIBIT D have
been received;

                  (c) All representations and warranties of STRONGWOOD set forth
in Section 7 are true and correct in all material respects as of the Closing
Date;

                  (d) STRONGWOOD is not otherwise in breach of this Agreement in
any material respect on the Closing Date;

                  (e) STRONGWOOD shall have delivered to PHYSICIANS a
certificate, dated the Closing Date and signed by senior officers of STRONGWOOD
stating that the conditions specified in Sections 4.1(c) and 4.1(d) have been
satisfied as of the Closing;

                  (f) No action, suit or other proceeding by any person to
restrain or prohibit the sale and purchase of the Shares is pending, is likely
to succeed;

                  (g) No injunction or order of any court or administrative
agency of competent jurisdiction is in effect which restrains or prohibits the
sale and purchase of the Shares; and

                  (h) STRONGWOOD shall have received from JPMP the Equity
Commitment Letter and JPMP shall not be in breach, nor shall STRONGWOOD have
waived, any of its rights, or JPMP's obligations pursuant thereto.

         4.2 The obligation of STRONGWOOD to purchase the Shares is subject to
the satisfaction or waiver by STRONGWOOD in writing in its sole and absolute
discretion prior to or upon Closing of each of the following conditions
precedent:

                  (a) All necessary insurance regulatory approvals, including
without limitation from the California, Ohio and Nevada Insurance Commissioners
where required of this Agreement;

                  (b) All other necessary approvals for STRONGWOOD to carry out
its obligations under this Agreement as set forth in EXHIBIT E have been
received;

                  (c) All representations and warranties of PHYSICIANS set out
in Section 5, and all representations and warranties of PICO set out in Section
6, are true and correct in all material respects as of the Closing Date, except
for such inaccuracies, which individually or in the aggregate would not have or
reasonably be expected to result in an event, circumstance, or development which
could reasonably be expected to result in a Material Adverse Effect;

                  (d) PHYSICIANS is not otherwise in breach of this Agreement in
any material respect as of the Closing Date;



                                       14
<PAGE>

                  (e) PHYSICIANS and PICO shall have delivered to STRONGWOOD a
certificate, dated the Closing Date and signed by senior officers of PHYSICIANS
and PICO, to the effect set forth above in Sections 4.2(c) and 4.2(d);

                  (f) No action, suit or other proceeding by any persons to
restrain or prohibit the sale and purchase of the Shares is pending which is
likely to succeed;

                  (g) No injunction or order of any court or administrative
agency of competent jurisdiction is in effect which restrains or prohibits the
sale and purchase of the Shares;

                  (h) Receipt of the third party consents specifically noted in
EXHIBIT F, and such other consents as PHYSICIANS or Sequoia shall have obtained
as a result of performing the obligation set forth in Section 9.5;

                  (i) Receipt of a release of Sequoia from any obligations
arising under the Agreement with Charles Bancroft, dated March 6, 1996, in form
and substance satisfactory to STRONGWOOD;

                  (j) Receipt of an assignment to Sequoia, in the form of
EXHIBIT G hereto, of all rights of PHYSICIANS under the Stock Purchase Agreement
between PHYSICIANS and Sydney Reinsurance Corporation, dated August 1, 1995, and
under the Guaranty of QBE Insurance Group Limited, dated August 1, 1995;

                  (k) STRONGWOOD shall have received from PHYSICIANS the FIRPTA
certificate provided for in Section 9.11(g) of this Agreement;

                  (l) Sequoia shall have sold or otherwise liquidated the
investments listed on EXHIBIT H;

                  (m) There shall have been no Material Adverse Effect on
Sequoia and its Subsidiaries taken as a whole, and no event, circumstance or
development that could reasonably be expected to become or result in,
individually or in the aggregate, a Material Adverse Effect shall have occured;
and

                  (n) Sequoia shall not have amended, terminated or waived its
rights under the Bancroft Non-Solicitation Agreement, and such agreement shall
remain in full force and effect.

5. REPRESENTATIONS AND WARRANTIES OF PHYSICIANS

         Except as set forth in the disclosure schedule, by reference to the
specific section or subsection in this Article 5 (including by cross-reference
to such section or subsection), which PHYSICIANS has delivered to STRONGWOOD on
or before the date of this Agreement (the "DISCLOSURE SCHEDULE"), PHYSICIANS
hereby represents and warrants to STRONGWOOD that:

         5.1 Authority.



                                       15
<PAGE>

                  (a) PHYSICIANS is a corporation duly organized, validly
existing and in good standing under the laws of Ohio. PHYSICIANS has all
requisite corporate power and authority to enter into this Agreement and to
carry out the transactions contemplated hereby. All corporate acts and other
proceedings required to be taken by PHYSICIANS to authorize the execution,
delivery and performance of this Agreement and the carrying out of the
transactions contemplated hereby have been duly and properly taken.

                  (b) This Agreement has been duly executed and delivered by
PHYSICIANS and constitutes a valid and binding obligation of PHYSICIANS
enforceable against PHYSICIANS in accordance with its terms, except as such
enforceability may be subject to principles of law and equity of general
application and all limitations resulting from the laws of bankruptcy,
insolvency, liquidation or other laws affecting generally the enforcement of
creditors' rights.

                  (c) The execution and delivery of this Agreement does not, and
the carrying out of the transactions contemplated hereby and compliance with its
terms will not, individually or in the aggregate conflict with, or result in any
violation of, cause or permit the termination or acceleration of, constitute a
breach or an event which, with or without the giving of notice or lapse of time
or both, would constitute a breach under, result in the creation or imposition
of any Lien pursuant to, or adversely affect the validity or enforceability by
PHYSICIANS, the Company or any of its Subsidiaries of (i) any provision of the
charter or by laws of PHYSICIANS, the Company or any of its Subsidiaries; (ii)
any material note, bond, mortgage, indenture, deed of trust, license, lease,
contract, commitment, agreement or arrangement to which PHYSICIANS, the Company
or any of its Subsidiaries is a party or by which any of them is or any of their
respective assets are bound; or (iii) any judgment, order or decree, statute,
law, ordinance, rule or regulation relating to the conduct of PHYSICIANS', the
Company's or any of it Subsidiaries' business.

                  (d) No consent, approval, license, permit, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission, other governmental authority or
instrumentality, domestic or foreign, is required to be obtained or made by
PHYSICIANS in connection with the execution and delivery of this Agreement or
the carrying out by PHYSICIANS of the transactions contemplated hereby.

                  (e) PHYSICIANS is the authorized holder in Ohio of every
material permit, authorization, or license (including permits, authorizations,
or licenses from the Ohio Department of Insurance) necessary to conduct its
business. To the knowledge of PHYSICIANS after reasonable inquiry of senior
officers of PHYSICIANS, no such qualification, permit, license, or authorization
is the subject of a proceeding for suspension or revocation or of similar
proceedings.

         5.2 The Shares.

                  (a) PHYSICIANS has legal title to the capital stock of Sequoia
registered in its name and PHYSICIANS beneficially owns all the Shares, free and
clear of any Liens. Assuming STRONGWOOD has the requisite power and authority to
be the lawful owner of the Shares, upon delivery to STRONGWOOD at Closing of
certificates representing the Shares, duly



                                       16
<PAGE>

endorsed by PHYSICIANS for transfer to STRONGWOOD, the Shares will be free and
clear of any Liens other than those arising from acts of STRONGWOOD or its
Affiliates.

                  (b) The Shares are not subject to any contract, arrangement,
or understanding, including any voting trust agreement or other contract,
arrangement or understanding restricting or otherwise relating to the voting,
dividend rights or disposition of the Shares, other than this Agreement.

         5.3 Organization and Standing of Sequoia; Books and Records; Powers of
Attorney; Change in Control.

                  (a) Sequoia is a corporation duly organized, validly existing
and in good standing under the laws of the state of California. Sequoia has full
corporate power and authority and possesses all material governmental
franchises, licenses, permits, authorizations and approvals necessary to enable
it to use its corporate name and to own, lease or otherwise hold its properties
and assets and to carry on its business as presently conducted. Prior to
Closing, PHYSICIANS will deliver to STRONGWOOD, as certified by the Secretary or
an Assistant Secretary of PHYSICIANS, true and complete copies of the charter,
and the by-laws, as amended, of Sequoia. Sequoia and each of its Subsidiaries is
duly qualified or licensed to do business and is in good standing in each of the
jurisdictions specified in Section 5.3(a) of the Disclosure Schedule, which
includes each jurisdiction in which the nature of its business or the properties
owned or leased by it makes such qualification or licensing necessary, except
where a failure to be so-qualified would not have a Material Adverse Effect.

                  (b) The books and records of Sequoia are located at Sequoia's
offices in California. PHYSICIANS has granted STRONGWOOD access to complete and
correct copies of the Organizational Documents of Sequoia and each of its
Subsidiaries, as in effect on the date of this Agreement. Each of the
Organizational Documents of Sequoia and its Subsidiaries is in full force and
effect, and neither Sequoia nor any of its Subsidiaries is in violation of any
of the provisions of its Organizational Documents. The minute books of Sequoia
and its Subsidiaries, which have heretofore been made available to STRONGWOOD,
correctly reflect all actions taken by the stockholders and directors of such
companies (including by any committee of the board of any such company).

         5.4 Capital Stock of Sequoia.

                  (a) The authorized capital stock of Sequoia is as listed in
Section 5.4(a) of the Disclosure Schedule and such Section 5.4(a) sets forth a
true and complete list of all legal and beneficial owners of all issued and
outstanding capital stock of Sequoia. All such capital stock is common stock,
par value $6.50 per share and is duly authorized, validly issued and
outstanding, fully paid and non-assessable. The shares have not been issued in
violation of, and are not subject to, any preemptive or subscription rights.

                  (b) There are no shares of capital stock or other equity
securities of Sequoia issued and outstanding other than as set forth in Section
5.4(a) of the Disclosure Schedule. There are no outstanding warrants, options,
agreements, convertible or exchangeable securities or other commitments (other
than this Agreement) pursuant to which PHYSICIANS or Sequoia or any of



                                       17
<PAGE>

its Subsidiaries is or may become obligated to issue, sell, purchase, return or
redeem any shares of capital stock or other securities of Sequoia or any of its
Subsidiaries.

         5.5 Equity Interests.

                  (a) Except for Investments in the ordinary course of its
business and except as set forth in Section 5.5(b) of the Disclosure Schedule,
Sequoia does not directly or indirectly own any capital stock of or other equity
interests in any Person.

                  (b) Sequoia has no Subsidiaries.

         5.6 Investments.

                  (a) The Regulatory Statements set forth a list, which list is
accurate and complete in all material respects, of all securities, mortgages and
other investments owned by Sequoia (collectively, "INVESTMENTS") as of the date
of such Regulatory Statements, together with the cost basis, book or amortized
value, as the case may be, as of the date of such Regulatory Statements. Section
5.6(a) of the Disclosure Schedule sets forth a complete list of all Investments
of Sequoia as of June 30, 2002, listing the CUSIP number, if any, of such
securities and the value of such Investments, as reflected in the June 30, 2002
GAAP Balance Sheet and the June 30, 2002 Statutory Balance Sheet and indicating
which Investments are securities, mortgages of, or other investments in
Affiliates of PHYSICIANS. All transactions in Investments from December 31, 2001
to the Closing Date have complied or, in the case of transactions that occur
after the date of this Agreement, will comply in all material respects with the
investment policies of Sequoia, and all applicable insurance laws and
regulations.

                  (b) Sequoia has good and marketable title to the Investments
listed in the Regulatory Statements as owned by it or acquired by it in the
ordinary course of business since December 31, 2001 other than with respect to
those Investments which have been disposed of in the ordinary course of business
or as contemplated by this Agreement or redeemed in accordance with their terms
since such date and other than with respect to statutory deposits which are
subject to certain restrictions on transfer.

                  (c) The aggregate reserves and other liability amounts with
respect to all future benefits, losses, claims and expenses arising under
insurance policies of Sequoia as established or reflected on its Regulatory
Statements were determined in accordance with generally accepted actuarial
standards consistently applied and are fairly stated in accordance with sound
actuarial principles. PHYSICIANS has no reason to believe that the aggregate
reserves will not be adequate to pay all such future benefits, losses, claims
and expenses. PHYSICIANS have made available to STRONGWOOD true and complete
copies of all actuarial reports or certificates in the possession or control of
PHYSICIANS or Sequoia relating to the adequacy of the claims reserves of Sequoia
for any period ended on or after December 31, 2001.

                  (d) No claim or assessment is pending nor, to PHYSICIANS'
knowledge, threatened against Sequoia by any state insurance guaranty
association in connection with that association's fund relating to insolvent
insurers.



                                       18
<PAGE>

         5.7 Regulatory Statements; Financial Statements.

                  (a) PHYSICIANS has made available, and will make available to
STRONGWOOD, as soon as practicable after their preparation, complete and correct
copies of each Regulatory Statement and all exhibits and schedules thereto as
filed with the appropriate insurance commissioner prior to Closing for periods
ending on or subsequent to December 31, 2001. The Regulatory Statements have
been and will be prepared in accordance with Statutory Accounting Principles
consistently applied throughout the periods involved and in accordance with the
books and records of Sequoia. Each of the statements contained in the Regulatory
Statements fairly and accurately present, and Regulatory Statements filed after
the date hereof and prior to the Closing will fairly and accurately present, in
each case in all material respects, the assets, liabilities, capital and
surplus, results of operations and cash flows of Sequoia, as of the dates
thereof in accordance with Statutory Accounting Principles.

                  (b) Attached hereto as EXHIBIT J are the balance sheets of
Sequoia and its Subsidiaries as of June 30, 2002 prepared in accordance with
Statutory Accounting Principles consistently applied (the "JUNE 30, 2002
STATUTORY BALANCE SHEETS"). The June 30, 2002 Statutory Balance Sheets present
fairly in all material respects the assets, liabilities and capital and surplus
of Sequoia and its Subsidiaries as of the date thereof in accordance with
Statutory Accounting Principles.

                  (c) PHYSICIANS has delivered to STRONGWOOD complete and
correct copies of the Financial Statements. The Financial Statements are
complete and correct and have been derived from the accounting books and records
of Sequoia and its Subsidiaries. The Financial Statements present fairly in all
material respects the financial position, results of operations and cash flows
of Sequoia and its Subsidiaries in accordance with GAAP consistently applied.
Attached hereto as EXHIBIT I is the consolidated balance sheet of Sequoia and
its Subsidiaries as of June 30, 2002, which has been prepared in accordance with
GAAP consistently applied and which presents fairly in all material respects the
financial position of Sequoia and its Subsidiaries.

         5.8 Undisclosed Liabilities, etc.

         Sequoia does not have any obligations or liabilities (whether known,
unknown, accrued, absolute, contingent, unliquidated, mature, unmatured, or
otherwise and regardless of when or by whom asserted) except: (i) obligations
and liabilities that are disclosed or reserved against in the Regulatory
Statements at December 31, 2001; (ii) obligations under Material Contracts or
under contracts and commitments entered into in the ordinary course of business
which are not required to be disclosed on the Disclosure Schedule due to
specified dollar thresholds (but not liabilities for breaches thereof occurring
on or prior to the Closing Date), (iii) liabilities and obligations which have
arisen after December 31, 2001 in the ordinary course of business and are not
prohibited by this Agreement (none of which is a liability for breach of
contract, tort, infringement, workers compensation claim, lawsuit or material
breach of warranty), and (iv) other liabilities and obligations expressly
disclosed in the Disclosure Schedule. Since December 31, 2001, there has not
occurred or come to exist any Material Adverse Effect or any event, occurrence,
fact, condition, change, development or effect that, individually or in the
aggregate, would reasonably be expected to become or result in a Material
Adverse Effect.



                                       19
<PAGE>

         5.9 Absence of Certain Developments.

         Since December 31, 2001, except as specifically permitted after the
date of this Agreement pursuant to Section 8.2, neither Sequoia nor any of its
Subsidiaries has:

                  (a) declared, set aside, made or paid any dividend or other
distribution in respect of its capital stock or otherwise purchased or redeemed,
directly or indirectly, any shares of its capital stock;

                  (b) issued or sold any shares of any class of its capital
stock, or any securities convertible into or exchangeable for any such shares,
or issued, sold, granted or entered into any subscriptions, options, warrants,
conversion or other rights, agreements, commitments, arrangements or
understandings of any kind, contingently or otherwise, to purchase or otherwise
acquire any such shares or any securities convertible into or exchangeable for
any such shares;

                  (c) incurred any indebtedness for borrowed money, issued or
sold any debt securities or prepaid any debt (including, without limitation, any
borrowings from or prepayments to PHYSICIANS or any Non-Company Affiliate)
except for borrowings and repayments in the ordinary course of business;

                  (d) mortgaged, pledged or otherwise subjected to any Lien, any
of its Real Property or other properties, assets or rights, tangible or
intangible, except for Permitted Liens in the ordinary course of business;

                  (e) forgiven, cancelled, compromised, waived or released any
debts, claims or rights, except for debts, claims and rights against Persons
other than any member of the Seller Group, forgiven, cancelled, compromised,
waived or released in the ordinary course of business;

                  (f) modified any existing Contract or entered into any
agreement or commitment, other than (i) agreements entered into in the ordinary
course of business and involving an expenditure of less than $10,000 in each
case, or (ii) any agreement or commitment that, pursuant to its terms, is
cancelable without penalty on less than 30 days' notice;

                  (g) paid any material bonus to any officer, director,
employee, sales representative, agent, broker or consultant, or granted to any
officer, director, employee, sales representative, agent, broker or consultant
any other material increase in compensation in any form;

                  (h) entered into, adopted or amended any employment,
consulting, retention, change-in-control, collective bargaining, bonus or other
incentive compensation, profit-sharing, health or other welfare, stock option or
other equity, pension, retirement, vacation, severance, deferred compensation or
other employment, compensation or benefit plan, policy, agreement, trust, fund
or arrangement for the benefit of any officer, director, employee, sales
representative, agent, consultant or Affiliate (whether or not legally binding),
except as required by applicable Law;

                  (i) suffered any damage, destruction or loss (whether or not
covered by insurance), or any strike or other employment-related problem, or any
change in relations with or



                                       20
<PAGE>

any loss of a supplier, customer or employee, that, individually or in the
aggregate, would reasonably be expected to have or result in a Material Adverse
Effect;

                  (j) amended any of its Organizational Documents;

                  (k) changed in any respect its accounting, actuarial or
reserving practices, policies or principles;

                  (l) except under insurance policies issued by Sequoia in the
ordinary course of business, incurred, assumed, guaranteed or otherwise become
directly or indirectly liable with respect to any liability or obligation in
excess of $10,000 in each case (whether absolute, accrued, contingent or
otherwise and whether direct or indirect, or as guarantor or otherwise with
respect to any liability or obligation of any other Person);

                  (m) transferred or granted any rights or licenses under, or
entered into any settlement regarding the infringement of, Company Intellectual
Property or entered into any licensing or similar agreements or arrangements;

                  (n) (i) sold any assets (other than Investments) with a value
in excess of $10,000 in each case other than in the ordinary course of business
or (ii) sold any Investments other than in the ordinary course of business and
in such event replaced such assets with assets of a similar nature and, in the
case of replaced assets acquired after the date hereof, are in compliance with
the Investment Guidelines;

                  (o) made any material changes in policies or practices
relating to selling, underwriting or claims handling practices or rates of the
Business, discounts, commissions or other terms of sale or accounting therefor
or in policies of employment;

                  (p) ceded or assumed any reinsurance other than in the
ordinary course of business;

                  (q) had any insurer financial strength ratings as determined
by any of Moody's Investor Services, Inc., Standard & Poor's Ratings Group, a
division of the McGraw-Hill Companies, or A.M. Best & Co., reduced, or received
any indication from any of such rating agencies that such insurer financial
strength ratings may be or will be reduced; or

                  (r) taken any action or omitted to take any action that would
result in the occurrence of any of the foregoing.

         5.10 Contracts.

                  (a) Section 5.10(a) of the Disclosure Schedule lists each
contract, agreement or understanding to which Sequoia is a party or by which
Sequoia is bound which is material to the operation of the Business (the
"MATERIAL CONTRACTS"), including, but not limited to, the following specific
agreements:



                                       21
<PAGE>
                       (i) leases or agreements under which Sequoia is lessee of
or holds or operates any property, real or personal, owned by any other party
for which the annual rental exceeds $5,000;

                       (ii) leases or agreements under which Sequoia is lessor
of or permits any third party to hold or operate, any property, real or
personal, owned or controlled by Sequoia for which the annual rental exceeds
$5,000;

                       (iii) management agreements or contracts for the
employment of any officer, partner, individual employee, agent, independent
contractor, or other person on a full-time, part-time or consulting basis
providing for (a) annual compensation in excess of $25,000, (b) the payment of
any cash or other compensation or benefits upon the sale of Sequoia or (c) a
limitation or prohibition on competition or solicitation of clients, employees
or agents;

                       (iv) agreements or indentures relating to the borrowing
of money or to mortgaging, pledging or otherwise placing a Lien on any of its
assets;

                       (v) agreements with respect to the lending or investing
of funds;

                       (vi) guaranties of any obligation for borrowed money or
otherwise that relates to Sequoia's assets, other than endorsements made for
collection;

                       (vii) finder's Contracts;

                       (viii) joint venture, partnership and similar agreements
involving a sharing of profits or expenses;

                       (ix) stock purchase agreements, asset purchase agreements
and other acquisition or divestiture agreements, including but not limited to
any agreements: (A) related to the acquisition, lease or disposition of: (i) the
Company or any current or former Subsidiary; (ii) any material assets or
properties (other than sales of inventory made in the ordinary course of
business); (iii) any business or any capital stock of or other interest in any
Person by the Company or any of its Subsidiaries, within the last ten years; or
(B) involving continuing indemnity or other obligation;

                       (x) agreements with insurance carriers or wholesalers
that resulted in aggregate commissions to Sequoia in the past twelve (12) months
of at least $25,000;

                       (xi) contracts of reinsurance or retrocession;

                       (xii) other contract or series of related contracts with
the same party involving more than $10,000 per annum or an aggregate of $75,000
over the term of the contract (or series of related contracts), other than
insurance policies issued in the ordinary course of business;

                       (xiii) contracts or agreements which would prohibit or
materially restrict STRONGWOOD, Sequoia or any of Sequoia's Subsidiaries from
freely engaging in the Business or any other related business as of the Closing
Date anywhere in the world;



                                       22
<PAGE>

                       (xiv) orders and other contracts for the purchase or sale
of materials, supplies, products or services (excluding the sale of insurance
policies in the ordinary course of business), involving aggregate payments in
excess of $10,000 in each case;

                       (xv) orders and other contracts with or for the direct or
indirect benefit of PHYSICIANS or any Non-Company Affiliates (whether or not
legally binding);

                       (xvi) contracts providing for future payments that are
conditioned, in whole or in part, on a change in control of the Company or any
of its Subsidiaries;

                       (xvii) trust agreements and powers of attorney, except
routine powers of attorney relating to representation before governmental
agencies or given in connection with qualification to conduct business in
another jurisdiction;

                       (xviii) contracts or agreements exclusively relating to
the distribution, marketing, advertising or promotion of Sequoia products or
services involving more than $10,000;

                       (xix) exclusive arrangements with respect to Sequoia,
including franchise agreements, license agreements or agency agreements under
which Sequoia is a franchisor or licensor or appoint any third party to be an
agent of Sequoia;

                       (xx) licenses, licensing arrangements and other contracts
providing in whole or in part for the use of, or limiting the use of, any
Intellectual Property (except for contracts relating to "off-the-shelf" or
"shrink-wrapped" software);

                       (xxi) agency, third-party administrator or claims
processing contracts;

                       (xxii) contracts not entered into in the ordinary course
of business; and

                       (xxiii) any contract or agreement not described above,
which is material to the operation of the Business as it is currently conducted.

                  (b) No contract, agreement or commitment required to be
disclosed on the Disclosure Schedule has been canceled or, to the knowledge of
Sequoia, breached in any respect by the other party thereto.

                  (c) None of Sequoia's significant customers, suppliers,
outside service providers or sources of referral has notified Sequoia that it
will stop or decrease the rate of business done with or referred to Sequoia.
Sequoia has performed all of its obligations under the contracts and agreements
required to be listed on the Disclosure Schedule. Sequoia has not materially
breached or defaulted under any lease, contract, commitment or other agreement
to which Sequoia is a party. No event has occurred which, upon giving of notice
or lapse of time or both, would constitute such a breach or default.

                  (d) (i) All Material Contracts are legal, binding, and in full
force and effect, (ii) the enforceability of all Material Contracts will not be
affected in any manner by the execution, delivery or performance of this
Agreement, and (iii) no Material Contract contains



                                       23
<PAGE>

any change in control or other terms or conditions that will become applicable
or inapplicable as a result of the consummation of the transactions contemplated
by this Agreement.

         STRONGWOOD has been supplied with a true and correct copy of all
written contracts and agreements (and a memorandum accurately describing all
oral contracts or agreements) which are listed in Section 5.10 of the Disclosure
Schedule, together with all amendments, exhibits, attachments, waivers or other
changes thereto.

         5.11 Taxes.

                  (a) All Tax Returns required to be filed by or on behalf of
Sequoia or its Subsidiaries have been duly filed on a timely basis (including
any extensions of time) and such Tax Returns are true and complete in all
material respects. All Taxes shown to be payable on such Tax Returns or
extensions thereof or on subsequent assessments with respect thereto have been
paid in full on a timely basis (including all extensions of time).

                  (b) Sequoia has withheld and paid over all Taxes required to
have been withheld and paid over by or on behalf of Sequoia or its Subsidiaries
in connection with amounts paid or owing to any employee, creditor, independent
contractor or other third party.

                  (c) No waiver or extension of any statute of limitations is in
effect with respect to any Tax Return of Sequoia or its Subsidiaries. No power
of attorney has been executed or filed by or on behalf of Sequoia or its
Subsidiaries with the Internal Revenue Service (the "IRS") or any other taxing
authority. Neither PHYSICIANS, PICO, nor any of their Affiliates have been
notified in writing or otherwise that any Tax Return filed by or on behalf of
Sequoia or its Subsidiaries is under audit by any taxing authority. There are no
disputes with a taxing authority with respect to Taxes payable by or on behalf
of Sequoia or its Subsidiaries. Neither Sequoia nor any of its Subsidiaries has
received any notice of deficiency, proposed adjustment, or underpayment of
Taxes. Neither Sequoia nor any of its Subsidiaries is subject to any proceedings
for the assessment or collection of Taxes, nor is such notice pending to
PHYSICIANS' knowledge.

                  (d) Neither Sequoia nor any of its Subsidiaries is a party to
or bound by or has an obligation under any Tax allocation, sharing, indemnity or
similar agreement or arrangement, other than the Tax Allocation Agreement dated
August 15, 2000 by and among PICO and its Subsidiaries (the "TAX ALLOCATION
AGREEMENT"). Neither Sequoia nor its Subsidiaries (i) is or has been a member of
any consolidated, combined or unitary group for purposes of filing Tax Returns
or paying Taxes, and would not be held liable for Taxes of any Person (other
than PHYSICIANS, PICO and their Affiliates) under Treasury Regulation Section
1.1502-6 or any similar provision of state, local or foreign law or as a
transferee or successor or (ii) has received or applied for a Tax ruling or has
entered into a closing agreement pursuant to Section 7121 of the Code, or any
predecessor provision or any similar provision of state or local law.

                  (e) Section 5.11(e) of the Disclosure Schedule contains a list
of states, territories and jurisdictions in which an income, franchise, premium,
sales, use, employment or payroll tax returns with respect to Sequoia or its
Subsidiaries was filed for the past three years.



                                       24
<PAGE>

                  (f) True, correct and complete copies of all income,
franchise, premium, sales, use employment and payroll Tax Returns and forms
filed by or with respect to Sequoia or its Subsidiaries for the past three years
have been furnished or made available to STRONGWOOD.

                  (g) There are no outstanding adjustments for Tax purposes
applicable to Sequoia or its Subsidiaries as a result of changes in methods of
accounting.

                  (h) None of the assets of Sequoia or its Subsidiaries are
subject to Tax liens (other than liens for Taxes which are not yet due and
payable).

                  (i) Section 5.11(i) of the Disclosure Schedule sets forth the
aggregate amount of Sequoia's net operating loss carryover for federal income
Tax purposes to the taxable year beginning January 1, 2002.

                  (j) No portion of the "consolidated net operating loss", as
defined in Treasury Regulation Section 1.1502-21(e), of the consolidated group
of which PICO is the common parent is or will be attributable to Sequoia or its
Subsidiaries.

         5.12 Compliance with Law.

                  (a) All aspects of the business and operations of Sequoia and
its Subsidiaries have been conducted in compliance, in all material respects,
with all applicable Laws, including without limitation, those of state insurance
departments, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. ss.ss.9601-9675, and any amendments thereto,
the Resource Conservation and Recovery Act, 42 U.S.C. ss.ss.6901-6987 and any
amendments thereto, or otherwise relating to pollution control and environmental
contamination, and all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours. Except as to
matters which have been settled on terms that have not had and would not be
expected to have any Material Adverse Effect, since January 1, 1993 neither
Sequoia nor PHYSICIANS has received any notification of any asserted present or
past failure by Sequoia or any of its subsidiaries to comply with any such Law.

                  (b) Sequoia holds all material permits, licenses,
certificates, accreditations or other authorizations of any Governmental
Authority required for the Business as it is presently conducted. Section
5.12(b) of the Disclosure Schedule sets forth a list of all of such permits,
licenses, certificates, qualifications, accreditations and other governmental
authorizations (collectively "GOVERNMENTAL AUTHORIZATIONS") that are material to
the Business. Sequoia is in compliance in all material respects with all terms
and conditions of any such Governmental Authorizations.

         5.13 Litigation.

         Sequoia is not subject to any judgment, stipulation, order, decree or
agreement arising from any action, suit, arbitration or proceeding against
Sequoia that would adversely affect the ability of Sequoia to carry out the
transactions contemplated in this Agreement. No action, suit, arbitration,
proceeding or governmental investigation is pending or, to PHYSICIANS'
knowledge, threatened, which seeks to question, delay or prevent the carrying
out of the



                                       25
<PAGE>

transactions contemplated hereby. There is no material Litigation pending or, to
the knowledge of any member of the Seller Group, threatened by, against or
affecting any member of the Seller Group or any of its properties or assets.
There are no outstanding material orders, judgments, decrees or injunctions
issued by any Governmental Authority against Sequoia or any of its Subsidiaries
that in any way affect the Business.

         5.14 Licenses and Registration.

         Section 5.14 of the Disclosure Schedule contains a complete and correct
list of all Governmental Approvals and other Consents necessary for, or
otherwise material to, the Business as it is presently conducted. Section 5.14
of the Disclosure Schedule lists all jurisdictions in which Sequoia is licensed
to write insurance. Sequoia has been duly authorized by the relevant state
insurance regulatory authorities to write the insurance or reinsurance that it
is currently writing in the respective states in which it does business. All
such Governmental Approvals and other Consents have been duly obtained and are
held by Sequoia and are in full force and effect. Sequoia and each of its
Subsidiaries is, and at all times has been, in compliance with all Governmental
Approvals and other Consents held by it, except for such failures so to comply
that, individually and in the aggregate, would not reasonably be expected to
have or result in a Material Adverse Effect. There is no Litigation pending or,
to the knowledge of PHYSICIANS, threatened, that would result in the revocation,
cancellation, suspension or modification or nonrenewal of any such Governmental
Approval or Consent; neither Sequoia, nor PHYSICIANS has been notified that any
such Governmental Approval or Consent will be modified, suspended, cancelled
modified or cannot be renewed in the ordinary course of business; and to the
knowledge of PHYSICIANS (assuming the Governmental Approvals and Consents
specified in EXHIBIT D and EXHIBIT E are obtained) there is no reasonable basis
for any such revocation, cancellation, suspension, modification or nonrenewal.

         5.15 Employee Benefits.

                  (a) Section 5.15 of the Disclosure Schedule contains a
complete and accurate list of all "employee benefit plans" within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and all bonus, stock option, stock purchase, incentive, deferred
compensation, supplemental retirement, severance and other employee pension or
welfare benefit plans, programs or arrangements, and any employment or
compensation agreements, for the benefit of, or relating to, current or former
employees, directors, consultants, independent contractors, sales
representatives or agents of Sequoia (the "EMPLOYEE PLANS"). None of the
Employee Plans is a "multi-employer plan" as defined in Section 3(37) of ERISA.
All Employee Plans are in material compliance with the requirements prescribed
by any and all Laws, and Sequoia has performed, in all material respects, all
obligations required to be performed by it under, and is not in default under or
in violation of, any of the Employee Plans.

                  (b) Neither Sequoia nor any entity considered its "affiliate"
pursuant to ERISA has incurred any liability to the Pension Benefit Guaranty
Corporation (other than for premiums in the ordinary course) or any "withdrawal
liability" within the meaning of Section 4201 of ERISA. There is no material
liability which remains unsatisfied with respect to any Employee Plan subject to
Title IV of ERISA.



                                       26
<PAGE>

                  (c) PHYSICIANS has delivered to STRONGWOOD full and complete
copies of all Employee Plans of Sequoia, related plan documents, trust
documents, summary plan descriptions, two most recent Form 5500's, most recent
actuarial report, most recent independent auditor report, and material employee
communications with respect to the Employee Plans.

                  (d) The sale of the Shares will not in and of itself (i)
require any severance or other compensatory payment to be made to any current or
former employees, directors, consultants or independent contractors of Sequoia
or (ii) accelerate the time of payment or vesting of any such benefits or
increase the amount of compensation due any such employee or service provider.
No benefit payable or which may become payable pursuant to any Employee Plan or
as a result of or arising under this Agreement shall constitute an "excess
parachute payment" (as defined in Section 280G(b)(1) of the Code) which is
subject to the imposition of an excise Tax under Section 4999 of the Code or the
deduction for which would be disallowed by reason of Section 280G of the Code.

                  (e) Sequoia, to PHYSICIANS' knowledge, has not proposed any
additional Employee Plan or proposed to modify any existing Employee Plan except
for changes required by applicable law.

                  (f) Each Employee Plan can be amended, terminated or otherwise
discontinued after the Closing Date in accordance with its terms, without
material liability to STRONGWOOD (other than ordinary administration expenses
typically incurred in a termination event).

                  (g) Each Employee Plan intended to be qualified under Section
401(a) of the Internal Revenue Code has either obtained from the IRS a favorable
determination letter as to its qualified status under the Internal Revenue Code,
including all amendments to the Internal Revenue Code which are currently
effective, or has time remaining under applicable Treasury Regulations or IRS
pronouncements for a determination or opinion letter and to make any amendments
necessary to obtain a favorable determination or opinion letter. No employee is
or will become entitled to post-employment benefits of any kind by reason of
employment with Sequoia other than (i) coverage mandated by Section 4980B of the
Internal Revenue Code or comparable provision of state law, or (ii) retirement
benefits payable under any plan qualified under Section 401(a) of the Internal
Revenue Code. No suit, administrative proceeding, action, or other litigation
has been brought, or to PHYSICIANS' knowledge, is threatened, against or with
respect to any Employee Plan, including any audit or inquiry by the IRS or the
United States Department of Labor.

         5.16 Real Property.

         Sequoia has no fee interest in any real property.

         5.17 Insurance.

         Section 5.17 of the Disclosure Schedule lists all policies of insurance
and fidelity bonds issued to or for the benefit of Sequoia or its directors and
officers showing the insurers, limits, type of coverage, and expiration dates.
All such policies and bonds are in full force and effect as of the date of this
Agreement.



                                       27
<PAGE>

         5.18 Bank Accounts.

         Section 5.18 of the Disclosure Schedule is an accurate and complete
list showing the names and address of each bank and trust company in which
Sequoia has an account or safe deposit box and identifies all persons authorized
to draw thereon, give instructions thereto or have access thereto.

         5.19 Intellectual Property.

                  (a) Section 5.19(a) of the Disclosure Schedule sets forth a
complete and correct list of all Intellectual Property that is owned by Sequoia
or any of its Subsidiaries (the "OWNED INTELLECTUAL PROPERTY").

                  (b) All of the Intellectual Property used or held for use in
connection with, necessary for the conduct of, or otherwise material to, the
Business as it is presently conducted (the "COMPANY INTELLECTUAL PROPERTY"), is
owned by, or held pursuant to a valid license or right to use in favor of,
Sequoia or its Subsidiaries. Sequoia and its Subsidiaries have the right to use
the Company Intellectual Property related to the Business, free from any Liens
(except for Permitted Liens incurred in the ordinary course of business) and any
requirement of any past, present or future royalty payments, license fees,
charges or other payments, or conditions or restrictions. Immediately after the
Closing, Sequoia and its Subsidiaries shall own or have licensed all the Company
Intellectual Property related to the Business, in each case free from Liens
(except for Permitted Liens incurred in the ordinary course of business) and on
the same terms and conditions as in effect prior to the Closing.

                  (c) Section 5.19(c) of the Disclosure Schedule sets forth all
Material Contracts and a list of any oral agreements or arrangements, except for
contracts relating to "off-the-shelf" or "shrink-wrapped" software, (i) pursuant
to which Sequoia or any of its Subsidiaries has licensed Intellectual Property
to, or the use of Intellectual Property is otherwise permitted (through
non-assertion, settlement or similar agreements or otherwise) with respect to,
any other Person (including PHYSICIANS and any Non-Company Affiliate), and (ii)
pursuant to which Sequoia or any of its Subsidiaries has had Intellectual
Property licensed to it, or has otherwise been permitted to use Intellectual
Property (through non-assertion, settlement or similar agreements or otherwise)
for the purpose of conducting the Business. The agreements or arrangements set
forth or required to be set forth in Section 5.19(c) of the Disclosure Schedule
are covered by the representations and warranties in Section 5.10 above.

                  (d) The conduct of the Business does not infringe or otherwise
conflict in any material respect with any rights of any Person in respect of any
Intellectual Property. To PHYSICIANS' knowledge, none of the Company
Intellectual Property is being infringed or otherwise used or available for use
by any Person without a license or permission from Sequoia or any of its
Subsidiaries.

                  (e) No claim or demand of any Person has been made or, to
PHYSICIANS' knowledge, threatened, nor is there any Litigation that is pending
or, to PHYSICIANS' knowledge, threatened that (i) challenges the rights of
Sequoia or any of its Subsidiaries in respect of any Company Intellectual
Property; (ii) asserts that Sequoia or any of its Subsidiaries






                                       28
<PAGE>

is infringing or otherwise in conflict with, or is, required to pay any royalty,
license fee, charge or other amount with regard to, any Intellectual Property;
or (iii) claims that any default exists under any agreement or arrangement
related to the Company Intellectual Property. To PHYSICIANS' knowledge, none of
the Company Intellectual Property is subject to any outstanding order, ruling,
decree, judgment or stipulation by or with any court, tribunal, arbitrator or
other Governmental Authority, or has been the subject of any Litigation within
the last three years, whether or not resolved in favor of any member of the
Seller Group.

                  (f) The Owned Intellectual Property has been duly registered
with, filed in or issued by, as the case may be, the United States Patent and
Trademark Office, the United States Copyright Office or other filing offices,
domestic or foreign, to the extent the owner thereof has determined in its
reasonable business judgment necessary or desirable to ensure protection under
applicable Law, and such registrations, filings, issuances and other actions
remain in full force and effect. Each member of the Seller Group has taken
commercially reasonable actions to ensure protection of the Company Intellectual
Property (including maintaining the secrecy of all confidential Intellectual
Property) under any applicable Law.

                  (g) The software and databases in which Sequoia and its
Subsidiaries claim ownership ("OWNED SOFTWARE") are identified on Section
5.19(g) of the Disclosure Schedule. Sequoia and its Subsidiaries own all right,
title and interest in such Owned Software, which has been created entirely by
employees of Sequoia and its Subsidiaries acting within the scope of their
employment or independent contractors who have assigned all rights in their work
in writing to Sequoia and its Subsidiaries. None of the Owned Software and, to
PHYSICIANS' knowledge, none of the third-party software used in the Business as
presently conducted infringes upon or misappropriates any patent, copyright,
trade secret or other Intellectual Property right of any person or entity, and
no claim or demand with respect to any such infringement or misappropriation has
been made or threatened. To PHYSICIANS' knowledge, there are no viruses, worms,
Trojan horses, or similar programs in the Owned Software. To PHYSICIANS'
knowledge, there are no defects in the Owned Software that would prevent such
software from performing in all material respects the tasks and functions for
which it is used in the conduct of the Business.

         5.20 Leases.

         PHYSICIANS has delivered to STRONGWOOD true, correct and complete
copies of each real property and personal property lease to which Sequoia or any
of its Subsidiaries is a party (the "LEASES") and all modifications and
amendments relating thereto, which Leases are listed in Section 5.20 of the
Disclosure Schedule. The Leases are valid, binding and enforceable in accordance
with their terms, and are in full force and effect. In each case, Sequoia or one
of its Subsidiaries has been in peaceable possession since the commencement of
each Lease. There are no existing defaults by Sequoia or any of its
Subsidiaries, or to PHYSICIANS' knowledge, the lessors, under the Leases. No
event has occurred which (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute a default by
Sequoia, or, to PHYSICIANS' knowledge, the lessors, under the Leases. Neither
Sequoia nor, to PHYSICIANS' knowledge, the lessor has violated any of the terms
or conditions of any such Lease in any material respect. No waiver, indulgence
or postponement of any of Sequoia's obligations under any Lease has been granted
by the respective lessor. Sequoia has paid,



                                       29
<PAGE>

satisfied or discharged all of its obligations which are due and payable under
such Leases through the Closing Date, including the payment of rent and
operating expenses. The real and personal property leased by Sequoia is in a
state of good maintenance and repair, ordinary wear and tear excepted.

         5.21 Personal Property.

         The personal property listed in Section 5.21 of the Disclosure Schedule
constitute all of the personal property of Sequoia utilized in the conduct of
the Business (the "PERSONAL PROPERTY"). Sequoia has good and marketable title to
all the Personal Property, and such Personal Property is in good operating
condition and repair, ordinary wear and tear excepted.

         5.22 Agency Relationships.

         Section 5.22 of the Disclosure Schedule sets forth the top 15 insurance
agencies with whom Sequoia has an agency contract, ranked by total commissions
paid by Sequoia in 2001. Since December 31, 2001, there has been no material
adverse change in the business relationships of Sequoia with any insurance
agency listed in Section 5.22 of the Disclosure Schedule.

         5.23 Governmental Filings.

                  (a) Each material registration, report, statement, notice or
other filing requested or required to be filed by Sequoia with any Governmental
Authority under any applicable Law has been timely filed, and when filed
complied and continues to comply in all material respects with applicable Law.
As of their respective dates, none of such registrations, reports, statements,
notices or other filings contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.

                  (b) All insurance policies issued by Sequoia, as now in force
are, to the extent required under applicable Law, in a form acceptable to
applicable regulatory authorities or have been filed and not objected to by such
authorities within the period provided for objection. All reports, statements,
documents, registrations, filings and submissions to state insurance regulatory
authorities complied in all material respects with applicable Law in effect when
filed and no material deficiencies have been asserted by any such regulatory
authority with respect to such reports, statements, documents, registrations,
filings or submissions that have not been satisfied. All premium rates
established by Sequoia that are required to be filed with or approved by
insurance regulatory authorities have been so filed or approved; the premiums
charged by Sequoia conform to the premium rates so filed or approved and comply
with the insurance laws applicable thereto.

5.24     Environmental Matters.

         Sequoia is in material compliance with all applicable Environmental
Laws (as defined below), which compliance includes the possession of all permits
and other Governmental Authorizations required under applicable Environmental
Laws, and compliance with the terms and conditions thereof except where failure
to comply would not have or result in a Material




                                       30
<PAGE>

Adverse Effect. Sequoia has not received any notice or other communication (in
writing or otherwise), whether from a Governmental Authority or citizens group,
that alleges that Sequoia is not in compliance with any Environmental Law, and,
to the knowledge of Sequoia, there are no circumstances that may prevent or
interfere with Sequoia's compliance with any Environmental Law in the future. To
PHYSICIANS' knowledge, no current or prior owner of any Real Estate leased or
controlled by Sequoia nor any current or prior owner of any real estate adjacent
to the Real Estate, which real estate is leased or controlled by any landlords,
adjacent tenants or property owners, has received any notice or other
communication (in writing or otherwise), whether from a Governmental Authority,
citizens group, employee or otherwise, that alleges that such current or prior
owner or Sequoia is not in compliance with any Environmental Law. Sequoia does
not, and is not required to, hold any Governmental Authorizations pursuant to
Environmental Laws. For purposes of this Section 5.24: (i) "ENVIRONMENTAL LAWS"
means any federal, state, local or foreign legal requirement relating to
pollution or protection of human health or the environment (including ambient
air, surface water, ground water, land surface or subsurface strata), including
any law or regulation relating to emissions, discharges, releases or threatened
releases of Materials of Environmental Concern (as defined below), or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Materials of Environmental Concern; and (ii)
"MATERIALS OF ENVIRONMENTAL CONCERN" include chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum products and any
other substance that is now or hereafter regulated by any Environmental Law.

         5.25 Affiliate Transactions.

                  (a) Section 5.25(a) of the Disclosure Schedule contains a
complete and correct list of all material agreements, contracts, arrangements,
understandings, transfers and transactions, whether or not entered into in the
ordinary course of business, between Sequoia or any of its Subsidiaries, on the
one hand, and PHYSICIANS or any Non-Company Affiliate, on the other hand, that
(i) are currently pending or in effect or (ii) involve continuing liabilities
and obligations that, individually or in the aggregate, have been, are or will
be material to Sequoia and its subsidiaries, taken as a whole.

                  (b) No stockholder, officer, director or employee of
PHYSICIANS, any Non-Company Affiliate or Sequoia, or, to PHYSICIANS' knowledge
after reasonable inquiry of senior officers of PHYSICIANS and Sequoia, any
family member, relative or Affiliate of any such stockholder, officer, director
or employee, (i) owns, directly or indirectly, and whether on an individual,
joint or other basis, any interest in (x) any property or asset, real or
personal, tangible or intangible, used in or held for use in connection with or
pertaining to the Business, or (y) any Person, that is a supplier, customer or
competitor of Sequoia or any of its Subsidiaries, (ii) serves as an officer,
director or employee of any Person that is a supplier, customer or competitor of
Sequoia or any of its Subsidiaries or (iii) has received any loans from or is
otherwise a debtor of, or made any loans to or is otherwise a creditor of
Sequoia or any of its Subsidiaries.




                                       31
<PAGE>

         5.26 Employees, Labor Matters, etc.

         Neither Sequoia nor any of its Subsidiaries is a party to or bound by
any collective bargaining agreement, nor are there any labor unions or other
organizations representing, purporting to represent or attempting to represent
any employees employed by Sequoia or any its Subsidiaries. There has not
occurred or been threatened any material strike, slowdown, picketing, work
stoppage, concerted refusal to work overtime or other similar labor activity
with respect to any employees of Sequoia or any of its Subsidiaries. There are
no material labor disputes currently subject to any grievance procedure,
arbitration or litigation and there is no representation petition pending or
threatened with respect to any employee providing services to Sequoia or any of
its Subsidiaries. Each person who performs services to Sequoia or its
Subsidiaries has been properly treated or classified as a "common law employee"
or an "independent contractor" pursuant to applicable Law. Sequoia and its
Subsidiaries have complied in all material respects with all applicable Laws
pertaining to the employment or termination of employment of their respective
employees, including, without limitation, all such Laws relating to labor
relations, equal employment opportunities, fair employment practices, prohibited
discrimination or distinction and other similar employment activities.

         5.27 Reinsurance.

         Section 5.27 of the Disclosure Schedule lists all reinsurance
contracts, agreements or treaties to which Sequoia is a party. Subject to
applicable waiver agreements, (i) the reserves recorded for potential
liabilities that Sequoia may incur pursuant to the reinsurance contracts,
agreements or treaties listed in Section 5.27 of the Disclosure Schedule or any
facultative certificate are properly determined in accordance with the
applicable statutory requirements; (ii) receivables due Sequoia pursuant to such
reinsurance contracts, agreements, treaties or certificates have been properly
recorded in the books of account of Sequoia, as the case may be, and reflected
in the Regulatory Statements of Sequoia, for the year ended December 31, 2001
and for periods subsequent to December 31, 2001; and (iii) no notice of intended
cancellation has been received by Sequoia from any reinsurer.

         5.28 Agents.

                  (a) Each Agent (including, without limitation, those who are
employees of Sequoia), at the time such Agent wrote, sold or produced insurance
policies for Sequoia, was duly licensed as an insurance agent (for the type of
business written, sold or produced by such Agent) in the particular jurisdiction
in which such Agent wrote, sold or produced such insurance policies, except
where the failure to have such license would not reasonably be expected to have
a Material Adverse Effect, and each Agent has executed a contract with Sequoia.

                  (b) No Agent has violated (or with or without notice or lapse
of time or both, would have violated) any term or provision of any Law,
regulation or any writ, judgment, decree, injunction or similar order applicable
to the writing, sale or production of the business of Sequoia, except where such
violation would not reasonably be expected to have a Material Adverse Effect.



                                       32
<PAGE>

                  (c) All payments due to Agents with respect to Sequoia's
insurance business are described in the form Agent contracts, copies of which
have been provided to STRONGWOOD.

         5.29 Policies, Claims and Manuals.

                  (a) PHYSICIANS has provided STRONGWOOD with complete and
correct copies of each standard insurance policy written by Sequoia.

                  (b) Section 5.29 of the Disclosure Schedule sets forth a
complete and correct list of all open claims pending against Sequoia as of the
date specified in such list and all claims closed within one year prior to the
date of execution of this Agreement, and separately identifies all claims (i) in
which Litigation that includes allegations that Sequoia has acted in bad faith
with respect to an insured or claimant is pending; (ii) in which Litigation is
not yet pending but claims, allegations or assertions have, to PHYSICIANS'
knowledge, been threatened or made that Sequoia has acted in bad faith with
respect to an insured or claimant; and (iii) that, to PHYSICIANS' knowledge,
contain facts or circumstances that may give rise to claims, allegations or
assertions that Sequoia has acted in bad faith with respect to an insured or
claimant.

                  (c) PHYSICIANS has delivered to STRONGWOOD complete and
correct copies of each claims processing, underwriting, employee training and
agent training manual prepared or used by Sequoia during the past two years.

         5.30 Brokers, Finders, etc.

         Except for the participation of Raymond James and Associates, Inc. and
Mergers & Acquisitions Services, Inc. as requested by PICO, (the fees for which
parties shall be the sole responsibility of PICO), all negotiations relating to
this Agreement and the transactions contemplated hereby have been carried on
without the participation of any Person acting on behalf of any member of the
Seller Group in such a manner as to, and the transactions contemplated hereby
and thereby will not otherwise, give rise to any valid claim against Sequoia,
any of its Subsidiaries or STRONGWOOD for any brokerage or finder's commission,
fee or similar compensation, or for any bonus payable to any officer, director,
employee, agent or representative of or consultant to Sequoia or any of its
Subsidiaries upon consummation of the transactions contemplated hereby.

         5.31 Disclosure.

         This Agreement, together with any Schedules and Exhibits hereto, do not
contain any untrue statement of PHYSICIANS or Sequoia of a material fact, or
omit any statement by PHYSICIANS or Sequoia of a material fact necessary in
order to make the statements contained herein or therein not misleading.



                                       33
<PAGE>

6. REPRESENTATIONS AND WARRANTIES OF PICO

         6.1 Authority.

                  (a) PICO is a corporation duly organized, validly existing and
in good standing under the laws of California. PICO has all requisite corporate
power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby. All corporate acts and other proceedings
required to be taken by PICO to authorize the execution, delivery and
performance of this Agreement and the carrying out of the transactions
contemplated hereby have been duly and properly taken.

                  (b) This Agreement has been duly executed and delivered by
PICO and constitutes a valid and binding obligation of PICO enforceable against
PICO in accordance with its terms, except as such enforceability may be subject
to principles of law and equity of general application and all limitations
resulting from the laws of bankruptcy, insolvency, liquidation or other laws
affecting generally the enforcement of creditors' rights.

                  (c) The execution and delivery of this Agreement does not, and
the carrying out of the transactions contemplated hereby and compliance with its
terms will not, individually or in the aggregate conflict with, or result in any
violation of, cause or permit the termination or acceleration of, constitute a
breach or an event which, with or without the giving of notice or lapse of time
or both, would constitute a breach under, result in the creation or imposition
of any Lien pursuant to, or adversely affect the validity or enforceability by
PICO of (i) any provision of the charter or by laws of PICO; (ii) any material
note, bond, mortgage, indenture, deed of trust, license, lease, contract,
commitment, agreement or arrangement to which PICO is a party or by which PICO
or any of its assets are bound; or (iii) any judgment, order or decree, statute,
law, ordinance or rule or regulation relating to the conduct of PICO's business.

                  (d) No consent, approval, license, permit, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission, other governmental authority or
instrumentality, domestic or foreign, is required to be obtained or made by PICO
in connection with the execution and delivery of this Agreement or the carrying
out by PICO of the transactions contemplated hereby.

         6.2 Litigation.

         PICO is not subject to any judgment, stipulation, order, decree or
agreement arising from any action, suit, arbitration or proceeding against PICO
that would adversely affect the ability of PICO to carry out the transactions
contemplated hereby. No action, suit, arbitration, proceeding or governmental
investigation is pending or, to the knowledge of PICO after reasonable inquiry
of senior officers of PICO, PHYSICIANS and Sequoia, threatened, which seeks to
question, delay or prevent the carrying out of the transactions contemplated
hereby. There is no Litigation pending or, to the knowledge of PICO, threatened
by, against or affecting PICO or any member of the Seller Group or any of its
properties or assets, that, individually or in the aggregate, would reasonably
be expected to have or result in a Material Adverse Effect.



                                       34
<PAGE>

         6.3 Taxes.

         PICO is the parent of a U.S. consolidated group for federal income Tax
purposes, and such consolidated group includes Sequoia.

7. REPRESENTATIONS AND WARRANTIES OF STRONGWOOD

         As an inducement to PHYSICIANS and PICO to enter into this Agreement,
STRONGWOOD, hereby represents and warrants to the Seller Group, and each of
them, as follows:

         7.1 Corporate Organization and Power.

         STRONGWOOD is a corporation duly organized and validly existing under
the laws of the State of Delaware, with full power and authority to enter into
this Agreement and to perform its obligations hereunder. All corporate acts and
other proceedings required to be taken by STRONGWOOD to authorize the execution,
delivery and performance of this Agreement and the carrying out of the
transactions contemplated hereby have been duly and properly taken.

         7.2 Authorization; No Breach.

                  (a) The execution, delivery and performance of this Agreement
and the other agreements contemplated hereby by STRONGWOOD and the consummation
of the transactions contemplated hereby and thereby have been duly and validly
authorized by all requisite corporate action on the part of STRONGWOOD, and no
other such proceedings on the part of STRONGWOOD are necessary to authorize the
execution, delivery, or performance of this Agreement or the other agreements
contemplated hereby. This Agreement and the other agreements contemplated hereby
constitute valid and binding obligations of STRONGWOOD, enforceable in
accordance with their terms, except as such enforceability may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to creditors' rights generally, and general principles of equity.

                  (b) The execution and delivery of this Agreement does not, and
the carrying out of the transactions contemplated hereby and compliance with its
terms will not, individually or in the aggregate, conflict with, or result in
any violation of, cause or permit the termination or acceleration of, constitute
a breach or an event which, with or without the giving of notice or lapse of
time or both, would constitute a breach under, result in the creation or
imposition of any Lien pursuant to, or adversely affect the validity or
enforceability by STRONGWOOD of (i) any provision of the charter or by laws of
STRONGWOOD, (ii) any material note, bond, mortgage, indenture, deed of trust,
license, lease, contract, understanding or arrangement to which STRONGWOOD is a
party or by which it is or its assets are bound, or (iii) any judgment, order or
decree, statute, law, ordinance, rule or regulation relating to the conduct of
STRONGWOOD's business.

         7.3 No Violation.

         STRONGWOOD is not subject to or obligated under its Articles of
Incorporation, bylaws, any applicable Law or rule or regulation of any
governmental authority, or any



                                       35
<PAGE>

agreement or instrument, or any license, franchise or permit, or subject to any
order, writ, injunction or decree, which would be breached or violated by its
execution, delivery or performance of this Agreement and the other agreements
contemplated hereby, except to the extent valid consents and approvals have been
obtained and except to the extent such breach or violation is not reasonably
likely to have a Material Adverse Effect on STRONGWOOD.

         7.4 Governmental Authorities and Consents.

         STRONGWOOD is not required to submit before Closing any notice, report
or other filing with any governmental authority in connection with the execution
or delivery by it of this Agreement or the consummation of the transactions
contemplated hereby. No consent, approval or authorization of any governmental
or regulatory authority is required to be obtained by STRONGWOOD in connection
with their execution, delivery and performance of this Agreement or the
transactions contemplated hereby, other than for consents, approvals or
authorizations the failure of which to obtain is not reasonably likely to have a
Material Adverse Effect on STRONGWOOD.

         7.5 Litigation.

         There are no actions, suits, proceedings, orders or investigations
pending or, to the knowledge of STRONGWOOD, threatened against or affecting
STRONGWOOD or its Affiliates, or before or by any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which would adversely affect STRONGWOOD's
performance under this Agreement or the consummation of the transactions
contemplated hereby.

         7.6 Independent Analysis.

         STRONGWOOD recognizes that, except as expressly provided in Articles 5
and 6 hereof, no member of the Seller Group nor any Affiliate thereof has made
any representation or warranty, express or implied, upon which STRONGWOOD is
relying in respect to Sequoia's ability to obtain business subsequent to the
Closing Date or as to the accuracy or completeness of any information in
connection with Sequoia. STRONGWOOD further recognizes that, except for those
subsumed within the express representations and warranties contained in Article
5 and Article 6, any cost estimates, projections or other predictions contained
in the information provided to STRONGWOOD or its Affiliates or any of their
employees, agents or representatives were prepared for Sequoia's and PHYSICIANS'
internal planning purposes only and are not and shall not be deemed to be
representations or warranties of any member of the Seller Group or any affiliate
thereof.

         7.7 Investment Intention.

         STRONGWOOD has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of acquiring the
Shares. STRONGWOOD confirms that PHYSICIANS has made available to STRONGWOOD the
opportunity to ask questions of the officers and management of PHYSICIANS and
Sequoia and to acquire additional information about the business, assets and
financial condition of Sequoia. STRONGWOOD is acquiring the Shares for
investment only, and not with a view toward or for



                                       36
<PAGE>

sale in connection with any distribution thereof, or with any present intention
of distributing or selling any of the Shares. STRONGWOOD understands that the
transactions contemplated hereby have not been, and will not be, the subject of
a registration statement filed under the Securities Act of 1933 (the "SECURITIES
ACT"), or qualified under applicable states securities law, by reason of a
specific exemption from the registration provisions of the Securities Act and
the qualification provisions of the applicable state securities laws. STRONGWOOD
understands that none of the Shares may be resold unless such resale is
registered under the Securities Act and qualified under applicable state
securities laws, or an exemption from such registration and qualification is
available.

         7.8 Brokerage.

         All negotiations relating to this Agreement and the transactions
contemplated hereby have been carried on without the participation of any Person
acting on behalf of STRONGWOOD or its Affiliates in such a manner as to, and the
transactions contemplated hereby and thereby will not otherwise, give rise to
any valid claim against PHYSICIANS, PICO or any of their Affiliates for any
brokerage or finder's commission, fee or similar compensation upon consummation
of the transactions contemplated by this Agreement.

         7.9 Equity Commitment Letter.

         JPMP has issued to STRONGWOOD the Equity Commitment Letter and JPMP has
not breached, nor has STRONGWOOD waived, the obligations and rights pursuant
thereto.

8. PRE-CLOSING CONDUCT OF THE BUSINESS

         8.1 Access to Records.

                  (a) Prior to the Closing, PHYSICIANS shall (and shall cause
each other member of the Seller Group, and each of the Representatives of or to
any member of the Seller Group, to) give STRONGWOOD and its Representatives,
reasonable access during reasonable business hours to all of such Person's
respective properties, assets, books, contracts, commitments, reports and
records relating to Sequoia and its Subsidiaries and the Business, and furnish
to STRONGWOOD all such documents, records and information with respect to the
properties, assets and businesses of Sequoia and its Subsidiaries and copies of
any work papers relating thereto as STRONGWOOD shall from time to time
reasonably request, subject to compliance with confidentiality obligations owed
to third parties and except where disclosure would compromise any
attorney-client privilege. In addition, PHYSICIANS shall, and shall cause each
member of the Seller Group to, permit STRONGWOOD and its Representatives,
reasonable access during reasonable business hours to each member of the Seller
Group; Sequoia's lenders, reinsurers, customers and suppliers; other Persons
with whom Sequoia or any of its Subsidiaries does or has done business; and
other Representatives or other personnel of any member of the Seller Group, as
may be necessary or useful to STRONGWOOD in its judgment in connection with its
review of the properties, assets and business of Sequoia and the above-mentioned
documents, records and information. Notwithstanding the above, STRONGWOOD
acknowledges that, in order to facilitate the conduct of the Business prior to
Closing, STRONGWOOD will only have such access as PHYSICIANS in its sole
discretion deems



                                       37
<PAGE>

appropriate, to any Agents currently working for Sequoia. PHYSICIANS shall, and
shall cause each member of the Seller Group to, keep STRONGWOOD generally
informed as to the affairs of the Business of Sequoia prior to Closing.

                  (b) In utilizing its access under Section 8.1(a), STRONGWOOD
shall make reasonable efforts to minimize disruption of the normal operations of
Sequoia or any member of the Seller Group.

         8.2 Continued Conduct of the Business.

                  (a) Except as otherwise required or permitted by this
Agreement, PHYSICIANS will cause the business of Sequoia prior to Closing to be
conducted in, and only in, the ordinary course of business in substantially the
same manner as presently conducted and will use its best efforts to preserve
intact the present business organization of Sequoia; keep available the services
of its present officers and significant employees; and preserve its
relationships with customers, suppliers, reinsurers and others having business
dealings with it, to the end that its goodwill and going business shall be in
all material respects unimpaired following the Closing. PHYSICIANS and PICO
shall conduct all Tax affairs relating to Sequoia and its Subsidiaries only in
the ordinary course of business consistent with past practice and in good faith
in substantially the same manner as such affairs would have been conducted if
this Agreement had not been entered into.

                  (b) Without limitation of Section 8.2(a), except as otherwise
required or permitted by this Agreement, PHYSICIANS will not cause or permit
Sequoia or any of its Subsidiaries to do any of the following without the prior
written consent of STRONGWOOD:

                        (i) Grant or pay to any director, employee or consultant
of Sequoia any increase in compensation, except cost of living increases
consistent with past practice;

                        (ii) Incur any obligations for Indebtedness or guarantee
or indemnify any obligations, other than less than $50,000 in the aggregate or
in the ordinary course of business;

                        (iii) Terminate, prior to its date of expiration, any
agency contract held by Sequoia;

                        (iv) Sell, lease or otherwise dispose of, or agree to do
so, any assets, properties or rights which are material to Sequoia taken as a
whole, other than investment portfolio transactions in the ordinary course of
business or as set forth in this Agreement;

                        (v) Hire any new employees or consultants;

                        (vi) Make or agree to make any capital expenditures in
excess of $50,000 in the aggregate;

                        (vii) Declare dividends on, or redeem or repurchase any
shares of, any class of its capital stock, except for the dividend contemplated
in Section 2.2;



                                       38
<PAGE>

                        (viii) Repay any loans or other amounts outstanding to
PHYSICIANS or PICO or any of their respective Affiliates, except for payment of
intercompany accounts in the ordinary course of business;

                        (ix) Pay any compensation, remuneration, contributions
to Plans or other arrangements, bonuses or advances against salaries other than
in the ordinary course of business;

                        (x) Prepay any accounts payable, or delay payment of any
trade payables other than in the ordinary course of business;

                        (xi) Transfer, assign, mortgage, pledge, hypothecate,
grant any security interest in, or otherwise subject to any other Lien, any of
its assets, properties or rights other than in the ordinary course of business;

                        (xii) Enter into or assume any Contract (including
without limitation any reinsurance or retrocession agreement or treaty, any
commutation, loss portfolio transfer or similar transaction, agreement or
arrangement or series of related transactions, agreements or arrangements
involving any ceded reinsurance of Casualty), or enter into or permit any
amendment, supplement, waiver or other modification in respect thereof, except
for such Contracts and amendments, supplements, waivers and modifications
thereof that are entered into, assumed or permitted in the ordinary course of
business;

                        (xiii) Compromise, settle, grant any material waiver or
release relating to or otherwise adjust in any material respect any Litigation
other than in the ordinary course of business;

                        (xiv) Take any action or omit to take any action, which
action or omission would result in a breach of any of the representations and
warranties set forth in Section 5.9; or

                        (xv) Agree or otherwise commit to take any of the
actions described in the foregoing paragraphs (i) through (xiv).

                  (c) PHYSICIANS will not cause or permit Sequoia or any of
Sequoia's Subsidiaries to do any of the following:

                        (i) Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, any
business, corporation, partnership or other organization or otherwise acquire or
agree to acquire any assets which are material to Sequoia and its Subsidiaries
taken as a whole, other than investment portfolio transactions in the ordinary
course of business which are consistent with the Investment Guidelines;

                        (ii) Amend Sequoia's charter or by-laws;

                        (iii) Create or issue any stock or other securities; or

                        (iv) Appoint any new directors.



                                       39
<PAGE>

         8.3 PHYSICIANS and PICO must use their best efforts to keep or cause to
be kept, all insurance contracts issued to or for the benefit of Sequoia
referred to in EXHIBIT K or suitable replacements for them in full force and
effect until Closing. STRONGWOOD acknowledges Sequoia must arrange new insurance
protection issued to or for the benefit of Sequoia after Closing. PICO and
PHYSICIANS hereby agree not to commute or retroactively terminate any insurance
policy or coverage benefiting Sequoia for periods occuring prior to Closing and
to cooperate with Sequoia in allowing Sequoia to make and receive payment on any
claims or other amounts due under such insurance policies or coverages for
events occuring prior to Closing.

9. ADDITIONAL AGREEMENTS

         9.1 Until Closing, STRONGWOOD will keep confidential, and will cause
its Affiliates and its and their directors, employees, consultants and advisers
to keep confidential, all non-public information relating to Sequoia and its
business, together with this Agreement, except:

                  (a) as required by law or the rules of the Exchanges;

                  (b) information which becomes public other than as a result of
a breach of this Section 9.1; or

                  (c) with PHYSICIANS' prior written consent

provided, that STRONGWOOD and its Representatives shall be entitled to meet with
and discuss the details of this Agreement and the transactions contemplated
hereby, as well as any non-public information relating to Sequoia and its
business, with any insurance regulator or with any rating agency currently
maintaining an insurer financial strength rating for Sequoia.

         9.2 PHYSICIANS acknowledges that none of STRONGWOOD, its Affiliates nor
any other person has made any representation or warranty, express or implied,
not included in or made pursuant to this Agreement and the Schedules and
Exhibits hereto as to the accuracy or completeness of any information in
connection with STRONGWOOD.

         9.3 Each of PICO and PHYSICIANS, as one party, and STRONGWOOD, as the
other party, acknowledges that the other party has entered into this Agreement
in reliance on the first party's representations and warranties set out in this
Agreement.

         9.4 Each of PICO and PHYSICIANS, as one party, and STRONGWOOD, as the
other party, agrees that no public announcement concerning the transactions
contemplated by this Agreement may be issued by either party without the prior
written consent of the other party, except such announcement as may be required
by law or the rules of the Exchanges, in which case the party required to make
the announcement must use its best efforts to allow the other party reasonable
time to comment on such announcement in advance of the announcement being
issued.

         9.5 (a) Each party will use its best efforts to promptly obtain all
approvals of and lodge such filing with regulatory bodies which are necessary or
desirable in connection with this Agreement and will cooperate fully with the
other party in promptly seeking such approvals and



                                       40
<PAGE>

lodging such filings, including without limitation approval from the California,
Ohio and Nevada Insurance Commissioners and any filing under the Hart Scott
Rodino Antitrust Improvements Act of 1976. Each party will promptly file any
information request by such body or from the other party and will not take any
action which will have the effect of delaying or otherwise impairing the receipt
of any necessary approval or lodging of any such necessary filing. Each party
will provide the other party with a copy of any material filing with any
regulatory body in connection with this Agreement (other than confidential
portions of such filing) and keep the other party advised of material requests
for information and assertions of material issues by such body with respect to
any filing. PHYSICIANS shall use its best efforts to promptly obtain all
consents to this Agreement and the transactions contemplated by this Agreement
from the third parties to the contracts set forth in EXHIBIT F.

                  (b) As promptly as practicable, and in no event later than 20
days after the execution of this Agreement, STRONGWOOD shall file with the
California Insurance Department a Form A regarding the transactions contemplated
in this Agreement.

                  (c) PHYSICIANS shall indemnify, defend and hold harmless
Sequoia and STRONGWOOD from any Damages incurred by either of them in obtaining
any such consents, as a consequence of any termination of any contracts for
failure to obtain such consent, or in replacing the products or services
provided under a contract so terminated.

         9.6 Except for amounts owed or, owing in respect of reinsurance
agreements with Affiliates listed on EXHIBIT L, or as otherwise agreed by the
Parties in writing prior to Closing, PHYSICIANS will cause all inter-company
accounts and arrangements between Sequoia and its pre-Closing Affiliates to be
settled in full and terminated prior to Closing and shall terminate the
intercompany agreements listed on EXHIBIT M hereto. Prior to or at the Closing,
PHYSICIANS shall cause Sequoia to pay to Charles Bancroft all amounts due at
Closing under the Agreement between Mr. Bancroft and Sequoia, dated March 6,
1996, which are accrued on the Pre-Closing GAAP Balance Sheet, and PHYSICIANS
shall pay all remaining amounts owing under such agreement, and shall deliver to
STRONGWOOD a release from Mr. Bancroft of all obligations of Sequoia arising
under such Agreement, in form and substance satisfactory to STRONGWOOD;

         9.7 From the date hereof to and including the Closing Date, PHYSICIANS
will, and will cause Sequoia to: (i) provide to STRONGWOOD a monthly management
report in scope and detail consistent with such monthly management report as
historically distributed to each member of Sequoia's senior management and as
previously delivered to STRONGWOOD; (ii) provide to STRONGWOOD a monthly update
of any changes to the Investments listed in Section 5.6(a) of the Disclosure
Schedule in scope and detail consistent with Section 5.6(a) of the Disclosure
Schedule; and (iii) timely prepare, and promptly deliver to STRONGWOOD, monthly
financial statements, to be in scope and detail consistent with such monthly
financial statements as historically distributed to Sequoia's senior management
and as previously delivered to STRONGWOOD. Each such financial statement shall
present fairly the financial position, assets and liabilities of Sequoia as at
the date thereof and the results of its operations and its cash flows for the
period then ended, in accordance with accounting policies and procedures
consistent with those historically used by Sequoia in the preparation of such
monthly financial statements.



                                       41
<PAGE>

         9.8 (a) Prior to the Closing Date, PICO shall adopt the Sequoia
Insurance Company Employees' Retirement Plan and Sequoia shall assign all assets
and liabilities of such plan to PICO and PICO shall amend such plan to reflect
such change in sponsorship and shall receive as a payment from Sequoia an amount
equal to $275,895, which represents the accrual up to June 30, 2002 in respect
of such plan. Following the Closing Date neither Sequoia, STRONGWOOD nor any
Affiliates of STRONGWOOD shall have any liability in respect of such plan, and
PICO shall indemnify and hold harmless Sequoia, STRONGWOOD and their respective
affiliates from and against any or all liabilities arising from and relating to
such plan.

                  (b) Effective as of the Closing Date, employees of Sequoia who
were participants in the PICO Holdings, Inc. Employee 401(k) Plan (the "PICO
401(K) PLAN") on the Closing Date shall commence participation in a tax-deferred
savings plan maintained by STRONGWOOD or its Affiliates (the "STRONGWOOD 401(K)
PLAN"). Employees of Sequoia who become participants in the Strongwood 401(k)
Plan shall receive service credit for vesting and accrual of any employer
contributions under such plan for service taken into account under the PICO
401(k) Plan. Following the Closing Date, the plan administrator of the PICO
401(k) Plan shall permit each Sequoia employee who is no longer an active
participant in the PICO 401(k) Plan as a result of the consummation of the
transaction contemplated in this Agreement to elect (i) to receive a
distribution of the value of the employee's account less the amount of any
outstanding loan to such participant under such plan (such participant's
"ACCOUNT BALANCE"), (ii) to roll over such participant's Account Balance to an
individual retirement account of such participant, or (iii) to roll over such
participant's Account Balance to the Strongwood 401(k) Plan.

                  (c) From and after the Closing Date, STRONGWOOD shall be
solely responsible for, and shall indemnify, reimburse, pay and hold harmless
PHYSICIANS and its Affiliates from and against any liability or obligation with
respect to all workers' compensation claims of any employee of Sequoia,
regardless of when the accident or injury giving rise to the claim occurred.
Notwithstanding the preceding sentence, as to any workers' compensation claim of
an employee of Sequoia that relates to an accident or injury documented to have
occurred prior to the Closing Date, PHYSICIANS shall cooperate with STRONGWOOD
and use its best efforts to obtain payment of the claim under the workers'
compensation insurance policy in effect for Sequoia prior to the Closing Date.

         9.9 After Closing, STRONGWOOD will cause Sequoia to give PHYSICIANS and
its representatives access during normal business hours and upon reasonable
notice to the books and records, including Tax Returns of Sequoia and to
consolidated and unitary Tax Returns of any Affiliate of Sequoia in which
Sequoia joins, to the extent necessary to permit PHYSICIANS and its
representatives to confirm any loss or other liability in respect of which
PHYSICIANS may make a claim for indemnification under this Agreement. After
Closing, PHYSICIANS will give STRONGWOOD, Sequoia and their representatives
access during normal business hours and upon reasonable notice to the books and
records, including Tax Returns, of PHYSICIANS and the consolidated and unitary
Tax Returns of any Affiliate of PHYSICIANS in which PHYSICIANS joins, to the
extent necessary to permit STRONGWOOD to confirm any loss or other liability in
respect of which PHYSICIANS may make a claim for indemnification under this
Agreement or to confirm any Tax Benefit realized in connection therewith.



                                       42
<PAGE>

         9.10 After Closing, STRONGWOOD or its Affiliates will not conduct
business in any way through Sequoia or otherwise which expressly or impliedly
indicates a continued association with PHYSICIANS or its Affiliates other than
as a party to a contract with PHYSICIANS or its Affiliates.

         9.11 (a) (i) PICO or PHYSICIANS, as applicable, shall file, or cause
to be filed, and PICO, PHYSICIANS and STRONGWOOD shall cause Sequoia and its
Subsidiaries, to the extent permitted by law, to join, for all taxable periods
ending on or prior to the Closing Date, in (A) the consolidated federal income
Tax Returns of which PICO is the common parent and (B) the combined,
consolidated or unitary Tax Returns for state, local and foreign Taxes which
includes PICO, PHYSICIANS or their applicable Affiliates and with respect to
which Sequoia and its Subsidiaries (x) filed such a Tax Return for the most
recent taxable period for which a Tax Return has been filed prior to the Closing
Date and may file such a Tax Return for subsequent taxable periods or (y) are
required to file such a Tax Return. PICO or PHYSICIANS, as applicable, shall
file, or cause to be filed, all other Tax Returns relating to the business or
assets of Sequoia and its Subsidiaries required to be filed on or prior to the
Closing Date. PICO or PHYSICIANS, as applicable, shall cause all such Tax
Returns, to the extent permitted by applicable Tax law, to be filed on a basis
consistent with the last previous such Tax Returns filed in respect of Sequoia
and its Subsidiaries.

                        (ii) STRONGWOOD shall file, or cause to be filed, all
Tax Returns relating to the business or assets of Sequoia and its Subsidiaries
other than those Tax Returns described in clause (i) above. Additionally,
STRONGWOOD shall not make any Tax election under Section 338(g) of the Internal
Revenue Code or file any amended Tax Returns for taxable periods ending on or
prior to the Closing Date which will result in any additional Tax for any Tax
periods ending prior to and/or on the Closing Date.

                  (b) PICO or PHYSICIANS, as applicable, shall be entitled to
retain, or receive immediate payment from Sequoia, its Subsidiaries or
STRONGWOOD of any refund or credit with respect to Taxes plus any interest
received with respect thereto from the applicable taxing authorities (net of any
cost or expenses to Sequoia, its Subsidiaries or STRONGWOOD and excluding any
refund or credit (i) to the extent reflected on the Closing GAAP Balance Sheet
or Closing Statutory Balance Sheet or (ii) resulting from the carryback of a
loss or credit from a taxable period (or a portion thereof) beginning after the
Closing Date), relating to Sequoia or its Subsidiaries that are described as
being the responsibility of PICO and PHYSICIANS in Section 10.2(a). STRONGWOOD,
Sequoia or its Subsidiaries shall be entitled to retain, or receive immediate
payment from PICO or PHYSICIANS, as applicable, of any refund or credit with
respect to Taxes plus any interest received with respect thereto from the
applicable taxing authorities (net of any cost or expenses to PICO or
PHYSICIANS, as applicable), relating to Sequoia or its Subsidiaries that PICO or
PHYSICIANS, as applicable, is not entitled to retain or receive pursuant to the
immediately preceding sentence. STRONGWOOD, PHYSICIANS and PICO shall cooperate
with respect to claiming any refund or credit with respect to Taxes referred to
in this Section 9.11(b), provided that such cooperation shall not unreasonably
interfere with the conduct of the business of the parties.

                  (c) PICO and PHYSICIANS shall (and shall cause their
Affiliates to) (i) provide STRONGWOOD and its Affiliates with such assistance as
may be reasonably requested in



                                       43
<PAGE>

connection with the preparation of any Tax Return, audit or other examination by
any taxing authority or judicial or administrative proceeding relating to Taxes
with respect to Sequoia or its Subsidiaries; and (ii) retain (and provide
STRONGWOOD and its Affiliates with reasonable access to) all records or
information which may be relevant to such Tax Return, audit, examination or
proceeding, provided that the foregoing shall be done in a manner so as not to
interfere unreasonably with the conduct of the business of PICO, PHYSICIANS or
their respective Affiliates. STRONGWOOD shall (and shall cause its Affiliates
to) (i) provide PICO, PHYSICIANS and their respective Affiliates with such
assistance as may be reasonably requested in connection with the preparation of
any Tax Returns, audits or other examinations by any taxing authority or
judicial or administrative proceeding relating to Taxes for which PHYSICIANS may
be responsible under Section 10.2; and (ii) retain (and provide PICO, PHYSICIANS
and their respective Affiliates with reasonable access to) all records or
information which may be relevant to such Tax Return, audit, examination or
proceeding, provided that the foregoing shall be done in a manner so as not to
interfere unreasonably with the conduct of the business of STRONGWOOD or any of
its Affiliates.

                  (d) To the extent permitted by law, STRONGWOOD shall cause
Sequoia and its Subsidiaries not to carry back any item of income, loss,
deduction or credit from any period beginning after the Closing Date to any
period including or ending prior to the Closing Date.

                  (e) Immediately after Closing, all Tax sharing agreements and
other similar arrangements of which Sequoia or any of its Subsidiaries is a
party, including without limitation the Tax Allocation Agreement, shall be
terminated without cost or liability to Sequoia or its Subsidiaries, and no
additional payments shall be made thereunder.

                  (f) PICO, PHYSICIANS and STRONGWOOD hereby agree that each of
them shall, and shall cause their respective Affiliates to, treat all
transactions or events of Tax consequence, that occur on the Closing Date but at
or before the Closing as properly allocable to the portion of the Closing Date
prior to the Closing and, accordingly, as occurring on the Closing Date for Tax
purposes and includible in the federal income Tax Return of the consolidated
group of which PICO is the common parent, as contemplated by Treasury
Regulations Section 1.1502-76(b)(1)(ii)(A), including the dividend paid by
Sequoia to PHYSICIANS on the Closing Date, as described in Section 2.2 of this
Agreement.

                  (g) At the Closing, PHYSICIANS shall deliver to STRONGWOOD
duly executed certificates certifying that the transactions contemplated hereby
are exempt from withholding under Section 1445 of the Internal Revenue Code.

                  (h) PICO will not make an election pursuant to Section
1.1502-20(g) of the Treasury Regulations with respect to Sequoia.

         9.12 From time to time prior to the Closing Date, PHYSICIANS may
supplement or amend the Disclosure Schedule to this Agreement with respect to
any matter hereafter arising that, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described therein or that
is necessary to complete or correct any information therein that is or has been
rendered untrue, inaccurate, incomplete or misleading. Delivery of such
supplements or amendments shall be for informational purposes only and shall not
expand or



                                       44
<PAGE>

limit the rights or affect the obligations of any party hereunder, and such
supplements shall not constitute a part of the Disclosure Schedule to this
Agreement for purposes of this Agreement.

         9.13 Promptly following Closing, STRONGWOOD agrees to cause Sequoia to
provide financial information to PHYSICIANS with respect to the operation of
Sequoia from the end of the proceeding calendar quarter to the date of Closing,
of the nature and in the form previously provided by Sequoia to PHYSICIANS
insofar as such information relates to PHYSICANS tax and financial reporting
requirements. Neither STRONGWOOD nor Sequoia shall have any obligation to
PHYSICIANS to insure the accuracy or completeness of any such information.

         9.14 Immediately after Closing, STRONGWOOD shall provide PHYSICIANS
with reasonable and necessary access to Sequoia's books and records so that
PHYSICIANS is able to: (i) complete all financial statements for inclusion in
the consolidated audited accounts of PHYSICIANS and its subsidiaries; (ii)
complete financial statements for inclusion in the consolidated audited accounts
of PICO; and (iii) complete all tax returns for PICO and its subsidiaries as of
the Closing Date.

         9.15 For a period of seven years following Closing, PICO and PHYSICIANS
will grant, and will cause their respective Subsidiaries to grant, reasonable
access at reasonable times to STRONGWOOD and Sequoia and their respective
Representatives to any books and records of PICO and PHYSICIANS or their
respective Subsidiaries pertaining to Sequoia and its Subsidiaries.

         9.16 For a period of seven years following Closing, STRONGWOOD will
grant, and will cause their respective Subsidiaries to grant, reasonable access
at reasonable times to PHYSICIANS and PICO and their respective Representatives
to any books and records of STRONGWOOD or its Subsidiaries pertaining to Sequoia
and its Subsidiaries for periods prior to the Closing Date.

         9.17 At or prior to the Closing, STRONGWOOD and PHYSICIANS shall enter
into the Escrow Agreement.

10. INDEMNIFICATION

         10.1 PHYSICIANS must indemnify STRONGWOOD for any Damages, suffered or
incurred by STRONGWOOD or its Affiliates (including, following the Closing,
Sequoia and its Subsidiaries) arising from any breach or inaccuracy of any
representation or warranty of PHYSICIANS contained in this Agreement or any
breach of any other obligation of PHYSICIANS contained in this Agreement,
whether arising directly, by reason of a Third Party Claim, or otherwise.

         10.2 (a) Notwithstanding anything in this Agreement to the contrary,
and excluding current and deferred taxes to the extent reflected on the Closing
Balance Sheets, other than any such taxes arising pursuant to the Tax Allocation
Agreement and paid pursuant to Section 3.7 of this Agreement, PICO and
PHYSICIANS, jointly and severally, must indemnify STRONGWOOD against and pay (i)
all Taxes which may be imposed or assessed in connection with any period up to
and including the Closing Date, including specifically any adjustments required
by any Taxing authority to Tax Returns of Sequoia filed for periods up to and
including


                                       45
<PAGE>
Closing; (ii) any liability for Taxes arising out of or attributable to any
inaccuracy in or breach of any representation or warranty made in Section 5.11,
(iii) all Taxes for which Sequoia or any of its Subsidiaries may be held liable
because it was, prior to the completion of the Closing, a member of any
combined, consolidated or unitary group for purposes of filing Tax Returns or
paying Taxes or a transferee or successor of any other Person; and (iv) Taxes
arising out of or attributable to the transactions described in Section 2.2, in
each case together with any reasonable out-of-pocket expenses incurred to third
parties by STRONGWOOD or Sequoia in responding to any such assessments or
adjustments (each, a "TAX LOSS").

                  (b) After Closing, STRONGWOOD must promptly notify PHYSICIANS
in reasonable detail of STRONGWOOD, Sequoia's or any of its Subsidiaries'
receipt from a Taxing authority of notice of the commencement of any Tax audit,
examination or judicial or administrative proceeding or receipt from a Taxing
authority of any proposed adjustment; demand or notice of deficiency which if
determined adversely to the taxpayer or after the lapse of time would be grounds
for indemnification by PHYSICIANS under Section 10.2(a). To the extent
STRONGWOOD fails to give notice as required in the preceding sentence and such
failure is prejudicial to PHYSICIANS, PHYSICIANS does not have any obligation to
indemnify STRONGWOOD for any Damages in connection with such asserted Tax
obligation that would not have been incurred but for such failure. Within 30
days of receipt of such notice from STRONGWOOD or Sequoia, PHYSICIANS may direct
through representatives of its own choosing and its expense any audit, refund
claim or judicial or administrative proceeding involving any asserted Tax
obligation with respect to such indemnity. If PHYSICIANS so elects to direct (i)
PHYSICIANS must thereafter notify STRONGWOOD of significant developments with
respect to such contest at its expense and (ii) STRONGWOOD at PHYSICIANS'
expense must promptly execute or cause to be executed by the taxpayer reasonable
powers of attorney or other documents authorizing such representatives of
PHYSICIANS as PHYSICIANS may designate to act in connection with such asserted
Tax liability; provided, that such powers of attorney shall not permit
PHYSICIANS to pay or compromise, and PHYSICIANS shall not pay or compromise,
such asserted Tax liability without STRONGWOOD's prior written consent, which
consent must not be unreasonably withheld or delayed. STRONGWOOD or its
Affiliates must not pay or compromise such asserted Tax liability without
PHYSICIANS' prior written consent, which consent must not be unreasonably
withheld or delayed.

                  (c) In case of any inconsistency between Section 9.11 or
Section 10.2 and any other provision of Article 10, Section 9.11 or Section
10.2, as applicable, shall control over such other provision of Article 10 with
respect to respect to Tax matters.

                  (d) All payments pursuant to Section 10.1, this Section 10.2,
Section 10.3 or Section 10.4 shall be deemed to be adjustments to the purchase
price for Tax purposes unless otherwise required by law. The parties shall, and
shall cause their respective Affiliates to, file all Tax Returns consistent with
the preceding sentence and act in accordance with such Tax treatment in the
course of any Tax audit, appeal, or litigation unless otherwise required by law.

                  (e) No disclosure pursuant to Section 5.11 shall affect the
express obligations that PHYSICIANS otherwise has under this Section 10.2,
provided that there shall not be any duplicative payments with respect to the
same item.



                                       46
<PAGE>

                  (f) PHYSICIANS' indemnification obligation under this Section
10.2 shall survive until 30 days after the expiration of the applicable statute
of limitations for Taxes; claims under this Section 10.2 are deemed to be
separate from claims under Section 10.1.

         10.3 STRONGWOOD must indemnify PHYSICIANS against Damages suffered or
incurred by PHYSICIANS or its Affiliates arising from any breach or inaccuracy
of any representation or warranty of STRONGWOOD contained in this Agreement or
any breach of any other obligation of STRONGWOOD contained in this Agreement,
whether arising directly, by reason of a Third Party Claim or otherwise.

         10.4 Notwithstanding anything to the contrary in this Agreement and
subject to Section 10.6, claims by a party under Sections 10.1 and 10.3:

                  (a) must not exceed, in the aggregate, $25 Million in the case
of all claims submitted under Section 10.1 and must not exceed, in the
aggregate, $12 Million in the case of claims submitted under Section 10.3;

                  (b) must be accompanied by a reasonably detailed written
explanation of the basis for the claim; and

                  (c) must involve Damages in respect of all such claims in the
aggregate greater than $175,000; provided, that it is understood that once such
claims exceed $175,000 in Damages, a party's obligation to indemnify shall apply
to such excess in its entirety.

         10.5 An indemnifying party shall promptly and in no event later than 45
days after receiving notice of an indemnification claim, pay all Damages set
forth in such claim or set forth in a subsequent written agreement regarding
such claim. After an indemnifying party has made any indemnification payment the
indemnified party shall be required to refund to the indemnifying party when
actually realized any amount of such Damages recovered by Sequoia (where the
indemnified party is STRONGWOOD) or PHYSICIANS, as the case may be, under
insurance policies. An indemnified party shall use reasonable efforts (at the
indemnifying party's expense) to pursue recoveries of Damages under insurance
policies if there is a good faith basis for asserting coverage.

         10.6 Subject to Sections 10.6(a) and 10.6(b), the obligations of a
party to indemnify a party under Sections 10.1 and 10.3 in respect of any breach
or inaccuracy of any representation or warranty terminate on May 31, 2004,
except that PHYSICIANS' obligations to indemnify under Section 10.1 in respect
of any breach of or inaccuracy in any representation or warranty contained in or
made pursuant to Sections 5.1, 5.2, 5.3, 5.4(a) and 5.24 shall survive
indefinitely and any breach of or inaccuracy in any representation or warranty
contained in or pursuant to Section 5.15 shall survive until 30 days after the
expiration of any applicable statute of limitation.

                  (a) A party's obligation to indemnify in respect of a breach
or inaccuracy of any representation or warranty will not terminate with respect
to any item on which the party seeking indemnification has made a claim before
the date such representation or warranty would otherwise expire pursuant to
Section 10.6 by delivering notice to the other party.



                                       47
<PAGE>

                  (b) PHYSICIANS' obligations to indemnify STRONGWOOD pursuant
to Section 9.8 and Section 10.1 for any liabilities arising from or relating to
the Sequoia Insurance Company Employees' Retirement Plan shall not be subject to
the limitations provided in this Section 10.6.

         10.7 (a) In order for a party to be entitled to any indemnification
under this Agreement in respect of a demand made by any corporation, firm,
government authority or other person against the indemnified party ("THIRD PARTY
CLAIM"), the indemnified party must notify the other party in reasonable written
detail within 20 days after receipt by such indemnified party of written notice
of the Third Party Claim.

                  (b) After giving notice under this Section 10.7, an
indemnified party must deliver to the other party within 5 days of receipt from
a third party any documents (including without limitation court documents) in
connection with a Third Party Claim. (c) The indemnifying party has 30 days
after receipt of notice under Section 10.7(a) or such lesser time as may be
required in order to meet procedural deadlines for responding to legal
proceedings to assume the defense to the Third Party Claim at its cost. If the
indemnifying party elects to assume the defense, it must give notice to the
indemnified party and thereafter notify the indemnified party of significant
developments on the Third Party Claim at its cost. The indemnifying party may
pay or compromise the Third Party Claim on any terms it thinks fit, subject to
no expense or continuing obligation of the indemnified party. If the
indemnifying party denies liability in connection with the Third Party Claim or
does not elect to assume its defense, the other party may pay or compromise the
Third Party Claim on any terms it thinks fit and must notify the indemnifying
party of any significant developments on or payment or compromise of the Third
Party Claim.

         10.8 Subject to this Agreement, STRONGWOOD acknowledges that PHYSICIANS
or its Affiliates have no liability for Damages of Sequoia suffered or incurred
after the Closing Date, and PHYSICIANS acknowledges that upon Closing,
STRONGWOOD and Sequoia and their Affiliates will have no liability for any
Damages suffered or incurred by Sequoia or PHYSICIANS prior to the Closing.
Subject to Sections 10.1 and 10.2, PHYSICIANS or its Affiliates will have no
liability for any expenses suffered, or incurred by Sequoia after the Closing in
connection with any Tax or insurance regulatory audit or examination.

         10.9 PHYSICIANS shall indemnify, defend and hold Sequoia and STRONGWOOD
and their Affiliates harmless from any Damages incurred prior to or after
Closing in connection with the termination prior to Closing of any Sequoia
employees or the termination after Closing of any Sequoia employee as to whom
notice of termination has been provided prior to Closing; and after Closing,
Sequoia and STRONGWOOD shall indemnify, defend and hold PHYSICIANS and its
Affiliates harmless from any Damages incurred after Closing in connection with
the termination after Closing of any Sequoia employee other than those employees
having received notice of termination prior to Closing, except to the extent
such employee is or becomes entitled to a payment or benefit that should have
been disclosed pursuant to this Agreement. The foregoing indemnification
obligations shall be without limit as to time or amount.



                                       48
<PAGE>

11. GUARANTEE BY PICO

         11.1 PICO hereby irrevocably and unconditionally guarantees to
STRONGWOOD and its successors and assigns the due, faithful and punctual
performance of, compliance with and payment when due of all obligations,
covenants, agreements, and liabilities under this Agreement required to be
performed by or complied with by PHYSICIANS, whether absolute or contingent,
joint or several, and whether now or hereafter existing or due or to become due
(all such obligations, covenants, agreements, and liabilities being referred to
herein as the "PICO GUARANTEED OBLIGATIONS"). In case PHYSICIANS shall fail to
pay or perform duly and punctually any PICO Guaranteed Obligation when and as
the same shall be due and payable or required to be performed, as the case may
be, in accordance with the terms hereof, PICO will pay or perform or cause to be
paid or performed such PICO Guaranteed Obligations. The Parties agree that, in
the event of any disputes regarding the fulfillment by PHYSICIANS of the PICO
Guaranteed Obligations, STRONGWOOD shall first attempt to resolve any such
dispute with PHYSICIANS; however, STRONGWOOD need not exhaust all of its
judicial or other remedies or take any steps to enforce any rights or judgments
against PHYSICIANS or any other Person to compel such payment or performance
other than giving the notice to PHYSICIANS pursuant to Section 16.1 and making a
senior officer available for discussions with PHYSICIANS as contemplated by
Section 16.1 for a period of 10 days from the giving of such notice prior to
seeking to enforce the terms of this Article 11 against PICO. PICO's guarantee
pursuant to this Article 11 is an absolute, unconditional, present and
continuing guarantee of payment and not of collectibility, without requirement
of any presentation, demand, notice of acceptance, protest or other notice of
any kind, all of which are unconditionally and irrevocably waived by PICO.

         11.2 The obligations of PICO under this Agreement are independent of
the PICO Guaranteed Obligations, and a separate action or actions may be brought
against PICO to enforce this Agreement, irrespective of whether any action is
brought against PHYSICIANS or whether PHYSICIANS is joined in any such action.
PICO's obligations hereunder shall not be in any way impaired, released,
discharged or limited by:

                  (a) any lack of validity or enforceability of another
provision of this Agreement;

                  (b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the PICO Guaranteed Obligations, or any
other amendment or waiver of any provision of this Agreement;

                  (c) any amendment or modification or addition or deletion to
or from any of the terms of this Agreement;

                  (d) any change or termination of the corporate structure or
existence of PHYSICIANS;

                  (e) any voluntary or involuntary bankruptcy, insolvency,
reorganization, assignment for the benefit of creditors, liquidation or similar
proceedings with respect to STRONGWOOD or any of their properties; and



                                       49
<PAGE>

                  (f) any other event or condition which might otherwise
constitute a legal or equitable defense of a guarantor or otherwise limit
recourse against PICO.

         11.3 Notwithstanding any payment or payments made by PICO, PICO shall
not assert any right to which it may become entitled, whether by subrogation,
contribution or otherwise, against STRONGWOOD or any of its properties, by
reason of the performance by PICO of its obligations under this Agreement, nor
shall PICO seek or be entitled to seek any reimbursement from STRONGWOOD in
respect of payments made by PICO until such time as all of the PICO Guaranteed
Obligations of PICO and PHYSICIANS shall be duly and fully performed.

12. FEES AND OTHER EXPENSES

         12.1 PHYSICIANS shall be responsible for, shall indemnify and hold
STRONGWOOD harmless from and against, and shall pay all transfer, documentary,
sales, use, registration and other such taxes (including without limitation all
applicable stock transfer taxes) and fees (including any penalties, interest and
additions to tax) incurred in connection with this Agreement, and the
transactions contemplated thereby ("TRANSFER TAXES") must be paid by PHYSICIANS.
PHYSICIANS shall timely prepare Tax Returns in respect of such Transfer Taxes
with the applicable taxing authority and shall deliver a copy of such Tax
Returns to STRONGWOOD for review prior to the filing and shall not file without
STRONGWOOD's prior written consent, which consent shall not be unreasonably
withheld. Each party shall execute and deliver to the other party at Closing all
applicable and properly completed Transfer Tax exemption certificates as either
STRONGWOOD or PHYSICIANS may reasonably request. Such certificates shall be in
the form, and shall be signed by the proper party, as provided under applicable
Tax law.

         12.2 Each party will pay its own legal, accounting and other costs with
respect to this Agreement, and the transactions contemplated hereby.

13. DELEGATION AND ASSIGNMENT

         13.1 Subject to either of PHYSICIANS or STRONGWOOD being permitted to
transfer its rights to an Affiliate all of whose stock is owned by such party,
or to a corporation which directly or indirectly controls or is under common
control with such party prior to Closing, the parties agree that this Agreement
is personal to all the parties to it and none of them may delegate, subcontract
or assign any of their rights or obligations under this Agreement without the
prior written consent of the other parties; provided further that STRONGWOOD may
assign its rights hereunder after the Closing to any transferee of the Shares or
to any reinsurer or purchaser of all or substantially all of the assets of
Sequoia or to any lender to STRONGWOOD without such consent.

         13.2 If either party to this Agreement assign its rights under this
Agreement prior to the Closing in the manner permitted by Section 13.1, then
such party represents and warrants that transferee ("SUB"): is duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it was formed; has all requisite corporate power and authority to perform
its obligations and to carry out the transactions contemplated by this
Agreement; and that the representations and warranties contained in Section 5 or
Section 7, as the case may be,




                                       50
<PAGE>

will at Closing be true and correct with respect to Sub as if it were PHYSICIANS
or STRONGWOOD, as the case may be. No such assignment shall relieve such
assigning party from its obligations hereunder.

14. AMENDMENTS

         No amendment, modification or discharge of this Agreement, and no
waiver hereunder, shall be valid or binding unless set forth in writing and duly
executed by the party against whom enforcement of the amendment, modification,
discharge or waiver is sought. Any such waiver shall constitute a waiver only
with respect to the specific matter described in such writing and shall in no
way impair the rights of the party granting such waiver in any other respect or
at any other time. Neither the waiver by any of the parties hereto of a breach
of or a default under any of the provisions of this Agreement, nor the failure
by any of the parties, on one or more occasions, to enforce any of the
provisions of this Agreement or to exercise any right or privilege hereunder,
shall be construed as a waiver of any other breach or default of a similar
nature, or as a waiver of any of such provisions, rights or privileges
hereunder. The rights and remedies herein provided are cumulative and none is
exclusive of any other, or of any rights or remedies that any party may
otherwise have at law or in equity. The rights and remedies of any party based
upon, arising out of or otherwise in respect of any inaccuracy or breach of any
representation, warranty, covenant or agreement or failure to fulfill any
condition shall in no way be limited by the fact that the act, omission,
occurrence or other state of facts upon which any claim of any such inaccuracy
or breach is based may also be the subject matter of any other representation,
warranty, covenant or agreement as to which there is no inaccuracy or breach.
The representations and warranties of PHYSICIANS and PICO shall not be affected
or deemed waived by reason of any investigation made by or on behalf of
STRONGWOOD (including but not limited to by any of its advisors, consultants or
representatives) or by reason of the fact that STRONGWOOD or any of such
advisors, consultants or representatives knew or should have known that any such
representation or warranty is or might be inaccurate. Subject to Section 10.6,
the representations and warranties of PHYSICIANS, PICO and STRONGWOOD shall
survive the Closing. No course of dealing between the parties shall be deemed
effective to modify, amend or discharge any part of this Agreement or any rights
or obligations of any party under or by reason of this Agreement.

15. NOTICES

         15.1 A notice, request, consent or other communication
("COMMUNICATION") to be given by a party under this Agreement must be in writing
addressed as follows:

<TABLE>
         <S>                                  <C>
         If to PHYSICIANS:                    PHYSICIANS Insurance Company of Ohio
                                              Attention:  Richard H. Sharpe, COO
                                              875 Prospect Street, Suite 301
                                              La Jolla, CA 92037
                                              Facsimile:  858-373-1497
</TABLE>



                                       51
<PAGE>
<TABLE>
         <S>                                  <C>
                  With a copy to:             Gray Cary Ware & Freidenrich LLP
                                              4365 Executive Drive, Suite 1100
                                              San Diego, CA 92121-2133
                                              Attention: Robert W. Ayling, Esq.
                                              Facsimile:  858-677-1477

         If to PICO:                          PICO Holdings, Inc.
                                              875 Prospect Street
                                              Suite 301
                                              La Jolla, CA 92037
                                              Facsimile:  858-456-6480

         If to STRONGWOOD:                    Strongwood Insurance Holdings Corporation
                                              c/o Richard J. Quagliaroli
                                              48 Westwood Road
                                              West Hartford, CT 06117
                                              Facsimile:  (860) 236-8612

                  With a copy to:             J.P. Morgan Partners, LLC
                                              Attention:  Mark Holden
                                              1221 Avenue of the Americas, 39th Floor
                                              New York, NY  10020-1080
                                              Facsimile:  (212) 899-3401

                                  and:        Debevoise & Plimpton
                                              919 Third Avenue
                                              New York, NY 10022
                                              Attention:  Steven Ostner
                                              Facsimile:  (212) 909-6836
</TABLE>

         15.2 A Communication must be delivered by hand or prepaid post,
certified or registered mail, return receipt requested or by facsimile.

16. DISPUTE RESOLUTION

         16.1 Except for a proceeding seeking an urgent remedy of a matter under
Section 9.14, a party must not commence arbitration in respect of a dispute
arising out of this Agreements ("DISPUTE") unless it has first notified the
other party in writing, and made itself available for discussions with the other
party for the purpose of attempting to resolve all or at least part of the
Dispute. For the purpose of this Section 16, STRONGWOOD, on the one hand, and
PICO and PHYSICIANS, on the other hand, shall each be considered to be a
"party." The parties agree that the Federal Arbitration Act applies to this
Agreement.

         16.2 If the parties fail to resolve a Dispute within ten days after the
giving of any notice pursuant to Section 16.1, the following procedures apply:



                                       52
<PAGE>

                  (a) either party must issue notice in writing to the other
party setting out full details of the matter which it regards as being in
dispute ("NOTICE").

                  (b) Within 14 days after receipt, the person receiving the
Notice must issue a written response to the person issuing the Notice expressing
its views on the matters referred to in the Notice ("RESPONSE").

                  (c) If the Dispute has not been resolved within 14 days after
receipt of the Response, or any other period agreed to in writing between the
parties, the Dispute will be referred to mandatory binding arbitration.

                  (d) The arbitration will take place in San Francisco,
California.

                  (e) The Parties agree that any arbitration will be
administered by the American Arbitration Association ("AAA") and that a neutral
arbitrator (the "ARBITRATOR"), will be selected by the AAA in a manner
consistent with the Commercial Arbitration Rules of the AAA in effect at the
time of the arbitration and the arbitration shall be conducted in accordance
with such rules.

                  (f) The Parties agree that the Arbitrator shall have the power
to decide any motions brought by any party to the arbitration, including motions
for summary judgment and/or adjudication and motions to dismiss and demurrers,
prior to any arbitration hearing. The Parties agree that the Arbitrator shall
issue a written decision on the merits and that the Arbitrator shall have the
power to award any remedies, including attorneys' fees and costs, available
under applicable law.

                  (g) The Arbitrator is relieved of all judicial formality and
is not bound by the strict rules of procedures and evidence. The Arbitrator is
empowered to grant interim relief as the Arbitrator may deem appropriate. The
Arbitrator's award and decision shall be deemed a final award enforceable
pursuant to the Federal Arbitration Act, 9 U.S.C. Section 1 et. seq. and
judgment on the Arbitrator's award may be entered in any court of competent
jurisdiction.

                  (h) Within 30 days of appointment of the Arbitrator, the
Arbitrator must meet with the parties and determine timely periods for briefs,
discovery procedures and schedules for hearings.

                  (i) Each party is entitled to be represented by legal counsel.

                  (j) The determination of the Arbitrator (if an individual) or
majority of Arbitrators (if a panel must be in writing and contain the reasons
for the determination and will be final and binding on the parties.

                  (k) All costs and expenses incurred as a result of such
arbitration are to be shared equally by the parties, unless otherwise agreed.

         16.3 The existence of a Dispute or application of any of the procedures
in this Section will not, of itself, relieve the parties of any obligation under
this Agreement.



                                       53
<PAGE>

17. SEVERABILITY

         If any provision, including any phrase, sentence, clause, section or
subsection, of this Agreement is invalid, inoperative or unenforceable for any
reason, such circumstances shall not have the effect of rendering such provision
in question invalid, inoperative or unenforceable in any other case or
circumstance, or of rendering any other provision herein contained invalid,
inoperative, or unenforceable to any extent whatsoever.

18. WAIVER, RIGHTS AND REMEDIES

         No exercise or failure to exercise or delay in exercising any right or
remedy will constitute a waiver by any party to any right or remedy available to
that party. The rights or remedies under this Agreement are in addition to any
rights or remedies available by law.

19. COUNTERPARTS

         This Agreement may be executed in counterparts (or by counterpart
signature pages), each of which constitute one and the same instrument.

20. GOVERNING LAW

         This Agreement shall be governed in all respects, including as to
validity, interpretation and effect, by and construed in accordance with the
laws of California without giving effect to the principles of conflicts of law
thereof. The Parties hereby irrevocably submit to the non-exclusive jurisdiction
of the courts of the State of California and the Federal courts of the United
States of America located in the State of California, City of San Diego and
County of San Diego solely in respect of the interpretation and enforcement of
the provisions of this Agreement and of the documents referred to in this
Agreement, and in respect of the transactions contemplated hereby and thereby.
Each of the parties hereby waives, and agrees not to assert, as a defense in any
action, suit or proceeding for the interpretation or enforcement hereof or of
any such document or in respect of any such transaction, that it is not subject
to such jurisdiction. Each of the parties hereby waives, and agrees not to
assert, as a defense in any action, suit or proceeding for the interpretation or
enforcement hereof or of any such document or in respect of any such
transaction, that such action, suit or proceeding may not be brought or is not
maintainable in such courts or that the venue thereof may not be appropriate or
that this Agreement or any such document may not be enforced in or by such
courts. The parties hereby consent to and grant any such court non-exclusive
jurisdiction over the person of such parties and over the subject matter of any
such dispute and agree that mailing of process or other papers in connection
with any such action or proceeding in the manner provided in Section 15 or in
such other manner as may be permitted by law, shall be valid and sufficient
service thereof.

21. FURTHER ASSURANCES

         21.1 Each party agrees that each party will execute all such documents
and do or cause to be done all things as may be reasonably required or desirable
on its part to give full force and effect to the provisions of this Agreement.




                                       54
<PAGE>

         21.2 PHYSICIANS at its cost will publish any notice required under the
Code in connection with closing.

22. TERMINATION

         22.1 This Agreement may be terminated at any time prior to the Closing
Date:

                  (a) by the written agreement of the Parties; or

                  (b) unilaterally by either party if all conditions precedent
in Section 4 to such party's obligations under this Agreement are not satisfied
or waived by March 31, 2003, subject to any extension agreed in writing between
the Parties.

                  (c) by either party by written notice to the other party if:

                        (i) the representations and warranties of the other
party shall not be true and correct in all material respects at and as of the
date when made, or shall not be true and correct in all material respects as of
the Closing Date as though made on and as of such date;

                        (ii) the other party shall (and the terminating party
shall not) have failed to perform and comply with, in all material respects, all
agreements, covenants and conditions hereby required to have been performed or
complied with by such party prior to the time of such termination, and such
failure shall not have been cured within a reasonable period of time but not
less than fifteen days following notice of such failure; or

                        (iii) any event, shall occur or exist that otherwise
shall have made it impossible to satisfy a condition precedent to the
terminating party's obligations to consummate the transactions contemplated by
this Agreement, unless the occurrence or existence of such event, fact or
condition shall be due to the failure of the terminating party to perform or
comply with any of the agreements, covenants or conditions hereof to be
performed or complied with by such party prior to the Closing.

         22.2 If the Closing does not occur because this Agreement terminates
pursuant to the provisions of Section 22.1:

                  (a) this Agreement shall become void and have no effect,
without any liability to any Person in respect hereof or of the transactions
contemplated hereby on the part of any party hereto, or any of its directors,
officers, Representatives, stockholders or Affiliates, except as specified in
Section 9.1, 12, and 22.2, which Sections remain in full force and effect
notwithstanding the termination of this Agreement, and except for any liability
resulting from such party's breach of this Agreement.

                  (b) each party must return to the other party all documents
received from the other party or its Affiliates by the party or its Affiliates
in connection with the transactions contemplated by this Agreement, whether
obtained before or after the execution of any such Agreement; and



                                       55
<PAGE>

                  (c) all confidential information received by STRONGWOOD or its
Affiliates with respect to the business of Sequoia must be treated in accordance
with Section 9.1.

23. NAME

                  (a) After the Closing, PHYSICIANS shall not, directly or
indirectly, use or do business, or allow any Affiliate to use or due business,
or assist any third party in using or doing business, under the names and marks
"Sequoia" or the Sequoia logo (or any other name or mark confusingly similar to
such names and marks).

                  (b) To the extent the trademarks, service marks, brand names,
domain names, or trade, corporate or business names of PHYSICIANS or any of the
Physician's Affiliates or divisions (other than Sequoia and its Subsidiaries)
are used by Sequoia and its Subsidiaries on stationery, signage, invoices,
receipts, forms, packaging, advertising and promotional materials, product,
training and service literature and materials, computer programs, Internet
Websites or like materials ("MARKED MATERIALS") or appear on inventory at the
Closing, Sequoia and its Subsidiaries may use such Marked Materials or sell such
inventory after the Closing for a period of [12] months without altering or
modifying such Marked Materials or inventory, or removing such trademarks,
service marks, brand names, domain names, or trade, corporate or business names,
but shall not thereafter use such trademarks, service marks, brand names or
trade, corporate or business names in any other manner without the prior written
consent of PHYSICIANS.

                  (c) STRONGWOOD must not cause or permit Sequoia to register or
seek to register any name, logo, trademark or service mark used by PHYSICIANS or
any of its Affiliates as of the Closing Date, which are not included in the
Owned Intellectual Property. Except as contemplated by this Agreement, Sequoia
will not use the name, logo, trademark or service mark of PHYSICIANS or any of
its Affiliates for any commercial purpose including without limitation in any
publicity material, on policy documents, on stationery or in any other way in
relation to the policies or policyholders without the prior written consent of
PHYSICIANS to such use.

24. ENTIRE CONTRACT

         This Agreement, including the Exhibits and Schedules hereto, comprise
the entire contract between the parties and supersede any prior understandings,
agreements or representations by or between the parties, written or oral, which
may have related to the subject matter of this Agreement in any way.



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                                       56
<PAGE>


         IN WITNESS WHEREOF the parties have caused this Stock Purchase
Agreement to be duly executed as of the date first written above.

                                              STRONGWOOD INSURANCE HOLDINGS
                                              CORPORATION

                                              By:    /s/Richard J. Quagliaroli
                                                     -------------------------
                                              Name:  Richard J. Quagliaroli
                                                     -------------------------
                                              Title: President
                                                     -------------------------


                                              PHYSICIANS INSURANCE COMPANY
                                              OF OHIO

                                              By:    /s/John R. Hart
                                                     -------------------------
                                              Name:  John R. Hart
                                                     -------------------------
                                              Title: President and CEO
                                                     -------------------------


                                              PICO HOLDINGS, INC.

                                              By:    /s/John R. Hart
                                                     -------------------------
                                              Name:  John R. Hart
                                                     -------------------------
                                              Title: President and CEO
                                                     -------------------------