11-K 1 e11-k.txt PICO HOLDINGS, INC. 11-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington DC 20549 FORM 11-K (Mark One) (X) ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the plan year ended September 30, 1999 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from ________________ to _____________ Commission File Number: 0-18786 A. Full title of the plan and the address of the plan, if different from that of the issuer named below: PICO HOLDINGS, INC. EMPLOYEES 401(k) RETIREMENT PLAN AND TRUST B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: PICO HOLDINGS, INC. 875 PROSPECT STREET, SUITE 301 LA JOLLA, CALIFORNIA 92037 Index to Exhibits appears on Page 16 Page 1 of 17 pages 2 REQUIRED INFORMATION -------------------- The following financial statements and schedules for PICO Holdings, Inc. Employees 401(k) Retirement Plan and Trust are being filed herewith: Signature Independent Auditors' Report Financial Statements: Statements of Net Assets Available for Plan Benefits, September 30, 1999 and 1998 Statements of Changes in Net Assets Available for Benefits, with Supplemental Information by Fund, for the Year Ended September 30, 1999 Notes to the Financial Statements Supplemental Schedules: Item 27(a) - Schedule of Assets Held for Investment Purposes, September 30, 1999 Item 27(d) - Schedule of Reportable Transactions for the Year Ended September 30, 1999 Index to Exhibits Exhibit 1 - Consent of Independent Auditors 2 3 SIGNATURE --------- The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. PICO HOLDINGS, INC. EMPLOYEES 401(k) RETIREMENT PLAN AND TRUST /s/ Gary W. Burchfield ------------------------------------ Date: July 31, 2000 Chief Financial Officer and Treasurer 3 4 INDEPENDENT AUDITORS' REPORT PICO Holdings, Inc. Employees 401(k) Retirement Plan and Trust Columbus, Ohio: We have audited the accompanying statements of net assets available for benefits of PICO Holdings, Inc. Employees 401(k) Retirement Plan and Trust (the "Plan") as of September 30, 1999 and 1998, and the related statement of changes in net assets available for benefits for the year ended September 30, 1999. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of September 30, 1999 and 1998, and the changes in net assets available for benefits for the year ended September 30, 1999 in conformity with accounting principles generally accepted in the United States of America. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules identified in the index are presented for the purpose of additional analysis and are not a required part of the basic financial statements, but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental information by fund in the statements of net assets available for benefits and the statement of changes in net assets available for benefits is presented for the purpose of additional analysis rather than to present the net assets available for benefits and changes in net assets available for benefits of the individual funds. The supplemental schedules and supplemental information by fund is the responsibility of the Plan's management. Such supplemental schedules and supplemental information by fund have been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, are fairly stated in all material respects when considered in relation to the basic financial statements taken as a whole. DELOITTE & TOUCHE LLP Columbus, Ohio June 30, 2000 4 5 PICO HOLDINGS, INC. EMPLOYEES 401(k) RETIREMENT PLAN AND TRUST STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS SEPTEMBER 30, 1999 AND 1998 --------------------------------------------------------------------------------
ASSETS 1999 1998 Investments: Participant directed at contract value: Separate Account A $ 695,801 $ 873,390 Separate Account B 337,192 416,694 Participant directed at fair value: American Century Select Fund 979,746 788,320 American Century Ultra Fund 783,945 698,598 Benham Short-Term Government Fund 55,806 58,277 American Century Balanced Fund 115,926 148,537 Benham Prime Money Market 79,801 177,357 Guaranteed Fund 1,256,821 1,500,360 Huntington Treasury Market Fund IV 6,580 19,810 PICO Stock Fund 544,041 339,750 ---------- ---------- Total participant directed investments 4,855,659 5,021,093 Non-Participant directed profit sharing: Separate Account B - at contract value 540,295 528,786 Guaranteed Fund - at fair value 1,072,643 723,387 ---------- ---------- Total non-participant directed investments 1,612,938 1,252,173 Participant loans 25,350 28,711 ---------- ---------- Total investments 6,493,947 6,301,977 ---------- ---------- Receivables: Employer's matching contributions 8,835 16,337 Participants' contributions 10,573 19,947 Other 19,409 Profit sharing contribution 543,658 617,925 ---------- ---------- Total receivables 582,475 654,209 ---------- ---------- NET ASSETS AVAILABLE FOR BENEFITS $7,076,422 $6,956,186 ========== ==========
See notes to financial statements. 5 6 PICO HOLDING, INC. EMPLOYEES 401(k) RETIREMENT PLAN AND TRUST STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS, WITH SUPPLEMENTAL INFORMATION BY FUND, FOR THE YEAR ENDED SEPTEMBER 30, 1999 --------------------------------------------------------------------------------
SUPPLEMENTAL INFORMATION BY FUND PARTICIPANT DIRECTED ------------------------------------------------------------------------------- HUNTINGTON AMERICAN TREASURY PICO CENTURY SEPARATE SEPARATE GUARANTEED MARKET STOCK SELECT ACCOUNT A ACCOUNT B FUND FUND IV FUND FUND ADDITIONS (DEDUCTIONS) TO NET ASSETS ATTRIBUTED TO: Investment income Net appreciation (depreciation) in fair value of investments $ 82,392 $ 11,857 $ 45,697 $ 53,384 Interest and dividend income $ 72,436 $ 922 173,555 ---------- ---------- ---------- ---------- ---------- ---------- Total 82,392 11,857 72,436 922 45,697 226,939 ---------- ---------- ---------- ---------- ---------- ---------- Employer contributions 71,319 28,501 35,625 73,776 43,166 Participant contributions 82,345 30,649 36,737 82,690 53,302 ---------- ---------- ---------- ---------- ---------- ---------- Total 153,664 59,150 72,362 156,466 96,468 ---------- ---------- ---------- ---------- ---------- ---------- Total additions 236,056 71,007 144,798 922 202,163 323,407 Benefits paid to participants 332,642 123,454 394,060 50,122 182,181 ---------- ---------- ---------- ---------- ---------- ---------- NET INCREASE (DECREASE) PRIOR TO INTERFUND TRANSFERS (96,586) (52,447) (249,262) 922 152,041 141,226 INTERFUND TRANSFERS (86,336) (20,645) 9,247 (17,248) 52,250 45,355 ---------- ---------- ---------- ---------- ---------- ---------- Net increase (decrease) (182,922) (73,092) (240,015) (16,326) 204,291 186,581 NET ASSETS AVAILABLE FOR BENEFITS: BEGINNING OF YEAR 881,364 422,052 1,506,361 26,232 339,750 791,324 ---------- ---------- ---------- ---------- ---------- ---------- END OF YEAR $ 698,442 $ 348,960 $1,266,346 $ 9,906 $ 554,041 $ 977,905 ========== ========== ========== ========== ========== ==========
See notes to financial statements. 6 7 PICO HOLDINGS, INC. EMPLOYEES 401(k) RETIREMENT PLAN AND TRUST STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS, WITH SUPPLEMENTAL INFORMATION BY FUND, FOR THE YEAR ENDED SEPTEMBER 30, 1999 (CONTINUED) --------------------------------------------------------------------------------
NON- SUPPLEMENTAL INFORMATION BY FUND PARTICIPANT PARTICIPANT DIRECTED DIRECTED --------------------------------------------------- ----------- AMERICAN BENHAM AMERICAN BENHAM CENTURY SHORT-TERM CENTURY PRIME ULTRA GOVERNMENT BALANCED MONEY PROFIT PARTICIPANT FUND FUND FUND MARKET SHARING LOAN TOTAL ADDITIONS (DEDUCTIONS) TO NET ASSETS ATTRIBUTED TO: Investment income Net appreciation (depreciation) in fair value of investments $ 130,830 $ (2,008) $ (7,217) $ 28,291 $ 343,226 Interest and dividend income 75,271 2,939 16,903 4,894 52,377 (573) 398,724 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total 206,101 931 9,686 4,894 80,668 (573) 741,950 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Employer contributions 67,334 590,597 910,318 Participant contributions 78,448 364,171 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total 145,782 590,597 1,274,489 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total additions 351,883 931 9,686 4,894 671,265 (573) 2,016,439 Benefits paid to participants 284,930 3,402 39,473 102,450 383,489 1,896,203 ---------- ---------- ---------- ---------- ---------- ---------- ---------- NET INCREASE (DECREASE) PRIOR TO INTERFUND TRANSFERS 66,953 (2,471) (29,787) (97,556) 287,776 (573) 120,236 INTERFUND TRANSFERS 22,989 (2,824) (2,788) ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net increase (decrease) 89,942 (2,471) (32,611) (97,556) 287,776 (3,361) 120,236 NET ASSETS AVAILABLE FOR BENEFITS: BEGINNING OF YEAR 706,123 58,277 148,537 177,357 1,870,098 28,711 6,956,186 ---------- ---------- ---------- ---------- ---------- ---------- ---------- END OF YEAR $ 796,065 $ 55,806 $ 115,926 $ 79,801 $2,157,874 $ 25,350 $7,076,422 ========== ========== ========== ========== ========== ========== ==========
See notes to financial statements. 7 8 PICO HOLDINGS, INC. EMPLOYEES 401(k) RETIREMENT PLAN AND TRUST NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 1999 -------------------------------------------------------------------------------- 1. DESCRIPTION OF PLAN The following description of the PICO Holdings, Inc. Employees 401(k) Retirement Plan and Trust (the "Plan") provides only general information. Participants should refer to the Plan document for a more complete description of the Plan's provisions. GENERAL - The Plan is a defined contribution 401(k) profit sharing plan covering eligible employees, as defined in the Plan Agreement, of PICO Holdings, Inc. (the Plan Sponsor). The Plan was adopted effective October 1, 1989, to provide retirement benefits to employees of the Plan Sponsor. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA) and the Retirement Equity Act of 1984 and has been determined to be qualified for tax exempt status by the Internal Revenue Service (IRS). The Plan has been amended since receiving the IRS determination letter. However, the Plan Sponsor believes that the Plan is designed and is currently being operated in compliance with the applicable requirements of the Internal Revenue Code. CONTRIBUTIONS - Each year, participants may contribute up to 5% of pretax annual compensation, as defined in the Plan, not to exceed $8,000. The Plan Sponsor matches 100% of the elective deferral of base compensation that a participant contributes to the Plan. Effective October 1997, the Plan Sponsor's matching contribution does not begin until the first day of the quarter after an employee completes one year of service. Additional amounts which represent profit sharing, as defined in the Plan, may be contributed at the option of the Plan Sponsor's Board of Directors. PARTICIPANT ACCOUNTS - For investments held under the investment contract, each participant's account is credited with the participant's contributions, employer matching contributions, and withdrawals, as applicable, and allocations of (a) the Plan Sponsor's discretionary profit sharing contributions and (b) Plan earnings, and debited with an allocation of administrative expenses. Allocations are based on participant compensation or account balances, as defined. Forfeited balances of terminated participants' nonvested accounts are used to first reinstate previously forfeited account balances of reemployed participants and any remainder will be used to reduce the Plan Sponsor's discretionary profit sharing contribution for the current or subsequent Plan year in which the forfeiture occurs. For investments held in mutual funds, each participant's account is credited with an allocation of earnings, based on shares owned, and debited by withdrawals, as applicable. 8 9 VESTING - Participants are immediately vested in their contributions, the employer matching contributions, plus earnings thereon. Vesting in the Plan Sponsor's discretionary profit sharing contribution portion of their accounts plus actual earnings thereon is based on years of credited service in accordance with the following schedule: Years of Service Percentage ---------------- ---------- Less than three 0% 3 20% 4 40% 5 60% 6 80% 7 or more 100% INVESTMENT OPTIONS - Upon enrollment in the Plan, a participant may direct the employee contributions and the matching contributions in 25% increments into any of the following investment options: Separate Account A, Separate Account B, or the Guaranteed Fund, which are offered to the Plan through an investment contract with American Physicians Life Insurance Company (APL), a Plan custodian. Effective October 1997, the Plan began offering two additional investment options to plan participants: PICO Holdings, Inc. common stock ("PICO Stock Fund") and Mutual Funds. Separate Account A has an investment objective to invest in individual securities that are selected on the basis of assessment of their relative undervaluation and their prospects for long-term appreciation. Elements such as dividend income and volatility of the security are important but secondary considerations. Separate Account B has an investment objective that is a more conservative approach with varying use of fixed income and/or high dividend securities to lower volatility and increase predictability of income. The amounts allocated to the Guaranteed Fund are retained in the general funds of APL, without requirements as to segregation of investments, and are credited with a guaranteed rate of return of 4%. The Plan Sponsor's discretionary profit sharing contributions are automatically allocated 50% to the Guaranteed Fund and 50% to Separate Account B. Participants may change their investment options quarterly. LOANS TO PARTICIPANTS - Loans to participants are not permitted under the Plan. However, under Citation Insurance Group Salary Reduction Profit Sharing Plan (the "Citation Plan") which was approved to merge into the Plan effective December 31, 1997 (see Note 3), participant loans were permitted to roll over. PAYMENT OF BENEFITS - Upon termination of service, a participant may elect to receive either a lump-sum amount equal to the value of the participant's vested interest in his or her account, or annual installments. If the value of the participants' account is $3,500 or less, the Trustee shall distribute the entire vested account to the participant. Amounts payable to such participants at September 30, 1999 and 1998 were $142,498 and $300,016, respectively. PLAN TERMINATION - While the Plan Sponsor has not expressed any intent to discontinue the Plan or their contributions thereto, they have the right to do so at any time, subject to the provisions of ERISA. In the event of partial or total termination of the Plan, participants' account balances become fully vested and the disposition of the net assets must be made for the benefit of the participants or their beneficiaries. 9 10 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION - The accounting records of the Plan are maintained on the accrual basis. Purchases and sales of securities are recorded on the trade date. Interest income is recorded as earned and dividend income is recorded on the ex-dividend date. INVESTMENT VALUATION - Investments are valued as follows: Investments held through the investment contract are valued at the contract value (see Note 3). Mutual funds and money market funds are valued at quoted market prices. ADMINISTRATIVE EXPENSES - The Plan's expenses are paid by the Plan, as provided by the Plan document. USE OF ESTIMATES - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of net assets and the changes in net assets during the reporting period and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. INVESTMENT CONTRACTS WITH INSURANCE COMPANIES In October 1989, the Plan entered into an investment contract with APL, which was a wholly-owned subsidiary of The Physicians Investment Company, which is a wholly-owned subsidiary of Physicians Insurance Company of Ohio, which is a wholly-owned subsidiary of PICO Holdings, Inc., the Plan Sponsor. Effective December 4, 1998, APL was sold to an unrelated party. APL maintains the contributions in either a general account or two pooled separate accounts. The accounts are credited with earnings on the underlying investments and charged for Plan withdrawals and administrative expenses incurred by APL. The contract accounts are included in the financial statements at the defined contracted value, because it is fully benefit responsive. For example, participants may ordinarily direct the withdrawal or transfer of all or a portion of their investment at contract value, which approximates fair value, as reported to the Plan by APL. There are no reserves against contract value for credit risk of the contract issue or otherwise. The interest rate guaranteed for the Guaranteed fund is 4% annually and the principal is guaranteed. There is no guarantee of principal and interest in relation to Separate Account A and Separate Account B. The Plan's assets in Separate Account A and Separate Account B represent approximately 34.65% (1998-43.5%) and 26.13% (1998-28.19%) of the total assets held by APL in the respective separate accounts. Effective December 31, 1997, the Plan Sponsor authorized the merger of the Citation Plan into the Plan. The net assets available for benefits in the Citation Plan as of the effective date were valued at $2,212,075 in total. The Citation Plan's investment accounts were administered under a previously established investment contract with Nationwide Financial Services ("Nationwide"), which was also the custodian of the Citation Plan assets. During the 1998 plan year the Citation Plan continued to be administered by Nationwide and the 1998 earnings continued to be allocated to participant accounts based on participant compensation or account balance, as defined, until all funds were either distributed to withdrawing participants or transferred to the Plan. As of September 30, 1998, all Citation Plan funds had either been paid to withdrawing participants or transferred into the Plan's investment accounts. 10 11 4. INVESTMENTS The Plan's investments which exceeded 5% of net assets available for benefits as of September 30 consisted of the following: 1999 1998 Separate Account A $ 695,801 $ 873,390 Separate Account B 337,192 416,694 Guaranteed Fund 1,256,821 1,500,360 Separate Account B - Profit Sharing 540,295 528,786 Guaranteed Fund - Profit Sharing 1,072,643 723,387 American Century Select Fund 979,746 788,320 American Century Ultra Fund 783,945 698,598 PICO Stock Fund 544,041 339,750 11 12 5. CUSTODIAL ASSETS The following is a summary of information regarding the Plan that was prepared or derived from information provided by APL, custodian of certain Plan assets, and furnished to the plan administrator. The plan administrator has obtained certification from the custodian that such information is complete and accurate:
SEPTEMBER 30, ------------------------- 1999 1998 APL SEPARATE ACCOUNTS: Investments at contract value - pooled separate accounts: Separate Account A $ 2,077,121 $ 2,008,207 Separate Account B 3,409,795 3,358,717 Investments at fair value: Guaranteed Fund 2,329,464 3,333,934 ----------- ----------- TOTAL INVESTMENTS $ 7,816,380 $ 8,700,858 =========== =========== INTEREST INCOME $ 136,656 $ 167,046 =========== =========== NET APPRECIATION (DEPRECIATION) IN FAIR VALUE OF INVESTMENTS $ 283,183 $(1,209,273) =========== =========== PLAN'S SHARE OF APL SEPARATE ACCOUNTS: Participant Directed: Investments at contract value - pooled separate accounts: Separate Account A $ 695,801 $ 873,390 Separate Account B 337,192 416,694 Investments at fair value: Guaranteed Fund 1,256,821 1,500,360 Non-Participant Directed: Profit Sharing: Separate Account B - at contract value 540,295 528,786 Guaranteed Fund - at fair value 1,072,643 723,387 ----------- ----------- TOTAL INVESTMENTS $ 3,902,752 $ 4,042,617 =========== =========== INTEREST INCOME $ 72,436 $ 90,025 =========== =========== NET APPRECIATION (DEPRECIATION) IN FAIR VALUE OF INVESTMENTS $ 94,929 $ (409,457) =========== ===========
12 13 6. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500 The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500: SEPTEMBER 30, -------------------------- 1999 1998 Net assets available for benefits per the financial statements $ 7,076,422 $ 6,956,186 Amounts allocated to withdrawing participants 300,016 APL contribution receivable (10,443) ----------- ----------- Net assets available for benefits per the Form 5500 $ 7,065,979 $ 6,656,170 =========== =========== ****** 13 14 PICO HOLDINGS, INC. EMPLOYEES 401(k) RETIREMENT PLAN AND TRUST ITEM 27a - SUPPLEMENTAL SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES, SEPTEMBER 30, 1999 --------------------------------------------------------------------------------
NUMBER FAIR OF MARKET DESCRIPTION SHARES COST VALUE American Century Select Fund 19,536 $ 1,172,256 $ 979,746 American Century Ultra Fund 21,910 856,772 783,945 Benham ST Government Fund 6,007 56,381 55,806 American Century Balanced Fund 6,270 106,077 115,926 Benham Prime Money Market 79,801 79,801 79,801 PICO Stock Fund 25,378 648,882 544,041 Huntington Treasury Market Fund IV 6,580 6,580 6,580 Guaranteed Fund 2,329,464 2,329,464 2,329,464 Participant Loans - 9.25% to 9.75% maturing January 16, 2001 to December 31, 2025 25,350 25,350 ----------- --------- TOTAL $ 5,281,563 $4,920,659 =========== ==========
14 15 PICO HOLDINGS, INC. EMPLOYEES 401(k) RETIREMENT PLAN AND TRUST ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS SEPTEMBER 30, 1999 --------------------------------------------------------------------------------
PURCHASES/ COST OF NET GAIN TRANSFERS IN SALES ASSETS (LOSS) IN SERIES (including individual transactions): Guaranteed Fund $ 1,071,679 $1,069,870 $1,069,870 $ 0
INDIVIDUAL: There were no individual transactions which exceeded 5% of Net Assets Available for Benefits. 15 16 PICO HOLDINGS, INC. EMPLOYEES 401(k) RETIREMENT PLAN & TRUST ANNUAL REPORT ON FORM 11-K FOR PLAN YEAR ENDED SEPTEMBER 30, 1999 INDEX TO THE EXHIBITS --------------------- Exhibit Number Description -------------- ----------- 1 Consent of Deloitte & Touche LLP, Independent Auditors 16