830122--3/12/2007--PICO_HOLDINGS_INC

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{acquisition, growth, future}

{stock, price, operating}

{loan, real, estate}

{loss, insurance, financial}

{cost, regulation, environmental}

{interest, director, officer}

{condition, economic, financial}

{cost, operation, labor}

{operation, international, foreign}

{personnel, key, retain}

{operation, natural, condition}

{gas, price, oil}

{financial, litigation, operation}

Our future water revenues are uncertain and depend on a number of factors that may make our revenue streams and profitability volatile. Our water activities may become concentrated in a limited number of assets, making our growth and profitability vulnerable to fluctuations in local economies and governmental regulations. Our water sales may meet with political opposition in certain locations, thereby limiting our growth in these areas. The fair values of our real estate and water assets are linked to external growth factors. Variances in physical availability of water, along with environmental and legal restrictions and legal impediments, could impact profitability from our water rights. We may not receive all of the permitted water rights we expect from the water rights applications we have filed in Nevada. Our sale of water may be subject to environmental regulations which would impact the profitability of such sales. Purchasers of our real estate and water assets may default on their obligations to us and adversely affect our results of operations and cash flow. If we do not successfully locate, select and manage acquisitions and investments, or if our acquisitions or investments otherwise fail or decline in value, our financial condition could suffer. Failure to successfully manage newly acquired companies could adversely affect our business. Our acquisitions may result in dilution to our shareholders and increase liabilities. We may not be able to sell our investments when it is advantageous to do so and we may have to sell these investments at a discount to fair value. We may not be able to sell our investments when it is advantageous to do so and we may have to sell these investments at a discount to fair value. Our acquisitions of and investments in foreign companies subject us to additional market and liquidity risks which could affect the value of our stock. Volatile fluctuations in our insurance reserves could cause our financial condition to be materially misstated. If we underestimate the amount of reinsurance we need or if the companies with which we have reinsurance agreements default on their obligations, we may be unable to cover claims made and that would have a material adverse effect on our results of operations. State regulators could require changes to our capitalization and/or to the operations of our insurance subsidiaries, and/or place them into rehabilitation or liquidation. If we are required to register as an investment company, we will be subject to a significant regulatory burden and our results of operations will suffer. We are directly impacted by international affairs, which directly exposes us to the adverse effects of any foreign economic or governmental instability. Because our operations are diverse, analysts and investors may not be able to evaluate us adequately, which may negatively influence our share price. Because our operations are diverse, analysts and investors may not be able to evaluate us adequately, which may negatively influence our share price. Fluctuations in the market price of our common stock may affect your ability to sell your shares. We may not be able to retain key management personnel we need to succeed, which could adversely affect our ability to successfully operate our businesses. We use estimates and assumptions in preparing financial statements in accordance with accounting principles generally accepted in the United States of America. Repurchases of our common stock could have a negative effect on our cash flows and our stock price. Future changes in financial accounting standards may cause adverse unexpected revenue fluctuations and affect our reported results of operations. Future changes in financial accounting standards may cause adverse unexpected revenue fluctuations and affect our reported results of operations. Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses. Absence of dividends could reduce our attractiveness to investors. We may need additional capital in the future to fund the growth of our business, and financing may not be available. Litigation may harm our business or otherwise distract our management. THE FOREGOING FACTORS, INDIVIDUALLY OR IN AGGREGATE, COULD MATERIALLY ADVERSELY AFFECT OUR OPERATING RESULTS AND CASH FLOWS AND FINANCIAL CONDITION AND COULD MAKE COMPARISON OF HISTORIC OPERATING RESULTS AND CASH FLOWS AND BALANCES DIFFICULT OR NOT MEANINGFUL.

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830122--3/12/2007--PICO_HOLDINGS_INC_/NEW