AIG BOOSTS ITS STAKE IN 20TH CENTURY.

Byline: Deborah Adamson Daily News Staff Writer

Four years ago, when 20th Century Industries found itself in dire straits following the rush of claims after the Northridge Earthquake, another insurer helped keep it afloat.

American International Group, or AIG, a New York-based commercial insurer, gave $200 million to 20th Century in exchange for preferred stock and warrants. If the preferred stock was converted into common shares and warrants were exercised, AIG would own 40 percent of the Woodland Hills-based insurer.

This week, AIG disclosed it had bought 557,500 20th Century common shares in the open market at prices ranging from $28.25 to $29. Adding the shares to ones AIG had been buying in the last few months, plus the preferred stock and warrants, AIG now controls 37.9 million shares - or 43.2 percent - of 20th Century.

AIG shows no signs of slowing down. In April, it disclosed in SEC filings that it could boost its stake to more than 50 percent, effectively gaining control of 20th Century. Furthermore, an agreement limiting AIG's ownership of the insurer expired in February.

``They're buying into it a piece at a time,'' said Steve Cesinger, managing director at Greif & Co., a Los Angeles-based investment banking firm. ``It would save (them) 30 to 40 percent in stock premiums.''

In other words, by slowly buying a controlling interest one handful of shares at a time, AIG is paying below the premium price it would have paid if it had announced a takeover and bulk purchase.

20th Century spokesman Ric Hill said the company can't stop anyone from buying shares, but its ``preference is that the current level of ownership interest be maintained.'' AIG officials declined to comment.

Officials with 20th Century may prefer to keep the company in their hands, but there's not much they can do to deter AIG, Cesinger said.

With AIG effectively controlling 43 percent of the company, and with two directors on 20th Century's board, any type of ``poison pill'' shareholder amendments would be tough to get passed.

Among many variations of the ``poison pill'' defense is to allow existing shareholders to buy newly-issued shares at a severely reduced price. That increases the number of shares outstanding a potential buyer would have to purchase, making it prohibitively more expensive to acquire the company.

Complicating matters are court decisions challenging the validity of ``poison pill'' tactics, Cesinger said. Critics say the maneuver protects incumbent management, not shareholder interests.

Since AIG's investment, 20th Century has rebuilt itself from near insolvency. Its stock - plunging to as low as $8 from $27 in less than year after the 1994 quake - closed at $29 on Friday, near its 52-week high of $29.875.

For the second quarter, 20th Century is raising its dividend to 16 cents a share, an increase of 60 percent and a return to pre-quake levels, the company announced Friday. It will be paid on June 26 to shareholders of record as of June 16.

Net income for 1997 reached $111 million, a 50 percent increase from 1996. Last year, revenues were $863.5 million.

AIG earned $3.3 billion on revenues of $28 billion in 1997.