21st Century Insurance Group Reports Q1 Results

April 20, 2005

Woodland Hills, Calif.-based 21st Century Insurance Group reported net income of $19.4 million ($0.23 per share) for the first quarter of 2005, compared to $19.8 million ($0.23 per share) for the same period in 2004. The 2004 results include net realized capital gains of $7.6 million, compared to a net realized capital loss of $0.5 million for the same period in 2005.

The GAAP combined ratio was 95.9 percent in the first quarter of 2005, compared to 96.6 percent for the same period in 2004.

Direct premiums written increased 3.4 percent to $352.1 million in the first quarter of 2005, compared to $340.6 million for the same period in 2004. Substantially all of the growth in direct premiums written was generated outside of California. California direct premiums written increased by 0.5 percent to $332.6 million, compared to $331.0 million for the same period in 2004. Non-California direct premiums written increased by 103 percent to $19.5 million, compared to $9.6 million for the same period in 2004.

“Expansion outside of California is a long-term strategy of 21st. With our entry into the Midwest in Q1, 2004 and Texas in Q1, 2005, we have increased the size of the market we operate in from $28 billion to $53 billion,” said Bruce Marlow, president and CEO of 21st Century Insurance. “From December 2004 to March 2005, non-California vehicles-in-force increased by over 32 percent to approximately 86,000. Non-California vehicles-in-force, as a percentage of total vehicles-in-force, increased from 4.3 percent to 5.5 percent in that same time period.”

“Consumers in our core California market have been remarkably quiet. The primary provocation for consumer shopping is a rate increase from their current carrier and there have been no significant rate increases by a top ten company in California since 2003,” said Marlow. “Q3, 2004 rate decreases by AAA and State Farm in California, which represent 23 percent of the market, along with substantially increased advertising spend by ourselves and several competitors in Q1, 2005 have not appeared to generate much consumer interest.”

“In Q1, 2005, we experienced a higher than normal level of expenses reflecting start-up marketing costs in new markets, California marketing costs noted above, plus non-capitalizable implementation costs of our customer service technology platform. Conversion of California policyholders to this real-time, state of the art system has begun and is expected to be completed by year-end. This system will be a source of cost savings and improved customer service in the years ahead,” added Marlow.

Stockholders’ equity at March 31, 2005 decreased 0.1 percent to $773.4 million, compared to $774.4 million at Dec. 31, 2004. Book value per share at March 31, 2005 declined 0.3 percent to $9.03 per share from $9.06 per share at Dec. 31, 2004. These changes resulted from a 0.7 percent decline in the fair market value of our investment grade bond portfolio as a result of changes in market interest rates.

Statutory surplus increased 0.4 percent to $617.3 million at March 31, 2005 from $614.9 million at Dec., 2004. The net premiums written to statutory surplus ratio was unchanged at 2.2 for March 31, 2005, compared to Dec. 31, 2004.

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