INVESTMENTS

At December 31, the cost and carrying value of its available-for-sale investments were as follows (in thousands):



2011:	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Carrying Value
Fixed maturities:
U.S. Treasury securities	$	7,053	$	227				$	7,280
Municipal bonds	3,118		297					3,415
Corporate bonds	23,738		588		$	(124	)	24,202
Government sponsored enterprises	1,625		76					1,701
	35,534		1,188		(124		)	36,598
Marketable equity securities	35,547		7,341		(1,210		)	41,678
Total	$	71,081	$	8,529	$	(1,334	)	$	78,276



2010:	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Carrying Value
Fixed maturities:
U.S. Treasury securities	$	4,911	$	56	$	(64	)	$	4,903
Municipal bonds	3,147		107					3,254
Corporate bonds	28,365		783		(675		)	28,473
Government sponsored enterprises	4,193		187					4,380
	40,616		1,133		(739		)	41,010
Marketable equity securities	80,664		30,687		(941		)	110,410
Total	$	121,280	$	31,820	$	(1,680	)	$	151,420

The amortized cost and carrying value of investments in fixed maturities at December 31, 2011, by contractual maturity, are shown below. Expected maturity dates may differ from contractual maturity dates because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties (in thousands):



	Amortized		Carrying
	Cost		Value
Due in one year or less	$	9,939	$	10,126
Due after one year through five years	21,222		21,942
Due after five years	4,373		4,530
	$	35,534	$	36,598

Net investment income is as follows for each of the years ended December 31 (in thousands):



	2011		2010		2009
Investment income:
Fixed maturities	$	2,051	$	3,020	$	2,175
Equity securities	1,405		2,215		2,479
Other, primarily cash balances, net	686		1,358		1,285
Net investment income	4,142		6,593		5,939

Pre-tax net realized gain or loss on investments is as follows for each of the years ended December 31 (in thousands):



	2011			2010			2009
Gross realized gains:
Fixed maturities	$	213		$	4,272		$	1,535
Equity securities and other investments	25,236			14,709			16,573
Total gain	25,449			18,981			18,108
Gross realized losses:
Fixed maturities	(6		)	(23		)	(5,225		)
Equity securities and other investments	(2,286		)	(443		)	(19,639		)
Total loss	(2,292		)	(466		)	(24,864		)
Net realized gain (loss)	$	23,157		$	18,515		$	(6,756	)

Realized Gains

The realized gains reported in 2011 is comprised of $9.4 million and $15.8 million on foreign and domestic equity securities, respectively. In 2010 and 2009, the Company reported realized gains of $9.6 million and $5.1 million and $5.9 million and $9.8 million on foreign and domestic equity securities, respectively. Also included in realized gains for 2009 is a gain of $8.2 million gain recorded on the deconsolidation of Spigit (see Investment in Unconsolidated Affiliate, below).

Realized Losses

In addition to losses that result from sale transactions, realized losses also include impairment charges on securities. During 2011, 2010 and 2009, the Company recorded other-than-temporary impairments of $1.9 million, $365,000, and $18.8 million, respectively, on debt and equity securities to recognize other-than-temporary declines in value. In addition, during 2009, the Company sold Global Equity Corporation, a previously consolidated subsidiary, which held investments in Canadian real estate partnerships, and reported a loss on the sale of $5.5 million. The majority of the reported loss results from accumulated foreign currency adjustments of $6.6 million that were part of the carrying value of the subsidiary. Such adjustments were previously recorded in other comprehensive income.

The following table summarizes the market value of those investments in an unrealized loss position for periods less than and greater than 12 months (in thousands):



	2011				2010
Less than 12 months	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
Fixed maturities:
US Treasury securities	$	553			$	3,494	$	64
Corporate bonds	3,770		$	67	11,286		196
	4,323		67		14,780		260
Marketable equity securities	7,847		461		5,907		459
Total	$	12,170	$	528	$	20,687	$	719



	2011				2010
Greater than 12 months	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
Fixed maturities:
Corporate bonds	$	2,818	$	57	$	7,053	$	479
Marketable equity securities	2,757		749		2,534		482
Total	$	5,575	$	806	$	9,587	$	961

Marketable equity securities: The Company’s investments in marketable equity securities totaled $41.7 million at December 31, 2011, and principally consist of common stock of publicly traded small-capitalization companies in the U.S. and selected foreign markets. At December 31, 2011, the Company reviewed all of its equity securities in an unrealized loss position and concluded certain securities were not other-than-temporarily impaired as the declines were not of sufficient duration and severity, and publicly-available financial information did not indicate impairment. The primary cause of the losses on those securities was normal market volatility. The securities that were deemed other-than-temporarily impaired were recorded as an impairment loss in the period. The Company recorded impairment losses of $1.9 million, $365,000 and $13.6 million, respectively, for the years ended December 31, 2011, 2010 and 2009.

Corporate Bonds and U.S. Treasury Obligations: The Company owns various fixed maturity bonds in its portfolio. The U.S. Treasury, municipal, and government-sponsored enterprise bonds are typically held to meet state regulatory capital and deposit requirements for the insurance companies. The remainder of the bond portfolio consists of corporate bonds, which are purchased on a case by case basis depending on the maturity date, yield-to-maturity of the bond and an analysis of the fundamental characteristics of the issuer. At December 31, 2011, there were unrealized losses on certain bonds in the portfolio. The Company did not consider those bonds to be other-than-temporarily impaired because the Company expects to hold, and will not be required to sell, these particular bonds, and it expects to recover the entire amortized cost basis at maturity. During 2011 and 2010, the Company did not record any impairment charges on fixed maturity securities. During 2009, the Company recorded impairment charges on corporate bonds of $5.2 million.

Investment in Unconsolidated Affiliate:

The Company’s share of the loss reported by Spigit during 2011 and 2010 was $5.3 million and $3.7 million respectively. During 2009, for the period from deconsolidation to the end of 2009 the Company’s share of the reported loss was $277,000. In addition, in 2009, the Company recorded a gain on deconsolidation of Spigit of approximately $8.2 million before income taxes, which is included in net realized gain (loss) on sale and impairment of investments, in the accompanying consolidated statements of operations.

The losses recognized in 2011 reduced the carrying value of the investment to zero at December 31, 2011. At December 31, 2010, the investment was carried at $5.2 million and is reported in other investments in the accompanying balance sheets.

As the total losses recorded to date on the investment in Spigit have reduced the carrying value to zero at December 31, 2011, the Company will not report any additional losses generated by Spigit unless the Company decides to invest additional capital into Spigit. There are no plans or obligations to invest additional capital at this time.

During 2011, Spigit, Inc. raised additional capital in two separate financings and as a result, the Company's ownership dropped from 37% to 30% as of December 31, 2011. The Company maintained its 37% interest during 2010. During 2009, the Company deconsolidated Spigit and changed its accounting from consolidation to the equity method of accounting due to the reduction in voting ownership from over 50% to approximately 37%.

The following is unaudited summarized financial information of Spigit as of and for the year ended December 31, 2011 and December 31, 2010 (in thousands):



	2011		2010
Current assets	$	9,061	$	6,602
Noncurrent assets	$	1,019	$	656
Current liabilities	$	18,163	$	8,598
Revenue	$	9,351	$	4,815
Gross margin	$	5,785	$	3,843
Loss from continuing operations and net loss	$	25,173	$	10,140

Financial Fair Value Measurements:

The following table sets forth the Company’s financial assets and liabilities that were measured at fair value on a recurring basis at December 31, 2011 and 2010, by level within the fair value hierarchy. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

The Company owns $29.3 million of available-for-sale equity securities that trade on an over-the-counter bulletin board market. At December 31, 2011, the Company classified $19.5 million of those securities as Level 2 due to the trading volumes being lower than normal, coupled with wide bid/ask spreads, lack of current publicly available information, or few or no recent transactions. There were no significant transfers between level 1 and level 2 during the year ended December 31, 2011 or 2010.

In 2011, the Company entered into a board crush margin hedge (the "swap") with an international bank. The purpose of the swap is to hedge the crush margin of the canola seed crushing facility that the Company anticipates will become operational in the third quarter of 2012. The swap begin at the time of estimated initial production for a notional quantity of 16,500 tons per month (approximately 55% of anticipated capacity) and swaps the floating price of the crush margin (the margin produced from the sale of canola oil and canola meal less the cost of canola seed) for a fixed price for a period of six months to March 2013. The Company may enter in to further swap agreements over the course of the next few months with the same counterparty for up to 80% of estimated future production. The swap qualifies as a financial instrument and is a cash-flow derivative that does not qualify for hedge accounting treatment. As such, the loss on this contract is reported in operating and other costs and the liability is included in other liabilities in the accompanying consolidated financial statements.

A description of the levels follows the table below.

At December 31, 2011 (in thousands):



Assets	Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)	Balance at December 31, 2011
Available-for-sale investments (A)	$	58,739	$	19,537		$	78,276
Liabilities
Deferred compensation (B)	$	36,315				$	36,315
Derivative instrument (C)			$	2,511		$	2,511

At December 31, 2010 (in thousands):



Assets	Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Balance at December 31, 2010
Available-for-sale investments (A)	$	132,677	18,743		$	151,420
Liabilities
Deferred compensation (B)	$	37,879			$	37,879

(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 available-for-sale investments 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. All Level 2 available-for-sale securities are one class because they all contain similar risks and are valued using market prices and 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. Inputs include directly or indirectly observable inputs such as quoted prices. Level 3 available-for-sale securities would 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 methodologies and similar techniques that use significant unobservable inputs.

(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 common stock held in the trusts. The related deferred compensation liability represents the fair value of the investment assets.

(C) The derivative financial instrument is classified as level 2 because the inputs are directly observable, such as quoted market prices for relevant commodity futures contracts. Derivative financial instruments are valued based on the difference of the arithmetic average of the quoted market price of the relevant underlying, multiplied by the notional quantities and the arithmetic average of the prices specified in the instrument multiplied by the notional quantities.

Non-Financial Fair Value Measurements:

The following table sets forth the Company's non-financial assets that were measured at fair value on a non-recurring basis for the year ended December 31, 2011 and 2010, by level within the fair value hierarchy. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset (in thousands):

Year Ended December 31, 2011:



Asset Description	Quoted Prices In Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)		Total Loss
(1) Intangible asset (exclusive right to use infrastructure and associated water credits)			$	84,890	$	16,224
(2) Real estate and options to purchase real estate			$	579	$	5,180

(1)

As of December 31, 2011, the Company had a non-recurring fair value measurement for an intangible asset with a carrying amount of $101.1 million that was written down to its implied fair value of $84.9 million, resulting in an impairment charge of $16.2 million, which was included in earnings for December 31, 2011. The implied fair value was calculated using a discounted cash flow model that incorporated a wide range of assumptions including current asset pricing, price escalation, discount rates, absorption rates, and timing of sales, and costs. Given the continued dramatic and prolonged slow-down in housing starts and sales in the North Valleys of Reno, Nevada, and the recent decline in market prices for similar assets, the Company adjusted its assumptions and judgments in the model by reducing the price and lengthening the timing of absorption of water sales from the original projections.

(2) As of December 31, 2011, the Company had a non-recurring fair value measurement for real estate and real estate option contracts with a carrying amount of $5.7 million that was written down to its implied fair value of $579,000 resulting in an impairment charge of $5.2 million, which was included in earnings for the year ended December 31, 2011. The implied fair value was calculated using a discounted cash flow model that incorporated a wide range of assumptions including current asset pricing, and timing of sales, and costs. Given the current facts and circumstances in certain of the real estate markets where the Company owns and develops real estate, including recent declines in market prices for similar assets, the Company adjusted its assumptions and judgments in its cash flow models by reducing prices, increasing costs and lengthening the timing of sales from the original projections.

Year Ended December 31, 2010:



Asset Description	Quoted Prices In Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)		Total Gain/(Loss)
(1) Intangible asset (exclusive right to use infrastructure and associated water rights)			$	26,630	$	10,316

(1)

As of December 31, 2010, the Company had a non-recurring fair value measurement for an intangible asset with a carrying amount of $36.9 million that was written down to its implied fair value of $26.6 million, resulting in an impairment charge of $10.3 million, which was included in earnings for 2010. The implied fair value was estimated based on a discounted cash flow model that incorporates estimates and assumptions about recognition of revenues and costs for the intangible asset. See Note 4, Real Estate and Water Assets.

Disclosures About Fair Value Of Financial Instruments:

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that fair value:



– –	Cash and Cash Equivalents: Carrying amounts for these items approximate fair value because of the short maturity of these instruments. The majority of the cash balance 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 evaluates the carrying value of securities to determine whether there has been any diminution in value that is other-than-temporary.
– –	Debt: Carrying amounts for these items approximates fair value because they are based on current interest rates.

The table below presents the carrying values and estimated fair values for certain of the Company’s financial instruments at December 31, 2011 (in thousands).



	December 31, 2011
	Carrying Amount		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	125,547	$	125,547
Investments in debt securities	$	36,598	$	36,598
Equity securities	$	41,678	$	41,678
Notes and other receivables, net	$	6,893	$	6,893
Reinsurance receivables	$	15,475	$	15,475
Financial liabilities:
Debt	$	93,431	$	93,431
Derivative liability	$	2,511	$	2,511