21st Century Insurance Group Reports Fourth Quarter Results and Improving Growth in Direct Premiums Written.

WOODLAND HILLS, Calif. -- 21st Century Insurance Group (NYSE:TW) today reported an upturn in premium growth. "We have improved from a 3.4% year-over-year decline in third quarter of 2006 to a 1.9% year-over-year increase in direct premiums written in the fourth quarter," said President and Chief Executive Officer Bruce Marlow. "This turnaround is continuing in the first quarter of 2007, with new customer activity more than double the level of the first quarter of 2006. Since December 31, 2006, total company Vehicles-in-Force ("VIF") have increased 2.3% to 1.582 million, as of February 25th, 2007," added Marlow.

Driving the growth is the Company's expansion into eight new states in 2006, increasing the share of total United States personal auto market in which the Company operates from 34% to 60%. Non-California VIF represents 19.0% of the Company's total VIF as of February 25th, 2007, compared to 16.5% at year-end 2006 and 8.2% at year-end 2005.

Streamlining of Operations

The Company also announced a reduction of approximately 110 employees, a 4% reduction of the Company's total work force of approximately 2,900 employees. The Company expects to incur approximately $3.7 million of severance expense in the first quarter of 2007 as a part of this action. The Company also intends to reduce the number of information technology contractors from approximately 300 to 20 over the next three months. A majority of the contractor cost had been capitalized. "2005 and 2006 were periods of implementation of new systems and new markets. Now that we have achieved a national capability, we are committed to reducing our expense ratio through expense management, quality of operations and growth in premiums," said Steve Erwin, Senior Vice President and Chief Financial Officer.

Fourth Quarter 2006 and 12 Month 2006 Results

The Company reported net income of $19.2 million ($0.22 per basic share) for the fourth quarter of 2006, compared to $26.4 million ($0.31 per basic share) for the same period in 2005. The decline in net income was primarily attributable to a planned acceleration in the Company's national expansion efforts during the quarter and the 2006 recognition of stock-based compensation. The Company entered five new states in the fourth quarter of 2006 (Colorado, Minnesota, Missouri, New Jersey, Wisconsin). Overall, the Company entered eight new states in 2006 and increased its footprint from 34% to 60% of the United States personal auto market. The fourth quarter results also included decreases in reserves for prior accident year losses and loss adjustment expenses ("LAE") totaling $12.4 million, versus decreases of $4.4 million in the fourth quarter of 2005. Other fourth quarter financial highlights:

* Direct premiums written of $322.5 million, versus $316.5 million in the fourth quarter of 2005 (1.9% increase)

* California direct premiums written of $271.0 million, versus $294.5 million in the fourth quarter of 2005 (8.0% decrease)

* Non-California direct premiums written of $51.5 million, versus $22.0 million in the fourth quarter of 2005 (134% increase)

* GAAP combined ratio of 96.9% versus 93.0% for the fourth quarter of 2005. 2006 was favorably impacted by 3.8 points of prior accident year loss and LAE reserve decreases, versus 1.3 points in 2005

For the twelve months ended December 31, 2006, net income was $97.2 million ($1.13 per basic share), compared to $87.4 million ($1.02 per basic share) for the same twelve-month period in 2005. The 2006 twelve-month results include net realized investment losses of $1.4 million, compared to net realized investment losses of $3.3 million for the same twelve-month period in 2005. The 2006 twelve-month results also include decreases in prior accident year loss and LAE reserves totaling $51.9 million, versus decreases of $25.1 million for the same twelve-month period in 2005. Other twelve-month financial highlights:

* Direct premiums written of $1.315 billion, versus $1.346 billion for the same twelve-month period in 2005 (2.3% decrease)

* California direct premiums written of $1.166 billion, versus $1.262 billion for the same twelve-month period in 2005 (7.6% decrease)

* Non-California direct premiums written of $149.1 million, versus $84.1 million for the same twelve-month period in 2005 (77.3% increase)

* GAAP combined ratio of 93.7% versus 94.9% for the same twelve-month period in 2005. 2006 was favorably impacted by 4.0 points of prior accident year loss and LAE reserve decreases, versus 1.9 points in 2005

Stockholders' equity at December 31, 2006 increased to $898.6 million, compared to $830.0 million at December 31, 2005. Book value per share at December 31, 2006 improved to $10.39 per share from $9.66 per share at December 31, 2005. Operating cash flows for the fourth quarter of 2006 were $32.0 million, compared to $37.9 million in the same period of 2005. Operating cash flows for the twelve months ended December 31, 2006 were $116.3 million, compared to $160.3 million for the same period of 2005.

Cash Dividend Doubled

On February 21, 2007, the Company's Board of Directors declared a quarterly dividend of $0.16 per basic share. "The doubling of the dividend in the first quarter of 2007 from $0.08 per common share in 2006 to $0.16 per common share in 2007 is another indication of our commitment to maximizing long-term shareholder returns," said Erwin. The Company previously increased cash dividends to shareholders from $0.02 in 2004 to $0.04 in 2005 and $0.08 in 2006. The cash dividend will be payable on March 29, 2007 to shareholders of record as of March 5, 2007.

Proposal from AIG 

On January 24, 2007 American International Group, Inc. ("AIG") submitted an unsolicited proposal to acquire the shares of 21st's common stock that it does not already own for $19.75 per share in cash, or approximately $690 million. As of December 31, 2006, AIG owned approximately 61.9% of 21st. As previously announced, the 21st Board of Directors formed a Special Committee of independent directors to review and evaluate AIG's offer and make a recommendation to the 21st Board. The Special Committee reported it is in discussions with AIG and has no further update at this time.

"We are pleased with the increasing success of our national expansion and marketing efforts, and we continue to execute our plans during the Special Committee's process," said Marlow.

About 21st: Drivers Just Like You

Founded in 1958, 21st Century Insurance Group is a direct-to-consumer provider of personal auto insurance. With $1.4 billion of revenue in 2006, the Company insures over 1.5 million vehicles in 17 states, including California, Florida, New Jersey, and Texas. The Company is executing a multi-year geographic expansion strategy which increased the percentage of the U.S. private passenger automobile market in which 21st operates from approximately 18% in 2003 to approximately 60% at the end of 2006. 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.

21st Century Insurance Group is traded on the New York Stock Exchange under the trading symbol "TW" and is headquartered at 21st Century Plaza, 6301 Owensmouth Avenue, Woodland Hills, CA 91367.

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Cautionary Statement:

Statements contained herein and within other publicly available documents may include, and the Company's officers and representatives may from time to time make, statements that may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not historical facts, but instead represent only the Company's belief regarding future events, many of which, by their nature, are inherently uncertain and outside of the Company's control. These statements may address, among other things, the Company's strategy for growth, underwriting results, expected combined ratio and growth of written premiums, product development, computer systems, litigation, regulatory environment and approvals, market position, financial results, dividend policy, reserves, and potential merger transactions. It is possible that the Company's actual results, actions and financial condition may differ, possibly materially, from the anticipated results, actions and financial condition indicated in these forward-looking statements. Other important factors that could cause the Company's actual results and actions to differ, possibly materially, from those in the specific forward-looking statements include the effects of competition and competitors' pricing actions; changes in consumer preferences or buying habits; adverse underwriting and claims experience; customer service problems; the impact on Company operations of natural disasters, principally earthquake, or civil disturbance, due to the concentration of Company facilities and employees in Southern California; information system problems; control environment failures; adverse developments in financial markets or interest rates; results of legislative, regulatory or legal actions, including the inability to obtain regulatory approval for necessary licenses, rate changes and product changes and possible adverse actions by state regulators in market conduct examinations and rate proceedings; the Company's ability to service its debt, including its ability to receive dividends and/or sufficient payments from its subsidiaries to service its obligations; and the Company's participation in potential merger transactions. The Company is not under any obligation (and expressly disclaims any such obligation) to update or alter any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future events or otherwise. Additional financial information is available on the Company's website at 21st.com (which shall not be deemed to be incorporated in or a part of this release) or by request to the Investor Relations Department.

Disclosure of Non-GAAP Measures:

The Company may have included financial measures and other information in this document that may not be presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Management believes these financial measures and other information may enhance investors' understanding of the Company's operations or enhance their understanding of the industry, in general. However, these financial measures and other information are not intended to replace, and should be read in conjunction with, the GAAP financial results. When possible, the Company has made efforts to reconcile these financial measures and other information to the most directly comparable GAAP financial measures available.

(1) Premiums Written: Premiums written represent the premiums charged on policies issued and in effect during a fiscal period. Premiums Earned, the most directly comparable GAAP measure, represents the portion of premiums written that is recognized as income in the financial statements for the periods presented and earned on a pro-rata basis over the terms of the policies. Premiums Written are meant as supplemental information and are not intended to replace Premiums Earned. (2) Statutory Surplus: Statutory surplus represents equity as of the end of a fiscal period for the Company's insurance entities, determined in accordance with Statutory Accounting Principles ("SAP"), as prescribed by insurance regulatory authorities. Stockholders' Equity is the most directly comparable GAAP measure. Statutory Surplus is presented as supplemental information and is not intended to replace Stockholders' Equity. (3) Underwriting Profit (Loss): Underwriting profit (loss) consists of net premiums earned less losses from claims, loss adjustment expenses and underwriting expenses. 21st believes that underwriting profit (loss) provides investors with financial information that is not only meaningful, but critically important to understanding the results of property and casualty insurance operations. The results of operations of a property and casualty insurance company include three components: underwriting profit (loss), net investment income and realized capital gains (losses). Without disclosure of underwriting profit (loss), it is difficult to determine how successful an insurance company is in its core business activity of assessing and underwriting risk, as including investment income and realized capital gains (losses) in the results of operations without disclosing underwriting profit (loss) can mask underwriting losses. Underwriting profit (loss) is presented as supplemental information and is not intended to replace Net Income.

These non-GAAP, financial measures should be read in conjunction with the GAAP financial results. The Company has reconciled these financial measures with the most directly comparable GAAP financial measures in the supplemental schedules.

[c] 2007 by 21st Century Insurance Group. All rights reserved.

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