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, 2002
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period from to
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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 11
Page 1 of 12 pages
REQUIRED INFORMATION
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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 Benefits, September 30, 2002 and
2001
Statement of Changes in Net Assets Available for Benefits for the Year
Ended September 30, 2002
Notes to the Financial Statements
Supplemental Schedules:
Schedule H Item 4i - Schedule of Assets as of September 30, 2002
Index to Exhibits
Exhibit 1 - Consent of Independent Auditors
2
SIGNATURE
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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/ Maxim C. W. Webb
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Date: July 15, 2003 Chief Financial Officer and Treasurer
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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, 2002 and 2001, and the related statement of changes in net
assets available for benefits for the year ended September 30, 2002. 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, 2002 and 2001, and the changes in net assets available for
benefits for the year ended September 30, 2002, in conformity with accounting
principles generally accepted in the United States of America.
As discussed in Note 5 to the financial statements, on March 31, 2003,
approximately 51% of plan participants were terminated as a result of PICO
Holdings, Inc.'s sale of Sequoia Insurance Company.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule identified in
the index is presented for the purpose of additional analysis and is not a
required part of the basic financial statements, but is 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 schedule is the responsibility of the Plan's management.
Such supplemental schedule has been subjected to the auditing procedures applied
in our audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects when considered in relation to the basic
financial statements taken as a whole.
/s/ DELOITTE & TOUCHE LLP
April 1, 2003
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PICO HOLDINGS, INC. EMPLOYEES 401(k)
RETIREMENT PLAN AND TRUST
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
SEPTEMBER 30, 2002 AND 2001
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ASSETS 2002 2001
INVESTMENTS:
Mutual funds $5,829,450 $5,875,227
Common stock, PICO Holdings, Inc. 739,052 646,614
Cash 5,361 1,826
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Total investments 6,573,863 6,523,667
RECEIVABLES:
Employer's matching contributions 10,773 10,267
Participants' contributions 11,550 10,463
Employer's profit sharing contributions 467,791 461,911
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Total receivables 490,114 482,641
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NET ASSETS AVAILABLE FOR BENEFITS $7,063,977 $7,006,308
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See notes to financial statements.
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PICO HOLDINGS, INC. EMPLOYEES 401(k)
RETIREMENT PLAN AND TRUST
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED SEPTEMBER 30, 2002
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ADDITIONS:
Additions to net assets attributed to interest and dividends $ 143,801
Contributions:
Employer 815,384
Participants 363,336
Rollovers 969
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Total additions 1,323,490
DEDUCTIONS:
Net depreciation in fair value of investments (686,585)
Deductions from net assets attributed to benefits paid to participants (579,236)
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Total deductions (1,265,821)
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NET INCREASE IN NET ASSETS AVAILABLE FOR BENEFITS 57,669
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 7,006,308
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End of year $ 7,063,977
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See notes to financial statements.
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PICO HOLDINGS, INC. EMPLOYEES 401(k)
RETIREMENT PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2002 AND 2001
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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 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 has been determined to be qualified for tax-exempt status by
the Internal Revenue Service ("IRS").
CONTRIBUTIONS--Each year, participants may contribute up to the maximum
allowed by law of pretax annual compensation, as defined in the Plan, not
to exceed $8,500 (based on Section 401(a)(17) compensation limit of
$170,000 as indexed). The Plan Sponsor matches 100% of the elective
deferral of base compensation that a participant contributes to the Plan.
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--Each participant's account is credited with the
participant's contributions, employer matching contributions, earnings as
applicable, and allocations of (a) the Plan Sponsor's discretionary profit
sharing contributions and (b) Plan earnings, and debited for withdrawals
as applicable. 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.
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%
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INVESTMENT OPTIONS--Upon enrollment in the Plan, a participant may direct
100% of elective deferrals, employer match and discretionary profit
sharing amounts. A participant chooses from a number of different mutual
fund options. In addition, participants are able to invest in the stock of
PICO Holdings, Inc., the Plan Sponsor.
LOANS TO PARTICIPANTS--Loans to participants are not permitted under the
Plan, and no loans were outstanding at September 30, 2002 and 2001.
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 $5,000 or less,
the Trustee shall distribute the entire vested account to the participant.
Amounts payable to such participants at September 30, 2002 and 2001 were
$4,570 and $82,389, 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.
TAX STATUS--The Internal Revenue Service has determined and informed the
Plan Sponsor by a letter dated December 7, 1994, that the Plan and related
trust are designed in accordance with applicable sections of the Internal
Revenue Code ("IRC"). Although the Plan has been amended since receiving
the determination letter, the Plan Sponsor, the Plan administrator and the
Plan's tax counsel believe that the Plan is designed and is currently
being operated in compliance with the applicable requirements of the IRC.
On September 27, 2002, the Plan Sponsor requested the issuance of a new
determination letter for the amended and restated Plan, effective October
1, 1997. No determination letter has been received.
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: mutual funds,
money market funds and PICO Holdings, Inc. common stock fund are valued at
quoted market prices.
ADMINISTRATIVE EXPENSES--The Plan's expenses are paid by the Plan Sponsor.
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 at the date of
the financial statements. Actual results could differ from those
estimates.
INVESTMENT RISK--The Plan utilizes various investment instruments.
Investment securities, in general, are exposed to various risks, such as
interest rate, credit and overall market volatility. Due to the level of
risk associated with certain investment securities, it is reasonably
possible that changes in the values
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of investment securities will occur in the near term and that such changes
could materially affect the amounts reported in the statements of net
assets available for benefits.
3. INVESTMENTS
The Plan's investments which exceeded 5% of net assets available for
benefits as of September 30 consisted of the following:
2002 2001
Smith Barney Money Market--Government Portfolio $1,590,954 $1,827,049
Strong Government Securities 784,066 635,752
PICO Holdings, Inc., Common Stock 739,052 646,614
American Century Ultra Fund 685,188 711,112
Royce Premier Fund 493,394 400,290
Neuberger Berman Focus Trust Fund 489,807
Dreyfus Founders Discovery Fund 351,388
4. RELATED PARTY TRANSACTIONS
Plan investments include common stock of PICO Holdings, Inc. and Smith
Barney Money Market Government Portfolio. PICO Holdings, Inc. is the Plan
Sponsor and Salomon Smith Barney is the Plan Custodian and record keeper.
The Plan Sponsor pays all administrative expenses of the Plan.
5. SUBSEQUENT EVENT
PARTIAL PLAN TERMINATION--On March 31, 2003, PICO Holdings, Inc. sold its
wholly-owned subsidiary Sequoia Insurance Company. As a result, Sequoia
employees who were participants in the Plan were terminated and became
fully vested. Approximately 51% of the active participants have been
terminated as a result of this partial plan termination.
******
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PICO HOLDINGS, INC. EMPLOYEES 401(k)
RETIREMENT PLAN AND TRUST
SCHEDULE H ITEM 4i--SUPPLEMENTAL SCHEDULE OF ASSETS
SEPTEMBER 30, 2002
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NUMBER FAIR
OF MARKET
DESCRIPTION SHARES COST VALUE
INVESTMENTS--MUTUAL FUNDS:
ABN AMRO Montag & Caldwell Growth--N Share 5,373 $ 153,583 $ 96,074
American Century Ultra Fund 33,345 1,234,141 685,188
Citi S&P 500 Index Funds 18,948 243,196 158,215
Credit Suisse Warburg Pincus 10,980 107,560 109,028
Dreyfus Emerging Markets 13,991 161,691 144,064
Dreyfus Founders Discovery Fund 18,360 680,173 344,839
Dreyfus Premier Core Value 16,244 454,802 331,264
Dreyfus US Treasury Long 860 13,282 14,049
Gabelli Growth Fund 8,208 309,768 147,585
Gabelli Global Growth Fund 1,938 38,021 20,403
ING GNMA Income Fund 11,080 93,732 100,715
INVESCO Health Sciences 4,584 226,797 183,169
Mercury HW International Value 1,116 25,784 17,607
Neuberger Berman Focus Trust Fund 19,427 618,340 273,722
Royce Premier Fund 54,019 554,934 493,394
Scudder International Fund 11,439 556,584 335,114
Smith Barney Money Market--Government Portfolio 1,590,954 1,590,954 1,590,954
Strong Government Securities 68,523 719,910 784,066
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Total Mutual Funds 7,783,252 5,829,450
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PICO Holdings, Inc., Common Stock 67,185 812,451 739,052
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TOTAL $8,595,703 $6,568,502
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PICO HOLDINGS, INC.
EMPLOYEES 401(k) RETIREMENT PLAN & TRUST
ANNUAL REPORT ON FORM 11-K
FOR PLAN YEAR ENDED SEPTEMBER 30, 2002
INDEX TO THE EXHIBITS
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Exhibit Number Description
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1 Consent of Deloitte & Touche LLP, Independent Auditors
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