PICO Holdings - Agribusiness Operations

WATER RESOURCE AND
WATER STORAGE
OPERATIONS

REAL ESTATE
OPERATIONS

AGRIBUSINESS
OPERATIONS

INSURANCE IN
"RUN-OFF"
OPERATIONS

In December 2010, we completed a business combination and funded $60 million of equity finance to a new operation, PICO Northstar Hallock, LLC doing business as Northstar Agri Industries ("Northstar"), which will construct and operate a canola seed processing plant near Hallock, Minnesota. It is anticipated that construction will be complete, and that the plant will commence production of canola oil and canola meal, in the fourth quarter of 2012.

The plant will have initial crushing capacity of 1,000 tons per day. Pending the completion of additional environmental permitting, it is estimated that the capacity can be increased to 1,500 tons per day at a cost of $10.5 million.

The plant is strategically located northern Minnesota, 25 miles south of the Canadian border and approximately 150 miles north of Fargo, North Dakota, with approximately one million acres currently planted in canola within a 100 mile radius in the U.S. and Canada. We believe that the plant's location in the southeastern portion of the North American canola growing region is a comparative advantage, and will result in cost efficiencies. The plant will also be in close proximity to Midwest markets for refined canola oil and for canola meal, which is used in dairy and poultry farming, and to transportation infrastructure.

Northstar has executed agreements with Land O'Lakes Purina Feed, LLC ("Land O'Lakes"), which is the largest North American consumer of protein meal. The agreements commit Land O'Lakes to guarantee the sale of 100% of the plant's canola oil and canola meal output for a period of five years at market-based prices.

Currently, domestic production of canola oil meets approximately 35% of domestic demand, and the other 65% is imported, primarily from Canada. In developed countries, vegetable oil has overtaken animal fat in consumers' diets, due to greater awareness of the health benefits of unsaturated fat in vegetable oil, and consumption of canola oil has grown more rapidly than other vegetable oils, partly because it has the lowest saturated fat content of edible oils. Over the past ten years, U.S. consumption of canola oil has increased by 27% in total and 15% per capita.

Canola meal is the second most consumed protein meal in the world, after soybean meal. The dairy industry is the primary consumer of canola meal in the U.S. The amino acid profile of canola meal enhances the milk production of dairy cows.

PICO Northstar Hallock Management

Neil Juhnke, President and Chief Operating Officer

PICO Holdings' agribusiness operations will be managed by Mr. Neil C. Juhnke, who has a degree in Mechanical Engineering and over 20 years of experience in the food processing industry with American Crystal Sugar Company, a grower owned Fortune 500 food company, and as an independent consultant. Mr. Juhnke's experience includes successful management of profitability of high capacity commodity processing plants. Mr. Juhnke has deep experience in all aspects of plant management, including maintenance, production, capital projects, safety, product quality, environmental compliance and general and executive management. Mr. Juhnke has extensive capital project experience with several project delivery structures including Engineering, Procurement and Construction (EPC), Design Build, and internal design, bidding, and construction management.

Top of Agribusiness Page