**UNITED      STATES SECURITIES AND EXCHANGE COMMISSION**

**FORM      10-Q**

**(X)      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**

**SECURITIES      EXCHANGE ACT OF 1934**

**(      ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**

**SECURITIES      EXCHANGE ACT OF 1934**

**PICO      HOLDINGS, INC.**

|  **California** (State                or other jurisdiction of incorporation or organization) |   |  **94-2723335** (I.R.S.                EmployerIdentification                No.) |
|---------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------|

**875      Prospect Street, Suite 301**

**La      Jolla, California 92037**

**(858)      456-6022**

----

**PICO      HOLDINGS, INC.**

**FORM      10-Q**

**For      the Three Months Ended March 31, 2007**

**TABLE      OF CONTENTS**

|                                                        |                                                                                                                                   |
|-------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------|
|                                                        | **Page                No.**                                                                                                            |
|                                                        |                                                                                                                                   |
| **Part                I:  Financial Information** |                                                                                                                                   |
|                                                        |                                                                                                                                   |
| Item                1:                                      | Condensed                Consolidated Financial Statements (Unaudited)                                                                 |   |
|                                                        |                                                                                                                                   |   |
|                                                        | Condensed                Consolidated Balance Sheets as of March 31, 2007 and December 31,                2006                         | 2 |
|                                                        |                                                                                                                                   |   |
|                                                        | Condensed                Consolidated Statements of Operations for the Three                Months Ended March 31, 2007 and 2006  | 3 |
|                                                        |                                                                                                                                   |   |
|                                                        | Condensed                Consolidated Statements of Cash Flows for the Three                Months Ended March 31, 2007 and 2006       | 4 |
|                                                        |                                                                                                                                   |   |
|                                                        | Notes                to Condensed Consolidated Financial Statements                                                                    | 5 |
|                                                        |                                                                                                                                   |   |
| Item                2:                                      | Management’s                Discussion and Analysis of Financial Condition and the Results of                Operations          | 8 |
|                                                        |                                                                                                                                   |   |
| Item                3:                                      | Quantitative                and Qualitative Disclosure About Market Risk                                                               | 13 |
|                                                        |                                                                                                                                   |   |
| Item                4:                                      | Controls                and Procedures                                                                                                 | 14 |
|                                                        |                                                                                                                                   |   |
| **Part                II:  Other Information**    |                                                                                                                                   |
|                                                        |                                                                                                                                   |
| Item                1:                                      | Legal                Proceedings                                                                                                       | 14 |
|                                                        |                                                                                                                                   |   |
| Item                1A:                                     | Risk                Factors                                                                                                            | 14 |
|                                                        |                                                                                                                                   |   |
| Item                2:                                      | Unregistered                Sales of Equity Securities and Use of Proceeds                                                             | 14 |
|                                                        |                                                                                                                                   |   |
| Item                3:                                      | Defaults                Upon Senior Securities                                                                                         | 14 |
|                                                        |                                                                                                                                   |   |
| Item                4:                                      | Submission                of Matters to a Vote of Security Holders                                                                     | 14 |
|                                                        |                                                                                                                                   |   |
| Item                5:                                      | Other                Information                                                                                                       | 14 |
|                                                        |                                                                                                                                   |   |
| Item                6:                                      | Exhibits                                                                                                                               | 14 |

----

**Part      I:**
**Financial      Information**

**Item      I:**
**Condensed      Consolidated Financial Statements**

**PICO      HOLDINGS, INC. AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

**(Unaudited)**

|                                                                                                                                | March                  31, 2007 |   | December                  31, 2006 |
|-------------------------------------------------------------------------------------------------------------------------------------|---------------------------------|--------|------------------------------------|
| **ASSETS**                                                                                                                          |                            |   |                               |
| Investments                                                                                                                         | $                  322,900,266  |   | $                  271,961,941     |
| Cash                  and cash equivalents                                                                                          | 182,745,681                     |   | 136,621,578                        |
| Notes                  and other receivables, net                                                                                   | 16,792,410                      |   | 17,177,827                         |
| Reinsurance                  receivables                                                                                            | 17,053,308                      |   | 17,290,039                         |
| Real                  estate and water assets, net                                                                                  | 119,171,157                     |   | 102,538,859                        |
| Property                  and equipment, net                                                                                        | 502,495                         |   | 518,564                            |
| Other                  assets                                                                                                       | 4,107,278                       |   | 2,934,131                          |
| Total                  assets                                                                                                       | $                  663,272,595  |   | $                  549,042,939     |
|                                                                                                                                |                            |   |                               |
| **LIABILITIES                  AND SHAREHOLDERS' EQUITY**                                                                           |                            |   |                               |
| Unpaid                  losses and loss adjustment expenses                                                                         | $                  40,341,259   |   | $                  41,083,301      |
| Deferred                  compensation                                                                                              | 54,006,494                      |   | 49,776,043                         |
| Bank                  and other borrowings                                                                                          | 12,753,003                      |   | 12,720,558                         |
| Deferred                  income taxes, net                                                                                         | 21,645,681                      |   | 17,952,916                         |
| Other                  liabilities                                                                                                  | 20,618,217                      |   | 22,282,822                         |
| Total                  liabilities                                                                                                  | 149,364,654                     |   | 143,815,640                        |
|                                                                                                                                |                            |   |                               |
| Commitments                  and Contingencies (Note 4)                                                                             |                            |   |                               |
|                                                                                                                                |                            |   |                               |
| Common                  stock, $.001 par value; authorized 100,000,000 shares,                                                      |                            |   |                               |
| 23,129,923                  issued in 2007 and 20,306,923 issued in 2006                                                            | 23,130                          |   | 20,307                             |
| Additional                  paid-in capital                                                                                         | 431,758,353                     |   | 331,582,308                        |
| Accumulated                  other comprehensive income                                                                             | 69,213,273                      |   | 60,950,679                         |
| Retained                  earnings                                                                                                  | 91,196,414                      |   | 90,968,815                         |
|                                                                                                                                | 592,191,170                     |   | 483,522,109                        |
| Treasury                  stock, at cost (common shares: 4,425,630 in 2007 and 4,426,465                  in                  2006) | (78,283,229)                    |   | (78,294,810)                       |
| Total                  shareholders' equity                                                                                         | 513,907,941                     |   | 405,227,299                        |
| Total                  liabilities and shareholders' equity                                                                         | $                  663,272,595  |   | $                  549,042,939     |

*The      accompanying notes are an integral part of the condensed consolidated financial      statements.*

----

**PICO      HOLDINGS, INC. AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF OPERATIONS**

**(Unaudited)**

|                                                              |                  Three                  Months Ended March 31, 2007 |   |                  Three                  Months Ended March 31, 2006 |
|-------------------------------------------------------------------|--------------------------------------------------------------------------|--------|--------------------------------------------------------------------------|
| Revenues:                                                         |                                                                     |   |                                                                     |
| Net                  investment income                            | $                  3,812,067                                             |   | $                  2,072,326                                             |
| Net                  realized gain on investments                 | 1,407,908                                                                |   | 14,685,947                                                               |
| Sale                  of real estate and water assets             | 2,308,998                                                                |   | 1,256,335                                                                |
| Rents,                  royalties and lease income                | 150,158                                                                  |   | 186,855                                                                  |
| Other                                                             | 135,577                                                                  |   | 45,176                                                                   |
| Total                  revenues                                   | 7,814,708                                                                |   | 18,246,639                                                               |
| Costs                  and Expenses:                              |                                                                     |   |                                                                     |
| Operating                  and other costs                        | 5,326,580                                                                |   | 4,158,274                                                                |
| Cost                  of real estate and water assets sold        | 766,864                                                                  |   | 379,886                                                                  |
| Depreciation                  and amortization                    | 276,412                                                                  |   | 312,563                                                                  |
| Interest                  expense                                 |                                                                     |   | 99,538                                                                   |
| Total                  costs and expenses                         | 6,369,856                                                                |   | 4,950,261                                                                |
| Income                  before income taxes and minority interest | 1,444,852                                                                |   | 13,296,378                                                               |
| Provision                  for income taxes                       | 923,908                                                                  |   | 4,549,314                                                                |
| Income                  before minority interest                  | 520,944                                                                  |   | 8,747,064                                                                |
| Minority                  interest in loss of subsidiaries        |                                                                     |   | 12,459                                                                   |
| Income                  from continuing operations                | 520,944                                                                  |   | 8,759,523                                                                |
| Loss                  from discontinued operations, net of tax    |                                                                     |   | (1,541,322)                                                              |
| Net                  income                                       | $                  520,944                                               |   | $                  7,218,201                                             |
|                                                              |                                                                     |   |                                                                     |
|                                                              |                                                                     |   |                                                                     |
| Net                  income per common share - basic:             |                                                                     |   |                                                                     |
| Income                  from continuing operations                | $                  0.03                                                  |   | $                  0.66                                                  |
| Discontinued                  operations                          |                                                                     |   | (0.12)                                                                   |
| Net                  income per common share                      | $                  0.03                                                  |   | $                  0.54                                                  |
| Weighted                  average shares outstanding              | 16,882,284                                                               |   | 13,271,440                                                               |
|                                                              |                                                                     |   |                                                                     |
| Net                  income per common share - diluted:           |                                                                     |   |                                                                     |
| Income                  from continuing operations                | $                  0.03                                                  |   | $                  0.66                                                  |
| Discontinued                  operations                          |                                                                     |   | (0.12)                                                                   |
| Net                  income per common share                      | $                  0.03                                                  |   | $                  0.54                                                  |
| Weighted                  average shares outstanding              | 17,071,198                                                               |   | 13,271,440                                                               |

*The      accompanying notes are an integral part of the condensed consolidated financial      statements.*

----

**PICO      HOLDINGS, INC. AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

|                                                                                                                |   | Three                  Months Ended March 31, 2007 |   | Three                  Months Ended March 31, 2006 |
|---------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|--------|----------------------------------------------------|
| **OPERATING                  ACTIVITIES:**                                                                          |   |                                               |   |                                               |
| Net                  cash used by operating activities - continuing operations                                      |   | $(6,683,702)                                       |   | $(14,331,744)                                      |
| Net                  cash used by operating activities - discontinued                  operations                   |   |                                               |   | (1,545,782)                                        |
|                                                                                                                |   | (6,683,702)                                        |   | (15,877,526)                                       |
| **INVESTING                  ACTIVITIES:**                                                                          |   |                                               |   |                                               |
| Purchases                  of investments                                                                           |   | (43,221,699)                                       |   | (8,376,341)                                        |
| Proceeds                  from sale of investments                                                                  |   | 2,702,089                                          |   | 17,705,434                                         |
| Proceeds                  from maturity of investments                                                              |   | 3,959,300                                          |   | 26,217,857                                         |
| Purchases                  of property and equipment and costs capitalized to water                  infrastructure |   | (10,710,767)                                       |   | (2,422,847)                                        |
| Cash                  used in investing activities - discontinued operations                                        |   |                                               |   | (587,927)                                          |
| Net                  cash provided by (used in) investing activities                                                |   | (47,271,077)                                       |   | 32,536,176                                         |
|                                                                                                                |   |                                               |   |                                               |
| **FINANCING                  ACTIVITIES:**                                                                          |   |                                               |   |                                               |
| Proceeds                  from common stock offering, net                                                           |   | 100,161,057                                        |   |                                               |
| Sale                  of treasury stock for deferred compensation plans                                             |   | 29,392                                             |   |                                               |
| Cash                  used in financing activities - discontinued operations                                        |   |                                               |   | (498,272)                                          |
| Net                  cash provided by (used in) financing activities                                                |   | 100,190,449                                        |   | (498,272)                                          |
|                                                                                                                |   |                                               |   |                                               |
| Effect                  of exchange rate changes on cash                                                            |   | (111,567)                                          |   | (238,362)                                          |
|                                                                                                                |   |                                               |   |                                               |
| INCREASE                  IN CASH AND CASH EQUIVALENTS                                                              |   | 46,124,103                                         |   | 15,922,016                                         |
|                                                                                                                |   |                                               |   |                                               |
| CASH                  AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                                     |   | 136,621,578                                        |   | 37,794,416                                         |
|                                                                                                                |   |                                               |   |                                               |
| CASH                  AND CASH EQUIVALENTS, END OF PERIOD                                                           |   | $182,745,681                                       |   | $53,716,432                                        |
|                                                                                                                |   |                                               |   |                                               |
| **SUPPLEMENTAL                  CASH FLOW INFORMATION:**                                                            |   |                                               |   |                                               |
| Cash                  paid for interest                                                                             |   | $125,523                                           |   | $99,422                                            |
| Cash                  paid for income taxes                                                                         |   | $2,032,900                                         |   | $2,053,000                                         |
| Non-cash                  investing and financing activities:                                                       |   |                                               |   |                                               |
| Change                  in capitalized costs included in other liabilities                                          |   | $5,896,849                                         |   |                                               |

*The      accompanying notes are an integral part of the condensed consolidated financial      statements.    *

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**PICO      HOLDINGS, INC. AND SUBSIDIARIES**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

**1.**
**Basis      of Presentation**

*Stock-Based      Compensation:*

*Stock-Based      Plans Outstanding:*

*Stock      Settled Stock Appreciation Rights:*

*PICO      Holdings, Inc. 2005 Long Term Incentive Plan (the "2005 Plan"*

*Deferred      Compensation:*

*Accounting      for Deferred Compensation Arrangements Where Amounts Earned Are Held in a Rabbi      Trust and Invested*

*Notes      and other receivables*:

*Accounting      for Income Taxes:*

*Accounting      for Uncertainty in Income Taxes*

*Reclassifications:*

*Recently      Issued Accounting Pronouncements*

**SFAS      155**
*Accounting      for Certain Hybrid Financial Instruments - an amendment of FASB Statements      No.      133 and 140*

**SFAS      157**
*Fair      Value Measurements*

**SFAS      159**
*The      Fair Value Option for Financial Assets and Financial Liabilities—Including an      amendment of FASB Statement No. 115*
*Fair      Value Measurements).*

----

**2.**
**Net      Income Per Share**

**3.      Comprehensive Income**

|                                                                |                    Three                    Months Ended March 31, 2007 |   |                    Three                    Months Ended March 31, 2006 |
|---------------------------------------------------------------------|------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|
|                                                                |                                                                         |   |                                                                         |
| Net                    income                                       | $                    520,944                                                 |   | $                    7,218,201                                               |
| Net                    change in unrealized appreciation            |                                                                         |   |                                                                         |
| (depreciation)                    on available for sale investments | 7,804,376                                                                    |   | (5,607,260)                                                                  |
| Net                    change in foreign currency translation       | 458,218                                                                      |   | (281,478)                                                                    |
| Total                    comprehensive income                       | $                    8,783,538                                               |   | $                    1,329,463                                               |

|                                                                         | March                    31, 2007 |   | December                    31, 2006 |
|------------------------------------------------------------------------------|-----------------------------------|--------|--------------------------------------|
| Unrealized                    appreciation on available for sale investments | $                    73,997,804   |   | $                    66,193,428      |
| Foreign                    currency translation                              | (4,784,531)                       |   | (5,242,749)                          |
| Accumulated                    other comprehensive income                    | $                    69,213,273   |   | $                    60,950,679      |

**Marketable      equity securities: **

**Corporate      Bonds and US Treasury Obligations**

----

**4.      Commitments and Contingencies**

|   | **5.                Segment Reporting** |
|--------|-----------------------------------------|

|                                                                 | **Three                Months Ended March 31,** |
|----------------------------------------------------------------------|-------------------------------------------------|
|                                                                 | **2007**                                        | **2006** |
| **Revenues:**                                                        |                                            |   |
| Water                Resource and Water Storage Operations           | $1,075,671                                      | $308,296 |
| Real                Estate Operations                                | 3,506,420                                       | 1,765,332 |
| Business                Acquisitions and Financing                   | 1,176,406                                       | 8,972,688 |
| Insurance                Operations in Run Off                       | 2,056,211                                       | 7,200,323 |
|                                                                 |                                            |   |
| Total                Revenues                                        | $7,814,708                                      | $18,246,639 |
|                                                                 |                                            |   |
| **Income                (Loss) Before Taxes and Minority Interest:** |                                            |   |
| Water                Resource and Water Storage Operations           | $(381,051)                                      | $(1,178,896) |
| Real                Estate Operations                                | 2,200,019                                       | 926,854 |
| Business                Acquisitions and Financing                   | (2,074,965)                                     | 6,747,814 |
| Insurance                Operations in Run Off                       | 1,701,849                                       | 6,800,606 |
|                                                                 |                                            |   |
| Income                Before Taxes and Minority Interest             | $1,444,852                                      | $13,296,378 |

|   | **6.                Private Placement of Common                Stock** |
|--------|------------------------------------------------------------------------|

----

**Item      2: Management’s Discussion and Analysis of Financial Condition      and Results of Operations**

**The      following discussion and analysis of financial condition and results of      operations should be read in conjunction with the Unaudited Condensed      Consolidated Financial Statements and Notes thereto included elsewhere in this      report and the Consolidated Financial Statements and Notes thereto included      in      our annual report on Form 10-K.**

**This      Form 10-Q (including the “Management’s Discussion and Analysis of Financial      Condition and Results of Operations” section) contains “forward-looking      statements” regarding our business, financial condition, results of operations,      and prospects, including, without limitation, statements about our expectations,      beliefs, intentions, anticipated developments, and other information concerning      future matters. Words such as “expects,” “anticipates,” “intends,” “plans,”“believes,” “seeks,” “estimates,” and similar expressions or variations of such      words are intended to identify forward-looking statements, but are not the      exclusive means of identifying forward-looking statements in this Form 10-Q.      **

**Although      forward-looking statements in this Form 10-Q represent the good faith judgment      of our management, such statements can only be based on facts and factors      currently known by us. Consequently, forward-looking statements are inherently      subject to risks and uncertainties, and the actual results and outcomes could      differ from those discussed in or anticipated by the forward-looking statements.      Factors that could cause or contribute to such differences in results and      outcomes include, without limitation, those discussed under the heading “Risk      Factors” and elsewhere in our 2006 Annual Report on Form 10-K. Readers are urged      not to place undue reliance on these forward-looking statements, which speak      only as of the date of this Form 10-Q. We undertake no obligation to revise      or      update any forward-looking statement in order to reflect any event or      circumstance which may arise after the date of this Form 10-Q. Readers are      urged      to carefully review and consider the various disclosures made in this Form      10-Q      and our 2006 Annual Report on Form 10-K, which attempt to advise interested      parties of the risks and factors which may affect our business, financial      condition, results of operations, and prospects.**

**INTRODUCTION**

**Our      objective is to maximize long-term shareholder value.  We manage our      operations to achieve a superior return on net assets over the long term,      as opposed to short-term earnings. **

| **·  ** | Water                Resource and Water Storage                Operations; |
|------------------------|----------------------------------------------------------------------------|

| **·  ** | Real                Estate Operations; |
|------------------------|----------------------------------------|

| **·  ** | Business                Acquisitions & Financing (which contains businesses, interests in                businesses, and other parent company assets);                and |
|------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **·  ** | Insurance                Operations in “Run Off”. |
|------------------------|---------------------------------------------------------------|

| **·  ** | Vidler                Water Company, Inc. (“Vidler”), a business which we started more than 10                years ago, which develops and owns water resources and water storage                operations in the southwestern United States, primarily in Nevada                and                Arizona; |
|------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **·  ** | Nevada                Land & Resource Company, LLC (“Nevada Land”), an operation that we                built since we acquired the company more than 10 years ago, which                owns                approximately 535,000 acres of land in Nevada, and certain mineral                rights                and water rights related to the property; |
|------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **·  ** | Physicians                Insurance Company of Ohio (“Physicians”), which is “running off” its                medical professional liability insurance loss reserves, and was our                original business historically; |
|------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **·  ** | Citation                Insurance Company (“Citation”), which is “running off” its historic                property & casualty insurance and workers’ compensation loss reserves.                Citation was acquired because it was complimentary to our other insurance                operations at the time; |
|------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **·  ** | Global                Equity AG, which holds our interest in Jungfraubahn Holding AG                (“Jungfraubahn”). Jungfraubahn is a public company that operates railway                and related tourism and transport activities in the Swiss Alps.                Jungfraubahn’s shares trade on the SWZ Swiss Exchange. We believe that                Jungfraubahn was significantly undervalued at the time we acquired                our                interest, which was primarily between 1999 and                2003. |
|------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**RESULTS      OF OPERATIONS--THREE MONTHS ENDED MARCH 31, 2007 AND 2006**

**Shareholders’      Equity**

**Comprehensive      Income**

**Segment      Results of Operations**

|                                                                 | **Three                Months Ended March 31,** |
|----------------------------------------------------------------------|-------------------------------------------------|
|                                                                 | **2007**                                        | **2006** |
| **Revenues:**                                                        |                                            |   |
| Water                Resource and Water Storage Operations           | $1,076,000                                      | $                308,000 |
| Real                Estate Operations                                | 3,506,000                                       | 1,765,000 |
| Business                Acquisitions and Financing                   | 1,177,000                                       | 8,973,000 |
| Insurance                Operations in Run Off                       | 2,056,000                                       | 7,200,000 |
|                                                                 |                                            |   |
| Total                Revenues                                        | $7,815,000                                      | $18,246,000 |
|                                                                 |                                            |   |
| **Income                (Loss) Before Taxes and Minority Interest:** |                                            |   |
| Water                Resource and Water Storage Operations           | $(381,000)                                      | $(1,179,000) |
| Real                Estate Operations                                | 2,200,000                                       | 927,000 |
| Business                Acquisitions and Financing                   | (2,075,000)                                     | 6,747,000 |
| Insurance                Operations in Run Off                       | 1,701,000                                       | 6,801,000 |
|                                                                 |                                            |   |
| Income                Before Taxes and Minority Interest             | $1,445,000                                      | $13,296,000 |

----

**First      Quarter Net Income **

**WATER      RESOURCE AND WATER STORAGE OPERATIONS**

|                                                | **Three                Months Ended March 31,** |
|-----------------------------------------------------|-------------------------------------------------|
|                                                | **2007**                                        | **2006** |
| **Revenues:**                                       |                                            |   |
| Sale                of Real Estate and Water Assets | $3,000                                          | $28,000 |
| Net                Investment Income                | 960,000                                         | 307,000 |
| Other                                               | 113,000                                         | (27,000) |
| Segment                Total Revenues               | $1,076,000                                      | $308,000 |
|                                                |                                            |   |
| **Expenses:**                                       |                                            |   |
| Cost                of Real Estate and Water Assets | $(1,000)                                        | $(9,000) |
| Depreciation                and Amortization        | (261,000)                                       | (266,000) |
| Overhead                                            | (537,000)                                       | (488,000) |
| Project                Expenses                     | (658,000)                                       | (724,000) |
| Segment                Total Expenses               | $(1,457,000)                                    | $(1,487,000) |
|                                                |                                            |   |
| **Loss                Before Tax**                  | $(381,000)                                      | $(1,179,000) |

**Segment      Results**

*See      "Fish Springs Ranch” below. *

| · | the                operation and maintenance of the Vidler Arizona Recharge                Facility;                                                      |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | the                development of water rights in the Tule Desert groundwater basin                (part of                the Lincoln County agreement); |

| · | the                utilization of water rights at Fish Springs Ranch as future municipal                water supply for the north valleys of the Reno, Nevada area;                and |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | the                operation of Fish Springs Ranch, and maintenance of the associated                water                rights.                                                       |

**Fish      Springs Ranch**

**Coyote        Springs**

**Western        Nevada**

----

**REAL      ESTATE OPERATIONS**

|                                                   | **Three                Months Ended March 31,** |
|--------------------------------------------------------|-------------------------------------------------|
|                                                   | **2007**                                        | **2006** |
| **Revenues:**                                          |                                            |   |
| Sale                of former Railroad Land       | $2,306,000                                      | $1,228,000 |
| Net                Investment Income                   | 857,000                                         | 379,000 |
| Other                                                  | 343,000                                         | 158,000 |
| Segment                Total Revenues                  | $3,506,000                                      | $1,765,000 |
|                                                   |                                            |   |
| **Expenses:**                                          |                                            |   |
| Cost                of former Railroad Land Sold  | $                (766,000)                      | $(371,000) |
| Operating                Expenses                      | (540,000)                                       | (467,000) |
| Segment                Total Expenses                  | $(1,306,000)                                    | $(838,000) |
|                                                   |                                            |   |
| **Income                Before Tax**                   | $2,200,000                                      | $927,000 |

**BUSINESS      ACQUISITIONS AND FINANCING**

|                                              | **Three                Months Ended March 31,** |
|---------------------------------------------------|-------------------------------------------------|
|                                              | **2007**                                        | **2006** |
| **Revenues:**                                     |                                            |   |
| Realized                Gains on Sale of Holdings |                                            | $8,157,000 |
| Net                Investment Income              | $1,177,000                                      | 715,000 |
| Other                                             |                                            | 101,000 |
| Segment                Total Revenues             | $1,177,000                                      | $8,973,000 |
|                                              |                                            |   |
| **Segment                Total Expenses**         | $(3,252,000)                                    | $(2,226,000) |
| **Income                (Loss) Before Tax**       | $(2,075,000)                                    | $6,747,000 |

*See      Item 1, “Legal Proceedings” in “Part II: Other Information.” *

----

**INSURANCE      OPERATIONS IN RUN OFF**

|                                                 | **Three                Months Ended March 31,** |
|------------------------------------------------------|-------------------------------------------------|
|                                                 | **2007**                                        | **2006** |
| **Revenues:**                                        |                                            |   |
| Net                Investment Income                 | $816,000                                        | $671,000 |
| Realized                Gains on Sale of Investments | 1,228,000                                       | 6,529,000 |
| Other                                                | 12,000                                          |   |
| Segment                Total Revenues                | $2,056,000                                      | $7,200,000 |
|                                                 |                                            |   |
| **Expenses:**                                        |                                            |   |
| Operating                and Underwriting Expenses   | $(355,000)                                      | $(399,000) |
| Segment                Total Expenses                | $(355,000)                                      | $(399,000) |
|                                                 |                                            |   |
| **Income                Before Taxes:**              |                                            |   |
| Physicians                Insurance Company of Ohio  | $1,249,000                                      | $5,293,000 |
| Citation                Insurance Company            | 452,000                                         | 1,508,000 |
| Income                Before Tax                     | $1,701,000                                      | $6,801,000 |

**Physicians      Insurance Company of Ohio**

| **PHYSICIANS                INSURANCE COMPANY OF OHIO -- LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES****(In                Millions)** |
|--------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                 |
|                                                                                                                                 | **March                31, 2007** | **December                31, 2006** |
| Direct                Reserves                                                                                                       | $10.3 | $10.4 |
| Ceded                Reserves                                                                                                        | (                1.0) | (1.0) |
| **Net                Medical Professional Liability Insurance Reserves**                                                             | $9.3 | $9.4 |

**Citation      Insurance Company**

| **CITATION                INSURANCE COMPANY -- LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES****(In                Millions) ** |
|----------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                        |
|                                                                                                                             | **March                31, 2007** | **December                31, 2006** |
| **Property                & Casualty Insurance**                                                                             |   |   |
| Direct                Reserves                                                                                                   | $6.5 | $6.6 |
| Ceded                Reserves                                                                                                    | (1.6) | (1.5) |
| Net                Property & Casualty Insurance Reserves                                                                    | $4.9 | $5.1 |
|                                                                                                                             |   |   |
| **Workers’                Compensation**                                                                                   |   |   |
| Direct                Reserves                                                                                                   | $23.6 | $24.1 |
| Ceded                Reserves                                                                                                    | (14.3) | (14.5) |
| Net                Workers’ Compensation Insurance Reserves                                                                | $9.3 | $9.6 |
|                                                                                                                             |   |   |
| **Total                Reserves**                                                                                                | $14.2 | $14.7 |

----

**DISCONTINUED      OPERATIONS - HYPERFEED TECHNOLOGIES**

|                                                                          | **Three                months ended March 31,** |
|-------------------------------------------------------------------------------|-------------------------------------------------|
|                                                                          | **2007**                                        | **2006** |
|                                                                          |                                            |   |
| Loss                Before Income Taxes                                       |                                            | $(2,572,000) |
| Income                Tax Benefit                                             |                                            | 866,000 |
| Gain                On Sale of HyperFeed’s Discontinued Operations, net |                                            | 165,000 |
| **Net                Loss After Tax**                                         |                                            | $(1,541,000) |

**LIQUIDITY      AND CAPITAL RESOURCES—THREE MONTHS ENDED MARCH 31, 2007 AND      2006**

**Cash      Flow**

| **·  ** | As                Vidler’s water assets are monetized, Vidler is generating free cash flow                as receipts from the sale of real estate and water assets have overtaken                maintenance capital expenditure, development costs, financing costs,                and                operating expenses; |
|------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **·  ** | Nevada                Land is actively selling land which has reached its highest and best                use.                Nevada Land’s principal sources of cash flow are the proceeds of                cash sales, and collections of principal and interest on sales                contracts where Nevada Land has provided vendor financing. These                receipts                and other revenues exceed Nevada Land’s operating and development costs,                so Nevada Land is generating strong cash flow;                and |
|------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **·  ** | Investment                income more than covers the operating expenses of the “run off” insurance                companies, Physicians and Citation. The funds to pay claims come                from the                maturity of fixed-income securities, the realization of fixed-income                investments and stocks held in their investment portfolios, and recoveries                from reinsurance companies.   |
|------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Share      Repurchase Program**

----

**Item      3:**
**Quantitative      and Qualitative Disclosure about Market Risk **

**Item      4:**
**Controls      and Procedures**

**Part      II: Other Information**

**Item      1:**
**Legal      Proceedings**

* *
* *

**Exegy      Litigation:**

**   **
** Fish      Springs Ranch, LLC:**

----

**Item      1A:** **Risk      Factors**

**Item      2:**
**Unregistered      Sales of Equity Securities and Use of Proceeds**

**Item      3:**
**Defaults      Upon Senior Securities**

**Item      4:**
**Submission      of Matters to a Vote of Security Holders**

**Item      5:**
**Other      Information**

**Item      6: Exhibits **

| ExhibitNumber |   | Description                                                                                                                                                                                                     |
|---------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3(i)          |   | Amended                and Restated Articles of Incorporation of PICO.(1)                                                                                                                                       |
| 3(ii)         |   | Amended                and Restated By-laws of PICO. (2)                                                                                                                                                        |
|  4.1     |   | Form                of Form of Securities Purchase Agreement dated February 28, 2007                between                PICO Holdings, Inc. and the Purchasers. (3)                                          |
| 10.12         |   | Form                of Form of Securities Purchase Agreement dated February 28, 2007                between                PICO Holdings, Inc. and the Purchasers. (3)                                          |
| 31.1          |   | Certification                of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) as                adopted                pursuant to Section 302 of the Sarbanes-Oxley Act of                2002. |
| 31.2          |   | Certification                of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) as                adopted                pursuant to Section 302 of the Sarbanes-Oxley Act of                2002. |
| 32.1          |   | Certification                of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 (Section                906                of the Sarbanes-Oxley Act of 2002).                                       |
| 32.2          |   | Certification                of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (Section                906                of the Sarbanes-Oxley Act of 2002).                                       |

|   | (1) | Incorporated                by reference to exhibit of same number filed with Form 8-K dated                December                4, 1996.           |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (2) | Filed                as Appendix to the prospectus in Part I of Registration Statement                on Form                S-4 (File No. 333-06671). |

|   | (3) | Incorporated                by reference to Exhibit 10.11 filed with Form 8-K dated March 2,                2007. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------|

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**PICO      HOLDINGS, INC. AND SUBSIDIARIES**

**SIGNATURE**

**PICO      HOLDINGS, INC.**

*Principal      Financial and Accounting Officer and Authorized Signatory)*