----

| California(State or other Jurisdiction ofIncorporation or Organization) | 94-2723335(IRS EmployerIdentification No.) |
|-------------------------------------------------------------------------|--------------------------------------------|

| Large accelerated filer                       | ý | Accelerated filer         | ¨ |
|-----------------------------------------------|--------|---------------------------|--------|
| Non-accelerated filer                         | ¨ | Smaller reporting company | ¨ |
| (Do not check if a smaller reporting company) |   |                      |   |

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|                                     |                                                                                                                       |
|------------------------------------------|----------------------------------------------------------------------------------------------------------------------------|
|                                     | Page No.                                                                                                                   |
|                                     |                                                                                                                       |
| Part I:  Financial Information |                                                                                                                       |
|                                     |                                                                                                                       |
| Item 1:                                  | Condensed Consolidated Financial Statements (Unaudited)                                                                    |   |
|                                     |                                                                                                                       |   |
|                                     | Condensed Consolidated Balance Sheets as of September 30, 2009 and December 31, 2008                                  | 3 |
|                                     |                                                                                                                       |   |
|                                     | Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2009 and 2008  | 4 |
|                                     |                                                                                                                       |   |
|                                     | Condensed Consolidated Statement Of Changes In Equity for the Nine Months Ended September 30, 2009                         | 5 |
|                                     |                                                                                                                       |   |
|                                     | Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2009 and 2008                      | 6 |
|                                     |                                                                                                                       |   |
|                                     | Notes to Condensed Consolidated Financial Statements                                                                       | 7 |
|                                     |                                                                                                                       |   |
| Item 2:                                  | Management’s Discussion and Analysis of Financial Condition and the Results of Operations                            | 17 |
|                                     |                                                                                                                       |   |
| Item 3:                                  | Quantitative and Qualitative Disclosure About Market Risk                                                                  | 32 |
|                                     |                                                                                                                       |   |
| Item 4:                                  | Controls and Procedures                                                                                                    | 32 |
|                                     |                                                                                                                       |   |
| Part II:  Other Information    |                                                                                                                       |
|                                     |                                                                                                                       |
| Item 1:                                  | Legal Proceedings                                                                                                          | 32 |
|                                     |                                                                                                                       |   |
| Item 1A:                                 | Risk Factors                                                                                                               | 33 |
|                                     |                                                                                                                       |   |
| Item 2:                                  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                | 33 |
|                                     |                                                                                                                       |   |
| Item 3:                                  | Defaults Upon Senior Securities                                                                                            | 33 |
|                                     |                                                                                                                       |   |
| Item 4:                                  | Submission of Matters to a Vote of Security Holders                                                                        | 33 |
|                                     |                                                                                                                       |   |
| Item 5:                                  | Other Information                                                                                                          | 33 |
|                                     |                                                                                                                       |   |
| Item 6:                                  | Exhibits                                                                                                                   | 34 |

----

Part I: Financial Information

Item I: Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

|                                                                                                                                                                                                   |   | September 30, 2009 |        |   | December 31, 2008 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|-------------|--------|-------------------|--------|
| ASSETS                                                                                                                                                                                                 |   |               |        |   |              |   |
| Investments                                                                                                                                                                                            |   | $                  | 163,452,340 |   |              | $      | 149,417,023 |   |
| Cash and cash equivalents                                                                                                                                                                              |   |               | 160,578,910 |   |              |   | 96,316,018 |   |
| Notes and other receivables, net                                                                                                                                                                       |   |               | 13,671,762  |   |              |   | 24,352,367 |   |
| Reinsurance receivables                                                                                                                                                                                |   |               | 15,375,222  |   |              |   | 16,373,132 |   |
| Real estate and water assets, net                                                                                                                                                                      |   |               | 296,344,731 |   |              |   | 271,714,300 |   |
| Property and equipment, net                                                                                                                                                                            |   |               | 1,401,476   |   |              |   | 1,512,370 |   |
| Deferred income taxes                                                                                                                                                                                  |   |               | 26,280,413  |   |              |   | 25,274,232 |   |
| Federal, foreign and state income taxes                                                                                                                                                                |   |               |        |   |              |   | 4,519,920 |   |
| Other assets                                                                                                                                                                                           |   |               | 3,491,462   |   |              |   | 3,154,434 |   |
| Total assets                                                                                                                                                                                           |   | $                  | 680,596,316 |   |              | $      | 592,633,796 |   |
|                                                                                                                                                                                                   |   |               |        |   |              |   |   |   |
| LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                                                                   |   |               |        |   |              |   |   |   |
| Unpaid losses and loss adjustment expenses                                                                                                                                                             |   | $                  | 26,230,284  |   |              | $      | 27,773,320 |   |
| Deferred compensation                                                                                                                                                                                  |   |               | 29,855,232  |   |              |   | 27,744,528 |   |
| Bank and other borrowings                                                                                                                                                                              |   |               | 38,734,658  |   |              |   | 42,381,718 |   |
| Federal, foreign and state income taxes                                                                                                                                                                |   |               | 4,170,353   |   |              |   |   |   |
| Other liabilities                                                                                                                                                                                      |   |               | 13,846,419  |   |              |   | 16,988,040 |   |
| Total liabilities                                                                                                                                                                                      |   |               | 112,836,946 |   |              |   | 114,887,606 |   |
|                                                                                                                                                                                                   |   |               |        |   |              |   |   |   |
| Commitments and Contingencies (Note 8)                                                                                                                                                                 |   |               |        |   |              |   |   |   |
|                                                                                                                                                                                                   |   |               |        |   |              |   |   |   |
| Common stock, $.001 par value; authorized 100,000,000 shares, 27,020,473 issued and 22,595,678 outstanding at September 30, 2009 and 23,265,187 issued and 18,840,392 outstanding at December 31, 2008 |   |               | 27,020      |   |              |   | 23,265 |   |
| Additional paid-in capital                                                                                                                                                                             |   |               | 539,473,676 |   |              |   | 439,381,715 |   |
| Retained earnings                                                                                                                                                                                      |   |               | 95,348,579  |   |              |   | 118,036,716 |   |
| Accumulated other comprehensive income (loss)                                                                                                                                                          |   |               | 13,816,500  |   |              |   | (1,423,863 | ) |
| Treasury stock, at cost (common shares: 4,424,795 in 2009 and 2008)                                                                                                                                    |   |               | (78,271,643 | )      |              |   | (78,271,643 | ) |
| Total PICO Holdings, Inc. shareholders’ equity                                                                                                                                                   |   |               | 570,394,132 |   |              |   | 477,746,190 |   |
| Noncontrolling interest in subsidiaries                                                                                                                                                                |   |               | (2,634,762  | )      |              |   |   |   |
| Total shareholders' equity                                                                                                                                                                             |   |               | 567,759,370 |   |              |   | 477,746,190 |   |
| Total liabilities and shareholders' equity                                                                                                                                                             |   | $                  | 680,596,316 |   |              | $      | 592,633,796 |   |

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

----

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                           |   | Three Months EndedSeptember 30, 2009 |       |    | Three Months EndedSeptember 30, 2008 |   |       | Nine Months EndedSeptember 30, 2009 |   |   | Nine Months EndedSeptember 30, 2008 |   |
|----------------------------------------------------------------|--------|--------------------------------------|------------|---------|--------------------------------------|--------|------------|-------------------------------------|--------|--------|-------------------------------------|--------|
| Revenues:                                                      |   |                                 |       |    |                                 |   |       |                                |   |   |                                |   |
| Net investment income                                          |   | $                                    | 1,441,156  |    |                                 | $      | 2,599,056  |                                |   | $      | 4,448,666                           |   |   | $ | 8,709,605 |   |
| Net realized gain (loss) on sale and impairment of investments |   |                                 | (2,010,010 | )  |                                 |   | (2,313,541 | )                                   |   |   | (13,090,637                         | )      |   |   | 47,758,894 |   |
| Sale of real estate and water assets                           |   |                                 | 535,850    |    |                                 |   | 429,956    |                                |   |   | 5,803,880                           |   |   |   | 1,735,727 |   |
| Gain on sale of water storage                                  |   |                                 |       |    |                                 |   | 8,715,682  |                                |   |   |                                |   |   |   | 8,715,682 |   |
| Rents, royalties and lease income                              |   |                                 | 492,975    |    |                                 |   | 166,972    |                                |   |   | 1,037,266                           |   |   |   | 488,903 |   |
| Other                                                          |   |                                 | 504,618    |    |                                 |   | 234,366    |                                |   |   | 1,440,000                           |   |   |   | 824,240 |   |
| Total revenues (charges)                                       |   |                                 | 964,589    |    |                                 |   | 9,832,491  |                                |   |   | (360,825                            | )      |   |   | 68,233,051 |   |
| Costs and Expenses:                                            |   |                                 |       |    |                                 |   |       |                                |   |   |                                |   |   |   |   |   |
| Operating and other costs                                      |   |                                 | 7,982,476  |    |                                 |   | 1,678,632  |                                |   |   | 28,082,868                          |   |   |   | 10,867,713 |   |
| Impairment loss                                                |   |                                 |       |    |                                 |   |       |                                |   |   | 12,378,000                          |   |   |   |   |   |
| Interest expense                                               |   |                                 |       |    |                                 |   |       |                                |   |   | 949,279                             |   |   |   |   |   |
| Cost of real estate and water assets sold                      |   |                                 | 306,914    |    |                                 |   | 145,369    |                                |   |   | 1,807,219                           |   |   |   | 467,267 |   |
| Depreciation and amortization                                  |   |                                 | 304,496    |    |                                 |   | 334,600    |                                |   |   | 976,811                             |   |   |   | 939,268 |   |
| Total costs and expenses                                       |   |                                 | 8,593,886  |    |                                 |   | 2,158,601  |                                |   |   | 44,194,177                          |   |   |   | 12,274,248 |   |
| Income (loss) before income taxes                              |   |                                 | (7,629,297 | )       |                                 |   | 7,673,890  |                                |   |   | (44,555,002                         | )      |   |   | 55,958,803 |   |
| Provision (benefit) for income taxes                           |   |                                 | (4,972,908 | )       |                                 |   | 7,213,702  |                                |   |   | (18,890,763                         | )      |   |   | 29,508,763 |   |
| Net income (loss)                                              |   |                                 | (2,656,389 | )       |                                 |   | 460,188    |                                |   |   | (25,664,239                         | )      |   |   | 26,450,040 |   |
| Net loss attributable to the noncontrolling interests          |   |                                 | 832,192    |    |                                 |   | 72,329     |                                |   |   | 2,976,102                           |   |   |   | 678,459 |   |
| Net income (loss) attributable to PICO Holdings, Inc.          |   | $                                    | (1,824,197 | )       |                                 | $      | 532,517    |                                |   | $      | (22,688,137                         | )      |   | $ | 27,128,499 |   |
|                                                           |   |                                 |       |    |                                 |   |       |                                |   |   |                                |   |   |   |   |   |
| Net income (loss) per common share – basic:              |   | $                                    | (0.08      | )       |                                 | $      | 0.03       |                                |   | $      | (1.11                               | )      |   | $ | 1.44 |   |
| Weighted average shares outstanding                            |   |                                 | 22,590,392 |    |                                 |   | 18,835,598 |                                |   |   | 20,383,087                          |   |   |   | 18,834,620 |   |
| Net income (loss) per common share – diluted:            |   | $                                    | (0.08      | )       |                                 | $      | 0.02       |                                |   | $      | (1.11                               | )      |   | $ | 1.43 |   |
| Weighted average shares outstanding                            |   |                                 | 22,590,392 |    |                                 |   | 19,026,136 |                                |   |   | 20,383,087                          |   |   |   | 18,930,047 |   |

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

----

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

|                                                |   |   |        |   |               |    |        | PICO Holdings, Inc. Shareholders |   |        |                                        |   |   |         |       |
|-----------------------------------------------------|--------|--------|-------------|--------|--------------------|---------|-------------|----------------------------------|--------|-------------|---------------------------------------------|--------|--------|--------------|------------|
|                                                |   | Total  |        |   | Comprehensive Loss |    |        | Retained Earnings                |   |        | Accumulated OtherComprehensiveIncome (Loss) |   |   | Common Stock |       |   | Paid-in Capital |   |   | TreasuryStock |   |   | Non-controlling Interest |   |
| Beginning balance, January 1, 2009                  |   | $      | 477,746,190 |   |               |    |        |                             | $      | 118,036,716 |                                        |   | $      | (1,423,863   | )          |   | $ | 23,265 |   |   | $ | 439,381,715 |   |   | $ | (78,271,643 | ) |   |   |   |
| Sale of subsidiary shares                           |   |   | 513,030     |   |               |    |        |                             |   |        |                                        |   |   |         |       |   |   |   |   |   |   | 171,690 |   |   |   |   |   |   | $ | 341,340 |   |
| Common stock offering, net of $5.4 of expenses      |   |   | 95,731,034  |   |               |    |        |                             |   |        |                                        |   |   |         |       |   |   | 3,750 |   |   |   | 95,727,284 |   |   |   |   |   |   |   |   |   |
| Restricted stock award                              |   |   | 49,462      |   |               |    |        |                             |   |        |                                        |   |   |         |       |   |   | 5 |   |   |   | 49,457 |   |   |   |   |   |   |   |   |   |
| Stock appreciation rights                           |   |   | 2,991,447   |   |               |    |        |                             |   |        |                                        |   |   |         |       |   |   |   |   |   |   | 2,991,447 |   |   |   |   |   |   |   |   |   |
| Restricted stock units                              |   |   | 1,152,083   |   |               |    |        |                             |   |        |                                        |   |   |         |       |   |   |   |   |   |   | 1,152,083 |   |   |   |   |   |   |   |   |   |
| Comprehensive income:                               |   |   |        |   |               |    |        |                             |   |        |                                        |   |   |         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                            |   |   | (25,664,239 | )      |               |  $ | (25,664,239 | )                                |   |        | (22,688,137                                 | )      |   |         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (2,976,102 | ) |
| Other comprehensive income (loss), net of tax: |   |   |        |   |               |    |        |                             |   |        |                                        |   |   |         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized gains on securities                      |   |   | 13,444,740  |   |               |    | 13,444,740  |                             |   |        |                                        |   |   |         | 13,444,740 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Foreign currency translation                        |   |   | 1,795,623   |   |               |    | 1,795,623   |                             |   |        |                                        |   |   |         | 1,795,623  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive income                          |   |   | 15,240,363  |   |               |    | 15,240,363  |                             |   |        |                                        |   |   |         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive loss                                  |   |   | (10,423,876 | )      |               | $       | (10,423,876 | )                                |   |        |                                        |   |   |         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ending balance, September 30, 2009                  |   | $      | 567,759,370 |   |               |    |        |                             |   | $           | 95,348,579                                  |   |   | $            | 13,816,500 |   |   | $ | 27,020 |   |   | $ | 539,473,676 |   |   | $ | (78,271,643 | ) |   | $ | (2,634,762 | ) |

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

----

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                 |   | Nine Months EndedSeptember 30, 2009 |        |    | Nine Months EndedSeptember 30, 2008 |   |
|----------------------------------------------------------------------|--------|-------------------------------------|-------------|---------|-------------------------------------|--------|
| OPERATING ACTIVITIES:                                                |   |                                |        |    |                                |   |
| Net cash used in operating activities                                |   | $                                   | (24,342,912 | )       |                                | $      | (78,953,089 | ) |
|                                                                 |   |                                |        |    |                                |   |   |   |
| INVESTING ACTIVITIES:                                                |   |                                |        |    |                                |   |   |   |
| Purchases of investments                                             |   |                                | (19,237,419 | )  |                                |   | (31,470,177 | ) |
| Proceeds from sale of investments                                    |   |                                | 18,089,286  |    |                                |   | 109,577,315 |   |
| Proceeds from maturity of investments                                |   |                                | 1,510,000   |    |                                |   | 62,192,968 |   |
| Proceeds from the sale of water storage                              |   |                                |        |    |                                |   | 11,749,900 |   |
| Real estate and water asset capital expenditure                      |   |                                | (197,623    | )       |                                |   | (2,207,511 | ) |
| Other investing activities, net                                      |   |                                | 79,182      |    |                                |   |   |   |
| Net cash provided by investing activities                            |   |                                | 243,426     |    |                                |   | 149,842,495 |   |
|                                                                 |   |                                |        |    |                                |   |   |   |
| FINANCING ACTIVITIES:                                                |   |                                |        |    |                                |   |   |   |
| Proceeds from common stock offering, net                             |   |                                | 95,731,034  |    |                                |   |   |   |
| Sale of treasury stock for deferred compensation plans               |   |                                |        |    |                                |   | 28,374 |   |
| Excess tax benefits from stock based payment arrangements            |   |                                |        |    |                                |   | 541,267 |   |
| Repayments of borrowings                                             |   |                                | (11,009,465 | )       |                                |   |   |   |
| Proceeds from borrowings                                             |   |                                | 4,427,040   |    |                                |   | 6,152,331 |   |
| Net cash provided by financing activities                            |   |                                | 89,148,609  |    |                                |   | 6,721,972 |   |
|                                                                 |   |                                |        |    |                                |   |   |   |
| Effect of exchange rate changes on cash                              |   |                                | (786,231    | )  |                                |   | (8,825,026 | ) |
|                                                                 |   |                                |        |    |                                |   |   |   |
| INCREASE IN CASH AND CASH EQUIVALENTS                                |   |                                | 64,262,892  |    |                                |   | 68,786,352 |   |
|                                                                 |   |                                |        |    |                                |   |   |   |
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                       |   |                                | 96,316,018  |    |                                |   | 70,791,025 |   |
|                                                                 |   |                                |        |    |                                |   |   |   |
| CASH AND CASH EQUIVALENTS, END OF PERIOD                             |   | $                                   | 160,578,910 |    |                                | $      | 139,577,377 |   |
|                                                                 |   |                                |        |    |                                |   |   |   |
| SUPPLEMENTAL CASH FLOW INFORMATION:                                  |   |                                |        |    |                                |   |   |   |
| Net cash paid (refunded) for federal, foreign and state income taxes |   | $                                   | (20,839,259 | )       |                                | $      | 13,643,030 |   |
| Cash paid for interest (net of amounts capitalized)                  |   | $                                   | 1,164,996   |    |                                |   |   |   |
| Non-cash investing and financing activities:                         |   |                                |        |    |                                |   |   |   |
| Construction in progress incurred but not paid                       |   |                                |        |    |                                | $      | 1,280,783 |   |
| Mortgage incurred to purchase land                                   |   | $                                   | 2,460,000   |    |                                | $      | 3,374,186 |   |

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

----

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

| 1. | Basis of Presentation |
|----|-----------------------|

----

| Outstanding at January 1, 2009 (all RSA)                      |   |   | 4,200   |   |
|---------------------------------------------------------------|--------|--------|---------|--------|
| Granted (RSU – expected to vest in March 2012)          |   |   | 300,000 |   |
| Granted (RSA – expected to vest in May and August 2010) |   |   | 5,286   |   |
| Total RSA and RSU Outstanding at September 30, 2009           |   |   | 309,486 |   |

| Expected volatility      |  29% — 31%   |
|--------------------------|-------------------------|
| Expected term            |  7 years           |
| Risk-free rate           |  4.3% — 4.7% |
| Expected dividend yield  |  0%                |
| Expected forfeiture rate |  0%                |

|                              |   | SAR       |   |   | Weighted Average Exercise Price |   | Weighted Average Contractual Term |
|-----------------------------------|--------|-----------|--------|--------|---------------------------------|--------|-----------------------------------|
| Outstanding at January 1, 2009    |   | 1,995,018 |   |   | $                               | 36.89  |                              | 7 years |
| Granted                           |   |      |   |   |                            |   |                              |   |
| Exercised                         |   |      |   |   |                            |   |                              |   |
| Outstanding at September 30, 2009 |   | 1,995,018 |   |   | $                               | 36.89  |                              |   |
| Exercisable at September 30, 2009 |   | 1,938,993 |   |   | $                               | 36.66  |                              | 7 years |

|                                                                 | SAR     |   | Weighted Average GrantDate Fair Value |   |
|----------------------------------------------------------------------|---------|--------|---------------------------------------|--------|
| Unvested at January 1, 2009                                          | 275,828 |   | $                                     | 18.31  |   |
| Granted                                                              |    |   |                                  |   |   |
| Vested                                                               | 219,803 |   |                                  | 18.15  |   |
| Unvested at September 30, 2009 (expected to vest over the next year) | 56,025  |   | $                                     | 18.93  |   |

----

----

----

| 2. | Net Loss Per Share |
|----|--------------------|

| 3. | Comprehensive Income (Loss) |
|----|-----------------------------|

|                                                                                  |   | Three Months Ended September 30, 2009 |       |   | Three Months Ended September 30, 2008 |   |        | Nine Months Ended September 30, 2009 |   |   | Nine Months Ended September 30, 2008 |   |
|---------------------------------------------------------------------------------------|--------|--------------------------------------------|------------|--------|--------------------------------------------|--------|-------------|-------------------------------------------|--------|--------|-------------------------------------------|--------|
| Net income (loss)                                                                     |   | $                                          | (2,656,389 | )      |                                       | $      | 460,188     |                                      |   | $      | (25,664,239                               | )      |   | $ | 26,450,040 |   |
| Other comprehensive income (loss), net of tax:                                        |   |                                       |       |   |                                       |   |        |                                      |   |   |                                      |   |   |   |   |   |
| Net change in unrealized appreciation (depreciation) on available for sale securities |   |                                       | 6,921,657  |   |                                       |   | (11,741,988 | )                                         |   |   | 13,444,740                                |   |   |   | (49,050,037 | ) |
| Net change in foreign currency translation                                            |   |                                       | 402,645    |   |                                       |   | (6,996,290  | )                                         |   |   | 1,795,623                                 |   |   |   | (6,225,055 | ) |
| Total other comprehensive income (loss), net of tax                                   |   |                                       | 7,324,302  |   |                                       |   | (18,738,278 | )                                         |   |   | 15,240,363                                |   |   |   | (55,275,092 | ) |
| Comprehensive income (loss)                                                           |   |                                       | 4,667,913  |   |                                       |   | (18,278,090 | )                                         |   |   | (10,423,876                               | )      |   |   | (28,825,052 | ) |
| Comprehensive loss attributable to the noncontrolling interest                        |   |                                       | 832,192    |   |                                       |   | 72,329      |                                      |   |   | 2,976,102                                 |   |   |   | 678,459 |   |
| Comprehensive income (loss) attributable to PICO Holdings, Inc.                       |   | $                                          | 5,500,105  |   |                                       | $      | (18,205,761 | )                                         |   | $      | (7,447,774                                | )      |   | $ | (28,146,593 | ) |

----

|                                                          | September 30, 2009 |        | December 31, 2008 |   |
|---------------------------------------------------------------|--------------------|-------------|-------------------|--------|
|                                                          |               |        |              |   |
| Net unrealized appreciation on available for sale investments | $                  | 25,011,716  |              | $      | 11,566,976 |   |
| Foreign currency translation                                  |               | (11,195,216 | )                 |   | (12,990,839 | ) |
| Accumulated other comprehensive income (loss)                 | $                  | 13,816,500  |              | $      | (1,423,863 | ) |

|                             |   | Cost   |        |   | Gross Unrealized Gains |   |       | Gross Unrealized Losses |   |   | Carrying Value |   |
|----------------------------------|--------|--------|-------------|--------|------------------------|--------|------------|-------------------------|--------|--------|----------------|--------|
| September 30, 2009:              |   |   |        |   |                   |   |       |                    |   |   |           |   |
| Fixed maturities:                |   |   |        |   |                   |   |       |                    |   |   |           |   |
| U.S. Treasury securities         |   | $      | 1,106,996   |   |                   | $      | 79,207     |                    |   |   |           |   | $ | 1,186,203 |   |
| Municipal bonds                  |   |   | 3,181,552   |   |                   |   | 203,208    |                    |   |   |           |   |   | 3,384,760 |   |
| Corporate bonds                  |   |   | 18,851,894  |   |                   |   | 2,878,092  |                    |   | $      | (2,651,336     | )      |   |   | 19,078,650 |   |
| Government sponsored enterprises |   |   | 20,112,117  |   |                   |   | 369,218    |                    |   |   | (124,841       | )      |   |   | 20,356,494 |   |
|                             |   |   | 43,252,559  |   |                   |   | 3,529,725  |                    |   |   | (2,776,177     | )      |   |   | 44,006,107 |   |
| Marketable equity securities     |   |   | 85,600,467  |   |                   |   | 34,528,343 |                    |   |   | (682,577       | )      |   |   | 119,446,233 |   |
| Total                            |   | $      | 128,853,026 |   |                   | $      | 38,058,068 |                    |   | $      | (3,458,754     | )      |   | $ | 163,452,340 |   |

|                             |   | Cost   |        |   | Gross Unrealized Gains |   |       | Gross Unrealized Losses |   |   | Carrying Value |   |
|----------------------------------|--------|--------|-------------|--------|------------------------|--------|------------|-------------------------|--------|--------|----------------|--------|
| December 31, 2008:               |   |   |        |   |                   |   |       |                    |   |   |           |   |
| Fixed maturities:                |   |   |        |   |                   |   |       |                    |   |   |           |   |
| U.S. Treasury securities         |   | $      | 1,110,327   |   |                   | $      | 111,407    |                    |   |   |           |   | $ | 1,221,734 |   |
| Municipal bonds                  |   |   | 2,137,003   |   |                   |   |       |                    |   | $      | (8,523         | )      |   |   | 2,128,480 |   |
| Corporate bonds                  |   |   | 25,627,851  |   |                   |   | 34,460     |                    |   |   | (7,822,451     | )      |   |   | 17,839,860 |   |
| Government sponsored enterprises |   |   | 7,442,611   |   |                   |   | 425,877    |                    |   |   |           |   |   |   | 7,868,488 |   |
|                             |   |   | 36,317,792  |   |                   |   | 571,744    |                    |   |   | (7,830,974     | )      |   |   | 29,058,562 |   |
| Marketable equity securities     |   |   | 102,322,281 |   |                   |   | 27,348,470 |                    |   |   | (9,312,290     | )      |   |   | 120,358,461 |   |
| Total                            |   | $      | 138,640,073 |   |                   | $      | 27,920,214 |                    |   | $      | (17,143,264    | )      |   | $ | 149,417,023 |   |

|                         | 2009       |   | 2008                  |   |
|------------------------------|------------|--------|-----------------------|--------|
| Less than 12 months          | Fair Value |   | Gross Unrealized Loss |   | Fair Value |   | Gross Unrealized Loss |   |
| Fixed maturities:            |       |   |                  |   |   |   |   |   |
| Municipal bonds              |       |   |                  |   |   |   |   |   |   | $  | 2,128,480 |   |   | $ |   8,523 |   |
| Government Sponsored         |       | $      | 13,383,570            |   |   | $ | 124,841 |   |   |   |   |   |   |   |   |   |
| Corporate bonds              |       |   |                  |   |   |   |   |   |   |   | 5,290,363 |   |   |   | 1,586,298 |   |
|                         |       |   | 13,383,570            |   |   |   | 124,841 |   |   |   | 7,418,843 |   |   |   | 1,594,821 |   |
| Marketable equity securities |       |   | 4,261,731             |   |   |   | 400,824 |   |   |   | 40,880,566 |   |   |   | 9,290,041 |   |
| Total                        |       | $      | 17,645,301            |   |   | $ | 525,665 |   |   | $ | 48,299,409 |   |   | $ | 10,884,862 |   |

|                         | 2009       |    | 2008                  |   |
|------------------------------|------------|---------|-----------------------|--------|
| Greater than 12 months  | Fair Value |    | Gross Unrealized Loss |   | Fair Value |   | Gross Unrealized Loss |   |
| Fixed maturities:            |       |    |                  |   |   |   |   |   |
| Corporate bonds              |       |  $ | 11,084,481            |   |   |  $ | 2,651,336 |   |   | $ | 10,044,022 |   |   | $ | 6,236,152 |   |
| Marketable equity securities |       |    | 3,281,357             |   |   |   | 281,753 |   |   |   | 160,430 |   |   |   | 22,250 |   |
| Total                        |       | $       | 14,365,838            |   |   | $ | 2,933,089 |   |   | $ | 10,204,452 |   |   | $ | 6,258,402 |   |

----

|  Assets                      |   | Quoted Prices In Active Markets for Identical Assets(Level 1) |        |  Significant Other Observable Inputs (Level 2) |   | Significant Unobservable Inputs (Level 3) |   | Balance atSeptember 30, 2009 |   |
|-----------------------------------|--------|---------------------------------------------------------------|-------------|-----------------------------------------------------|--------|-------------------------------------------|--------|------------------------------|--------|
| Available for sale securities (A) |   | $                                                             | 158,893,563 |                                                |   |                                      | $      | 3,207,560                    |   | $ | 162,101,123 |   |
| Liabilities                       |   |                                                          |        |                                                |   |                                      |   |                         |   |   |   |   |
| Deferred compensation (B)         |   | $                                                             | 29,855,232  |                                                |   |                                      |   |                         |   | $ | 29,855,232 |   |

| (A) Where there are quoted market prices that are readily available in an active market, securities are classified as Level 1 of the valuation hierarchy.  Level 1 marketable equity securities are valued using quoted market prices multiplied by the number of shares owned and debt securities are valued using a market quote in an activemarket.  Level 2 available for sale securities include securities where the markets are not active, that is where there are few transactions, or the prices are not current or the prices vary considerably over time. Level 3 available for sale securities include securities where valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets.  This includes certain pricing models, discounted cash flow methodologiesand similar techniques that use significant unobservable inputs.  |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (B) Deferred compensation plans are compensation plans directed by the Company and structured as Rabbi Trusts for certain executives and non-employee directors.  The investment assets of the Rabbi Trust are valued using quoted market prices multiplied by the number of shares held in each trust account including the shares of PICOHoldings common stock held in the trusts.  The related deferred compensation liability represents the fair value of the investment assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

----

| Asset Description             |   | Fair Value at Beginning of Period |      | Unrealized Gains Included in Income |   | Accumulated Other Comprehensive Income |   | Purchases, Sales, and Issuances |   | Transfers In |   | Fair Value at End of Period |    |
|-------------------------------|--------|-----------------------------------|-----------|-------------------------------------|--------|----------------------------------------|--------|---------------------------------|--------|--------------|--------|-----------------------------|---------|
| Available for sale securities |   | $                                 | 2,998,055 |                                |   |                                   | $      | 89,995                          |   |         |   | $                           | 119,510 |   | $ | 3,207,560 |   |

| Asset Description                                |   | Quoted Prices In Active Markets for Identical Assets (Level 1) |   | Significant Other Observable Inputs (Level 2) |      | Significant Unobservable Inputs (Level 3) |   | Total Losses |   |
|--------------------------------------------------|--------|----------------------------------------------------------------|--------|-----------------------------------------------|-----------|-------------------------------------------|--------|--------------|--------|
| Intangible asset (applications for water rights) |   |                                                           |   | $                                             | 3,953,033 |                                      |   |         | $      | 12,378,000 |   |

| 4. | Disclosures About Fair Value of Financial Instruments: |
|----|--------------------------------------------------------|

| -- | Cash and Cash Equivalents:  Carrying amounts for these items approximate fair value because of the short maturity of these instruments.  The majority of the Company’s cash is held in the Federated Government Obligations Money Market.                                                                                                                                                                                                                     |
|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| -- | Investments in fixed maturities and equity securities: Fair values are estimated based on quoted market prices, or dealer quotes for the actual or comparable securities. Fair value for equity securities that do not have a readily determinable fair value is estimated based on the value of the underlying common stock. The Company regularly evaluatesthe carrying value of securities to determine whether there has been any diminution in value that is other-than-temporary. |
| -- | Borrowings: Carrying amounts for these items approximates fair value because current interest rates and, therefore, discounted future cash flows for the terms and amounts of loans are not significantly different from the original terms.                                                                                                                                                                                                                                            |

|                             |   | September 30, 2009 |        |
|----------------------------------|--------|--------------------|-------------|
|                             |   | Carrying Amount    |        |   | Estimated Fair Value |   |
| Financial assets:                |   |               |        |   |   |   |
| Cash and cash equivalents        |   | $                  | 160,578,910 |   |   | $ | 160,578,910 |   |
| Fixed maturities                 |   | $                  | 44,006,108  |   |   | $ | 44,006,108 |   |
| Equity securities                |   | $                  | 119,446,232 |   |   | $ | 119,446,232 |   |
| Notes and other receivables, net |   | $                  | 13,671,762  |   |   | $  | 13,671,762 |   |
| Financial liabilities:           |   |               |        |   |   |   |   |   |
| Borrowings                       |   | $                  | 38,734,658  |   |   | $ | 38,734,658 |   |

----

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

|                                        |   | September 30, 2009 |        |   | December 31, 2008 |   |
|---------------------------------------------|--------|--------------------|-------------|--------|-------------------|--------|
| Total Assets:                               |   |               |        |   |              |   |
| Water Resource and Water Storage Operations |   | $                  | 206,778,238 |   |              | $      | 225,870,410 |   |
| Real Estate Operations                      |   |               | 126,689,002 |   |              |   | 97,592,062 |   |
| Corporate                                   |   |               | 186,965,161 |   |              |   | 111,984,967 |   |
| Insurance Operations in Run Off             |   |               | 160,163,915 |   |              |   | 157,186,357 |   |
|                                        |   | $                  | 680,596,316 |   |              | $      | 592,633,796 |   |

|                                                          |   | Three Months Ended September 30, |       |    | Nine Months Ended September 30, |   |
|---------------------------------------------------------------|--------|----------------------------------|------------|---------|---------------------------------|--------|
|                                                          |   | 2009                             |       |    | 2008                            |   |   | 2009 |   |   | 2008 |   |
| Revenues (Charges):                                           |   |                             |       |    |                            |   |   |   |   |   |   |   |
| Water Resource and Water Storage Operations                   |   | $                                | 389,933    |    |                            | $      | 9,145,309 |   |   | $ | 3,974,870 |   |   | $ | 10,342,490 |   |
| Real Estate Operations                                        |   |                             | 926,493    |    |                            |   | 953,658 |   |   |   | 3,903,414 |   |   |   | 4,119,835 |   |
| Insurance Operations in Run Off                               |   |                             | 359,597    |    |                            |   | (507,898) |   |   |   | (4,231,576 | ) |   |   | 5,999,673 |   |
| Corporate                                                     |   |                             | (711,434   | )  |                            |   | 241,422 |   |   |   | (4,007,533 | ) |   |   | 47,771,053 |   |
| Total revenues (charges)                                      |   | $                                | 964,589    |    |                            | $      | 9,832,491 |   |   | $ | (360,825 | ) |   | $ | 68,233,051 |   |
|                                                          |   |                             |       |    |                            |   |   |   |   |   |   |   |   |   |   |   |
| Income (Loss) Before Taxes and Noncontrolling Interests:      |   |                             |       |    |                            |   |   |   |   |   |   |   |   |   |   |   |
| Water Resource and Water Storage Operations                   |   | $                                | (2,131,089 | )  |                            | $      | 7,374,882 |   |   | $ | (14,927,130 | ) |   | $ | 5,186,921 |   |
| Real Estate Operations                                        |   |                             | (712,012   | )       |                            |   | (480,869) |   |   |   | (2,782,968 | ) |   |   | 381,911 |   |
| Insurance Operations in Run Off                               |   |                             | 35,489     |    |                            |   | (1,010,152) |   |   |   | (5,793,044 | ) |   |   | 4,697,658 |   |
| Corporate                                                     |   |                             | (4,821,685 | )       |                            |   | 1,790,029 |   |   |   | (21,051,860 | ) |   |   | 45,692,313 |   |
| Income (loss) before income taxes and noncontrolling interest |   | $                                | (7,629,297 | )       |                            | $      | 7,673,890 |   |   | $ | (44,555,002 | ) |   | $ | 55,958,803 |   |

| 6. | Impairment of Real Estate and Water Assets |
|----|--------------------------------------------|

| 7. | Stock Offering |
|----|----------------|

----

| 8. | Commitments and Contingencies |
|----|-------------------------------|

----

| 9. | Subsequent Event |
|----|------------------|

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

----

| · | Water Resource and Water Storage Operations;       |
|--------|----------------------------------------------------|
| · | Real Estate Operations;                            |
| · | Insurance Operations in “Run Off”; and |
| · | Corporate.                                         |

| · | Vidler Water Company, Inc. (“Vidler”), a business that we started more than 11 years ago, which acquires and develops water resources and water storage operations in the southwestern United States, with assets in Nevada, Arizona, Idaho, Colorado, and New Mexico;                    |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | UCP, LLC (“UCP”), a business we started in 2008, which acquires and develops partially-developed and finished residential housing lots in selected markets in California;                                                                                                                 |
| · | Nevada Land & Resource Company, LLC (“Nevada Land”), an operation that we built since we acquired the company more than 11 years ago, which owns approximately 440,000 acres of former railroad land in Nevada, and certain mineral rights and water rights related to the property;  |
| · | Physicians Insurance Company of Ohio (“Physicians”), which is “running off” its medical professional liability insurance loss reserves; and                                                                                                                                   |
| · | Citation Insurance Company (“Citation”), which is “running off” its property & casualty insurance and workers’ compensation loss reserves.                                                                                                                          |

----

|                                                                |   | Three Months Ended September 30, |       |   | Nine Months Ended September 30, |   |
|---------------------------------------------------------------------|--------|----------------------------------|------------|--------|---------------------------------|--------|
|                                                                |   | 2009                             |       |   | 2008                            |   |   | 2009 |   |   | 2008 |   |
| Revenues:                                                           |   |                             |       |   |                            |   |   |   |   |   |   |   |
| Water Resource and Water Storage Operations                         |   | $                                | 390,000    |   |                            | $      | 9,145,000 |   |   | $ | 3,975,000 |   |   | $ | 10,343,000 |   |
| Real Estate Operations                                              |   |                             | 926,000    |   |                            |   | 954,000 |   |   |   | 3,903,000 |   |   |   | 4,120,000 |   |
| Insurance Operations in “Run Off”                       |   |                             | 360,000    |   |                            |   | (508,000 | ) |   |   | (4,232,000 | ) |   |   | 5,999,000 |   |
| Corporate                                                           |   |                             | (711,000   | )      |                            |   | 241,000 |   |   |   | (4,007,000 | ) |   |   | 47,771,000 |   |
| Total Revenues (Charges)                                            |   | $                                | 965,000    |   |                            | $      | 9,832,000 |   |   | $ | (361,000 | ) |   | $ | 68,233,000 |   |
|                                                                |   |                             |       |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Income (Loss) before income taxes and noncontrolling interest:      |   |                             |       |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Water Resource and Water Storage Operations                         |   | $                                | (2,131,000 | )      |                            | $      | 7,375,000 |   |   | $ | (14,927,000 | ) |   | $ | 5,187,000 |   |
| Real Estate Operations                                              |   |                             | (712,000   | )      |                            |   | (481,000 | ) |   |   | (2,783,000 | ) |   |   | 382,000 |   |
| Insurance Operations in “Run Off”                       |   |                             | 35,000     |   |                            |   | (1,010,000 | ) |   |   | (5,793,000 | ) |   |   | 4,698,000 |   |
| Corporate                                                           |   |                             | (4,821,000 | )      |                            |   | 1,790,000 |   |   |   | (21,052,000 | ) |   |   | 45,692,000 |   |
| Total Income (Loss) before income taxes and noncontrolling interest |   | $                                | (7,629,000 | )      |                            | $      | 7,674,000 |   |   | $ | (44,555,000 | ) |   | $ | 55,959,000 |   |

| · | In the third quarter of 2008, the Water Resource and Water Storage segment recorded a gain of $8.7 million from the sale of our interest in the Semitropic water storage facility.  We did not have a similar gain in the third quarter of 2009. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | We recorded a $2 million unfavorable change in net foreign currency expense year over year.                                                                                                                                                                |
| · | We recorded a $5.2 million net unfavorable change in net deferred compensation revenues and expenses year over year.                                                                                                                                       |

----

| · | In the first nine months of 2008, our results of operations included a $46.1 million realized gain on the sale of our interest in Jungfraubahn Holding AG (“Jungfraubahn”), an equity security that was held in the Corporate segment.  We did not have a similar gain in 2009.                                                                                                                                           |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | In the first nine months of 2009, our results of operations were reduced by a $12.4 million charge for the impairment of our water assets in the Tule Desert Groundwater Basin in Lincoln County, Nevada, after the Nevada State Engineer ruled to award only a fraction of the water rights the Company had expected to receive.  See PartII, Item 1, Legal Proceedings.”  We did not have a similar charge in 2008. |
| · | We experienced an unfavorable change of $9.6 million in net realized investment gains and losses of our insurance companies’ investment portfolios in the first nine months of 2009 compared to the corresponding period in 2008 primarily as a result of other-than-temporary impairments of certain securities held in these portfolios.                                                                                                |
| · | We recorded a $7.5 million unfavorable change in net foreign currency expense year over year.                                                                                                                                                                                                                                                                                                                                                   |
| · | We recorded a $13.1 million unfavorable change in net deferred compensation revenues and expenses year over year.                                                                                                                                                                                                                                                                                                                               |

|                                                           |   | Three Months EndedSeptember 30, |        |   | Nine Months EndedSeptember 30, |   |
|----------------------------------------------------------------|--------|---------------------------------|-------------|--------|--------------------------------|--------|
|                                                           |   | 2009                            |        |   | 2008                           |   |   | 2009 |   |   | 2008 |   |
| Revenues:                                                      |   |                            |        |   |                           |   |   |   |   |   |   |   |
| Sale of real estate and water assets                           |   | $                               | 16,000      |   |                           | $      | 8,849,000 |   |   | $ | 3,197,000 |   |   | $ | 9,095,000 |   |
| Net investment income                                          |   |                            | 173,000     |   |                           |   | 144,000 |   |   |   | 215,000 |   |   |   | 893,000 |   |
| Other                                                          |   |                            | 201,000     |   |                           |   | 152,000 |   |   |   | 563,000 |   |   |   | 355,000 |   |
| Segment total revenues                                    |   | $                               | 390,000     |   |                           | $      | 9,145,000 |   |   | $ | 3,975,000 |   |   | $ | 10,343,000 |   |
|                                                           |   |                            |        |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Expenses:                                                      |   |                            |        |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Cost of real estate and water assets sold                      |   | $                               | (4,000)     |   |                           | $      | (29,000 | ) |   | $ | (224,000) |   |   |   | (70,000 | ) |
| Impairment of water assets                                     |   |                            |        |   |                           |   |   |   |   |   | (12,378,000) |   |   |   |   |   |
| Depreciation and amortization                                  |   |                            | (273,000)   |   |                           |   | (265,000 | ) |   |   | (808,000) |   |   |   | (825,000 | ) |
| Overhead                                                       |   |                            | (675,000)   |   |                           |   | (791,000 | ) |   |   | (2,227,000) |   |   |   | (2,363,000 | ) |
| Project expenses                                               |   |                            | (1,569,000) |   |                           |   | (685,000 | ) |   |   | (3,265,000) |   |   |   | (1,898,000 | ) |
| Segment total expenses                                         |   | $                               | (2,521,000) |   |                           | $      | (1,770,000 | ) |   | $ | (18,902,000) |   |   | $ | (5,156,000 | ) |
| Income (Loss) before income taxes and noncontrolling interests |   | $                               | (2,131,000) |   |                           | $      | 7,375,000 |   |   | $ | (14,927,000) |   |   | $ | 5,187,000 |   |

----

----

| · | the operation and maintenance of the Vidler Arizona Recharge Facility;                                                                       |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------|
| · | the development of water rights in the Tule Desert groundwater basin (part of the Lincoln County agreement);                       |
| · | the utilization of water rights at Fish Springs Ranch as a future municipal water supply for the north valleys of the Reno, Nevada area; and |
| · | the operating and financing costs of our farm properties in Idaho and maintenance of the associated water rights.                            |

----

|                                                           | Three Months Ended September 30, |       |    | Nine Months Ended September 30, |   |
|----------------------------------------------------------------|----------------------------------|------------|---------|---------------------------------|--------|
|                                                           | 2009                             |       |    | 2008                            |   |   | 2009 |   |   | 2008 |   |
| Revenues:                                                      |                             |       |    |                            |   |   |   |   |   |   |   |
| Sale of real estate – Nevada Land                        | $                                | 45,000     |    |                            | $      | 297,000 |   |   | $ | 430,000 |   |   | $ | 1,357,000 |   |
|                                                           |                             |       |    |                            |   |   |   |   |   |   |   |   |   |   |   |
| Sale of real estate -  UCP                           |                             | 475,000    |    |                            |   |   |   |   |   | 2,177,000 |   |   |   |   |   |
| Net investment income                                          |                             | 210,000    |    |                            |   | 439,000 |   |   |   | 764,000 |   |   |   | 1,975,000 |   |
| Other                                                          |                             | 196,000    |    |                            |   | 218,000 |   |   |   | 532,000 |   |   |   | 788,000 |   |
| Total revenues                                                 | $                                | 926,000    |    |                            | $      | 954,000 |   |   | $ | 3,903,000 |   |   | $ | 4,120,000 |   |
|                                                           |                             |       |    |                            |   |   |   |   |   |   |   |   |   |   |   |
| Expenses:                                                      |                             |       |    |                            |   |   |   |   |   |   |   |   |   |   |   |
| Cost of real estate – Nevada Land                        | $                                | (11,000    | )  |                            | $      | (116,000 | ) |   | $ | (131,000 | ) |   | $ | (398,000 | ) |
|                                                           |                             |       |    |                            |   |   |   |   |   |   |   |   |   |   |   |
| Cost of real estate - UCP                                      |                             | (292,000   | )       |                            |   |   |   |   |   | (1,452,000 | ) |   |   |   |   |
| Operating expenses                                             |                             | (1,335,000 | )  |                            |   | (1,319,000 | ) |   |   | (5,103,000 | ) |   |   | (3,340,000 | ) |
| Segment total expenses                                         | $                                | (1,638,000 | )  |                            | $      | (1,435,000 | ) |   | $ | (6,686,000 | ) |   | $ | (3,738,000 | ) |
| Income (Loss) before income taxes and noncontrolling interests | $                                | (712,000   | )  |                            | $      | (481,000 | ) |   | $ | (2,783,000 | ) |   | $ | 382,000 |   |

----

| · | a decline in investment income of $1.2 million due to both the redeployment of  liquid funds for real estate acquisitions as well as decreased rates of interest available on liquid funds in the first nine months of 2009 compared to the corresponding period in 2008;                                                     |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | the complete write-off in 2009 of a note connected to a property held by us for potential alternative energy development which amounted to $807,000; and                                                                                                                                                                                |
| · | a year over year increase in operating expenses at UCP of approximately $1.3 million.  UCP’s operating expenses in the first nine months of 2009 include interest expense of $349,000 from the non-recourse debt financing we have assumed on certain development properties compared to zero interest expense in 2008. |

|                                                               |   | Three Months Ended September 30, |     |   | Nine Months Ended September 30, |   |
|--------------------------------------------------------------------|--------|----------------------------------|----------|--------|---------------------------------|--------|
|                                                               |   | 2009                             |     |   | 2008                            |   |   | 2009 |   |   | 2008 |   |
| Revenues:                                                          |   |                             |     |   |                            |   |   |   |   |   |   |   |
| Net investment income                                              |   | $                                | 471,000  |   |                            | $      | 845,000 |   |   | $ | 2,103,000 |   |   | $ | 2,736,000 |   |
| Net realized gain (loss) on sale or impairment of investments |   |                             | (137,000 | )      |                            |   | (1,379,000 | ) |   |   | (6,428,000 | ) |   |   | 3,171,000 |   |
| Other                                                              |   |                             | 26,000   |   |                            |   | 26,000 |   |   |   | 93,000 |   |   |   | 92,000 |   |
| Segment total revenues (charges)                                   |   | $                                | 360,000  |   |                            | $      | (508,000 | ) |   | $ | (4,232,000 | ) |   | $ | 5,999,000 |   |
|                                                               |   |                             |     |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Expenses:                                                          |   |                             |     |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Segment total expenses                                             |   | $                                | (325,000 | )      |                            | $      | (502,000 | ) |   | $ | (1,561,000) |   |   | $ | (1,302,000 | ) |
| Income (Loss) before income taxes and noncontrolling interests     |   | $                                | 35,000   |   |                            | $      | (1,010,000 | ) |   | $ | (5,793,000 | ) |   | $ | 4,697,000 |   |

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| PHYSICIANS INSURANCE COMPANY OF OHIO -- LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES |   |
|-----------------------------------------------------------------------------------|--------|
|                                                                              |   | September 30, 2009 |   |   | December 31, 2008 |   |
| Net direct medical professional liability insurance reserves                      |   | $ | 3,687,000 |   |   | $ | 3,834,000 |   |

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| CITATION INSURANCE COMPANY -- LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES |   |
|-------------------------------------------------------------------------|--------|
|                                                                    |   | September 30, 2009 |   |   | December 31, 2008 |   |
| Property & Casualty Insurance                                       |   |   |   |   |   |   |
| Direct Reserves                                                         |   | $ | 594,000 |   |   | $ | 741,000 |   |
| Ceded Reserves                                                          |   |   | (96,000 | ) |   |   | (96,000 | ) |
| Net property and casualty insurance reserves                       |   | $ | 498,000 |   |   | $ | 645,000 |   |
|                                                                    |   |   |   |   |   |   |   |   |
| Workers’ Compensation                                             |   |   |   |   |   |   |   |   |
| Direct Reserves                                                         |   | $ | 21,950,000 |   |   | $ | 23,198,000 |   |
| Ceded Reserves                                                          |   |   | (15,039,000 | ) |   |   | (15,781,000 | ) |
| Net workers’ compensation insurance reserves                      |   | $ | 6,911,000 |   |   | $ | 7,417,000 |   |
| Total net reserves                                                      |   | $ | 7,409,000 |   |   | $ | 8,062,000 |   |

|                                                           |   | Three Months EndedSeptember 30, |       |   | Nine Months EndedSeptember 30, |   |
|----------------------------------------------------------------|--------|---------------------------------|------------|--------|--------------------------------|--------|
|                                                           |   | 2009                            |       |   | 2008                           |   |   | 2009 |   |   | 2008 |   |
| Revenues:                                                      |   |                            |       |   |                           |   |   |   |   |   |   |   |
| Net realized gain (loss) on sale or impairment of investments  |   | $                               | (1,872,000 | )      |                           | $      | (959,000 | ) |   | $ | (6,662,000 | ) |   | $ | 44,562,000 |   |
| Net investment income                                          |   |                            | 588,000    |   |                           |   | 1,171,000 |   |   |   | 1,366,000 |   |   |   | 3,105,000 |   |
| Other                                                          |   |                            | 573,000    |   |                           |   | 29,000 |   |   |   | 1,289,000 |   |   |   | 104,000 |   |
| Segment total revenues (charges)                               |   | $                               | (711,000   | )      |                           | $      | 241,000 |   |   | $ | (4,007,000 | ) |   | $ | 47,771,000 |   |
|                                                           |   |                            |       |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Expenses:                                                      |   |                            |       |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Stock-based compensation expense                               |   | $                               | (1,525,000 | )      |                           | $      | (997,000 | ) |   | $ | (4,193,000 | ) |   | $ | (2,991,000 | ) |
| Net deferred compensation (expense) benefit                    |   |                            | (1,878,000 | )      |                           |   | 2,483,000 |   |   |   | (4,206,000 | ) |   |   | 3,322,000 |   |
| Net foreign exchange gain (loss)                               |   |                            | 1,456,000  |   |                           |   | 3,472,000 |   |   |   | (252,000 | ) |   |   | 7,267,000 |   |
| Other                                                          |   |                            | (2,163,000 | )      |                           |   | (3,409,000 | ) |   |   | (8,394,000 | ) |   |   | (9,677,000 | ) |
| Segment total expenses                                         |   | $                               | (4,110,000 | )      |                           | $      | 1,549,000 |   |   | $ | (17,045,000 | ) |   | $ | (2,079,000 | ) |
| Income (loss) before income taxes and noncontrolling interests |   | $                               | (4,821,000 | )      |                           | $      | 1,790,000 |   |   | $ | (21,052,000 | ) |   | $ | 45,692,000 |   |

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| · | included Stock-Based Compensation expense (principally SAR and RSU) of $1.5 million (see “Stock-Based Compensation Expense” below); |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------|
| · | included deferred compensation expense of $1.9 million (see “Deferred Compensation Expense” below); and                             |
| · | were reduced by a $1.5 million net foreign exchange gain (see “Foreign Exchange Gain or Loss” below).                               |

| · | included Stock-Based Compensation (SAR) expense of $997,000;                  |
|--------|-------------------------------------------------------------------------------|
| · | were reduced by a $2.5 million recovery of deferred compensation expense; and |
| · | were reduced by a $3.5 million net foreign exchange gain.                     |

| · | included Stock-Based Compensation (principally SAR and RSU) expense of $4.2 million; |
|--------|--------------------------------------------------------------------------------------|
| · | included a $252,000 foreign exchange expense; and                                    |
| · | included deferred compensation expense of $4.2 million.                              |

| · | included Stock-Based Compensation (SAR) expense of $3 million; and        |
|--------|---------------------------------------------------------------------------|
| · | were reduced by a $7.3 million exchange rate gain; and                    |
| · | were reduced by a $3.3 million recovery of deferred compensation expense. |

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| · | the Water Resource and Water Storage Operations segment holds cash of $1.3 million;                                                                                                                                                                                                                                                                                                                                                     |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | the Real Estate Operations segment holds cash of $23.1 million;                                                                                                                                                                                                                                                                                                                                                                         |
| · | the Insurance in “Run Off” segment holds cash of $11.2 million, fixed-income securities with a market value of $14.6 million, and equities with a market value of $110.3 million; and                                                                                                                                                                                                                                       |
| · | the Corporate segment holds cash of $118.2 million and a fixed-income securities with a market value of $15.4 million.  In addition, cash of $6.8 million, fixed-income securities with a market value of $14 million, and equity securities with a market value of $7.8 million are held in deferred compensation Rabbi Trusts within theCorporate segment, which will be used to pay the deferred compensation liabilities. |

| · | As Vidler’s water assets are monetized, Vidler should generate free cash flow as receipts from the sale of real estate and water assets will have overtaken maintenance capital expenditure, development costs, financing costs, and operating expenses;                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Although UCP made some initial sales of lots during the second and third quarters of 2009, we are still acquiring finished and partially-developed residential lots in select California markets.  During the third quarter of 2009, we acquired a defaulted note at a cost of $22.6 million.  We foreclosed on the note as plannedand, as a result, acquired 1,400 entitled residential units on a 244-acre property (East Garrison) in Monterey County, California.  Over the next two to three years, we plan to expend approximately $18 million to complete the first phase of the development and to prepare other parts of the property for potential future development; |
| · | Nevada Land is actively selling real estate which has reached its highest and best use.  Nevada Land’s principal sources of cash flow are the proceeds of cash real estate sales and collections of principal and interest on sales contracts where Nevada Land has provided vendor financing.  These receipts and other revenuesexceed Nevada Land’s operating and development costs, so Nevada Land is generating positive cash flow; and                                                                                                                                                                                                                                    |
| · | Investment income more than covers the operating expenses of the “run off” insurance companies, Physicians and Citation.  The funds to pay claims come from the maturity of fixed-income securities, the realization of fixed-income investments and stocks held in their investment portfolios, and recoveries from reinsurancecompanies.                                                                                                                                                                                                                                                                                                                                               |

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| ISSUER                                           |   | Fair Value  September 30, 2009 |       |   | Percentage |   |
|--------------------------------------------------|--------|-------------------------------------|------------|--------|------------|--------|
|                                             |   |                                |       |   |       |   |
| Government-sponsored enterprises                 |   | $                                   | 6,763,000  |   |       |   | 46 | % |
| Other investment grade corporate                 |   |                                | 3,265,000  |   |       |   | 23 | % |
| State of California general obligation municipal |   |                                | 3,385,000  |   |       |   | 23 | % |
| U.S. Treasury                                    |   |                                | 1,186,000  |   |       |   | 8 | % |
|                                             |   | $                                   | 14,599,000 |   |       |   | 100 | % |

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Item 3. Quantitative and Qualitative Disclosure about Market Risk

Item 4:  Controls and Procedures

Part II:  Other Information

Item 1:  Legal Proceedings

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Item 1A:  Risk Factors

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

Item 3:  Defaults Upon Senior Securities

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

Item 5:  Other Information

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Item 6.  Exhibits

| ExhibitNumber |        | Description                               |
|---------------|-------------|-------------------------------------------|
|          | 3(i)        |                                      | Amended and Restated Articles of Incorporation of PICO. (1) |
| 3(ii)         |        | Amended and Restated By-laws of PICO. (2) |
|          | 4.1         |                                      | Form of Indenture relating to Debt Securities. (3) |
|          | 10.1† |                                      | Form of Restricted Stock Grant for Directors. |
|          | 23.1        |                                      | Consent of Daniel B. Stephens and Associates, Inc. |
|          | 23.2        |                                      | Consent of Peter A. Mock, Ph. D., R. G., P. H. |
|          | 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). |

| † | Indicates compensatory plan, contract or arrangement in which directors or executive officers may participate. |
|---------|----------------------------------------------------------------------------------------------------------------|

| (1) | Incorporated by reference to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 7, 2007. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Incorporated by reference to the Current Report on Form 8-K filed with the Securities and Exchange Commission on May 19, 2009. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Incorporated by reference to the Form S-3 filed with Securities and Exchange Commission on November 20, 2007. |
|-----|---------------------------------------------------------------------------------------------------------------|

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