21st Century Insurance Group Reports 35% Increase in Third Quarter Net Income as Non-California Premium Climbs 79%

Business Wire, Nov 2, 2006

October 2006 Entry into New Jersey a Significant Milestone as 21st Now Writes Business in over Half of the U.S. Private Passenger Auto Market

WOODLAND HILLS, Calif. -- 21st Century Insurance Group (NYSE: TW) today reported net income of $28.4 million ($0.33 per basic share) for the third quarter of 2006, compared to $21.1 million ($0.25 per basic share) for the same period in 2005. The third quarter results include decreases to reserves for prior accident year losses and loss adjustment expenses ("LAE") totaling $14.4 million, versus decreases of $1.2 million in the third quarter of 2005. The third quarter results also include $0.2 million of net realized investment gains, compared to net realized investment losses of $0.9 million in the third quarter of 2005. In October 2006, the Company announced its entry into the New Jersey private passenger automobile insurance market.

Other third quarter financial highlights:

* Direct premiums written of $337.2 million, versus $349.1 million in the third quarter of 2005 (3.4% decrease)

* California direct premiums written of $295.8 million, versus $326.0 million in the third quarter of 2005 (9.3% decrease)

* Non-California direct premiums written of $41.4 million, versus $23.1 million in the third quarter of 2005 (79.6% increase)

* GAAP combined ratio of 91.7% versus 95.2% for the third quarter of 2005. 2006 was favorably impacted by 4.4 points of prior accident year loss and LAE reserve decreases, versus 0.3 points in 2005

"We are turning 21st into a national competitor. As a direct-to-consumer company, having more markets and more consumers to target increases our opportunities and operating flexibility. In the third quarter, we continued to expand into new markets and maintained our profitability," said President and Chief Executive Officer Bruce Marlow.

For the nine months ended September 30, 2006, net income was $78.0 million ($0.91 per basic share), compared to $61.0 million ($0.71 per basic share) for the same nine-month period in 2005. The 2006 nine-month results include decreases to prior accident year loss and LAE reserves totaling $39.5 million, versus decreases of $20.8 million for the same nine-month period in 2005. The 2006 nine-month results also include net realized investment losses of $0.9 million, compared to net realized investment losses of $2.7 million for the same nine-month period in 2005. Other nine-month financial highlights:

* Direct premiums written of $992.6 million, versus $1,029.9 million for the same nine-month period in 2005 (3.6% decrease)

* California direct premiums written of $895.0 million, versus $967.8 million for the same nine-month period in 2005 (7.5% decrease)

* Non-California direct premiums written of $97.6 million, versus $62.1 million for the same nine-month period in 2005 (57.2% increase)

* GAAP combined ratio of 92.6% versus 95.5% for the same nine-month period in 2005. 2006 was favorably impacted by 4.0 points of prior accident year loss and LAE reserve decreases, versus 2.0 points in 2005

Stockholders' equity at September 30, 2006 increased to $897.6 million, compared to $813.0 million at September 30, 2005. Book value per share at September 30, 2006 improved to $10.39 per share from $9.47 per share at September 30, 2005. Operating cash flows for the third quarter of 2006 were $19.8 million, compared to $52.1 million in the same period of 2005. Operating cash flows for the nine months ended September 30, 2006 were $84.3 million, compared to $122.4 million for the same period of 2005.

The addition of New Jersey means more than 50 percent of the national auto insurance market has access to 21st's low prices, superior policy features and great customer service. At $6.3 billion of Direct Written Premium, New Jersey is the 7th largest market for personal auto insurance in the United States. Regulatory reforms in 2003 have made the state more attractive for new entrants. New Jersey is the latest step in the company's geographic expansion strategy, as 21st entered the Midwest in 2004, Texas in 2005 and three Eastern states - Florida, Georgia & Pennsylvania - during the second quarter of 2006. During the first ten months of 2006, the Company has increased the percentage of the U.S. personal auto market in which it operates from 34% to 53%.

"Over the last few years, the Company has consistently invested in the capability to execute its national expansion strategy. We are seeing the results of this focused effort, as the percent of our premium that is written outside California has grown steadily. We wrote 12.3% of the current quarter's premium outside California, versus 6.6% during the same quarter last year," said the Company's Senior Vice President and Chief Financial Officer, Steve Erwin. "These investments and our consistent profitability show the strength and focus of our business model. We have a conservative balance sheet and a strong capital position which strongly support our national expansion strategy," added Erwin.

About 21st

Founded in 1958, 21st Century Insurance Group is a direct-to-consumer provider of personal auto insurance. With $1.4 billion of revenue in 2005, the Company insures over 1.5 million vehicles in Arizona, California, Florida, Georgia, Illinois, Indiana, Nevada, New Jersey, Ohio, Oregon, Pennsylvania, Texas and Washington. 21st provides superior policy features and 24/7 customer service at a competitive price. Customers can purchase insurance, service their policy or report a claim at www.21st.com or on the phone with our licensed insurance professionals at 1-800-211-SAVE, 24 hours a day, 365 days a year. Service is offered in English and Spanish, both on the phone and on the web. 21st Century Insurance Company, 21st Century Casualty Company, and 21st Century Insurance Company of the Southwest are rated A by A. M. Best, Fitch Ratings and Standard & Poor's.