**SECURITIES      AND EXCHANGE COMMISSION**

**WASHINGTON,      D.C. 20549**

**FORM        10-K/A**

**(Amendment        No. 1) **

**(MARK      ONE)**

| x | **ANNUAL                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934** |
|---|---------------------------------------------------------------------------------------------------------------------------------------|

**FOR      THE FISCAL YEAR ENDED DECEMBER 31, 2006**

**OR**

| o | **TRANSITION                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934** |
|---|-------------------------------------------------------------------------------------------------------------------------------------------|

**For      the Transition Period from __________ to __________**

**Commission      File Number 0-18786**

**PICO      HOLDINGS, INC.**

**(Exact      Name of Registrant as Specified in its Charter)**

| **California**                                                                                   | **94-2723335**                                                         |
|--------------------------------------------------------------------------------------------------|------------------------------------------------------------------------|
| **(State                or Other Jurisdiction of Incorporation or                Organization)** | **(I.R.S.                Employer Identification                No.)** |

**875      Prospect Street, Suite 301**

**La      Jolla, California 92037**

**(Address      of Principal Executive Offices)**

**Registrant’s      Telephone Number, Including Area Code (858) 456-6022**

**Securities      Registered Pursuant to Section 12(b) of the Act:**

**Common      Stock, Par Value $.001, Listed on The NASDAQ Stock Market      LLC**

**Securities      Registered Pursuant to Section 12(g) of the Act:**

**None**

| Large                accelerated filer o | Accelerated                filer x | Non-accelerated                filer o |
|------------------------------------------|------------------------------------|----------------------------------------|

----

**DOCUMENTS            INCORPORATED BY REFERENCE**

**TABLE            OF CONTENTS**

| PART                      III  |                                        |
|--------------------------------|---------------------------------------------|
|                           |                                        |   |   |
|                           | Item                      10.               | DIRECTORS,                      EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE | 2 |
|                           | Item                      11.               | EXECUTIVE                      COMPENSATION | 3 |
|                           | Item                      12.               | SECURITY                      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, AND                      RELATED                      STOCKHOLDER MATTERS | 6 |
|                           | Item                      13.               | CERTAIN                      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR                      INDEPENDENCE | 6 |
|                           | Item                      14.               | PRINCIPAL                      ACCOUNTING FEES AND SERVICES | 7 |
| PART                        IV |                                        |   |   |
|                           | Signatures                                  |   | 8 |
|                           |                                        |   |   |
|                           | Exhibits                    Index           |   | 9 |
|                           | Exhibit                    31.3        |   |   |
|                           | Exhibit                    31.4   |   |   |

**EXPLANATORY              NOTE **

| **Item**                                 |  **Description**                                                                                                                                                |
|------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ITEM                          10.   | Directors,                          Executive Officers and Corporate Governance                                                                                           |
| ITEM                          11.   | Executive                          Compensation                                                                                                                           |
| ITEM                          12.   | Security                          Ownership of Certain Beneficial Owners and Management and                          Related                          Stockholder Matters |
| ITEM                          13.   | Certain                          Relationships and Related Transactions, and Director                          Independence                                               |
| ITEM                          14.   | Principal                          Accounting Fees and Services                                                                                                           |

----

**ITEM          10.  DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE          GOVERNANCE**

**DIRECTORS**

**Directors            with terms ending in 2007 (to be Nominated for terms ending in            2010):**

| **Director                  Name** | **Business                  Experience** | **Age** | **Director                  Since** |
|------------------------------------|------------------------------------------|---------|-------------------------------------|

| Carlos                  C. Campbell  | President,                  C. C. Campbell & Co.; Director of Resource America, Inc. since 1990;                  Director of Herley Industries, Inc. since 2005. Mr. Campbell was                  a                  Director of HyperFeed Technologies, Inc., an 80% owned subsidiary                  of the                  Company; on November 29, 2006 HyperFeed Technologies, Inc. filed                  a                  petition for bankruptcy under Chapter 7 of the U. S. Bankruptcy                  Code with                  the U. S. Bankruptcy Court, District of Delaware.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 69 | 1998  |
|--------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----|------------|
| Kenneth                  J. Slepicka | Chief                  Executive Officer of Synthonics Inc., an early stage biotechnology                  company; held Risk Advisor and Portfolio Manager positions in                  the financial service industry; President and Treasurer of SBC                  Warburg                  Futures Inc. from 1994 to 1998; Executive of Fixed Income Trading                  for                  O’Connor & Associates from 1985 to 1994; former member of the Chicago                  Board of Trade, Chicago Mercantile Exchange, Chicago Board of Options                  exchange, and Pacific Options Exchange; served as a Governor of                  the Board of Trade Clearing Corporation; member of the FIA Steering                  Committee and the Federal Reserve FCM Working Group; and the Illinois                  Fatherhood Initiative. Mr. Slepicka was a Director of HyperFeed                  Technologies, Inc., an 80% owned subsidiary of the Company; on                  November                  29, 2006 HyperFeed Technologies, Inc. filed a petition for bankruptcy                  under Chapter 7 of the U. S. Bankruptcy Code with the U. S. Bankruptcy                  Court, District of Delaware.  | 51 | 2005       |

| **Directors                  with terms ending in 2009:** |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |
|-----------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| S.                  Walter Foulkrod, III, Esq.            | Attorney;                  President and Chairman of Foulkrod, Reynolds & Havas, PC, from 1984 to                  1994; sole owner of S. Walter Foulkrod, III & Associates, Attorneys at                  Law, Harrisburg, PA from 1994 through 2000; owner of one third                  of the                  issued and outstanding capital stock of Foulkrod Ellis Professional                  Corporation, Attorneys at Law, Harrisburg, PA from 2000 to                  2006. | 65     | 1996 |
| Richard                  D. Ruppert, MD                   | Physician;                  President of Medical College of Ohio from 1978 to 1993; President                  of                  American Society of International Medicine from 1992 to 1993; Director                  of                  Physicians Insurance Company of Ohio since 1988.                                                                                                                                                                                                   | 76     | 1996 |

**Directors        with terms ending in 2008:**

| **Director                  Name** | **Business                  Experience** | **Age** | **Director                  Since** |
|------------------------------------|------------------------------------------|---------|-------------------------------------|

| John                  R. Hart   | Director                  of Physicians Insurance Company of Ohio since 1993 and President                  and CEO                  since 1995; Director, President and CEO of Global Equity Corporation                  from                  1995 to 1998 when it was combined with the Company; Director of                  Vidler                  Water Company, Inc. since 1995, Chairman since 1997, and CEO since                  1998;                  Director, President and CEO of PICO Holdings, Inc. since 1996;                  Director                  and Chairman of Citation Insurance Company since 1996; Director,                  Chairman,                  and CEO of Nevada Land & Resource Company, LLC since 1997. Mr. Hart                  was a Director of HyperFeed Technologies, Inc., an 80%- owned subsidiary                  of the Company; on November 29, 2006 HyperFeed filed a petition                  for                  bankruptcy under Chapter 7 of the U. S. Bankruptcy Code with the                  U. S.                  Bankruptcy Court, District of Delaware. | 47 | 1996 |
|---------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----|------|
| Ronald                  Langley | Director                  of Physicians Insurance Company of Ohio since 1993 and Chairman                  since                  1995; Director and Chairman of Global Equity Corporation from 1995                  to 1998                  when it was combined with the Company; Director of Vidler Water                  Company,                  Inc. since 1995; Chairman and Director of PICO Holdings, Inc. since                  1996;                  Director of Citation Insurance Company since 1996; Director of                  Nevada Land                  & Resource Company, LLC since 1997; Director of Jungfraubahn Holding                  AG since 2000. Mr. Langley was a Director of HyperFeed Technologies,                  Inc.,                  an 80%- owned subsidiary of the Company; on November 29, 2006 HyperFeed                  filed a petition for bankruptcy under Chapter 7 of the U. S. Bankruptcy                  Code with the U. S. Bankruptcy Court, District of                  Delaware.                                                                              | 63 | 1996 |
| John                  D. Weil   | President,                  Clayton Management Company, an investment company since 1978; Director                  of                  Allied Health Products, Inc. since 1997 and Baldwin & Lyons, Inc.                  since 1997.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | 66 | 1996 |

**Executive        Officers**

**SECTION          16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE**

**CORPORATE        GOVERNANCE**

**Director        Independence**

**Committees        of the Board of Directors**

| **Name                  of Director**                                  | **Audit** | **Compensation** | **Nominating** |
|------------------------------------------------------------------------|-----------|------------------|----------------|
| Carlos                  C. Campbell                                    | P         | P                | P              |
| S.                  Walter Foulkrod, III, Esq.                         | P         |             |           |
| John                  R. Hart                                          |      |             | P              |
| Richard                  D. Ruppert, MD                                | Chair     | P                |           |
| Ronald                  Langley                                        |      |             | Chair          |
| Kenneth                  J. Slepicka                                   | P         | P                |           |
| John                  D. Weil                                          |      | Chair            |           |
| Number                  of Committee Meetings                  in 2006 |  6   |  2          |  1        |

**Audit        Committee Financial Expert**

**Shareholder        Nomination of Directors**

**Code          of Ethics **

----

**ITEM          11.  EXECUTIVE COMPENSATION**

**Compensation        Discussion and Analysis**

**Overview**

**Our        Compensation Philosophy and Programs**

| ·   | pay                  for performance |
|--------------------|--------------------------------------|

| ·   | recruitment,                  retention and motivation of the highest quality                  employees |
|--------------------|----------------------------------------------------------------------------------------------------------|

| ·   | alignment                  with the interests of our various constituencies including shareholders                  and employees |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------|

| ·   | promoting                  excellent corporate governance |
|--------------------|-----------------------------------------------------------|

**The        Role of the Compensation Committee in Determining Executive        Compensation**

| ·   | The                  Compensation Committee has periodically retained independent compensation                  experts, when deemed necessary by the Committee. The Committee                  has in the                  past retained William M. Mercer, Incorporated and The Bankers Bank                  as                  independent compensation experts. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | In                  March 2007 the Compensation Committee adopted a Charter, which                  was                  subsequently unanimously approved by the Board. A copy of the                  Compensation Committee’s Charter is posted on the Company’s website at                  www.picoholdings.com. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                  Committee’s members are appointed annually by the Chairman, and the                  appointments are ratified by the full                  Board. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Base                  Salary |
|--------------------|------------------------------|

| ·   | Annual                  Incentive (Bonus) Awards |
|--------------------|--------------------------------------------------|

| ·   | Long-Term                  Incentives |
|--------------------|---------------------------------------|

| ·   | Retirement                  Plans |
|--------------------|-----------------------------------|

| ·   | Insurance                  and Other Benefits |
|--------------------|-----------------------------------------------|

**Compensation          Committee Report**

----

| **SUMMARY                  COMPENSATION TABLE**                                            |
|--------------------------------------------------------------------------------------------|
|       **NAME                  AND****PRINCIPAL****POSITION** |         **YEAR** |        **SALARY****($)** |        **BONUS****(4)(2)** |        **STOCK****AWARDS($)** |        **OPTION****AWARDS($)** |      **NON-EQUITY****INCENTIVE                  PLAN****COMPENSATION****($)(2)** |    **CHANGE                  IN****PENSION                  VALUE****AND                  NON-QUALIFIED****DEFERRED****COMPENSATION****EARNINGS****($)(2)** |       **ALL                  OTHER****COMPENSATION****($)** |        **TOTAL****COMPENSATION($)** |
|                                                                                       |   |   |   |   |   |   |   |   |   |
| Ronald                  Langley(8)(9)                                                      | 2006 | $1,075,000 | $2,115,635 | $0 | 0 | $2,115,635 | N/A | $29,000(4) | $3,219,635 |
| Chairman                                                                                   | 2005 | $932,988 | $3,013,326 | $11,024,381(3) | 0 | $3,013,326 |   | $15,643,670(5) | $30,614,365 |
|                                                                                       | 2004 | $908,460 | $619,094 | $0 | 0 | $619,094 |   | $29,250(6) | $1,556,804 |
|                                                                                       |   |   |   |   |   |   |   |   |   |
| John                  R. Hart(7)(8)                                                        | 2006 | $1,075,000 | $2,115,635 | $0 | 0 | $2,115,635 | N/A | $29,000(4) | $3,219,635 |
| President                  & CEO                                                       | 2005 | $932,988 | $3,013,326 | $11,024,381(3) | 0 | $3,013,326 |   | $17,872,467(5) | $32,843,162 |
|                                                                                       | 2004 | $908,460 | $619,094 | $0 | 0 | $619,094 |   | $29,250(6) | $1,556,804 |
|                                                                                       |   |   |   |   |   |   |   |   |   |
| Richard                  H. Sharpe(10)                                                     | 2006 | $311,504 | $613,052 | $0 | 0 | $613,052 | N/A | $29,000(4) | $953,556 |
| COO                                                                                        | 2005 | $295,265 | $953,635 | $2,504,740(3) | 0 | $953,635 |   | $2,583,321(5) | $6,336,961 |
|                                                                                       | 2004 | $283,909 | $193,477 | $0 | 0 | $193,477 |   | $26,603(6) | $503,989 |
|                                                                                       |   |   |   |   |   |   |   |   |   |
| Maxim                  C. W. Webb(11)                                                      | 2006 | $255,000 | $501,848 | $0 | 0 | $501,848 | N/A | $29,000(4) | $785,848 |
| CFO                  & Treasurer                                                       | 2005 | $204,599 | $660,805 | $2,153,956(3) | 0 | $660,805 |   | $1,342,525(5) | $4,361,885 |
|                                                                                       | 2004 | $196,730 | $134,066 | $0 | 0 | $134,066 |   | $25,984(6) | $356,744 |
|                                                                                       |   |   |   |   |   |   |   |   |   |
| W.                  Raymond Webb(12)                                                       | 2006 | $200,000 | $393,607 | $0 | 0 | $393,607 | N/A | $26,363(4) | $619,970 |
| VP,                  Investments                                                           | 2005 | $160,680 | $518,958 | $789,000(3) | 0 | $518,958 |   | $604,591(5) | $2,273,229 |
|                                                                                       | 2004 | $154,500 | $52,644 | $0 | 0 | $52,644 |   | $20,378(6) | $227,522 |

|                             (1) | The                  Company does not maintain a defined benefit plan or an actuarial                  pension                  plan. The Company does not provide above market or preferential                  earnings                  on nonqualified deferred compensation. |
|-----------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                             (2) | This                  refers to the incentive awards paid to the NEOs; please see the                  Compensation Discussion and Analysis in the Executive Compensation                  Report. |
|-----------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                             (3) | This                  refers to awards granted by the Compensation Committee on December                  12,                  2005 under the PICO Holdings, Inc. 2005 Long-Term Incentive Plan                  (“Incentive Plan”). The Incentive Plan was approved by the Company’s                  shareholders on December 8, 2005. On December 12, 2005, the Compensation                  Committee granted the following number of freestanding stock-settled                  stock                  appreciation rights to the NEOs: Ronald Langley, 838,356; John                  R. Hart,                  838,356; Richard H. Sharpe, 190,454; Maxim C. W. Webb, 163,799;                  and W.                  Raymond Webb, 60,000. The exercise price was established by the                  Compensation Committee as $33.76 for each freestanding stock-settled                  stock                  appreciation right, which was the closing price for the Company’s stock on                  the Nasdaq Global Market on December 12, 2005. Each freestanding                  stock-settled stock appreciation right was fully vested on December                  12,                  2005 and each expires on December 12, 2015. The dollar values shown                  in the                  Stock Awards column represent the full FAS 123R grant date fair                  value of                  the freestanding stock-settled stock appreciation rights awarded                  to the                  NEOs by the Compensation Committee on December 12, 2005. The number                  of                  shares to be issued to a NEO who exercises freestanding stock-settled                  stock appreciation rights will be based on the net exercise value                  (i.e.,                  the market value price per share of the Company’s stock on the date of                  exercise, minus the exercise price of $33.76) times the number                  of                  freestanding stock-settled stock appreciation rights exercised,                  minus                  applicable taxes. |
|-----------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                             (4) | This                  represents contributions made by the Company for the NEOs to the                  PICO                  Holdings, Inc. 401(k) Employees Retirement Plan and Trust. None                  of the                  life insurance premiums paid by the Company for any one NEO exceeded                  $10,000 in 2006, 2005, or 2004 and the Company’s health insurance plans do                  not discriminate in favor of the NEOs and are available to all                  employees. |
|-----------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                             (5) | This                  represents amounts attributable to cash-settled stock appreciation                  rights                  granted to the NEOs on July 17, 2003, pursuant to shareholder of                  the PICO                  Holdings, Inc. 2003 Stock Appreciation-Rights Program (the “Program”). On                  September 21, 2005, the Compensation Committee decided that amending                  the                  Program was in the best interest of the Company and its shareholders.                  Under the terms of the September 21, 2005 amendment to the Program,                  each                  holder of cash-settled stock appreciation rights, including the                  NEOs                  monetized the difference between his or her exercise prices for                  the                  cash-settled stock appreciation rights and the September 21, 2005                  closing                  price of $33.23 for the Company’s stock on the Nasdaq Global Market. Prior                  to the Compensation Committee’s September 21, 2005 action to amend the                  Program, all cash-settled stock appreciation rights were fully                  vested.                  After September 21, 2005, no cash-settled stock appreciation rights                  were                  outstanding or available for grant under the Program. Based on                  the                  September 21, 2005 closing price on the Nasdaq Global Market for                  the                  Company’s common stock, the NEOs realized the following values when the                  cash-settled stock appreciation rights in the Program were monetized                  on                  September 21, 2005: Ronald Langley, $15,625,170; John R. Hart,                  $17,851,842; Richard H. Sharpe, $2,559,120; Maxim C. W. Webb, $1,315,491;                  and W. Raymond Webb, $583,360. Of these amounts the NEOs elected                  to defer                  the following amounts: Ronald Langley, $15,625,170; John R. Hart,                  $17,851,842; Richard H. Sharpe, $2,047,296; Maxim C. W. Webb, 1,315,491;                  W. Raymond Webb, $583,360. Also included are amounts contributed                  by the                  Company for the NEOs to the PICO Holdings, Inc. 401(k) Employees                  Retirement Plan and Trust in the following amounts: Ronald Langley,                  $18,500; John R. Hart, $20,625; Richard H. Sharpe, $24,201; Maxim                  C. W.                  Webb, $27,034; W. Raymond Webb,                  $21,231. |
|-----------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                  (6) | This                  represents contributions made by the Company for the NEOs to the                  PICO                  Holdings, Inc. 401(k) Employees Retirement Plan and                  Trust. |
|---------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7) | Mr.                  Hart became President and CEO of the Company on November 20, 1996.                  He                  became President and CEO of Physicians Insurance Company of Ohio                  on July                  15, 1995. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (8) | On                  January 1, 2006, Mr. Langley and Mr. Hart each signed employment                  agreements with the Company. Each Employment Agreement provides                  for annual                  compensation of $1,075,000, subject to annual adjustment in January                  of                  each year in the same percentage applicable to the Company’s other staff                  members in an amount deemed adequate to provide for cost of living,                  subject to the Compensation Committee’s approval, based on several major                  compensation studies; see Executive Compensation                  Report. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (9) | Mr.                  Langley became Chairman of the Board of Physicians Insurance Company                  of                  Ohio on July 15, 1995. He became Chairman of the Board of the Company                  on                  November 20, 1996. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (10) | Mr.                  Sharpe became Chief Operating Officer of Physicians Insurance Company                  of                  Ohio on June 3, 1994. He became Chief Operating Officer of the                  Company on                  November 20, 1996. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (11) | Mr.                  Maxim C. W. Webb became Chief Financial Officer and Treasurer on                  May 14,                  2001. Prior to that he was Vice President, Investments of the                  Company. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (12) | Mr.                  W. Raymond Webb became Vice President, Investments of the Company                  on April                  18, 2003. Prior to that he was Chief Investment                  Analyst. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Grants        of Plan-Based Awards **

**Option        Exercises and Stock Vested During Last Fiscal Year**

**Pension        Benefits **

**Employment        Agreements **

**Partial        Payments upon Termination or Change        in Control **

----

|  **NON                  QUALIFIED DEFERRED COMPENSATION** |
|----------------------------------------------------------------|
|    **NAME**                                     |   **EXECUTIVE****CONTRIBUTIONS                  IN 2006($)(1)(2)** |  **COMPANY****CONTRIBUTIONS****IN                  2006($)(3)** |  **AGGREGATE****EARNINGS****IN                  2006($)(2)(4)** | **AGGREGATE****WITHDRAWALS/****DISTRIBUTIONS****($)(5)** |  **AGGREGATE****BALANCE                  ON****DECEMBER                  31, 2006($)(6)** |
|                                                           |   |   |   |   |   |
| Ronald                  Langley                                | -0- | -0- | $1,002,292 | -0- | $16,756,810 |
| John                  R. Hart                                  | $1,615,635 | -0- | $1,408,234 | -0- | $26,762,617 |
| Richard                  H. Sharpe                             | $613,052 | -0- | $177,897 | -0- | $3,094,086 |
| Maxim                  C.W. Webb                               | $501,848 | -0- | $87,990 | -0- | $2,076,147 |
| W.                  Raymond Webb                               | $413,607 | -0- | $94,944 | -0- | $2,017,891 |

|                             (1) | The                  Company permits the NEO's to defer salary, bonus, and other cash                  compensation, pursuant to federal rules. In 2006 Ronald Langley                  chose not                  to defer any compensation including the March 2007 bonus paid based                  on                  2006 performance; John R. Hart chose to receive $500,000 in cash                  immediately and to defer the remainder of the March 2007 bonus                  paid based                  on 2006 performance; Richard H. Sharpe chose to defer all of the                  March                  2007 bonus paid based on 2006 performance; Maxim C. W. Webb chose                  to defer                  all of the March 2007 bonus paid based on 2006 performance; and                  W. Raymond                  Webb chose to defer 10% of his 2006 salary and all of the March                  2007 bonus                  paid based on 2006 performance. |
|-----------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                             (2) | Amounts                  deferred by the NEO's attributable to 2006 compensation, i.e.,                  2006 salary                  and bonuses payable in March 2007 based on 2006 performance, as                  reported                  in the Executive Contributions in 2006 column, are reported as                  compensation in the Summary Compensation Table for 2006. Amounts                  reported                  in the Aggregate Earnings in 2006 represent earnings on assets                  subject to the Company's deferred compensation plan.  Because such                  earnings are earned at rates that are not above market, these amounts                  are not reported as compensation for 2006 in the Summary Compensation                  Table. Amounts reported in the Aggregate Balance on December 31,                  2006                  column consist of deferred compensation which has been reported                  as                  compensation in prior years. The earnings on deferred compensation                  have not been reported as compensation in 2006, 2005, or                  2004. |
|-----------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                             (3) | The                  only contributions to deferred compensation for the NEOs are from                  their                  voluntary deferrals of salary, bonus, and other cash compensation.                  The                  Company does not make additional contributions. |
|-----------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                  (5) | Each                  NEO who chooses to defer compensation has the option, pursuant                  to federal                  rules, to receive a lump sum payment on a date certain or on separation                  from service, or to receive up to ten substantially equal payments                  beginning on a certain date. |
|---------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | This                  includes bonuses paid in March 2007 based on the Company’s performance in                  2006. |
|-----|------------------------------------------------------------------------------------------------------------------------------|

| **OUTSTANDING                  EQUITY AWARDS AT FISCAL YEAR-END**  The                  following table provides information on the outstanding equity                  awards as                  of December 31, 2006 for our Named Executive Officers. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|           **NAME**                                                                                                                                                                                                |        **NUMBER                  OF SECURITIES UNDERLYING UNEXERCISED OPTIONS-NUMBER EXERCISABLE****(1)** |        **NUMBER                  OF****SECURITIES****UNDERLYING****UNEXERCISED****OPTIONS****NUMBER****UNEXERCISABLE****(2)** |       **EQUITY****INCENTIVE****PLAN****AWARDS:****NUMBER                  OF****SECURITIES****UNDERLYING****UNEXERCISED**** ****UNEARNED****O****PTIONS****(2)** |           **OPTION****EXERCISE****PRICE****(3)** |           **OPTION****EXPIRATION                   D****ATE** |          **NUMBER****OF                  SHARES****OR                  UNITS OF****STOCK                  THAT****HAVE                  NOT****VESTED                  (2)** |         **MARKET                  VALUE**** OF                  SHARES****OR                  UNITS OF****STOCK                  THAT****HAVE                  NOT****VESTED                  (2)** |       **EQUITY****INCENTIVE****PLAN****AWARDS:****NUMBER                  OF****UNEARNED****SHARES,****UNITS****OR****OTHER****RIGHTS****THAT                  HAVE****NOT****VESTED                  (2)** |       **EQUITY****INCENTIVE                  PLAN****AWARDS****MARKET****OR                  PAYOUT****VALUE**** OF                  U****NEARNED****SHARES,****UNITS****OR                  OTHER****RIGHTS****THAT****HAVE                  NOT****VE****STED (2)** |
|  Ronald                  Langley                                                                                                                                                                                                                               |  838,356 |   |   |  $33.76 |  December                  12, 2015 |   |   |   |   |
|  John                  R. Hart                                                                                                                                                                                                                                 |  838,356 |   |   |  $33.76 |  December                  12, 2015 |   |   |   |   |
|  Richard                  H. Sharpe                                                                                                                                                                                                                            |  190,454 |   |   |  $33.76 |  December                  12, 2015 |   |   |   |   |
|  Maxim                  C. W. Webb                                                                                                                                                                                                                             |  163,799 |   |   |  $33.76 |  December                  12, 2015 |   |   |   |   |
|  W.                  Raymond Webb                                                                                                                                                                                                                              |  60,000 |   |   |  $33.76 |  December                  12, 2015 |   |   |   |   |

|                             (1) | This                  applies to freestanding stock-settled stock appreciation rights                  granted                  pursuant to the PICO Holdings, Inc. 2005 Long-Term Incentive Plan                  (“Incentive Plan”). The Incentive Plan was approved by the Company’s                  shareholders on December 8, 2005. On December 12, 2005, the Compensation                  Committee granted freestanding stock-settled stock appreciation                  rights to                  various employees, nonemployee directors, and the NEOs. A total                  of                  2,090,965 freestanding stock-settled stock appreciation rights                  were                  granted to the NEOs on December 12, 2005. The Incentive Plan provides                  that                  the number of shares issued, upon exercise of freestanding stock-settled                  stock appreciation rights, will be based on the net exercise value                  (i.e.,                  the market value price per share on the date of exercise, minus                  the                  exercise price of $33.76) times the number of freestanding stock-settled                  stock appreciation rights exercised, minus applicable                  taxes. |
|-----------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                             (2) | All                  of the freestanding stock-settled stock appreciation rights granted                  on                  December 12, 2005 in the Incentive Plan were fully vested on December                  12,                  2005. |
|-----------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                             (3) | The                  exercise price for each of the freestanding stock-settled stock                  appreciation rights granted on December 12, 2005 is $33.76, the                  closing                  price of the Company’s stock on the Nasdaq Global Market on December 12,                  2005, the date the freestanding stock-settled stock appreciation                  rights                  were awarded by the Compensation                  Committee. |
|-----------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**DIRECTORS’        COMPENSATION**

| **DIRECTOR                  COMPENSATION TABLE FOR 2006**  |
|-----------------------------------------------------------------|
|     **NAME**                                |    **FEES                  EARNED OR****PAID                  IN CASH ($)(1)** |     **STOCK                  AWARDS ($)(2)** |     **OPTION                  AWARDS ($)** |   **NON-EQUITY****INCENTIVE                  PLAN****COMPENSATION                  ($)**  |  **CHANGES                  IN PENSION****VALUE                  AND NON-QUALIFIED****DEFEERRED                  COMPENSATION****EARNINGS(3)(4)** |    **ALL                  OTHER****COMPENSATION                  ($)(5)** |     **TOTAL                  ($)** |
|  Carlos                  C. Campbell                       |  $71,000 |  -0- |  -0- |  -0- |  -0- |  -0- |  $71,000 |
|                                                            |   |   |   |   |   |   |   |
| S.                  Walter Foulkrod, III, Esq.                  | $64,000 | -0- | -0- | -0- | -0- | -0- | $64,000 |
|                                                            |   |   |   |   |   |   |   |
| Richard                  D. Ruppert, MD                         | $77,000 | -0- | -0- | -0- | -0- | -0- | $77,000 |
|                                                            |   |   |   |   |   |   |   |
| Kenneth                  J. Slepicka                            | $51,000 | -0- | -0- | -0- | -0- | -0- | $51,000 |
|                                                            |   |   |   |   |   |   |   |
| John                  D. Weil                                   | $53,000 | -0- | -0- | -0- | -0- | -0- | $53,000 |
|                                                            |   |   |   |   |   |   |   |

|                             (1) | At                  its March 14, 2005 meeting, the Board approved the recommendation                  of the                  Compensation Committee and increased Board and Committee compensation                  as                  follows, retroactive to January 1, 2005. Directors who are not                  officers or                  employees of the Company or its subsidiaries receive an annual                  retainer of                  $35,000. The Chairman of the Audit Committee receives an additional                  annual                  retainer of $10,000 and the other members of the Audit Committee                  each                  receive an additional annual retainer of $5,000. Each director                  who is not                  an officer or employee of the Company or its subsidiaries also                  receives a                  $2,000 fee or each Board and Committee meeting attended in person                  or by                  telephone. There is a limit of $4,000 per day in Board and Committee                  fees                  to any one director. Any nonemployee director attending an educational                  activity or seminar on behalf of the Company receives a fee of                  $1,000 per                  day plus expenses. |
|-----------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                             (2) | On                  December 8, 2005 the Company’s shareholders approved the PICO Holdings,                  Inc. 2005 Long-Term Incentive Plan. On December 12, 2005, the Compensation                  Committee awarded grants under the PICO Holdings, Inc. in the form                  of                  freestanding stock-settled stock appreciation rights to various                  officers,                  employees, and nonemployee directors. This included grants of 5,000                  freestanding stock-settled stock appreciation rights each to the                  following                  nonemployee directors: Carlos C. Campbell, S. Walter Foulkrod,                  III, Esq.,                  Richard D. Ruppert, MD, Kenneth J. Slepicka, and John D. Weil.                  The                  exercise price for each freestanding stock-settled stock appreciation                  right granted to the nonemployee director is $33.76 each, which                  was the                  closing price of the Company’s stock on December 12, 2005. All                  freestanding stock-settled stock appreciation rights granted on                  December                  12, 2005 were fully vested on that date, and each expires on December                  12,                  2015. The number of shares to be issued to a nonemployee director                  who                  exercises freestanding stock-settled stock appreciation rights                  will be                  based on the net exercise value (i.e., the market value price per                  share of                  the Company’s stock on the date of exercise, minus the exercise price of                  $33.76) times the number of freestanding stock-settled stock appreciation                  rights exercised, minus applicable taxes. No awards were granted                  in 2006                  pursuant to the PICO Holdings, Inc. 2005 Long-Term Incentive Plan. |
|-----------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                           (3) | The                  Company’s deferred compensation plans do not provide for above-market or                  preferential earnings. |
|----------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|
|                           (4) |  The                Company does not have an actuarial pension plan or a defined benefit                pension plan. |
|----------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------|
|                           (5) |  The                Company’s nonemployee directors do not participate in the Company’s 401(k)                Plan. |
|----------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------|

|   |  |
|--------|--|

**COMPENSATION          COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION          DECISIONS**

----

**ITEM          12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT          AND RELATED STOCKHOLDER MATTERS**

|   **Name                  and Address of Beneficial Owner**                                                                                                                                                                                   | **Number                  of Shares and****Nature                  of Beneficial****Ownership**(1)(12)(13) | **Percentage                  Ownership****of                  Shares** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------|
| Ronald                  Langley(2)                                                                                                                                                                                                                      | 2,517,829                                                                                                  | 13.46%                                                                  |
| John                  R. Hart(3)                                                                                                                                                                                                                        | 2,518,906                                                                                                  | 13.46%                                                                  |
| Carlos                  C. Campbell(4)                                                                                                                                                                                                                  | 1,000                                                                                                      | *                                                                       |
| S.                  Walter Foulkrod, III, Esq.                                                                                                                                                                                                     | 2,903                                                                                                      | *                                                                       |
| Richard                  D. Ruppert, MD(5)                                                                                                                                                                                                              | 6,298                                                                                                      | *                                                                       |
| Kenneth                  J. Slepicka                                                                                                                                                                                                                    | -0-                                                                                                        | *                                                                       |
| John                  D. Weil(6)                                                                                                                                                                                                                        | 3,395,016                                                                                                  | 18.15%                                                                  |
| Richard                  H. Sharpe(7)                                                                                                                                                                                                                   | 8,504                                                                                                      | *                                                                       |
| Maxim                  C. W. Webb(8)                                                                                                                                                                                                                    | 1,672                                                                                                      | *                                                                       |
| W.                  Raymond Webb                                                                                                                                                                                                                        | 20                                                                                                         | *                                                                       |
| PICO                  Equity Investors, L.P.(9)                                                                                                                                                                                                         | 2,500,000                                                                                                  | 13.36%                                                                  |
| Dimensional                  Fund Advisors Inc.(10)1299                  Ocean Avenue, 11th                  Floor, Santa Monica, CA 90401                                                                                                              | 1,331,610                                                                                                  | 7.11%                                                                   |
| Artisan                  Partners Limited Partnership, Artisan Investment Corporation,                   Andrew A. Ziegler, and Carlene Murphy Ziegler                  (11)1000                  N. Water Street, Suite 1770, Milwaukee, WI 53202 | 1,136,531                                                                                                  | 6.07%                                                                   |
| FMR                  Corp., 82 Devonshire Street, Boston, MA 02109                                                                                                                                                                                      | 2,805,000                                                                                                  | 14.99%                                                                  |
| Executive                  Officers and Directors as a Group (12 persons)                                                                                                                                                                               | 3,457,830                                                                                                  | 18.48%                                                                  |

|   |  |   |
|--------|--|--------|
|   | (5) | Dr.                  Ruppert shares voting and investment power with his wife. The number                  of                  shares shown above does not include 1,670 shares held in a deferred                  compensation plan Rabbi Trust for Dr.                  Ruppert. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (6) | Of                  these shares 894, 999 are owned by a partnership which Mr. Weil                  controls.                  Mr. Weil owns a membership interest in PICO Equity Investors Management,                  LLC, which has voting control of 2,500,000 shares of the Company.                  The                  number of shares shown above does not include 8,084 shares of the                  Company                  held in a deferred compensation plan Rabbi Trust for Mr. Weil. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (8) | The                  number of shares shown includes 1,291 shares held in the Company’s 401(k)                  Plan. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------|

|   | (9) | Pursuant                  to a rights offering conducted by the Company in March 2000, an                  investment                  partnership named PICO Equity Investors, L.P. acquired on March                  28, 2000,                  3,333,333 newly issued shares which were not subscribed for in                  the rights                  offering. PICO Equity Investors, L.P. is managed by PICO Equity                  Investors                  Management, LLC. PICO Equity Investors Management, LLC is owned                  by Mr.                  Langley, Mr. Hart and Mr. Weil. PICO Equity Investors Management,                  LLC will                  exercise all voting and investment decisions with respect to the                  Company’s                  shares owned by PICO Equity Investors, L.P. for up to ten years.                  The                  interest of PICO Investors Management, LLC in any profits and losses                  earned on this investment will be proportional to the capital                  contributions made to PICO Equity Investors, L.P. by the partners,                  i.e.,                  1,000/50,001,000. There are no other fees or other management compensation                  of any kind payable to Mr. Langley, Mr. Hart, and Mr. Weil. Effective                  May                  23, 2006, the limited partner and the general partner of PICO Equity                  Investors, L.P. made a capital withdrawal totaling 833,333 shares                  of the                  Company. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (11) | The                  Company received a Form 13-G filing from Artisan Partners Limited                  Partnership, Artisan Investment Corporation, Andrew A. Ziegler,                  and                  Carlene Murphy Ziegler in 2007 for calendar year                  2006. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|
|   | (12) | No                  shares are pledged as security by any director, nominee for director,                  or                  NEO. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------|

| (13)   | The                  Company does not have a requirement for directors’ qualifying                  shares. |
|------------------|-------------------------------------------------------------------------------------------------------------------|

**Equity        Compensation Plan Information**

|   **Plan                  Category**                                             |  **Number                  of Securities****To                  Be Issued Upon Exercise of****Outstanding                  Options, Warrants and Rights (A)** |  **Weighted-Average                  Exercised Price of Outstanding Options, Warrants and Rights                  (B)** | **Number                  of****Securities                  Remaining Available for****Future                  Issuance Under Equity Compensation Plans (Excluding Securities                  Reflected                  in**** ****Column                  (A)(C)** |
|--------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Equity                  Compensation Plansapproved                  by security holders(1) |  2,185,965                                                                                                                                                    |  $33.76                                                                                                                 |  468,035                                                                                                                                                                                                                                                              |
|  Equity                  Compensation Plans not approved by security holders(2)       |  -0-                                                                                                                                                          |  -0-                                                                                                                    |  -0-                                                                                                                                                                                                                                                                  |

| (1)   | This                  refers to freestanding, stock-settled stock appreciation rights                  granted to                  employees and directors on December 12, 2005 by the Compensation                  Committee, pursuant to approval on December 8, 2005 by the Company’s                  shareholders of the PICO Holdings, Inc. 2005 Long-Term Incentive                  Plan.                  Each freestanding stock-settled stock appreciation right was fully                  vested                  on December 12, 2005 and each expires on December 12, 2015. The                  exercise                  price for each free standing stock-settled stock appreciation right                  granted on December 12, 2005 was $33.76, the closing price for                  the                  Company’s common stock on the Nasdaq Global Market on December 12, 2005.                  The number of shares to be issued to a grantee who exercises freestanding                  stock-settled stock appreciation rights will be based on the net                  exercise                  value (i.e., the market value price per share of the Company’s stock on                  the date of exercise, minus the exercise price of $33.76) times                  the number                  of freestanding stock-settled stock appreciation rights exercised,                  minus                  applicable taxes. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | The                  Company has no equity compensation plans which have not been approved                  by                  the Company’s shareholders |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**ITEM        13.  CERTAIN RELATIONSHIPS AND RELATED PERSONS TRANSACTIONS AND        DIRECTOR INDEPENDENCE**

**Related        Persons Transactions**

**Procedures        for Approval of Relation Persons Transactions**

**Director          Independence**

----

**ITEM        14. PRINCIPAL ACCOUNTING FEES AND SERVICES**

|                                                                                                                                                                                                                                                                    | **2005**   | **2006** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|
|                                                                                                                                                                                                                                                                    |       |     |
| Audit                  Fees (a)                                                                                                                                                                                                                                         | $1,089,323 | $924,780 |
| Tax                  Fees (b)                                                                                                                                                                                                                                           | $776,343   | $380,135 |
| Audit-Related                  Fees (c)                                                                                                                                                                                                                                 | $31,850    | $26,723  |
| All                  Other Fees**                                      ** | -0-        | -0-      |

| (a)   | Fees                  for 2006 audit services consisted                  of: |
|-----------------|------------------------------------------------------------------------------|

| ·   | Audit                  of the Company’s annual financial                  statements |
|--------------------|--------------------------------------------------------------------------------------------|

| ·   | Reviews                  of the Company’s quarterly financial                  statements |
|--------------------|-------------------------------------------------------------------------------------------------|

| ·   | Statutory                  and regulatory audits and consents |
|--------------------|---------------------------------------------------------------|

| ·   | Audit                  of internal control over financial reporting, as required by the                  Sarbanes-Oxley Act of 2002, Section                  404 |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Audit                  of the Company’s annual financial                  statements |
|--------------------|--------------------------------------------------------------------------------------------|

| ·   | Reviews                  of the Company’s quarterly financial                  statements |
|--------------------|-------------------------------------------------------------------------------------------------|

| ·   | Statutory                  and regulatory audits, consents and other services related to Securities                  and Exchange Commission matters |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Audit                  of internal control over financial reporting, as required by the                  Sarbanes-Oxley Act of 2002, Section                  404 |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b)   | Fees                  for tax services billed in 2005 and 2006 consisted of tax compliance                  and                  tax planning and advice: |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Fees                  for tax compliance services totaled $210,200 in 2005 and $279,020                  in 2006,                  respectively. Tax compliance services are services rendered based                  upon                  facts already in existence or transactions that have already occurred                  to                  document, compute, and obtain government approval for amounts to                  be                  included in tax filings and consisted                  of: |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Fees                  for tax planning and advice services totaled $566,143 in 2005 and                  $101,115                  in 2006, respectively. Tax planning and advice are services rendered                  with                  respect to proposed transactions or that alter a transaction to                  obtain a                  particular tax result. Such services consisted of                  : |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| i.   | Tax                  advice related to structuring certain proposed mergers, acquisitions                  and                  disposals |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------|

| (c)   | This                  represents audit-related fees for the PICO Holdings, Inc. Employees                  401(k)                  Retirement Plan and Trust. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Independent        Auditor**

**Pre-Approval        Policy**

| (1)   | At                  the earliest possible date, management shall inform the Audit Committee                  of                  each audit or non-audit service which management desires the Company’s                  independent auditing firm to                  perform. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Management                  shall promptly provide to the Audit Committee detailed information                  about                  the particular services to be provided by the Company’s independent                  auditing firm. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | The                  supporting documentation provided to the Audit Committee by management                  shall be sufficiently detailed so that the Audit Committee knows                  precisely                  what services it is being asked to                  pre-approve. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4)   | As                  permitted by Section 202(3), the Audit Committee has delegated                  pre-approval authority to the Chairman of the Audit Committee.                  All such                  pre-approvals shall be presented to the full Audit Committee at                  the Audit                  Committee’s next scheduled meeting. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**SIGNATURES**

|   | PICO                    Holdings, Inc. |
|--------|----------------------------------------|
|   |                                   |   |
|   |                                   |   |
|   | By:                                    | /s/                    John R. Hart |
|   |                                   | John                    R. Hart |
|   |                                   | Chief                    Executive Officer |
|   |                                   | President                    and Director |

| /s/                    Ronald Langley                |   | Chairman                    of the Board                           |
|------------------------------------------------------|--------|--------------------------------------------------------------------|
| Ronald                    Langley                    |   |                                                               |
|                                                 |   |                                                               |
| /s/                    John R. Hart                  |   | Chief                    Executive Officer, President and Director |
| John                    R. Hart                      |   | (Principal                    Executive Officer)                   |
|                                                 |   |                                                               |
| /s/                    Maxim C. W. Webb              |   | Chief                    Financial Officer and Treasurer           |
| Maxim                    C. W. Webb                  |   | (Chief                    Accounting Officer)                      |
|                                                 |   |                                                               |
| /s/                    S. Walter Foulkrod, III, Esq. |   | Director                                                           |
| S.                    Walter Foulkrod, III, Esq.     |   |                                                               |
|                                                 |   |                                                               |
| /s/                    Richard D. Ruppert, MD        |   | Director                                                           |
| Richard                    D. Ruppert, MD            |   |                                                               |
|                                                 |   |                                                               |
|                                                 |   | Director                                                           |
| Carlos                    C. Campbell                |   |                                                               |
|                                                 |   |                                                               |
|                                                 |   | Director                                                           |
| Kenneth                    J. Slepicka               |   |                                                               |
|                                                 |   |                                                               |
|                                            |   | Director                                                           |
| John                    D. Weil                      |   |                                                               |

----

| ExhibitNumber |   | Description                                                                                         |
|---------------|--------|-----------------------------------------------------------------------------------------------------|
|  31.3    |   | Rule                    13a-14(a) Certification of Chief Executive                    Officer  |
|  31.4    |   | Rule                    13a-14(a) Certification of Chief Financial Officer                     |
|          |   |                                                                                                |