21ST CENTURY INSURANCE GROUP - 10-Q Quarterly Report

Delaware	95-1935264
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

6301 Owensmouth Avenue
Woodland Hills, California	91367
(Address of principal executive offices)	(Zip Code)

(818) 704-3700	www.21st.com
(Registrant’s telephone number, including area code)	(Registrant’s web site)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

21ST CENTURY INSURANCE GROUP
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
		March 31,			December 31,
AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA		2004			2003

Assets
Fixed maturity investments available-for-sale, at fair value (amortized cost: $1,239,198 and $1,183,526)	$	1,284,296		$	1,219,676
Cash and cash equivalents		59,396			65,010

Total investments and cash		1,343,692			1,284,686
Accrued investment income		13,960			14,746
Premiums receivable		117,061			104,638
Reinsurance receivables and recoverables		9,218			12,135
Prepaid reinsurance premiums		1,717			1,719
Deferred income taxes		65,474			76,611
Deferred policy acquisition costs		55,026			53,079
Leased property under capital lease, net of deferred gain of $4,302 and $4,698 and net of accumulated amortization of $15,496 and $12,397		39,830			42,534
Property and equipment, at cost less accumulated depreciation of $62,473 and $60,070		106,688			101,237
Other assets		44,938			46,747

Total assets	$	1,797,604		$	1,738,132


Liabilities and stockholders’ equity
Unpaid losses and loss adjustment expenses	$	447,308		$	438,323
Unearned premiums		333,491			312,254
Debt		146,897			149,686
Claim checks payable		44,488			45,702
Reinsurance payable		665			1,761
Other liabilities		99,794			89,716

Total liabilities		1,072,643			1,037,442


Commitments and contingencies

Stockholders’ equity:
Common stock, par value $0.001 per share; 110,000,000 shares authorized; shares issued and outstanding 85,455,964 in 2004 and 85,435,505 in 2003		85			85
Additional paid-in capital		419,583			419,245
Retained earnings		277,924			259,808
Accumulated other comprehensive income (loss):
Unrealized gains on available-for-sale investments, net of deferred income taxes of $15,784 and $12,653		29,314			23,497
Minimum pension liability in excess of unamortized prior service cost, net of deferred income taxes of $1,047 and $1,047		(1,945	)		(1,945	)

Total stockholders’ equity		724,961			700,690

Total liabilities and stockholders’ equity	$	1,797,604		$	1,738,132

21ST CENTURY INSURANCE GROUP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited

AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA
Three Months Ended March 31,		2004		2003

Revenues
Net premiums earned	$	318,220	$	271,441
Net investment income		13,146		11,637
Net realized investment gains		7,646		4,580

Total revenues		339,012		287,658

Losses and expenses
Net losses and loss adjustment expenses		247,514		253,343
Policy acquisition costs		53,690		46,144
Other operating expenses		6,400		942
Interest and fees expense		2,226		707

Total losses and expenses		309,830		301,136

Income (loss) before provision for income taxes		29,182		(13,478	)
Provision for income taxes		9,357		(6,767	)

Net income (loss)	$	19,825	$	(6,711	)

Earnings (loss) per common share
Basic and diluted	$	0.23	$	(0.08	)

Weighted average shares outstanding ¾ basic		85,441,615		85,431,505

Weighted average shares outstanding ¾ diluted		85,618,231		85,431,505

21ST CENTURY INSURANCE GROUP
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
Unaudited

AMOUNTS IN THOUSANDS,
EXCEPT SHARE DATA	Common Stock

			$0.001 par			Additional					Accumulated Other
			value			Paid-in		Retained			Comprehensive
		Shares		Amount		Capital		Earnings			Income			Total

Balance – January 1, 2004		85,435,505	$	85	$	419,245	$	259,808		$	21,552		$	700,690
Comprehensive income		-		-		-		19,825	^⁽¹⁾		5,817	⁽²⁾		25,642
Cash dividends declared on common stock ($0.32 per share)		-		-		-		(1,709	)		-			(1,709	)
Other		20,459		-		338		-			-			338

Balance – March 31, 2004		85,455,964	$	85	$	419,583	$	277,924		$	27,369		$	724,961

21ST CENTURY INSURANCE GROUP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited

AMOUNTS IN THOUSANDS
Three Months Ended March 31,		2004			2003

Operating activities
Net income (loss)	$	19,825		$	(6,711	)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization		6,405			4,847
Amortization of restricted stock grants		99			92
Provision (benefit) for deferred income taxes		8,005			(6,861	)
Realized gains on sale of investments		(7,638	)		(4,580	)
Changes in assets and liabilities:
Reinsurance balances		1,823			3,937
Federal income taxes		(556	)		¾
Other assets		(11,736	)		(12,868	)
Unpaid losses and loss adjustment expenses		8,985			32,834
Unearned premiums		21,237			20,773
Claims checks payable		(1,214	)		(655	)
Other liabilities		12,341			7,974

Net cash provided by operating activities		57,576			38,782

Investing activities
Fixed maturities available-for-sale
Purchases		(576,783	)		(168,348	)
Calls or maturities		11,597			12,937
Sales		515,988			131,330
Net purchases of property and equipment		(8,082	)		(3,396	)

Net cash used in investing activities		(57,280	)		(27,477	)

Financing activities
Repayment of debt		(2,732	)		(2,047	)
Dividends paid (per share: $0.04 and $0.04)		(3,417	)		(3,417	)
Proceeds from the exercise of stock options		239			—

Net cash used in financing activities		(5,910	)