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

----

|                                          |                                                                                                                      |
|-----------------------------------------------|---------------------------------------------------------------------------------------------------------------------------|
|                                          | Page      No.                                                                                                             |
|                                          |                                                                                                                      |
| Part      I:  Financial Information |                                                                                                                      |
|                                          |                                                                                                                      |
| Item      1:                                  | Condensed Consolidated Financial      Statements (Unaudited)                                                              |   |
|                                          |                                                                                                                      |   |
|                                          | Condensed Consolidated Balance      Sheets as of June 30, 2008 and December 31,      2007                                 | 2 |
|                                          |                                                                                                                      |   |
|                                          | Condensed Consolidated Statements      of Operations for the Three and Six Months Ended June 30, 2008 and      2007  | 3 |
|                                          |                                                                                                                      |   |
|                                          | Condensed Consolidated Statements      of Cash Flows for the Six Months Ended June 30, 2008 and      2007                 | 4 |
|                                          |                                                                                                                      |   |
|                                          | Notes to Condensed      Consolidated Financial Statements                                                                 | 5 |
|                                          |                                                                                                                      |   |
| Item      2:                                  | Management’s Discussion and      Analysis of Financial Condition and the Results of      Operations                 | 9  |
|                                          |                                                                                                                      |   |
| Item      3:                                  | Quantitative and Qualitative      Disclosure About Market Risk                                                            | 14 |
|                                          |                                                                                                                      |   |
| Item      4:                                  | Controls and      Procedures                                                                                              | 14 |
|                                          |                                                                                                                      |   |
| Part      II:  Other Information    |                                                                                                                      |
|                                          |                                                                                                                      |
| Item      1:                                  | Legal      Proceedings                                                                                                    | 14 |
|                                          |                                                                                                                      |   |
| Item      1A:                                 | Risk      Factors                                                                                                         | 14 |
|                                          |                                                                                                                      |   |
| Item      2:                                  | Unregistered Sales of      Equity Securities and Use of Proceeds                                                          | 14 |
|                                          |                                                                                                                      |   |
| Item      3:                                  | Defaults Upon Senior      Securities                                                                                      | 14 |
|                                          |                                                                                                                      |   |
| Item      4:                                  | Submission of Matters to a      Vote of Security Holders                                                                  | 15 |
|                                          |                                                                                                                      |   |
| Item      5:                                  | Other      Information                                                                                                    | 15 |
|                                          |                                                                                                                      |   |
| Item      6:                                  | Exhibits                                                                                                                  | 15 |

----

CONDENSED CONSOLIDATED BALANCE SHEETS

|                                                                                       | June      30, 2008 |   | December      31, 2007 |
|--------------------------------------------------------------------------------------------|--------------------|--------|------------------------|
| ASSETS                                                                                     |               |   |                   |
| Investments                                                                                | $      228,686,593 |   | $      365,523,644     |
| Cash      and cash equivalents                                                             | 165,930,852        |   | 70,791,025             |
| Notes      and other receivables, net                                                      | 24,998,234         |   | 17,151,065             |
| Reinsurance      receivables                                                               | 16,489,856         |   | 16,887,953             |
| Real      estate and water assets, net                                                     | 235,260,488        |   | 200,605,792            |
| Deferred      taxes, net                                                                   | 6,056,350          |   |                   |
| Property      and equipment, net                                                           | 1,238,664          |   | 1,212,394              |
| Other      assets                                                                          | 3,942,443          |   | 4,170,407              |
| Total      assets                                                                          | $      682,603,480 |   | $      676,342,280     |
|                                                                                       |               |   |                   |
| LIABILITIES      AND SHAREHOLDERS' EQUITY                                                  |               |   |                   |
| Unpaid      losses and loss adjustment expenses                                            | $      31,305,799  |   | $      32,376,018      |
| Deferred      compensation                                                                 | 53,176,022         |   | 52,546,234             |
| Bank      and other borrowings                                                             | 29,096,642         |   | 18,878,080             |
| Deferred      income taxes, net                                                            |               |   | 17,675,162             |
| Income      taxes payable                                                                  | 32,807,804         |   | 3,209,651              |
| Other      liabilities                                                                     | 17,648,494         |   | 25,806,566             |
| Total      liabilities                                                                     | 164,034,761        |   | 150,491,711            |
|                                                                                       |               |   |                   |
| Commitments      and Contingencies (Note 4)                                                |               |   |                   |
|                                                                                       |               |   |                   |
| Common      stock, $.001 par value; authorized 100,000,000    shares,                      |               |   |                   |
| 23,263,567      issued and outstanding in 2008 and 23,259,367 in2007                       | 23,263             |   | 23,259                 |
| Additional      paid-in capital                                                            | 437,882,756        |   | 435,235,358            |
| Accumulated      other comprehensive income                                                | 42,932,618         |   | 79,469,438             |
| Retained      earnings                                                                     | 116,001,725        |   | 89,405,743             |
|                                                                                       | 596,840,362        |   | 604,133,798            |
| Treasury      stock, at cost (common shares: 4,424,795 in 2008 and 4,425,630 in      2007) | (78,271,643)       |   | (78,283,229)           |
| Total      shareholders' equity                                                            | 518,568,719        |   | 525,850,569            |
| Total      liabilities and shareholders' equity                                            | $      682,603,480 |   | $      676,342,280     |

Theaccompanying notes are an integral part of the condensed consolidated financialstatements

----

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                         | Three      Months Ended June 30, 2008 |   | Three      Months Ended June 30, 2007   |   | Six      Months Ended June 30, 2008  |   | Six      Months Ended June 30, 2007  |
|--------------------------------------------------------------|---------------------------------------|--------|---------------------------------------------------|--------|-------------------------------------------|--------|-------------------------------------------|
| Revenues:                                                    |                                  |   |                                              |   |                                      |   |                                      |
| Net      investment income                                   | $      3,082,923                      |   | $      5,730,337                                  |   | $      6,110,549                          |   | $      9,542,404                          |
| Net      realized gain on investments                        | 49,600,581                            |   | 210,185                                           |   | 50,072,435                                |   | 1,618,093                                 |
| Sale      of real estate and water assets                    | 811,363                               |   | 2,117,378                                         |   | 1,305,771                                 |   | 4,426,376                                 |
| Rents,      royalties and lease income                       | 162,375                               |   | 151,381                                           |   | 321,931                                   |   | 301,539                                   |
| Other                                                        | 266,253                               |   | 104,995                                           |   | 589,874                                   |   | 139,265                                   |
| Total      revenues                                          | 53,923,495                            |   | 8,314,276                                         |   | 58,400,560                                |   | 16,027,677                                |
| Costs      and Expenses:                                     |                                  |   |                                              |   |                                      |   |                                      |
| Operating      and other costs                               | 7,172,817                             |   | 13,026,793                                        |   | 9,189,081                                 |   | 18,252,066                                |
| Cost      of real estate and water assets sold               | 172,053                               |   | 704,342                                           |   | 321,898                                   |   | 1,471,206                                 |
| Depreciation      and amortization                           | 308,255                               |   | 272,283                                           |   | 604,668                                   |   | 548,695                                   |
| Total      costs and expenses                                | 7,653,125                             |   | 14,003,418                                        |   | 10,115,647                                |   | 20,271,967                                |
| Income      (loss) before income taxes and minority interest | 46,270,370                            |   | (5,689,142)                                       |   | 48,284,913                                |   | (4,244,290)                               |
| Provision      (benefit) for income taxes                    | 18,328,066                            |   | (1,975,946)                                       |   | 22,295,061                                |   | (1,052,038)                               |
| Income      (loss) before minority interest                  | 27,942,304                            |   | (3,713,196)                                       |   | 25,989,852                                |   | (3,192,252)                               |
| Minority      interest in loss of subsidiaries               | 300,353                               |   |                                              |   | 606,130                                   |   |                                      |
| Net      income (loss)                                       | $      28,242,657                     |   | $      (3,713,196)                                |   | $      26,595,982                         |   | $      (3,192,252)                        |
|                                                         |                                  |   |                                              |   |                                      |   |                                      |
|                                                         |                                  |   |                                              |   |                                      |   |                                      |
|                                                         |                                  |   |                                              |   |                                      |   |                                      |
| Net      income (loss) per common share – basic:       | $      1.50                           |   | $      (0.20)                                     |   | $      1.41                               |   | $      (0.18)                             |
| Weighted      average shares outstanding                     | 18,836,607                            |   | 18,769,015                                        |   | 18,835,172                                |   | 17,811,337                                |

|                                                     |        |   |          |   |        |   |          |
|----------------------------------------------------------|-------------|--------|---------------|--------|-------------|--------|---------------|
| Net      income (loss) per common share – diluted: | $      1.49 |   | $      (0.20) |   | $      1.41 |   | $      (0.18) |
| Weighted      average shares outstanding                 | 18,946,837  |   | 18,769,015    |   | 18,872,797  |   | 17,811,337    |

Theaccompanying notes are an integral part of the condensed consolidated financialstatements.

----

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                                                 |   | Six      Months Ended June 30, 2008 |   | Six      Months Ended June 30, 2007 |
|----------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|--------|-------------------------------------|
| OPERATING      ACTIVITIES:                                                                                           |   |                                |   |                                |
| Net      cash used in operating activities                                                                           |   | $(28,375,943)                       |   | $(25,458,736)                       |
|                                                                                                                 |   |                                |   |                                |
| INVESTING      ACTIVITIES:                                                                                           |   |                                |   |                                |
| Purchases      of investments                                                                                        |   | (20,208,159)                        |   | (98,799,107)                        |
| Proceeds      from sale of investments                                                                               |   | 90,383,043                          |   | 3,848,950                           |
| Proceeds      from maturity of investments                                                                           |   | 61,192,968                          |   | 18,213,245                          |
| Real      estate and water asset capital expenditure                                                                 |   | (10,972,382)                        |   | (27,138,070)                        |
| Net      cash provided by (used in) investing activities                                                             |   | 120,395,470                         |   | (103,874,982)                       |
|                                                                                                                 |   |                                |   |                                |
| FINANCING      ACTIVITIES:                                                                                           |   |                                |   |                                |
| Proceeds      from common stock offering, net                                                                        |   |                                |   | 100,141,935                         |
| Sale      of treasury stock for deferred compensation plans                                                          |   |        28,374                  |   | 29,392                              |
| Excess      tax benefits from stock based payment arrangements                                                       |   | 479,114                             |   |        4,905,804               |
| Proceeds      from borrowings                                                                                        |   | 6,928,629                           |   |                                |
| Net      cash provided by financing activities                                                                       |   | 7,436,117                           |   | 105,077,131                         |
|                                                                                                                 |   |                                |   |                                |
| Effect      of exchange rate changes on cash                                                                         |   | (4,315,817)                         |   | (3,283)                             |
|                                                                                                                 |   |                                |   |                                |
| INCREASE      (DECREASE) IN CASH AND CASH EQUIVALENTS                                                                |   | 95,139,827                          |   | (24,259,870)                        |
|                                                                                                                 |   |                                |   |                                |
| CASH      AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                                                  |   | 70,791,025                          |   | 136,621,578                         |
|                                                                                                                 |   |                                |   |                                |
| CASH      AND CASH EQUIVALENTS, END OF PERIOD                                                                        |   | $165,930,852                        |   | $112,361,708                        |
|                                                                                                                 |   |                                |   |                                |
| SUPPLEMENTAL      CASH FLOW INFORMATION:                                                                             |   |                                |   |                                |
| Cash      paid for income taxes                                                                                      |   | $638,106                            |   | $2,865,896                          |
| Non-cash      investing and financing activities:                                                                    |   |                                |   |                                |
| Change      in capitalized costs included in other liabilities                                                       |   | $4,872,491                          |   | $5,608,295                          |
|  Withhold      taxes recorded in additional paid in capital related to stock appreciation      rights exercised |   |                                |   |  $5,398,767                    |

Theaccompanying notes are an integral part of the condensed consolidated financialstatements.    

----

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

|                                |                      RSA |
|-------------------------------------|-------------------------------|
| Outstanding      at January 1, 2008 |        -                 |
| Granted                             |        4,200             |
| Exercised                           |        -                 |
| Outstanding      at June 30, 2008   |        4,200             |

----

|  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      AverageExercise      Price |   | Weighted      AverageContractual      Term Remaining |
|----------------------------------------------|--------|---------------|------------------------------------------|--------|------------------------------------------------------|
| Outstanding      at January 1, 2008          |   | 2,007,018     |                                     | $      | 34.72                                                |   |   |
| Granted                                      |   |        - |                                     |   |                                                 |   |   |
| Exercised                                    |   |        - |                                     |   |                                                 |   |   |
| Outstanding      at June 30, 2008            |   | 2,007,018     |                                     | $      | 34.72                                                |   |                                                                 8 years |
| Vested      and exercisable at June 30, 2008 |   | 1,509,766     |                                     | $      | 34.72                                                |   |                                          7.6      years |

|                             | SAR    |          | Weighted      Average GantDate      Fair Value |
|----------------------------------|--------|---------------|------------------------------------------------|
| Unvested      at January 1, 2008 |   | 497,252       |                                           |   $                          18.24 |
| Granted                          |   |        - |                                           |   |   |
| Vested                           |   |        - |                                           |   |   |
|                             |   |          |                                           |   |   |
| Unvested      at June 30, 2008   |   | 497,252       |                                           | $ | 18.24 |

----

|                                   | Quoted      Prices In Active      |   | Significant      Other | Significant         |                          |
|----------------------------------------|-----------------------------------|--------|------------------------|--------------------------|-------------------------------|
|                                   | Markets      for Identical Assets |   | Observable      Inputs | Unobservable      Inputs |                          |
| Assets                                 | (Level      1)                    |   | (Level      2)         | (Level      3)           | Balance      at June 30, 2008 |
| Available      for sale securities (A) | $223,777,061                      |   | $3,441,733             |                     |        $227,218,794      |
| Liabilities                            |                              |   |                   |                     |                          |
| Deferred      compensation (B)         | $53,176,022                       |   |                   |                     |        $53,176,022       |

| (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 active      market.  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. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (B) | Deferred      compensation plans are compensation plans directed by the Company and      structured as a rabbi trust 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 PICO Holdings common stock held in      the trusts. The related deferred compensation liability represents the      fair value of the investmentassets. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                            |  Three      Months Ended June 30, 2008 |   |   Three      Months Ended June 30, 2007 |   |  Six      Months Ended June 30, 2008 |   |   Six      Months Ended June 30, 2007 |
|-------------------------------------------------------------------------------------------------|---------------------------------------------|--------|---------------------------------------------------|--------|-------------------------------------------|--------|-------------------------------------------------|
| Net      income (loss)                                                                          | $      28,242,657                           |   | $      (3,713,196)                                |   | $      26,595,982                         |   | $      (3,192,252)                              |
| Net      change in unrealized appreciation (depreciation) on available for      sale securities | (34,675,913)                                |   | 12,168,869                                        |   | (37,308,019)                              |   | 19,973,245                                      |
| Net      change in foreign currency translation                                                 | (1,440,394)                                 |   | 599,035                                           |   | 771,199                                   |   | 1,057,253                                       |
| Total      comprehensive income (loss)                                                          | $      (7,873,650)                          |   | $      9,054,708                                  |   | $      (9,940,838)                        |   | $      17,838,246                               |

|                                                          | June      30, 2008 |   | December      31, 2007 |
|---------------------------------------------------------------|--------------------|--------|------------------------|
| Unrealized      appreciation on available for sale securities | $      45,148,480  |   | $      82,456,499      |
| Foreign      currency translation                             | (2,215,862)        |   | (2,987,061)            |
| Accumulated      other comprehensive income                   | $      42,932,618  |   | $      79,469,438      |

----

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

|                                             | At      June 30, 2008 |   | At      December 31, 2007 |
|--------------------------------------------------|-----------------------|--------|---------------------------|
| Total      Assets:                               |                  |   |                      |
| Water      Resource and Water Storage Operations | $223,127,297          |   | $231,863,512              |
| Real      Estate Operations                      | 80,989,686            |   | 83,750,531                |
| Insurance      Operations in Run Off             | 220,106,449           |   | 221,348,861               |
| Corporate                                        | 158,380,048           |   | 139,379,376               |
| Total      assets                                | $682,603,480          |   | $676,342,280              |

|                                                          | Three      Months Ended June 30, | Six      Months Ended June 30, |
|---------------------------------------------------------------|----------------------------------|--------------------------------|
|                                                          | 2008                             | 2007                           | 2008 | 2007 |
| Water      Resource and Water Storage Operations              | $377,896                         | $1,492,627                     | $1,197,181 | $2,466,991 |
| Real      Estate Operations                                   | 1,571,758                        | 2,960,805                      | 3,166,178 | 6,467,991 |
| Insurance      Operations in Run Off                          | 4,834,439                        | 1,213,198                      | 6,507,571 | 3,268,643 |
| Corporate                                                     | 47,139,402                       | 2,647,646                      | 47,529,630 | 3,824,052 |
| Total      Revenues                                           | $53,923,495                      | $8,314,276                     | $58,400,560 | $16,027,677 |
|                                                          |                             |                           |   |   |
| Income      (Loss) Before Income Taxes and Minority Interest: |                             |                           |   |   |
| Water      Resource and Water Storage Operations              | $(1,227,923)                     | $(7,209,479)                   | $(2,187,961) | $(7,590,530) |
| Real      Estate Operations                                   | 440,656                          | 1,638,571                      | 862,780 | 3,838,589 |
| Insurance      Operations in Run Off                          | 4,498,553                        | 862,380                        | 5,707,810 | 2,563,230 |
| Corporate                                                     | 42,559,084                       | (980,614)                      | 43,902,284 | (3,055,579) |
| Income      (Loss) Before Income Taxes and Minority Interest  | $46,270,370                      | $(5,689,142)                   | $48,284,913 | $(4,244,290) |

|   6.   Subsequent      Event |
|-------------------------------------------------------|

----

Discussion and Analysis of Financial Condition andResults of Operations

| · | Water Resource and Water Storage    Operations;                                                                                                                                                                                                                                                                        |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Real Estate Operations;                                                                                                                                                                                                                                                                                                |
| · | Insurance Operations in “Run Off”;    and                                                                                                                                                                                                                                                                  |
| · | Corporate (formerly known as “Business Acquisitions      & Financing”).  At June 30, 2008, this segment contains      cash, bank time deposits, the assets and related liabilities of deferred      compensation plans, interests in small businesses, and other parent      company assets. |

| · | Vidler      Water Company, Inc. (“Vidler”), a business which we started more than 10      years ago, acquires and develops water resources and water storage      operations in the southwestern United States, with assets in Nevada,      Arizona, Idaho, California, and Colorado;                                      |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Nevada      Land & Resource Company, LLC (“Nevada Land”), an operation that we      built since we acquired the company more than 10 years ago, which owns      approximately 449,000 acres of former railroad land in Nevada, and certain      mineral rights and water rights related to theproperty;                |
| · | Physicians      Insurance Company of Ohio (“Physicians”), which is “running off” its      medical professional liability insurance loss reserves;                                                                                                                                                              |
| · | Citation      Insurance Company (“Citation”), which is “running off” its property &      casualty insurance and workers’ compensation loss reserves;      and                                                                                                                                        |
| · | Global      Equity AG, a holding company incorporated in      Switzerland.  Following the sale of our interest in Jungfraubahn      Holding AG (“Jungfraubahn”) in April 2008, Global Equity AG’s assets      principally consist of bank time deposits denominated in U.S. Dollars and      Swiss Francs. |

|                                                          | Three      Months Ended June 30, | Six      Months Ended June 30, |
|---------------------------------------------------------------|----------------------------------|--------------------------------|
|                                                          | 2008                             | 2007                           | 2008 | 2007 |
| Revenues:                                                     |                             |                           |   |   |
| Water      Resource and Water Storage Operations              | $378,000                         | $1,493,000                     | $1,197,000 | $2,467,000 |
| Real      Estate Operations                                   | 1,572,000                        | 2,961,000                      | 3,166,000 | 6,467,000 |
| Insurance      Operations in Run Off                          | 4,834,000                        | 1,213,000                      | 6,508,000 | 3,270,000 |
| Corporate                                                     | 47,139,000                       | 2,647,000                      | 47,530,000 | 3,824,000 |
| Total      Revenues                                           | $53,923,000                      | $8,314,000                     | $58,401,000 | $16,028,000 |
|                                                          |                             |                           |   |   |
| Income      (Loss) Before Income Taxes and Minority Interest: |                             |                           |   |   |
| Water      Resource and Water Storage Operations              | $(1,228,000)                     | $(7,209,000)                   | $(2,188,000) | $(7,591,000) |
| Real      Estate Operations                                   | 441,000                          | 1,639,000                      | 863,000 | 3,839,000 |
| Insurance      Operations in Run Off                          | 4,498,000                        | 862,000                        | 5,708,000 | 2,563,000 |
| Corporate                                                     | 42,559,000                       | (      981,000)                | 43,902,000 | (3,055,000) |
| Income      (Loss) Before Income Taxes and Minority Interest  | $46,270,000                      | $(5,689,000)                   | $48,285,000 | $(4,244,000) |

----

WATER RESOURCE AND WATER STORAGE OPERATIONS

|                                                | Three      Months Ended June 30, | Six      Months Ended June 30, |
|-----------------------------------------------------|----------------------------------|--------------------------------|
|                                                | 2008                             | 2007                           | 2008 | 2007 |
| Revenues:                                           |                             |                           |   |   |
| Sale      of real estate and water assets           | $116,000                         | $      5,000                   | $246,000 | $      8,000 |
| Net      investment income                          | 183,000                          | 1,451,000                      | 749,000 | 2,411,000 |
| Other                                               | 79,000                           | 37,000                         | 202,000 | 48,000 |
| Segment      total revenues                         | $378,000                         | $1,493,000                     | $1,197,000 | $2,467,000 |
|                                                |                             |                           |   |   |
| Expenses:                                           |                             |                           |   |   |
| Cost      of real estate and water assets           | $(18,000)                        | $(      2,000)                 | $(40,000) | $(      2,000) |
| Depreciation      and amortization                  | (282,000)                        | (      255,000)                | (559,000) | (      517,000) |
| Overhead                                            | (715,000)                        | (      503,000)                | (1,573,000) | (      1,039,000) |
| Project      expenses                               | (591,000)                        | (7,942,000)                    | (1,213,000) | (      8,500,000) |
| Segment      total expenses                         | $(1,606,000)                     | $(8,702,000)                   | $(3,385,000) |     $(10,058,000) |
| Loss      before income taxes and minority interest | $(1,228,000)                     | $(7,209,000)                   | $(2,188,000) | $(7,591,000) |

| · | 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 future municipal      water supply for the north valleys of the Reno, Nevada    area;                                                                                             |
| · | the      operation of Fish Springs Ranch, and maintenance of the associated water      rights; and                                                                                                                                              |
| · | in      the second quarter and first half of 2007, a settlement of all outstanding      claims and legal actions with the Pyramid Lake Paiute Tribe (“the Tribe      settlement”). See “Fish      Springs Ranch” below. |

----

REAL ESTATE OPERATIONS

|                                                  | Three      Months Ended June 30, | Six      Months Ended June 30, |
|-------------------------------------------------------|----------------------------------|--------------------------------|
|                                                  | 2008                             | 2007                           | 2008 | 2007 |
| Revenues:                                             |                             |                           |   |   |
| Sale      of real estate and water assets             | $689,000                         | $2,112,000                     | $1,054,000 | $4,419,000 |
| Net      investment income                            | 613,000                          | 680,000                        | 1,536,000 | 1,537,000 |
| Other                                                 | 270,000                          | 169,000                        | 576,000 | 511,000 |
| Segment      total revenues                           | $1,572,000                       | $2,961,000                     | $3,166,000 | $6,467,000 |
|                                                  |                             |                           |   |   |
| Expenses:                                             |                             |                           |   |   |
| Cost      of real estate and water assets        | $(154,000)                       | $(      703,000)               | $(281,000) | $(1,469,000) |
| Operating      expenses                               | (977,000)                        | (      619,000)                | (2,022,000) | (1,159,000) |
| Segment      total expenses                           | $(1,131,000)                     | $(1,322,000)                   | $(2,303,000) | $(2,628,000) |
| Income      before income taxes and minority interest | $441,000                         | $1,639,000                     | $863,000 | $3,839,000 |

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INSURANCE OPERATIONS IN RUN OFF

|                                                                      | Three      Months Ended June 30, | Six      Months Ended June 30, |
|---------------------------------------------------------------------------|----------------------------------|--------------------------------|
|                                                                      | 2008                             | 2007                           | 2008 | 2007 |
| Revenues:                                                                 |                             |                           |   |   |
| Net      investment income                                                | $1,272,000                       | $990,000                       | $1,891,000 | $1,807,000 |
| Net      realized gain on sale or impairment    of  investments | 3,537,000                        | 204,000                        | 4,551,000 | 1,432,000 |
| Other                                                                     | 25,000                           | 19,000                         | 66,000 | 31,000 |
| Segment      total revenues                                               | $4,834,000                       | $1,213,000                     | $6,508,000 | $3,270,000 |
|                                                                      |                             |                           |   |   |
| Expenses:                                                                 |                             |                           |   |   |
| Segment      total expenses                                               | $(336,000)                       | $(351,000)                     | $(800,000) | $(707,000) |
|                                                                      |                             |                           |   |   |
| Income      Before Taxes:                                                 |                             |                           |   |   |
| Physicians      Insurance Company of Ohio                                 | $4,230,000                       | $742,000                       | $5,162,000 | $1,991,000 |
| Citation      Insurance Company                                           | 268,000                          | 120,000                        | 546,000 | 572,000 |
| Income      before income taxes and minority interest                     | $4,498,000                       | $862,000                       | $5,708,000 | $2,563,000 |

| PHYSICIANS      INSURANCE COMPANY OF OHIO -- LOSS AND LOSS ADJUSTMENT EXPENSE      RESERVES |
|---------------------------------------------------------------------------------------------|
|                                                                                        | June 30,      2008  | December      31, 2007 |
|                                                                                        |   |   |
| Direct      Reserves                                                                        | $6,497,000 | $6,603,000 |
| Ceded      Reserves                                                                         | (    83,000) | (    83,000) |
| Net      Medical Professional Liability Insurance Reserves                                  | $6,414,000 | $6,520,000 |

| CITATION      INSURANCE COMPANY -- LOSS AND LOSS ADJUSTMENT EXPENSE    RESERVES |
|---------------------------------------------------------------------------------|
|                                                                            | June      30, 2008 | December      31, 2007 |
| Property      & Casualty Insurance                                          |   |   |
| Direct      Reserves                                                            | $3,495,000 | $3,587,000 |
| Ceded      Reserves                                                             | (  435,000) | (   438,000) |
| Net      Property & Casualty Insurance Reserves                             | $3,060,000 | $3,149,000 |
|                                                                            |   |   |
| Workers’      Compensation                                                |   |   |
| Direct      Reserves                                                            | $21,313,000 | $22,186,000 |
| Ceded      Reserves                                                             | (15,679,000) | (16,133,000) |
| Net      Workers’ Compensation Insurance Reserves                         | $5,634,000 | $6,053,000 |
| Total      Reserves                                                             | $8,694,000 | $9,202,000 |

----

CORPORATE

|                                                         | Three      Months Ended June 30, | Six      Months Ended June 30, |
|--------------------------------------------------------------|----------------------------------|--------------------------------|
|                                                         | 2008                             | 2007                           | 2008 | 2007 |
| Revenues:                                                    |                             |                           |   |   |
| Net      realized gain on sale or impairment of investments  | $46,060,000                      | $      6,000                   | $45,519,000 | $      5,000 |
| Net      investment income                                   | 1,014,000                        | 2,609,000                      | 1,934,000 | 3,786,000 |
| Other                                                        | 65,000                           | 32,000                         | 77,000 | 33,000 |
| Segment      total revenues                                  | $47,139,000                      | $2,647,000                     | $47,530,000 | $3,824,000 |
|                                                         |                             |                           |   |   |
| Expenses:                                                    |                             |                           |   |   |
| Stock      appreciation rights expense                       | $(  997,000)           |                           | $(1,994,000) |   |
|  Other                                                  | (3,583,000                       |  $(3,628,000)             | (1,634,000) | $(6,879,000) |
| Segment      total expenses                                  | $(4,580,000)                     | $(3,628,000)                   | $(3,628,000) | $(6,879,000) |
| Income      (loss) before income taxes and minority interest | $42,559,000                      | $(981,000)                     | $43,902,000 | $(3,055,000) |

----

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

| · | 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      sales of real estate for cash, and collections of principal and interest      on sales contracts where Nevada Land has provided vendor financing. These      receipts and other revenues exceed Nevada Land’s operating and development      costs, so Nevada Land is generating positive cash flow.  We are      redeploying part of the cash flow from Nevada Land to build the business      of UCP, by acquiring lots and un-entitled land in selected California      markets; and |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

Item 3:  Quantitative and Qualitative Disclosure aboutMarket Risk

Item 4:  Controls and Procedures

Item 1:  Legal Proceedings

----

Item 4: Submission of Matters to a Vote of SecurityHolders

|                                             | For        | Against/Withheld | Abstained | BrokerNon-Votes |
|--------------------------------------------------|------------|------------------|-----------|-----------------|
| (1)  Election      of Directors:       |       |             |      |            |
|                                             |       |             |      |            |
|       NOMINEE      |       |             |      |            |
| Ronald      Langley                              | 10,587,584 | 2,757,589        |      |            |
| John      R. Hart                                | 10,557,355 | 2,787,818        |      |            |
| John      D. Weil                                | 12,359,151 | 986,022          |      |            |
|                                             |       |             |      |            |
| (2)      Ratification of the Independent Auditor | 13,246,021 | 79,860           | 19,292    |            |

| Exhibit      Number |   | Description                                                                                                                                                        |
|---------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3(i)                |   | Amended      and Restated Articles of Incorporation of PICO.  (1)                                                                                                  |
| 3(ii)               |   | Amended      and Restated By-laws of PICO. (2)                                                                                                                     |
| 31.1                |   | Certification of Chief      Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) as adopted pursuant      to Section 302 of the Sarbanes-Oxley Act of      2002. |
| 31.2                |   | Certification of Chief      Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) as adopted pursuant      to Section 302 of the Sarbanes-Oxley Act of      2002. |
| 32.1                |   | Certification of Chief      Executive Officer pursuant to 18 U.S.C. Section 1350 (Section 906 of the      Sarbanes-Oxley Act of 2002).                             |
| 32.2                |   | Certification of Chief      Financial Officer pursuant to 18 U.S.C. Section 1350 (Section 906 of the      Sarbanes-Oxley Act of2002).                              |

|   | (1) | Incorporated      by reference to Exhibit 3(i) in the Form 10-Q filed with the SEC on      November 7, 2007.  |
|--------|-----|---------------------------------------------------------------------------------------------------------------|
|   | (2) | Incorporated      by reference to Exhibit 3(ii) in the Form 8-K filed with the SEC on      February 29, 2008. |

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