Exhibit 99.2
Exhibit 99.2
PICO Holdings
PICO Holdings, Inc.
Nasdaq: PICO
May 2009
Safe Harbor Statement
This presentation may contain “forward-looking statements.” Forward- looking statements often address current expected future business and financial performance, and may contain words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” or “will.” Forward-looking statements may address matters that are uncertain. These uncertainties may cause actual future results to be materially different than those expressed in the forward-looking statements. PICO does not undertake to update any forward-looking statements, and undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made. Other risks and uncertainties are detailed from time to time in PICO’s filings with the U.S. Securities and Exchange Commission, including those described under the heading “Risk Factors” in the Company’s annual report, quarterly reports and other periodic reports.
PICO Holdings, Inc.
We are a diversified holding company that seeks to acquire assets and businesses that we identify as undervalued and are unique or strategic and where our participation in operations can result in the recognition of fair value for the business as well as create additional value.
Our objective is to maximize long-term growth in book value per share.
“Opportunism is PICO’s stock-in-trade. It buys assets not because they are pretty, or because they seem to make a coherent fit with assets previously acquired; it buys them because they are value-laden” (Grant’s, May 30, 2008).
PICO Overview
Acquires and develops unique undervalued assets including:
Water Assets, primarily in the southwestern United States
Undeveloped Real Estate
Book value per share increase from $5.83 in 1994 to $25.36 as of December 31, 2008
15 year CAGR of approximately 15% pre-tax with minimal leverage
Increasing supply/demand imbalances due to continued population growth in core markets
Unique and Diversified Assets
Net Book Value of $477.7 million ($25.36 per share) as of December 31, 2008
17% 43% Water Resource and Real Estate Storage Operations* Operations* $80.9 $206.4 Insurance in “Run Off”**
$64.4
Corporate**
14% $126.0
26%
Cash to Equity ratio: 20%
Debt to Equity ratio: 10%
*Assets held at cost
**Assets held at fair value
Water: A Critical Issue for the Southwest
Significant population growth relative to decreasing availability of water resources
Key challenges:
Access to new sources of economic water
Limited and finite clean water supply
Inadequate water storage infrastructure
Water and land policies influencing resource utilization
Population Growth
April 1, 2000 – July 1, 2008
Nevada 30.1% Arizona 26.7% Colorado 14.8% Idaho 17.8% California 8.5%
8.0% Total U.S.
Source: U.S. Census Bureau
July 1, 2007 – July 1, 2008
Nevada 1.8% Arizona 2.3% Colorado 2.0% Idaho 1.8% California 1.0%
0.9% Total U.S.
Source: U.S. Census Bureau
PICO’s Water Assets Located in Areas of Greatest Need
Southwestern U.S. water supply forecast through 2025
Salt Lake City
Denver Carson City Sacramento
Santa Fe
Phoenix
Unmet rural water needs Conflict potential – Moderate Conflict potential – Substantial Conflict potential – Highly likely
Colorado water rights
Vidler Water Recharge Facility
Harquahala Valley Irrigation District
Lincoln County Project
Tule desert groundwater and Toquop Energy, Inc.
Sandy Valley
Semitropic Water Storage District
Fish Springs Ranch
Diablo Plateau
Austin
Source: Department of Interior and Vidler Water Company
Water Resource Development
Identification and Acquisition
Permitting Development Sale
Projects can span 10+ years
Site Feasibility Analysis
Purchase assets at attractive valuations
Localized relationships
Public participation and support
Deep industry expertise (Environmental Impact Statement (EIS), Endangered Species Act, Section 7, etc...)
Maximizing aquifer potential (managed groundwater recharge and augmentation wells)
Capital investments to bridge supply and demand
Full process may take as long as 10 years
Buyers of groundwater
Developers
Providers of municipal/industrial water supplies
Public Agencies
Energy Companies
Key Water Resource Assets
Fish Springs Ranch and Carson-Lyon
The issues:
Limited water supplies to support further community developments
Inefficient allocation of available water between agricultural users and growing municipal or industrial users
Inadequate infrastructure to fully utilize existing and new water supplies
The Fish Springs Ranch solution:
Project provides new water supply of 8,000 acre-feet to meet master-planned water demands of at least 12,000 acre-feet
Constructed 35 miles of pipeline to deliver water from Fish Springs Ranch to the north valleys of Reno
The Carson-Lyon solution:
Agreement to connect Carson City and Lyon County, Nevada municipal water systems
Development of Company-owned Carson River water rights to approximately 4,000 acre-feet of municipal water for use in the Dayton corridor area which has indicated demand of over 20,000 acre-feet of water
Key Water Storage Assets
Vidler Arizona Recharge Facility
The issues:
Population growth is expected to exceed currently available water supplies
Inadequate water storage infrastructure for Colorado River and other surface water rights
The solution:
Company is currently buying and storing water on its own account
Vidler has net recharge credits of more than 170,000 acre-feet of water in storage at its Arizona Recharge Facility
Land Holdings: Nevada Land and Resource Company, LLC
Sale of land and water rights when we believe highest and best value may be achieved
Development of water rights
Development of land in and around growing municipalities
Retention and management of substantially all natural resources
Water
Geothermal
Mineral rights
Land Holdings: UCP
New land acquisition and development business established in 2008 to respond to current regional and national homebuilders’ liquidity crisis
Business Plan: to acquire well-located finished lots, partially developed lots, multi-residential and commercial properties in select California markets at steep discounts to today’s replacement cost
Rigorous due diligence and long-term holding horizon
Insurance in “Run Off”
Insurance in “Run Off”
Description of Assets
Two holdings:
Physicians Insurance of Ohio – running off medical professional liability insurance loss reserves
Citation Insurance Company
– running off property and casualty and workers’ compensation loss reserves
Strategy
Earn excess investment returns which accrue to shareholders, not policy holders
Since 2000, equities within PICO’s insurance companies’ investment portfolios have generated a total return of 109%
Experienced Management Team
John R. Hart
President, CEO
Maxim C. W. Webb Richard H. Sharpe Damian C. Georgino
EVP, CFO EVP, COO EVP, CLO
Name Position Years with PICO Background
John Hart President, CEO and Director 15 Former Principal ad Detweiler Ryan & Co., Inc., Investment Bank
Max Webb Executive Vice President, CFO and 15 Former Manager at KPMG Treasurer
Rich Sharpe Executive Vice President and COO 31 Former COO of Physicians Insurance
Damian Georgino EVP - Corpirate Development and 2 Served multiple executive roles at U.S. Filter Chief Legal Officer
Dorothy Timian-Palmer President and COO - Vidler and NLRC 11 Former Utilities Director for Carson City, NV
Steve Hartman EVP - Corporate Development and 8 Served as a law clertk at Nevada Supreme Court Corporate Counsel - Vidler and NLRC Justice Cameron Batjer and later entered private law practice concentrating in real estate for over 25 years
W.Raymond Webb Vice President, Investments 10 Has been with PICO Holdings since August 1999 as Chief Investment Analyst and became Vice President, Investments in April 2003
Value Creation and Preservation
Book Value per Share
$30.00
$27.92
$25.52 $25.36
$25.00
$22.67
$20.00 $19.40
$15.00
$10.00
2004 2005 2006 2007 2008
Year End
Shareholders’ Equity
($ in millions) $600.0 $525.9 $500.0 $477.7
$405.2 $400.0
$300.9 $300.0 $239.9
$200.0
$100.0
–
2004 2005 2006 2007 2008
Year End
15 Year Book Value per Share CAGR of Approximately 15% Pre-Tax
Key Growth Strategies
Expand development of the water resource and water storage segment
Water Resource and Storage Operations
Positioned to take advantage of demographic trends in the Southwest
While the economic slowdown may delay monetization, water assets continue to appreciate based on population growth and persistent drought conditions
Increase investment in Union Community Partners (“UCP”)
Expansion of Union Community Partners (or “UCP”) Project
Acquiring attractive and well-located finished lots, partially-developed lots,
multi-residential and commercial properties in select California markets
Capitalize on developers and homebuilders that have liquidity challenges as a result of the downturn in the real estate market
Make additional investments in unique undervalued assets and businesses
New Acquisitions
Advantageously invest in opportunities created in the current market environment, including corporate orphans and generational dispositions
Investment Considerations
Unique, diversified assets
Strategic water and land assets
Opportunity for liquid investment in compelling but typically non-liquid businesses and asset classes
Increasing supply/demand imbalances due to continued population growth in core markets
Book value per share increase from $5.83 in 1994 to $25.36 as of December 31, 2008
15 year CAGR of approximately 15% pre-tax with minimal leverage
PICO Holdings
