SHAREHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2011

Stockholders' Equity Note [Abstract]

Shareholders' Equity

SHAREHOLDERS’ EQUITY:

Long Term Incentive Plan

As described in Note 1, the 2005 Plan was adopted by the Board of Directors and approved by shareholders on December 8, 2005. The Plan provides for the grant or award of various equity incentives to PICO employees, non-employee directors, and consultants. A total of 2,654,000 shares of common stock are issuable under the Plan and it provides for the issuance of incentive stock options, non-statutory stock options, free-standing stock-settled stock appreciation rights (“SAR”), restricted stock awards (“RSA”), performance shares, performance units, restricted stock units (“RSU”), deferred compensation awards, and other stock-based awards.

A summary of activity of RSU and RSA is as follows:

	RSU		RSA
Outstanding at January 1, 2011	594,000		4,200
Granted	—		5,046
Vested	—		(4,200		)
Outstanding and unvested at December 31, 2011	594,000		5,046
Unrecognized compensation cost, expected to be recognized over the next 3 years (in thousands)	$	10,023	$	62

Restricted Stock Units (RSU):

In October 2010 and March 2009, the Company awarded to various officers 454,000 RSU that will vest in 2014, and 300,000 RSU that will vest in 2012, respectively. RSU entitle the recipient, who must be continuously employed by the Company until the vesting date, unless employment contracts stipulate otherwise, the right to receive one share of PICO common stock with no monetary payment required. RSU do not vote and are not entitled to receive dividends. The total fair value of the awards was $13.9 million and $5.9 million at the date of grant for the 2010 and 2009 awards, respectively based on the Company’s closing stock price on the respective date of grant. Compensation expense is recognized ratably over the vesting period for each grant. The Company recorded $4.4 million, $3.8 million and $1.6 million of compensation expense for the awards during 2011, 2010 and 2009, respectively.

Restricted Stock Awards (RSA):

Granted in 2011 and 2010:

In May of each year since 2008, and as part of a duly adopted revised director annual compensation program, the Company has issued 700 RSA (or a proration of such amount based on the director’s start date) to each non-employee director of the Company.  Each award vests one year from the date of grant.  Until vested, the awards are held in escrow; however, the shares can be voted and the holder is entitled to any dividends.  Once vested, common stock of the Company is distributed to the recipient.  Each award is valued at the Company’s closing stock price on the date of grant and the compensation expense is recognized over the vesting period of the award.

Stock-Settled Stock Appreciation Right:

A summary of SAR activity is as follows:

	SAR		Weighted Average Exercise Price		Weighted Average Contractual Term Remaining
Outstanding at January 1, 2011	1,822,079		$	36.15	5.5	years
Expired	(10,000	)	$	33.76
Outstanding  and exercisable at December 31, 2011	1,812,079		$	36.16	4.5	years

At December 31, 2011, none of the outstanding SAR were in-the-money. 

There were no SAR granted or exercised during 2011, 2010 or 2009. However, 10,000 SAR expired worthless during 2011. There was no compensation expense recognized for SAR during the year ended December 31, 2011 as there were no unvested SAR during the period. Compensation expense recognized for SAR for the years ended December 30, 2010, and 2009 was $728,000 and $2.8 million respectively.

The fair value of each SAR awarded was estimated on the grant date using a Black-Scholes option pricing model that uses various assumptions and estimates to calculate a fair value as described below.

Expected volatility was based on the actual trading volatility of the Company’s common stock.  The Company uses historical experience to estimate expected forfeitures and estimated terms.  The expected term of a SAR grant represents the period of time that the SAR is expected to be outstanding.  The risk-free rate is the U.S. Treasury Bond yield that corresponds to the expected term of each SAR grant.  Expected dividend yield is zero as the Company has not and does not foresee paying a dividend in the future.  Forfeitures are estimated to be zero based on the strike price and expected holding period of the SAR.

Expected volatility	29% — 31%
Expected term	7 years
Risk-free rate	4.3% — 4.7%
Expected dividend yield	—	%
Expected forfeiture rate	—	%

The fair value of each award was estimated on the grant date using a Black-Scholes option pricing model that uses various assumptions and estimates to calculate a fair value as described below.

Expected volatility was based on the actual trading volatility of the Company’s common stock.  The Company uses historical experience to estimate expected forfeitures and estimated terms.  The expected term of a SAR grant represents the period of time that the SAR is expected to be outstanding.  The risk-free rate is the U.S. Treasury Bond yield that corresponds to the expected term of each SAR grant.  Expected dividend yield is zero as the Company has not and does not foresee paying a dividend in the future.  Forfeitures are estimated to be zero based on the strike price and expected holding period of the SAR.

Common Stock Offerings

During 2009, the Company completed public offerings of its common stock of 3,750,000 shares at a price of $27 per share.  The net proceeds from the offerings were $95.7 million, after deducting $5.5 million offering expenses.  The offerings were made pursuant to the Company’s universal shelf registration statement on Form S-3 that was declared effective on December 3, 2007.