**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 and Nine Months Ended September 30, 2006**

**TABLE        OF CONTENTS**

|                                                          |                                                                                                                                              |
|---------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                          | **Page                  No.**                                                                                                                     |
|                                                          |                                                                                                                                              |
| **Part                  I:  Financial Information** |                                                                                                                                              |
|                                                          |                                                                                                                                              |
| Item                  1:                                      | Condensed                  Consolidated Financial Statements (Unaudited)                                                                          |   |
|                                                          |                                                                                                                                              |   |
|                                                          | Condensed                  Consolidated Balance Sheets as of September 30, 2006                  and December 31, 2005                            | 3 |
|                                                          |                                                                                                                                              |   |
|                                                          | Condensed                  Consolidated Statements of Operations for the Three                  and Nine Months Ended September 30, 2006 and 2005 | 4 |
|                                                          |                                                                                                                                              |   |
|                                                          | Condensed                  Consolidated Statements of Cash Flows for the Nine                  Months Ended September 30, 2006 and 2005           | 5 |
|                                                          |                                                                                                                                              |   |
|                                                          | Notes                  to Condensed Consolidated Financial                  Statements                                                            | 6 |
|                                                          |                                                                                                                                              |   |
| Item                  2:                                      | Management’s                  Discussion and Analysis of Financial Condition                  and the Results of Operations                 |  10 |
|                                                          |                                                                                                                                              |   |
| Item                  3:                                      | Quantitative                  and Qualitative Disclosure About                  Market Risk                                                       |  17 |
|                                                          |                                                                                                                                              |   |
| Item                  4:                                      | Controls                  and Procedures                                                                                                          |   |
|                                                          |                                                                                                                                              |   |
| **Part                  II:  Other Information**    |                                                                                                                                              |
|                                                          |                                                                                                                                              |
| Item                  1:                                      | Legal                  Proceedings                                                                                                                | 17 |
|                                                          |                                                                                                                                              |   |
| Item                  1A:                                     | Risk                  Factors                                                                                                                     | 17 |
|                                                          |                                                                                                                                              |   |
| Item                  2:                                      | Unregistered                  Sales of Equity Securities and Use of                  Proceeds                                                     | 17 |
|                                                          |                                                                                                                                              |   |
| Item                  3:                                      | Defaults                  Upon Senior Securities                                                                                                  | 17 |
|                                                          |                                                                                                                                              |   |
| Item                  4:                                      | Submission                  of Matters to a Vote of Security                  Holders                                                             | 18 |
|                                                          |                                                                                                                                              |   |
| Item                  5:                                      | Other                  Information                                                                                                                | 18 |
|                                                          |                                                                                                                                              |   |
| Item                  6:                                      | Exhibits                                                                                                                                          | 19 |

----

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

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

**PICO      HOLDINGS, INC. AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

**(Unaudited)**

|                                                                                                                                | September                  30, 2006 |   | December                  31, 2005 |
|-------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------|--------|------------------------------------|
| **ASSETS**                                                                                                                          |                                |   |                               |
| Investments                                                                                                                         | $286,098,163                        |   | $287,446,334                       |
| Cash                  and cash equivalents                                                                                          | 115,806,003                         |   | 37,794,416                         |
| Notes                  and other receivables, net                                                                                   | 15,819,756                          |   | 14,692,888                         |
| Reinsurance                  receivables                                                                                            | 15,182,387                          |   | 16,186,105                         |
| Real                  estate and water assets, net                                                                                  | 87,293,218                          |   | 76,891,435                         |
| Property                  and equipment, net                                                                                        | 561,239                             |   | 1,572,492                          |
| Other                  assets                                                                                                       | 3,126,937                           |   | 7,188,858                          |
| Other                  assets - Discontinued Operations                                                                             |                                |   | 57,094                             |
| Total                  assets                                                                                                       | $523,887,703                        |   | $441,829,622                       |
|                                                                                                                                |                                |   |                               |
| **LIABILITIES                  AND SHAREHOLDERS' EQUITY**                                                                           |                                |   |                               |
| Unpaid                  losses and loss adjustment expenses                                                                         | $42,327,094                         |   | $46,646,906                        |
| Deferred                  compensation                                                                                              | 47,945,241                          |   | 42,737,293                    |
| Bank                  and other borrowings                                                                                          | 12,399,452                          |   | 12,334,868                         |
| Deferred                  income taxes                                                                                              | 10,419,434                          |   | 17,239,062                         |
| Other                  liabilities                                                                                                  | 20,179,868                          |   | 20,039,392                         |
| Reinsurance                  balance payable                                                                                        | 317,431                             |   | 325,081                            |
| Other                  liabilities - Discontinued Operations                                                                        | 370,365                             |   | 533,548                            |
| Total                  liabilities                                                                                                  | 133,958,885                         |   | 139,856,150                        |
| Minority                  interest                                                                                                  |                                |   | 1,098,515                          |
| Commitments                  and Contingencies (Note 4)                                                                             |                                |   |                               |
|                                                                                                                                |                                |   |                               |
| Common                  stock, $.001 par value; authorized 100,000,000 shares,                                                      |                                |   |                               |
| 20,306,923                  issued in 2006 and 17,706,923 issued in 2005                                                            | 20,307                              |   | 17,707                             |
| Additional                  paid-in capital                                                                                         | 331,582,308                         |   | 257,466,412                        |
| Retained                  earnings                                                                                                  | 81,155,822                          |   | 61,725,860                         |
| Accumulated                  other comprehensive income                                                                             | 55,465,191                          |   | 60,092,462                         |
| Treasury                  stock, at cost (common shares: 4,426,465 in 2006 and 4,435,483                  in                  2005) | (78,294,810)                        |   | (78,427,484)                       |
| Total                  shareholders' equity                                                                                         | 389,928,818                         |   | 300,874,957                        |
| Total                  liabilities and shareholders' equity                                                                         | $523,887,703                        |   | $441,829,622                       |

*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 September 30, 2006 |        | Three                  Months Ended September 30, 2005   |   | Nine                  Months EndedSeptember                  30, 2006  |   | Nine                  Months EndedSeptember                  30, 2005  |
|--------------------------------------------------------------------------|-------------------------------------------------------------|--------|--------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|
| Revenues:                                                                |                                                        |   |                                                               |   |                                                                        |   |                                                                        |
| Net                  investment income                                   | $3,311,097                                                  |   | $2,107,541                                                         |   | $9,816,302                                                                  |   | $5,919,806                                                                  |
| Net                  realized gain on investments                        | 3,906,008                                                   |   | 502,664                                                            |   | 19,279,304                                                                  |   | 7,017,213                                                                   |
| Sale                  of real estate and water assets                    | 28,310,663                                                  |   | 3,914,241                                                          |   | 33,399,627                                                                  |   | 102,239,065                                                                 |
| Rents,                  royalties and lease income                       | 87,178                                                      |   | 187,258                                                            |   | 722,161                                                                     |   | 771,816                                                                     |
| Service                  revenue                                         | 1,026,913                                                   |   | 1,406,844                                                          |   | 2,907,268                                                                   |   | 3,340,427                                                                   |
| Other                                                                    | 586,113                                                     |   | 19,121                                                             |   | 779,989                                                                     |   | 176,269                                                                     |
| Total                  revenues                                          | 37,227,972                                                  |   | 8,137,669                                                          |   | 66,904,651                                                                  |   | 119,464,596                                                                 |
| Costs                  and Expenses:                                     |                                                        |   |                                                               |   |                                                                        |   |                                                                        |
| Operating                  and other costs                               | 16,093,762                                                  |   | 17,524,579                                                         |   | 30,176,736                                                                  |   | 55,369,189                                                                  |
| Cost                  of real estate and water assets sold               | 5,816,820                                                   |   | 1,446,442                                                          |   | 7,498,442                                                                   |   | 40,471,389                                                                  |
| Cost                  of service revenue                                 | 438,805                                                     |   | 440,053                                                            |   | 1,326,162                                                                   |   | 1,002,050                                                                   |
| Depreciation                  and amortization                           | 492,378                                                     |   | 496,905                                                            |   | 1,459,766                                                                   |   | 1,622,287                                                                   |
| Interest                                                                 | 121,826                                                     |   | 79,379                                                             |   | 332,586                                                                     |   | 584,510                                                                     |
| Total                  costs and expenses                                | 22,963,591                                                  |   | 19,987,358                                                         |   | 40,793,692                                                                  |   | 99,049,425                                                                  |
| Income                  (loss) before income taxes and minority interest | 14,264,381                                                  |   | (11,849,689)                                                       |   | 26,110,959                                                                  |   | 20,415,171                                                                  |
| Provision                  (benefit) for income taxes                    | 2,608,646                                                   |   | (2,259,342)                                                        |   | 7,045,249                                                                   |   | 14,319,896                                                                  |
| Income                  (loss) before minority interest                  | 11,655,735                                                  |   | (9,590,347)                                                        |   | 19,065,710                                                                  |   | 6,095,275                                                                   |
| Minority                  interest in loss of subsidiaries               | 8,843                                                       |   | 231,514                                                            |   | 34,252                                                                      |   | 1,214,692                                                                   |
| Income                  (loss) from continuing operations                | 11,664,578                                                  |   | (9,358,833)                                                        |   | 19,099,962                                                                  |   | 7,309,967                                                                   |
| Income                  from discontinued operations, net of tax         | 165,000                                                     |   | 75,732                                                             |   | 330,000                                                                     |   | 36,083                                                                      |
| Net                  income (loss)                                       | $11,829,578                                                 |   | $(9,283,101)                                                       |   | $19,429,962                                                                 |   | $7,346,050                                                                  |
|                                                                     |                                                        |   |                                                               |   |                                                                        |   |                                                                        |
|                                                                     |                                                        |   |                                                               |   |                                                                        |   |                                                                        |
| Net                  income (loss) per common share - basic and diluted: |                                                        |   |                                                               |   |                                                                        |   |                                                                        |
| Income                  (loss) from continuing operations                | $0.73                                                       |   | $(0.71)                                                            |   | $1.30                                                                       |   | $0.57                                                                       |
| Discontinued                  operations                                 | 0.01                                                        |   | 0.01                                                               |   | 0.02                                                                        |   |                                                                        |
| Net                  income (loss) per common share                      | $0.74                                                       |   | $(0.70)                                                            |   | $1.32                                                                       |   | $0.57                                                                       |
| Weighted                  average shares outstanding                     | 15,880,458                                                  |   | 13,271,440                                                         |   | 14,712,267                                                                  |   | 12,859,162                                                                  |

*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)**

|                                                                                                                | Nine                  Months EndedSeptember                  30, 2006 |        | Nine                  Months EndedSeptember                  30, 2005  |
|---------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|
| **OPERATING                  ACTIVITIES:**                                                                          |                                                                  |   |                                                                        |
| Net                  cash provided by operating activities                                                          | $9,079,884                                                            |   | $62,322,812                                                                 |
| Net                  cash provided by (used in) discontinued operations                                             | 213,080                                                               |   | (579,067)                                                                   |
|                                                                                                                | 9,292,964                                                             |   | 61,743,745                                                                  |
| **INVESTING                  ACTIVITIES:**                                                                          |                                                                  |   |                                                                        |
| Purchases                  of investments                                                                           | (72,087,598)                                                          |   | (94,697,270)                                                                |
| Proceeds                  from sale of investments                                                                  | 39,342,472                                                            |   | 17,379,539                                                                  |
| Proceeds                  from maturity of investments                                                              | 45,728,000                                                            |   | 1,250,000                                                                   |
| Purchases                  of property and equipment and costs capitalized to water                  infrastructure | (13,955,733)                                                          |   | (722,443)                                                                   |
| Proceeds                  from the sale of property and equipment                                                   |                                                                  |   | 1,550                                                                       |
| Capitalized                  software costs                                                                         | (1,400,394)                                                           |   | (2,156,587)                                                                 |
| Net                  cash used in investing activities                                                              | (2,373,253)                                                           |   | (78,945,211)                                                                |
|                                                                                                                |                                                                  |   |                                                                        |
| **FINANCING                  ACTIVITIES:**                                                                          |                                                                  |   |                                                                        |
| Proceeds                  from common stock offering, net                                                           | 73,945,146                                                            |   | 21,378,095                                                                  |
| Repayment                  of borrowings                                                                            | (537,928)                                                             |   | (3,915,176)                                                                 |
| Proceeds                  from borrowings                                                                           |                                                                  |   | 35,000                                                                      |
| Distribution                  to partner of V&B (minority interest)                                             | (700,000)                                                             |   |                                                                        |
| Proceeds                  from exercise of stock options (HyperFeed)                                                | 1,727                                                                 |   | 7,633                                                                       |
| Purchase                  of treasury stock for deferred compensation plans                                         |                                                                  |   | (839)                                                                       |
| Net                  cash provided by financing activities                                                          | 72,708,945                                                            |   | 17,504,713                                                                  |
|                                                                                                                |                                                                  |   |                                                                        |
| Effect                  of exchange rate changes on cash                                                            | (1,617,069)                                                           |   | 3,326,824                                                                   |
|                                                                                                                |                                                                  |   |                                                                        |
| INCREASE                  IN CASH AND CASH EQUIVALENTS                                                              | 78,011,587                                                            |   | 3,630,071                                                                   |
|                                                                                                                |                                                                  |   |                                                                        |
| CASH                  AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                                     | 37,794,416                                                            |   | 17,407,138                                                                  |
|                                                                                                                |                                                                  |   |                                                                        |
| CASH                  AND CASH EQUIVALENTS, END OF PERIOD                                                           | $115,806,003                                                          |   | $21,037,209                                                                 |
|                                                                                                                |                                                                  |   |                                                                        |
| **SUPPLEMENTAL                  CASH FLOW INFORMATION:**                                                            |                                                                  |   |                                                                        |
| Cash                  paid for interest                                                                             | $330,427                                                              |   | $566,831                                                                    |
| Cash                  paid for income taxes                                                                         | $5,646,797                                                            |   | $19,917,021                                                                 |
| Distribution                  of treasury stock to settle deferred compensation                  liability          | $306,027                                                              |   |                                                                        |

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

----

**PICO      HOLDINGS, INC. AND SUBSIDIARIES**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

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

*Stock-Based      Compensation:*

*Stock-Based      Plans Outstanding:*

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

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

*Employee      Compensation and Bonus Plans:*

*Notes      and other receivables*:

*   Federal,      State and      Local Income Taxes*

*Reclassification*

----

*Recently      Issued Accounting Pronouncements*

**SFAS      153**
      (SFAS      153). This statement amends APB No. 29 to eliminate the exception for      nonmonetary exchanges of similar productive assets and replaces it with a      general exception for exchanges of nonmonetary assets that do not have      commercial substance. A nonmonetary exchange has commercial substance if the      future cash flows of the entity are expected to change significantly as a result      of the exchange. This statement was effective beginning in the first quarter      of      2006. The adoption of SFAS      153      did not have a material impact on PICO’s financial statements.

**SFAS      154 **

**SFAS      155**

**FIN      48**

**SFAS      157**

**SFAS      158 - **

**SAB      108**
*Considering      the Effects of Prior Year Misstatements when Quantifying Misstatements in      Current Year Financial Statements*

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

----

**3.      Comprehensive Income**

|                                                                |                    Three                    Months EndedSeptember                    30, 2006 |   |                    Three                    Months EndedSeptember                    30, 2005 |   |                    Three                    Months EndedSeptember                    30, 2006 |   |                    Three                    Months EndedSeptember                    30, 2005 |
|---------------------------------------------------------------------|----------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------|
| Net                    income (loss)                                | $11,829,578                                                                                        |   | $(9,283,101)                                                                                       |   | $19,429,962                                                                                        |   | $7,346,050                                                                                         |
| Net                    change in unrealized appreciation            |                                                                                               |   |                                                                                               |   |                                                                                               |   |                                                                                               |
| (depreciation)                    on available for sale investments | 1,956,060                                                                                          |   | 1,050,150                                                                                          |   | (4,791,041)                                                                                        |   | 19,618,815                                                                                         |
| Net                    change in foreign currency translation       | 202,084                                                                                            |   | (5,278)                                                                                            |   | 163,770                                                                                            |   | (472,124)                                                                                          |
| Total                    comprehensive income (loss)                | $13,987,722                                                                                        |   | $(8,238,229)                                                                                       |   | $14,802,691                                                                                        |   | $26,492,741                                                                                        |

|                                                                                            | September                  30, 2006 |   | December                  31, 2005 |
|-------------------------------------------------------------------------------------------------|-------------------------------------|--------|------------------------------------|
| Unrealized                    appreciation on available                    for sale investments | $61,333,371                         |   | $66,124,412                        |
| Foreign                  currency translation                                                   | (5,868,180)                         |   | (6,031,950)                        |
| Accumulated                  other comprehensive income                                         | $55,465,191                         |   | $60,092,462                        |

**    Investments:**

**Marketable      equity securities: **

**Corporate      Bonds and US Treasury Obligations**

**4.      Commitments and Contingencies**

----

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

|                                                         | At                  September 30, 2006 |   | At                  December 31, 2005 |
|--------------------------------------------------------------|----------------------------------------|--------|---------------------------------------|
| **Total                  Assets:**                           |                                   |   |                                  |
| Water                  Resource and Water Storage Operations | $141,866,851                           |   | $86,353,051                           |
| Real                  Estate Operations in Nevada            | 67,816,684                             |   | 66,513,641                            |
| Business                  Acquisitions and Financing         | 158,293,551                            |   | 127,980,663                           |
| Insurance                  Operations in Run Off             | 155,011,468                            |   | 156,366,749                           |
| HyperFeed                  Technologies, Inc.                | 899,149                                |   | 4,615,518                             |
|                                                         | $523,887,703                           |   | $441,829,622                          |

|                                                                 | **Three                Months Ended September 30,** | **Nine                Months Ended September 30,** |
|----------------------------------------------------------------------|-----------------------------------------------------|----------------------------------------------------|
|                                                                 | **2006**                                            | **2005**                                           | **2006** | **2005** |
| **Revenues:**                                                        |                                                |                                               |   |   |
| Water                Resource and Water Storage Operations           | $4,343,945                                          | $789,984                                           | $5,326,229 | $95,789,510 |
| Real                Estate Operations in Nevada                      | 26,021,029                                          | 4,277,212                                          | 32,412,616 | 8,795,171 |
| Business                Acquisitions and Financing                   | 1,852,718                                           | 859,731                                            | 14,013,587 | 4,743,211 |
| Insurance                Operations in Run Off                       | 3,981,139                                           | 803,828                                            | 12,241,059 | 6,796,125 |
| HyperFeed                Technologies                                | 1,029,141                                           | 1,406,914                                          | 2,911,160 | 3,340,579 |
| Total                Revenues                                        | $37,227,972                                         | $8,137,669                                         | $66,904,651 | $119,464,596 |
|                                                                 |                                                |                                               |   |   |
| **Income                (Loss) Before Taxes and Minority Interest:** |                                                |                                               |   |   |
| Water                Resource and Water Storage Operations           | $452,045                                            | $(1,287,282)                                       | $(1,509,332) | $49,027,144 |
| Real                Estate Operations in Nevada                      | 21,262,153                                          | 2,379,487                                          | 24,912,546 | 4,795,600 |
| Business                Acquisitions and Financing                   | (3,261,070)                                         | (11,607,367)                                       | 4,366,077 | (34,212,034) |
| Insurance                Operations in Run Off                       | 3,585,947                                           | 470,174                                            | 11,134,949 | 5,877,631 |
| HyperFeed                Technologies                                | (7,774,694)                                         | (1,804,701)                                        | (12,793,281) | (5,073,170) |
| Income                Before Taxes and Minority Interest             | $14,264,381                                         | $(11,849,689)                                      | $26,110,959 | $20,415,171 |

----

**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 2005 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 2005 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.  This return        can be increased through the acquisition of operations or assets at a        significant discount to our assessment of current realizable value, and        enhancing that value through incorporation with existing operations or the        development of more viable operations.**

**We        regularly monitor and evaluate our        operations to determine how best to maximize shareholder value, which may        result        in the sale of existing operations, or the acquisition of new business or        assets.**

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

| ·   | Real                Estate Operations in Nevada; |
|--------------------|--------------------------------------------------|

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

| ·   | Insurance                Operations in “Run Off”; and |
|--------------------|-------------------------------------------------------------------|

| ·   | HyperFeed                Technologies, Inc. (“HyperFeed”). |
|--------------------|------------------------------------------------------------------------|

| ·   | Vidler                Water Company, Inc. (“Vidler”), 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”), which owns approximately                648,000 acres of land in Nevada, and certain mineral rights and water                rights related to the land owned; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Physicians                Insurance Company of Ohio (“Physicians”), which is running off its medical                professional liability insurance loss                reserves; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Citation                Insurance Company (“Citation”), which is running off its historic property                & casualty insurance and workers’ compensation loss reserves; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Global                Equity AG, which holds our interest in Jungfraubahn Holding AG;                and |
|--------------------|----------------------------------------------------------------------------------------------------------|

| ·   | HyperFeed,                which is a developer of ticker plant technologies, data distribution,                smart order routing, and managed data services to the financial                community. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**RESULTS      OF OPERATIONS--THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND      2005**

**Shareholders’      Equity**

**Comprehensive      Income**

**Segment      Results of Operations**

|                                                                 | **Three                Months Ended September 30,** | **Nine                Months Ended September 30,** |
|----------------------------------------------------------------------|-----------------------------------------------------|----------------------------------------------------|
|                                                                 | **2006**                                            | **2005**                                           | **2006** | **2005** |
| **Revenues:**                                                        |                                                |                                               |   |   |
| Water                Resource and Water Storage Operations           | $4,344,000                                          | $790,000                                           | $5,326,000 | $95,790,000 |
| Real                Estate Operations in Nevada                      | 26,021,000                                          | 4,277,000                                          | 32,413,000 | 8,795,000 |
| Business                Acquisitions and Financing                   | 1,853,000                                           | 860,000                                            | 14,014,000 | 4,743,000 |
| Insurance                Operations in Run Off                       | 3,981,000                                           | 804,000                                            | 12,241,000 | 6,796,000 |
| HyperFeed                Technologies                                | 1,029,000                                           | 1,407,000                                          | 2,911,000 | 3,341,000 |
| Total                Revenues                                        | $37,228,000                                         | $8,138,000                                         | $66,905,000 | $119,465,000 |
|                                                                 |                                                |                                               |   |   |
| **Income                (Loss) Before Taxes and Minority Interest:** |                                                |                                               |   |   |
| Water                Resource and Water Storage Operations           | $452,000                                            | $(1,287,000)                                       | $(1,509,000) | $49,027,000 |
| Real                Estate Operations in Nevada                      | 21,262,000                                          | 2,379,000                                          | 24,913,000 | 4,796,000 |
| Business                Acquisitions and Financing                   | (3,261,000)                                         | (11,607,000)                                       | 4,366,000 | (34,212,000) |
| Insurance                Operations in Run Off                       | 3,586,000                                           | 470,000                                            | 11,135,000 | 5,877,000 |
| HyperFeed                Technologies                                | (7,775,000)                                         | (1,805,000)                                        | (12,794,000) | (5,073,000) |
| Income                (Loss) Before Taxes and Minority Interest      | $14,264,000                                         | $(11,850,000)                                      | $26,111,000 | $20,415,000 |

**Third      Quarter Net Income (Loss)**

**Nine      Months Net Income**

----

**WATER      RESOURCE AND WATER STORAGE OPERATIONS**

|                                                     | **Three                Months Ended September 30,** | **Nine                Months Ended September 30,** |
|----------------------------------------------------------|-----------------------------------------------------|----------------------------------------------------|
|                                                     | **2006**                                            | **2005**                                           | **2006** | **2005** |
| **Revenues:**                                            |                                                |                                               |   |   |
| Sale                of Real Estate and Water Assets      | $2,906,000                                          | $26,000                                            | $2,941,000 | $94,573,000 |
| Interest                                                 | 1,031,000                                           | 692,000                                            | 1,914,000 | 787,000 |
| Other                                                    | 407,000                                             | 72,000                                             | 471,000 | 430,000 |
| Segment                Total Revenues                    | $4,344,000                                          | $790,000                                           | $5,326,000 | $95,790,000 |
|                                                     |                                                |                                               |   |   |
| **Expenses:**                                            |                                                |                                               |   |   |
| Cost                of Real Estate and Water Assets Sold | $(1,593,000)                                        | $(                10,000)                          | $(1,605,000) | $(37,899,000) |
| Commission                and Other Cost of Sales        |                                                |                                               |   | (1,065,000) |
| Depreciation                and Amortization             | (313,000)                                           | (271,000)                                          | (902,000) | (907,000) |
| Interest                                                 |                                                | 3,000                                              |   | (269,000) |
| Overhead                Expenses                         | (1,424,000)                                         | (391,000)                                          | (2,475,000) | (3,411,000) |
| Project                Expenses                          | (562,000)                                           | (1,408,000)                                        | (1,853,000) | (3,212,000) |
| Segment                Total Expenses                    | $(3,892,000)                                        | $(2,077,000)                                       | $(6,835,000) | $(46,763,000) |
|                                                     |                                                |                                               |   |   |
| **Income                (Loss) Before Tax**              | $452,000                                            | $(1,287,000)                                       | $(1,509,000) | $49,027,000 |

**Sale      of Harquahala Valley Irrigation District Real Estate and Water      Assets**

**Segment      Results**

| ·   | the                Lincoln County Water District/Vidler undertaking (“Lincoln/Vidler”) sold                approximately 570 acre-feet of water rights at Meadow Valley, Nevada                for                $6,050 per acre-foot. Vidler’s 50% share of the sales price was $1.7                million; and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Vidler                sold its water rights at Golden, Colorado for $1.2                million. |
|--------------------|--------------------------------------------------------------------------------------------------|

*See      "Fish Springs Ranch” below. *

**Fish      Springs Ranch**

----

**REAL      ESTATE OPERATIONS IN NEVADA **

|                                                                                                     | **Three                Months Ended September 30,** | **Nine                Months Ended September 30,** |
|----------------------------------------------------------------------------------------------------------|-----------------------------------------------------|----------------------------------------------------|
|                                                                                                     | **2006**                                            | **2005**                                           | **2006** | **2005** |
| **Revenues:**                                                                                            |                                                |                                               |   |   |
| Sale                of Land:  Former                Railroad Land                                   |                                 | $3,405,000                                         | $3,888,000 | $8,459,000 | $7,666,000 |
|         Spring              Valley Ranch                         |             | 22,000,000                                         |   | 22,000,000 |   |
| Lease                and Royalty                                                                         | 170,000                                             | 145,000                                            | 722,000 | 431,000 |
| Interest                and Other                                                                        | 446,000                                             | 244,000                                            | 1,232,000 | 698,000 |
| Segment                Total Revenues                                                                    | $26,021,000                                         | $4,277,000                                         | $32,413,000 | $8,795,000 |
|                                                                                                     |                                                |                                               |   |   |
| **Expenses:**                                                                                            |                                                |                                               |   |   |
| Cost                of Land Sales:  Former                Railroad Land                             |                                 | $(1,049,000)                                       | $(1,436,000) | $(2,720,000) | $(2,572,000) |
|             Spring              Valley Ranch |                                                     | (3,174,000)                                        |   | (3,174,000) |   |
| Operating                Expenses                                                                        | (                536,000)                           | (                462,000)                          | (1,606,000) | (1,427,000) |
| Segment                Total Expenses                                                                    | $(4,759,000)                                        | $(1,898,000)                                       | $(7,500,000) | $(3,999,000) |
|                                                                                                     |                                                |                                               |   |   |
| **Income                Before Tax**                                                                     | $21,262,000                                         | $2,379,000                                         | $24,913,000 | $4,796,000 |

**Spring      Valley Ranch**

**All      Other Real Estate Operations in Nevada**

**Summary      and Outlook**

**BUSINESS      ACQUISITIONS AND FINANCING**

|                                              | **Three                Months Ended September 30,** | **Nine                Months Ended September 30,** |
|---------------------------------------------------|-----------------------------------------------------|----------------------------------------------------|
|                                              | **2006**                                            | **2005**                                           | **2006** | **2005** |
| **Revenues:**                                     |                                                |                                               |   |   |
| Realized                Gains On Sale of Holdings | $727,000                                            | $486,000                                           | $9,424,000 | $2,373,000 |
| Investment                Income                  | 1,032,000                                           | 402,000                                            | 4,298,000 | 2,308,000 |
| Other                                             | 94,000                                              | (                28,000)                           | 292,000 | 62,000 |
| Segment                Total Revenues             | $1,853,000                                          | $860,000                                           | $14,014,000 | $4,743,000 |
|                                              |                                                |                                               |   |   |
| **Segment                Total Expenses**         | $(5,114,000)                                        | $(12,467,000)                                      | $(9,648,000) | $(38,955,000) |
| **Income                (Loss) Before Tax**       | $(3,261,000)                                        | $(11,607,000)                                      | $4,366,000 | $(34,212,000) |

----

**INSURANCE      OPERATIONS IN RUN OFF**

|                                                | **Three                Months Ended September 30,** | **Nine                Months Ended September 30,** |
|-----------------------------------------------------|-----------------------------------------------------|----------------------------------------------------|
|                                                | **2006**                                            | **2005**                                           | **2006** | **2005** |
| **Revenues:**                                       |                                                |                                               |   |   |
| Investment                Income                    | $800,000                                            | $785,000                                           | $2,385,000 | $2,149,000 |
| Realized                Investment Gains            | 3,180,000                                           | 19,000                                             | 9,855,000 | 4,647,000 |
| Other                                               | 1,000                                               |                                               | 1,000 |   |
| Segment                Total Revenues               | $3,981,000                                          | $804,000                                           | $12,241,000 | $6,796,000 |
|                                                |                                                |                                               |   |   |
| **Expenses:**                                       |                                                |                                               |   |   |
| Operating                and Underwriting Expenses  | $(395,000)                                          | $(334,000)                                         | $(1,106,000) | $(919,000) |
| Segment                Total Expenses               | $(395,000)                                          | $(334,000)                                         | $(1,106,000) | $(919,000) |
|                                                |                                                |                                               |   |   |
| **Income                Before Taxes:**             |                                                |                                               |   |   |
| Physicians                Insurance Company of Ohio | $2,593,000                                          | $266,000                                           | $8,538,000 | $4,593,000 |
| Citation                Insurance Company           | 993,000                                             | 204,000                                            | 2,597,000 | 1,284,000 |
| Segment                Income Before Tax            | $3,586,000                                          | $470,000                                           | $11,135,000 | $5,877,000 |

**Physicians      Insurance Company of Ohio**

|  **PHYSICIANS                  INSURANCE COMPANY OF OHIO -- LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES                  (In                  Millions)** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                         |
|                                                                                                                                                         | **September                  30, 2006** | **June                  30, 2006** | **December                  31, 2005** |
| Direct                  Reserves                                                                                                                             | $11.3 | $12.6 | $12.9 |
| Ceded                  Reserves                                                                                                                              | (1.0) | (1.0) | (1.0) |
| **Net                  Medical Professional Liability Insurance Reserves**                                                                                   | $10.3 | $11.6 | $11.9 |

**Citation      Insurance Company**

| **CITATION                INSURANCE COMPANY -- LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES (In                Millions) ** |
|-------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                          |   |   |   |
|                                                                                                                          | **September                30, 2006** | **June                30, 2006** | **December                31, 2005** |
| **Property                & Casualty Insurance**                                                                          |   |   |   |
| Direct                Reserves                                                                                                | $7.5 | $7.6 | $8.2 |
| Ceded                Reserves                                                                                                 | (1.7) | (1.8) | (1.8) |
| Net                Property & Casualty Insurance Reserves                                                                 | $5.8 | $5.8 | $6.4 |
|                                                                                                                          |   |   |   |
| **Workers’                Compensation Insurance**                                                                      |   |   |   |
| Direct                Reserves                                                                                                | $23.5 | $24.4 | $25.6 |
| Ceded                Reserves                                                                                                 | (11.9) | (12.4) | (13.1) |
| Net                Workers’ Compensation Insurance Reserves                                                             | $11.6 | $12.0 | $12.5 |
|                                                                                                                          |   |   |   |
| **Total                Reserves**                                                                                             | $17.4 | $17.8 | $18.9 |

----

**HYPERFEED      TECHNOLOGIES**

|                                                               | **Three                months ended September 30,** | **Nine                months ended September 30,** |
|--------------------------------------------------------------------|-----------------------------------------------------|----------------------------------------------------|
|                                                               | **2006**                                            | **2005**                                           | **2006** | **2005** |
| **Revenues:**                                                      |                                                |                                               |   |   |
| Service                                                            | $1,027,000                                          | $1,407,000                                         | $2,907,000 | $3,341,000 |
| Investment                Income                                   | 2,000                                               |                                               | 4,000 |   |
| Segment                Total Revenues                              | $1,029,000                                          | $1,407,000                                         | $2,911,000 | $3,341,000 |
|                                                               |                                                |                                               |   |   |
| **Expenses:**                                                      |                                                |                                               |   |   |
| Cost                of service                                     | $(                439,000)                          | $                (440,000)                         | $(                1,326,000) | $(1,002,000) |
| Depreciation                and amortization                       | (                155,000)                           | (180,000)                                          | (                447,000) | (589,000) |
| Other                                                              | (8,210,000)                                         | (2,592,000)                                        | (13,932,000) | (6,823,000) |
| Segment                Total Expenses                              | $(8,804,000)                                        | $(3,212,000)                                       | $(15,705,000) | $(8,414,000) |
|                                                               |                                                |                                               |   |   |
| **Segment                Loss Before Taxes and Minority Interest** | $(7,775,000)                                        | $(1,805,000)                                       | $(12,794,000) | $(5,073,000) |

**DISCONTINUED      OPERATIONS**

----

**LIQUIDITY      AND CAPITAL RESOURCES--NINE MONTHS ENDED SEPTEMBER 30, 2006 AND      2005**

| ·   | 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 costs, so Nevada Land is generating strong                cash flow; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 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; and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | HyperFeed                maintains its own cash and cash equivalents balances, and borrowings.                At                September 30, 2006, HyperFeed held approximately $899,000 in cash                and cash                equivalents, and had no external borrowings available. PICO has extended                a                $10 million secured convertible promissory note to HyperFeed (the“Note”),                on which $9.7 million was drawn at September 30, 2006. Subsequent                to                September 30, 2006 HyperFeed had drawn another $320,000 on the Note.                 By letter dated November 7, 2006, Exegy informed PICO and HyperFeed                that                it was terminating the Contribution Agreement among Exegy, HyperFeed                and                PICO Holdings, Inc. dated August 25, 2006. Under the terms of the                Contribution Agreement, PICO would have contributed to Exegy all                shares of                the common stock of HyperFeed owned by it and received by it upon                conversion of outstanding amounts owed under a Convertible Note dated                March 30, 2006. In addition, PICO and stockholders of Exegy would                have                contributed a combined $10 million in cash to Exegy. Under the terms                of                Contribution Agreement, in exchange for its contribution of cash                and                equity to Exegy, PICO would have received approximately 15.4 million                shares of Series A-3 Preferred Stock of Exegy representing 50% of                the                equity of Exegy. At                  this time, PICO and HyperFeed dispute Exegy’s right to terminate the                  Contribution Agreement and plans to vigorously defend its rights                  thereunder through all available legal means.  Given                  the uncertainty of additional funding available to HyperFeed due                  to the                  termination of the Contribution Agreement and therefore for HyperFeed                  to                  continue as a going concern, it is imminent that                  HyperFeed file for bankruptcy protection under Chapter 7 of The U.S.                  Bankruptcy Code.    |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Share      Repurchase Program**

----

**Risk      Factors**

*The      following information sets forth factors that could cause our actual results      to      differ materially from those contained in forward-looking statements we have      made in this quarterly report and those we may make from time to time.*
*You      should carefully consider the following risks, together with other matters      described in this Form 10-Q or incorporated herein by reference in evaluating      our business and prospects. If any of the following risks occurs, our business,      financial condition or operating results could be harmed. In such case, the      trading price of our securities could decline, in some cases significantly.      The      risks described below are not the only ones we face. Additional risks not      presently known to us, or that we currently deem immaterial, may also impair      our      business operations. For a more detailed discussion of the factors that could      cause actual results to differ, see the Risk Factors section*
*** ***
*in      our Annual Report on Form 10-K filed with the Securities and Exchange Commission      on March 10, 2006.*

**Our      future water revenues are uncertain and depend on a number of factors, which      may      make our revenue streams and profitability volatile.**

**Our      water activities may become concentrated in a limited number of assets, making      our growth and profitability vulnerable to fluctuations in local economies      and      governmental regulations.**

**Our      water sales may meet with political opposition in certain locations, thereby      limiting our growth in these areas. **

**The      fair values of our real estate and water assets are linked to external growth      factors. **

**Variances        in physical availability of water, along with environmental and legal        restrictions and legal impediments, could impact profitability from our water        rights.**

**If       we do not successfully locate, select and manage acquisitions and investments,      or if our acquisitions or investments otherwise fail or decline in value, our      financial condition could suffer.**

**Failure      to successfully manage newly acquired companies could adversely affect our      business.**

**Our      acquisitions may not achieve expected rates of return, and we may not realize      the value of the funds we invest.**

**We      may make acquisitions and investments that may yield low or negative returns      for      an extended period of time, which could temporarily or permanently depress      our      return on shareholders’ equity.**

**We      may not be able to sell our investments when it is advantageous to do so and      we      may have to sell these investments at a discount to fair      value.**

**Our      acquisitions of and investments in foreign companies subject us to additional      market, liquidity and foreign exchange risks which could affect the value      of our stock.**

**If      we underestimate the amount of insurance claims, our financial condition could      be materially misstated and our financial condition could      suffer.**

| · | the                length of time in reporting claims;                         |
|--------|--------------------------------------------------------------------------------|
| · | the                diversity of historical losses among                claims; |

| · | the                amount of historical information available during the estimation                process;                                   |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|
| · | the                degree of impact that changing regulations and legal precedents may                have                on open claims; and |

| · | the                consistency of reinsurance programs over                time. |
|--------|----------------------------------------------------------------------------------|

**State      regulators could require changes to our capitalization and/or to the operations      of our insurance subsidiaries, and/or place them into rehabilitation or      liquidation.**

**If      we are required to register as an investment company, then we will be subject      to      a significant regulatory burden.**

**We      are directly impacted by international affairs, which directly exposes us to      the      adverse effects of any foreign economic or governmental      instability.**

| · | exposure                to fluctuations in exchange rates;             |
|--------|------------------------------------------------------------------------|
| · | the                imposition of governmental                controls; |

| · | the                need to comply with a wide variety of foreign and U.S. export                laws; |
|--------|-------------------------------------------------------------------------------------------------------|
| · | political                and economic instability;                                                    |

| · | trade                restrictions;           |
|--------|----------------------------------------------|
| · | changes                in tariffs and taxes; |

| · | volatile                interest rates;             |
|--------|-----------------------------------------------------|
| · | changes                in certain commodity prices; |

| · | exchange                controls which may limit our ability to withdraw money;              |
|--------|----------------------------------------------------------------------------------------------|
| · | the                greater difficulty of administering business overseas;                and |

| · | general                economic conditions outside the United                States. |
|--------|--------------------------------------------------------------------------------------|

**Because      our operations are diverse, analysts and investors may**
**not      be able to evaluate us adequately, which may negatively influence our share      price.**

**Fluctuations      in the market price of our common stock may affect your ability to sell your      shares.**

| · | quarterly                variations in financial performance and condition;                                  |
|--------|--------------------------------------------------------------------------------------------------------------|
| · | shortfalls                in revenue or earnings from levels forecast by securities                analysts; |

| · | changes                in estimates by such analysts; |
|--------|-------------------------------------------------------|
| · | product                introductions;                 |

| · | our                competitors’ announcements of extraordinary events such as                acquisitions; |
|--------|------------------------------------------------------------------------------------------------------------------|
| · | litigation;                and                                                                                   |

| · | general                economic conditions. |
|--------|---------------------------------------------|

**We      may not be able to retain key management personnel we need to succeed, which      could adversely affect our ability to make sound investment      decisions.**

**We      use estimates and assumptions in preparing financial statements in      accordance with accounting principles generally accepted in the United States      of      America.**

* *

**Repurchases      of our common stock could have a negative effect on our cash flows and our      stock      price.**

**Future      changes in financial accounting standards may cause adverse unexpected revenue      fluctuations and affect our reported results of      operations.**

**Compliance      with changing regulation of corporate governance and public disclosure may      result in additional expenses.**

**Absence      of dividends could reduce our attractiveness to investors.**

**We      may need additional capital in the future to fund the growth of our business,      and financing may not be available.**

**Litigation      may harm our business or otherwise distract our      management.**

----

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

**Item      4:** **Controlsand      Procedures**

**Part      II: Other Information**

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

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

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

**ISSUER      PURCHASES OF EQUITY SECURITIES**

| Period                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | (a)Total                number of shares purchased | (b)Average                Price Paid per Share | (c)Total                Number of Shares (or Units) Purchased as Part of Publicly Announced                Plans                or Programs (1) | (d)Maximum                Number (or Approximate Dollar Value) of Shares (or Units) that May                Yet Be                Purchased Under the Plans or Programs (1) |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------|------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                               |                                           |                                                                                                                                            |                                                                                                                                                                        |
| 7/1/06                - 7/31/06                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | -                                                  | -                                              |                                                                                                                                            |                                                                                                                                                                        |
| 8/1/06                - 8/31/06                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | -                                                  | -                                              |                                                                                                                                            |                                                                                                                                                                        |
| 9/1/06                - 9/30/06                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | -                                                  | -                                              |                                                                                                                                            |                                                                                                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (1)                In October 2002, PICO’s Board of Directors authorized the repurchase of up                to $10 million of PICO common stock. The stock purchases may be made                from                time to time at prevailing prices through open market or negotiated                transactions, depending on market conditions, and will be funded                from                available cash. As of September 30, 2006, no stock had been repurchased                under this authorization. |

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

----

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

**Director:**
**Elected      Through:**

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

----

**Item      6: Exhibits **

|  **Exhibit                Number** |  **Exhibit                Description** |
|-----------------------------------------|----------------------------------------------|
| 3.1                                     |                                         | Amended                and Restated Articles of Incorporation of PICO.(1) |
| 3.2                                     |                                         | Amended                and Restated By-laws of PICO. (2) |
| 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 (File No. 000-18786).                                           |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (2) | Filed                as Appendix to the prospectus in Part I of Registration Statement                on Form                S-4 filed with the SEC on October 2, 1996 (File No.                333-06671). |

**PICO      HOLDINGS, INC. AND SUBSIDIARIES**

**SIGNATURE**

**PICO      HOLDINGS, INC.**

*Principal      Financial and Accounting Officer)*