SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
The Securities Exchange Act of 1934

Filed by the Registrant /X/
Filed by a Party other than the Registrant / /

Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12

21ST CENTURY INSURANCE GROUP
- ------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

Payment of Filing Fee (Check the appropriate box):

/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction
applies:
-----------------------------------------------------------
2) Aggregate number of securities to which transaction
applies:
-----------------------------------------------------------
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
-----------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------
5) Total fee paid:
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/ / Fee paid previously with preliminary materials.

/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.

1) Amount Previously Paid:
-----------------------------------------------------------
2) Form, Schedule or Registration Statement Number:
-----------------------------------------------------------
3) Filing Party:
-----------------------------------------------------------
4) Date Filed:
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NOTICE OF 2000
ANNUAL MEETING OF SHAREHOLDERS
AND PROXY STATEMENT

LOGO

21ST CENTURY INSURANCE GROUP
WOODLAND HILLS, CALIFORNIA 91367

DEAR SHAREHOLDER,

YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING OF SHAREHOLDERS OF
21ST CENTURY INSURANCE GROUP ON TUESDAY, MAY 23, 2000 AT 10:00 A.M., AT THE
MARRIOTT HOTEL, 21850 OXNARD STREET, WOODLAND HILLS, CALIFORNIA.

DETAILS OF THE BUSINESS TO BE CONDUCTED AT THE ANNUAL MEETING ARE GIVEN IN
THE ATTACHED NOTICE OF ANNUAL MEETING AND PROXY STATEMENT.

WHETHER OR NOT YOU PLAN TO ATTEND, IT IS IMPORTANT THAT YOUR SHARES BE
REPRESENTED AND VOTED AT THE MEETING. I THEREFORE URGE YOU TO SIGN, DATE AND
PROMPTLY RETURN YOUR PROXY CARD IN THE ENCLOSED SELF-ADDRESSED ENVELOPE OR TO
USE ONE OF THE OTHER AVAILABLE METHODS (BY TELEPHONE OR THE INTERNET) SO THAT
YOUR SHARES CAN BE VOTED IN ACCORDANCE WITH YOUR INSTRUCTIONS. YOU MAY ATTEND
THE ANNUAL MEETING AND VOTE IN PERSON, IF YOU SO DECIDE.

TICKETS FOR THE MEETING ARE NOT REQUIRED, THOUGH WE ASK THAT ATTENDEES SIGN
THE ATTENDANCE REGISTER PRIOR TO THE COMMENCEMENT OF THE MEETING.

ON BEHALF OF THE BOARD OF DIRECTORS, I WOULD LIKE TO EXPRESS OUR
APPRECIATION FOR YOUR CONTINUED INTEREST IN THE AFFAIRS OF THE COMPANY.

SINCERELY,

/s/ Robert M. Sandler

ROBERT M. SANDLER
CHAIRMAN OF THE BOARD

YOUR VOTE IS IMPORTANT
We encourage you to sign and return your proxy card or use
the telephone or the Internet for voting your shares prior
to the meeting.

[LOGO]

21ST CENTURY INSURANCE GROUP
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 23, 2000

The Annual Meeting of Shareholders of 21st Century Insurance Group ("21st
Century" or "Company") will be held at the Marriott Hotel, 21850 Oxnard Street,
Woodland Hills, California 91367 on May 23, 2000 at 10:00 a.m. for the following
purposes:

1. To elect nine directors.

2. To ratify the appointment of Ernst & Young LLP as independent auditors
for 2000.

3. To act upon a shareholder proposal requesting 21st Century Insurance
Group to retain an investment banking firm.

4. To transact such other business as may properly come before the meeting
or any adjournment thereof.

The Board of Directors has fixed the close of business on April 7, 2000 as
the record date for the determination of those shareholders entitled to notice
of, and to vote at the meeting.

By Order of the Board of Directors,

MICHAEL J. CASSANEGO
Secretary

Woodland Hills, California
DATED: April 20, 2000

IMPORTANT

Whether or not you expect to attend in person, we urge you to sign, date and
return the enclosed Proxy, by mail, telephone or the Internet at your earliest
convenience. This will ensure the presence of a quorum at the meeting. PROMPTLY
SUBMITTING THE PROXY WILL SAVE THE COMPANY THE EXPENSE AND EXTRA WORK OF
ADDITIONAL SOLICITATION. You can also vote your stock at the meeting if you
desire to do so, as your Proxy is revocable at your option.

LOGO

21ST CENTURY INSURANCE GROUP
6301 OWENSMOUTH AVENUE
WOODLAND HILLS, CALIFORNIA 91367

PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 23, 2000

GENERAL INFORMATION

This Proxy Statement and the accompanying Notice of Annual Meeting and Proxy
Card are solicited by the Board of Directors of 21st Century Insurance Group for
use at the Annual Meeting of Shareholders to be held on Tuesday, May 23, 2000 at
10:00 a.m., at the Marriott Hotel, 21850 Oxnard Street, Woodland Hills,
California 91367. These proxy materials are proposed to be sent on or about
April 20, 2000 to all shareholders of the Company's common stock of record as of
April 7, 2000. The Company's principal executive office is located at 6301
Owensmouth Avenue, Woodland Hills, California 91367.

All proxies, properly executed and returned, will be voted at the annual
meeting as directed by the shareholder. Any shareholder may revoke a proxy by
giving written notice to the Company, by submitting a duly executed proxy
bearing a later date, or by voting in person at the meeting. If no directions
are indicated, the shares represented by the signed proxy will be voted FOR the
election of the nominees, FOR the appointment of Ernst & Young LLP as the
independent auditors for 2000, and AGAINST the shareholder proposal requesting
the Company to retain an investment banking firm. The cost of the solicitation
of these proxies is to be borne by the Company.

Only shareholders of the Company's common stock at the close of business on
April 7, 2000 will be entitled to notice of and to vote at the meeting. As of
that date, 85,326,290 shares of common stock without par value of 21st Century
Insurance Group were outstanding. A quorum represented by a majority of the
outstanding shares of common stock, present in person or by proxy, is necessary
to conduct the meeting. In the election of directors, nominees receiving the
highest number of affirmative votes cast, up to the number of the directors to
be elected, are elected. Each share is entitled to one vote on all matters
except for the election of directors. In electing directors, each shareholder is
entitled to that number of votes which is equal to the number of shares held
multiplied by the number of directors to be elected. If notice of intention to
cumulate votes is given by any shareholder, all shareholders may cumulate their
votes and give one nominee all of those votes, or they may distribute the votes
among as many nominees as the shareholder deems fit.

If there are nominees other than those designated by the Board of Directors,
the proxyholders have discretionary authority to cumulate votes, which they will
do through instructions from the Board, with the objective of electing as many
of the nominees of the Board of Directors as possible. The effect of the
decision of the proxyholders to exercise their discretionary authority to
cumulate votes will be to make it more difficult for nominees, other than those
designated by the Board of Directors, to be elected.

ELECTION OF DIRECTORS
(PROPOSAL 1)

The Board of Directors recommends the election of the nine nominees named in
this Proxy Statement to hold office until the next annual meeting or their
successors are elected and qualified. It is intended that the accompanying
proxy will be voted in favor of the following persons, all of whom are members
of the present Board, to serve as directors unless the shareholder indicates to
the contrary on the proxy. Management expects that each of the nominees will be
available for election, but if any of them is not a candidate at the time the
election occurs, it is intended that such proxy will be voted for the election
of another nominee to be designated by the Board of Directors to fill any such
vacancy. The proxy may not be voted for more than nine nominees.

NOMINEES FOR BOARD OF DIRECTORS

ROBERT M. SANDLER Director since 1994 Age 57

Chairman of the Board of the Company. Executive Vice
President, Senior Casualty Actuary and Senior Claims Officer
of American International Group, Inc. ("AIG") located in New
York, NY.

JOHN B. DE NAULT, III Director since 1988 Age 52

Chairman of the Board of Omnithruster, Inc. in Orange, CA
and private investor with offices in Los Angeles, CA. He
currently serves as a director of Liberty Bank. He is the
son of John B. De Nault, former chairman and director of the
Company.

WILLIAM N. DOOLEY Director since 1998 Age 47

Senior Vice President--Financial Services of AIG located in
New York, NY. He also serves as a director of International
Lease Finance Corporation, a wholly-owned subsidiary of AIG.

R. SCOTT FOSTER, M.D. Director since 1986 Age 59

Ophthalmologist in Stockton, CA and Clinical Professor at
Stanford University. He is the son of the late Louis W.
Foster, Founder of the Company.

ROXANI M. GILLESPIE Director since 1998 Age 58

Partner in the law firm of Barger & Wolen located in San
Francisco, CA since 1997. Previously, Ms. Gillespie was a
member of the law firm of Buchalter, Nemer, Fields & Younger
for 7 years. She was the California Insurance Commissioner
from 1986 to 1991.

BRUCE W. MARLOW Director since 2000 Age 51

Vice Chairman of the Board, Chief Executive Officer and
President of the Company. Prior to joining the Company in
February 2000, Mr. Marlow was employed by Allstate
Corporation, since 1999, as Senior Vice President and
President of its Independent Agency Markets subsidiary.
Previously, he served Progressive Corporation from 1978-96,
holding various positions including Chief Operating Officer.
His voluntary resignation from Progressive included an
agreement with an anti-competition clause whereby he agreed
to pursue for three years opportunities outside of the auto
insurance business.

JAMES P. MISCOLL Director since 1998 Age 65

Retired as Vice Chairman of Bank of America in 1992.
Mr. Miscoll currently serves as a consultant to AIG and as
director of MK Gold Company and US Foodservice, Inc.

GREGORY M. SHEPARD Director since 1995 Age 44

Chairman of the Board of Directors and President of American
Union Financial Corporation and its subsidiaries, Direct
Auto Insurance Company, American Union Life Insurance
Company, Illinois HealthCare Insurance Company and Direct
Auto Indemnity Company, all of Bloomington, IL.

HOWARD I. SMITH Director since 1994 Age 55

Executive Vice President, Chief Financial Officer and
Comptroller of AIG located in New York, NY. Mr. Smith
currently serves as a director of The Knoll-O'Gara Company;
Transatlantic Holdings, Inc., a majority-owned subsidiary of
AIG; and International Lease Finance Corporation, a
wholly-owned subsidiary of AIG.

EXECUTIVE OFFICERS
THE FOLLOWING IS INFORMATION CONCERNING THE EXECUTIVE OFFICERS OF THE COMPANY.

HAS SERVED
AS AN OFFICER
OFFICERS OF THE COMPANY AGE SINCE BUSINESS BACKGROUND
- ----------------------- -------- ------------- --------------------------------------------------

BRUCE W. MARLOW 51 2000 Chief Executive Officer, President and Chief
Operating Officer. Prior to joining the Company in
February 2000, Mr. Marlow was employed by Allstate
Corporation, since 1999, as Senior Vice President
and President of its Independent Agency Markets
subsidiary. Previously, he served Progressive
Corporation from 1978-96, holding various
positions including Chief Operating Officer. His
voluntary resignation from Progressive included an
agreement with an anti-competition clause whereby
he agreed to pursue for three years opportunities
outside of the auto insurance business.
RICHARD A. ANDRE 50 1988 Vice President, Human Resources. Before joining
the Company in 1988, Mr. Andre was with Fidelity
National Title Insurance Company. Prior to that
time, he was with Safeco Corporation where he held
a variety of positions including Vice President of
Personnel for Safeco Title Insurance Company.
MICHAEL J. CASSANEGO 49 1999 Senior Vice President, General Counsel and
Secretary. Mr. Cassanego joined the Company in
March of 1999. He previously was Vice President
and Deputy General Counsel for Fremont
Compensation Insurance Group, which he joined upon
Fremont's acquisition of Industrial Indemnity
Company in 1997. Mr. Cassanego was employed for 21
years with Industrial Indemnity Company, serving
in several positions including Senior Vice
President, Secretary and General Counsel.
MARGARET CHANG 62 1982 Treasurer and Assistant Secretary. Ms. Chang has
been employed by the Company since 1966 serving in
various capacities with accounting
responsibilities prior to being elected Treasurer
and Assistant Secretary in 1982.
RICHARD A. DINON 55 1986 Senior Vice President, Corporate Relations.
Mr. Dinon joined the Company in 1983 as a manager
of training. He later was named Assistant Vice
President in Corporate Relations and was elected
to the position of Vice President, Corporate
Relations in 1986. He has served as Senior Vice
President since 1990.

HAS SERVED
AS AN OFFICER
OFFICERS OF THE COMPANY AGE SINCE BUSINESS BACKGROUND
- ----------------------- -------- ------------- --------------------------------------------------

MICHAEL T. FARRELL 51 1997 Vice President and Chief Information Officer.
Mr. Farrell joined the Company in 1997. He was
Vice President of Information Services for
National Computer Systems, Inc. from 1993 to 1997.
Previously, Mr. Farrell was employed for 19 years
with General Mills, Inc. in various information
services capacities.
RICHARD L. HILL 47 1993 Vice President, Corporate Relations. Mr. Hill
joined the Company in 1977, serving in numerous
technical, administrative and management
positions. He was previously an Assistant Vice
President in Claims and in Corporate Relations.
JOHN M. LORENTZ 47 1996 Controller. Mr. Lorentz joined the Company in
1996. He was previously employed by Transamerica
Financial Services as Vice President and
Controller in 1995 and 1996 and as Assistant
Controller from 1990 to 1995.
JOSEPH J. PRATT 51 1995 Vice President and Chief Actuary. Mr. Pratt joined
the Company in 1995. He was an actuary with
Farmers Insurance Group from June 1994 to October
1995. He also served as Vice President and Actuary
for Transamerica Insurance Group from 1988 to
1994.
RICKARD F. SCHUTT 52 1992 Vice President, Operations. Mr. Schutt joined the
Company in 1982 as Underwriting Manager and was
promoted to Assistant Vice President in 1986. He
served as Vice President of Underwriting from 1992
until 1995, when he assumed responsibility for
Operations.
CAREN L. SILVESTRI 46 2000 Vice President and Product Manager. Ms. Silvestri
joined the Company in 1982, serving in various
positions in Marketing, Operations and
Underwriting. She has over 20 years experience in
the insurance industry.
DEAN E. STARK 46 1993 Vice President, Claims. Mr. Stark joined the
Company in 1979, serving in numerous claim
positions including Assistant Vice President. He
has over 20 years of experience in the insurance
industry.
ROBERT B. TSCHUDY 51 1995 Senior Vice President and Chief Financial Officer.
Mr. Tschudy joined the Company in 1995.
Previously, he was with Ernst & Young LLP for over
20 years, including nine years as a partner in its
Los Angeles office.

Each executive officer serves at the pleasure of the Board of Directors. Every
person chosen by the Board of Directors to be an executive officer is listed
above.

William L. Mellick, Chief Executive Officer and President, and Paul F. Farber,
Chief Operating Officer and Executive Vice President, resigned their positions
with the Company, effective February 4 and March 17, 2000, respectively.

BOARD OF DIRECTORS AND COMMITTEE MEETINGS

The business of the Company is managed under the direction of the Board of
Directors. The Board meets on a regularly scheduled basis during the year to
review significant developments affecting the Company and to act on matters
requiring Board approval. It also holds special meetings when an important
matter requires Board action between scheduled meetings. The Board of Directors
met four times during 1999. Each Board member participated in at least 75% of
the meetings of the Board and Committees of the Board on which he or she served.

The Board of Directors has standing audit and compensation committees,
identified below. The Company does not have a standing nominating committee. The
functions of a nominating committee are performed by the Board as a whole.

AUDIT COMMITTEE. The Audit Committee, which met three times during 1999,
recommends to the Board of Directors the appointment of the firm selected to be
independent auditors for the Company, reviews the Company's procedures and
accounting objectives, reviews and approves the findings and reports of the
independent auditors, and makes recommendations and reports to the Board of
Directors as it deems appropriate. Current members of the Committee are John B.
De Nault, III, R. Scott Foster and Gregory M. Shepard.

COMPENSATION COMMITTEE. The Compensation Committee met once last year. The
Compensation Committee reviews and approves compensation policies, except those
related to equities, and makes recommendations regarding executive compensation
to the Board of Directors. No member of the Committee is a former or current
officer or employee of the Company or any of its subsidiaries. Current members
of the Committee are Robert M. Sandler, William N. Dooley, R. Scott Foster,
James P. Miscoll and Gregory M. Shepard.

EQUITY BASED COMPENSATION COMMITTEE. The Equity Based Compensation
Committee was formed in November 1998 and met once last year. The Committee
reviews and approves equity-based compensation policies and makes
recommendations regarding equity-based compensation to the Board of Directors.
No member of the Committee is a former or current officer or employee of the
Company or any of its subsidiaries. Members of the Committee are John B. De
Nault, III, R. Scott Foster and Gregory M. Shepard.

COMPENSATION OF DIRECTORS

For 1999, each outside director of the Company received an annual
remuneration of $15,000. All directors received $1,250 for each attended meeting
of the Board of Directors. In addition, each committee member received $1,250
for each attended meeting of a committee, if otherwise entitled. No director is
entitled to more than $1,250 for any calendar day, regardless of the number of
meetings attended on that day. Under the Company's 1995 Stock Option Plan,
nonemployee directors receive an option to purchase 4,000 shares of the
Company's common stock on the day of each Annual Meeting of Shareholders or the
date on which the individual initially becomes a director. The options have an
exercise price equal to the fair market value of the underlying shares subject
to the option on the date of grant and become exercisable one year after the
date of grant.

Ms. Gillespie is a partner in the law firm of Barger & Wolen who rendered
services, currently not exceeding 5% of its gross revenues, to the Company.

BENEFICIAL OWNERSHIP OF SECURITIES
PRINCIPAL SHAREHOLDERS

The following table lists the beneficial ownership of each person or group
who owned as of March 31, 2000, to the Company's knowledge, more than five
percent of any class of its outstanding voting securities.

AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS
-------------- --------------------------------------------------------- ---------- ----------

Common AMERICAN INTERNATIONAL GROUP, INC. 53,013,920 62.1%
Through its subsidiaries,
American Home Assurance Company,
Commerce & Industry Insurance Company,
National Union Fire Insurance Company of Pittsburgh, Pa.
and New Hampshire Insurance Company
70 Pine Street
New York, NY 10270

Common AMERICAN UNION INSURANCE COMPANY 5,505,100 6.4%
303 East Washington Street
Bloomington, IL 61701

MANAGEMENT OWNERSHIP

The following table summarizes the ownership of equity securities of 21st
Century Insurance Group and affiliated company, which may be considered by the
Security Exchange Commission to be its parent, by the directors, the Company's
Chief Executive Officer, the four other highest paid executive officers, and the
directors and officers as a group.

EQUITY SECURITIES OF 21ST CENTURY INSURANCE GROUP AND ITS
PARENT OWNED BENEFICIARY
-----------------------------------------------------------------------
21ST CENTURY INSURANCE
GROUP AIG
------------------------ ----------------------
AMOUNT AND NATURE OF PERCENT AMOUNT AND NATURE OF PERCENT
TITLE OF NAME OF BENEFICIAL BENEFICIAL OWNERSHIP (1) OF BENEFICIAL OWNERSHIP OF
CLASS OWNER AS OF MARCH 31, 2000 CLASS AS OF MARCH 13, 2000 CLASS
- -------- ------------------------------------- ------------------------ -------- ---------------------- --------

Common Robert M. Sandler 16,000(2) * 301,916 *
Common John B. De Nault, III 1,589,700(2) 1.9% 0 *
Common William N. Dooley 8,000(3) * 39,248 *
Common R. Scott Foster 58,080(2) * 300 *
Common Roxani M. Gillespie 8,000(3) * 400 *
Common James P. Miscoll 10,000(3) * 5,346 *
Common Gregory M. Shepard 5,521,180(2)(4) 6.5% 0 *
Common Howard I. Smith 16,000(2) * 252,162 *
Common Bruce W. Marlow 32,990 * 0 *
Common William L. Mellick 237,210(5) * 152 *
Common Paul F. Farber 119,888(6) * 235 *
Common Robert B. Tschudy 122,819(7) * 152 *
Common Richard A. Dinon 109,414(8) * 152 *
Common Richard A. Andre 60,650(9) * 58 *

Common All Directors and Officers as a Group 8,467,066(10) 9.9% 602,230 *
(24 individuals)

- ------------------------

* Less than 1%

(1) Under the rules of the Securities and Exchange Commission (the "SEC"), a
person is deemed to be a beneficial owner of a security if he or she has
or shares the power to vote or to direct the voting of such security, or
the power to dispose or to direct the disposition of such security. A
person is also deemed to be a beneficial owner of any securities of which
that person has the right to acquire beneficial ownership within 60 days,
as well as any securities owned by such person's spouse, children or
relatives living in the same household. Accordingly, more than one person
may be deemed to be a beneficial owner of the same securities.

(2) Includes 16,000 shares issuable upon exercise of stock options exercisable
within 60 days of the date of this Proxy Statement.

(3) Includes 8,000 shares issuable upon exercise of stock options exercisable
within 60 days of the date of this Proxy Statement.

(4) Mr. Shepard is Chairman of the Board and President of Direct Auto
Insurance Company and its subsidiary, American Union Life Insurance
Company, which together own 5,505,100 shares. Includes 80 shares owned by
his son as to which Mr. Shepard has sole voting power.

(5) Includes 170,000 shares issuable upon exercise of stock options
exercisable within 60 days of this Proxy Statement.

(6) Includes 86,166 shares issuable upon exercise of stock options exercisable
within 60 days of this Proxy Statement.

(7) Includes 103,000 shares issuable upon exercise of stock options
exercisable within 60 days of this Proxy Statement.

(8) Includes 79,166 shares issuable upon exercise of stock options exercisable
within 60 days of this Proxy Statement.

(9) Includes 46,000 shares issuable upon exercise of stock options exercisable
within 60 days of this Proxy Statement.

(10) Includes 958,265 shares issuable upon exercise of stock options
exercisable within 60 days of this proxy statement.

EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE

The following table sets forth certain information regarding compensation
paid during each of the Company's last three years to the Company's Chief
Executive Officer, and each of the Company's four other most highly compensated
executive officers (the "Named Executives"), based on salary and bonus earned
during 1999.

LONG TERM
ANNUAL COMPENSATION COMPENSATION (4)
------------------------------------- --------------------------------------
AWARDS
-----------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARDS OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($)(2) ($)(5) (#)(6) ($)(7)
- ----------------------- -------- -------- -------- ------------ ---------- ---------- ------------

William L. Mellick (1) 1999 655,000 250,000 20,875 -0 - 60,000 45,810
CEO, President, Vice 1998 612,500 250,000 20,500 -0 - 50,000 45,300
Chairman and Director 1997 505,000 150,000 20,500 500,000 60,000 34,876
Paul F. Farber (3) 1999 283,345 105,000 15,500 -0 - 27,500 19,191
Executive Vice
President 1998 228,000 104,000 15,500 -0 - 22,000 21,054
COO 1997 203,000 78,000 15,500 -0 - 35,000 13,913
Robert B. Tschudy 1999 286,000 90,000 15,500 -0 - 24,000 19,678
Senior Vice President 1998 267,000 87,000 15,500 -0 - 20,000 14,981
CFO 1997 249,500 67,000 15,500 -0 - 35,000 14,888
Richard A. Dinon 1999 207,000 55,000 15,500 -0 - 20,000 15,672
Senior Vice President 1998 194,000 53,000 15,500 -0 - 17,500 14,102
Corporate Relations 1997 181,500 45,000 15,500 181,500 30,000 13,181
Richard A. Andre 1999 194,100 40,000 14,500 194,100 12,000 12,210
Vice President 1998 183,875 45,900 13,933 -0 - 12,000 10,951
Human Resources 1997 173,875 38,000 13,700 -0 - 20,000 9,814

- --------------------------

(1) Includes fees for attending meetings of the Board of Directors. William L.
Mellick resigned his positions with the Company, effective February 4,
2000. Bruce W. Marlow assumed the position of Vice Chairman, CEO, President
and Director effective February 9, 2000.

(2) Company-owned automobile allowance.

(3) Paul F. Farber resigned his positions with the Company on March 17, 2000.

(4) During 1999, there were no awards of Stock Appreciation Rights ("SARs"),
nor were there any Long-Term Incentive Plan ("LTIP") payouts.

(5) Restricted Stock awards are for a five-year period, vesting at 20% per
year. During the restriction period, participants are entitled to receive
dividends on and may vote for the shares. The following table sets forth
the restricted stock award information and the vesting schedule for the
Named Executives.

PRESENT VALUE
DATE SHARES AWARD SHARES BALANCE AS AS OF 12/31/99
AWARDED AWARDED VALUE VESTED OF 12/31/99 FMV $19 5/16 PER SHARE
-------- -------- --------- -------- ----------- ----------------------

William L. Mellick -- -- -- -- -0 - -0 -
Paul F. Farber -- -- -- -- -0 - -0 -
Robert B. Tschudy -- -- -- -- -0 - -0 -
Richard A. Dinon -- -- -- -- -0 - -0 -
Richard A. Andre 5/25/99 10,745 $194,100 -- 10,745 $207,518

(6) Represents the number of shares of the Company's common stock for which
options were granted under the Company's 1995 Stock Option Plan.

(7) Includes the following other compensation for each Named Executive for
1999.

(a) Imputed income of group term life in excess of $50,000.

(b) Deferred employer's contribution to the Company's qualified 401(k) Plan
and supplemental 401(k) Plan.

1999
(A) (B) TOTAL
-------- -------- ---------

William L. Mellick.......................... $ 5,310 $40,500 $ 45,810
Paul F. Farber.............................. 1,761 17,430 19,191
Robert B. Tschudy........................... 2,893 16,785 19,678
Richard A. Dinon............................ 3,972 11,700 15,672
Richard A. Andre............................ 1,410 10,800 12,210
------- ------- --------
$15,346 $97,215 $112,561
======= ======= ========

OPTION GRANTS AND EXERCISES IN 1999

The following table sets forth as to each of the Named Executives
information with respect to options granted for the year ended December 31, 1999
and the present value of the options on the date of grant.

PERCENT OF
NUMBER OF TOTAL OPTIONS EXERCISE
OPTIONS GRANTED TO OR GRANT DATE
GRANTED EMPLOYEES BASE PRICE EXPIRATION PRESENT VALUE
NAME (1) IN 1999 ($/SH) (1) DATE $(2)
- ----------------- --------- ------------- ------------- ---------- -------------

William L.
Mellick 60,000 10.64% $ 17 13/16 5/25/09 $241,800

Paul F. Farber 27,500 4.88% $ 17 13/16 5/25/09 110,825

Robert B. Tschudy 24,000 4.26% $ 17 13/16 5/25/09 96,720

Richard A. Dinon 20,000 3.55% $ 17 13/16 5/25/09 80,600

Richard A. Andre 12,000 2.13% $ 17 13/16 5/25/09 48,360

- ------------------------

(1) Options were granted to the Named Executives on May 25, 1999. The exercise
price is equal to the closing price of $17 13/16 of the Company's common
stock on the business day immediately preceding the date of grant, as
reported in the Wall Street Journal, Western Edition. These options vest in
three equal annual installments beginning May 25, 2000.

(2) Present value was calculated using the Black-Scholes option pricing model
valued at 4.03. Use of this model should not be viewed in any way as a
forecast of the future performance of the Company's common stock, which
will be determined by future events and unknown factors. The estimated
values under the Black-Scholes model are based upon certain assumptions as
to variables, including expected stock price volatility of .23, an annual
interest rate of 5.48 %, a dividend yield of 3.59 % for the options granted
on May 25, 1999 and an expected term of eight (8) years.

DECEMBER 31, 1999 OPTION VALUES

The following table provides information as to the value of options held by
each of the Named Executives at December 31, 1999. No options were exercised by
the Named Executives during 1999 except by Paul F. Farber and Richard A. Andre.

AGGREGATED OPTION EXERCISES DURING THE YEAR ENDED DECEMBER 31, 1999 AND
DECEMBER 31, 1999 OPTION VALUES

NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY OPTIONS
UNEXERCISED OPTIONS AT DECEMBER 31, 1999
AT DECEMBER 31, 1999 (#) ($)(1)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------- --------------- ------------ ----------- ------------- ----------- -------------

William L. -- -- 150,000 60,000 $153,140 $90,000
Mellick
Paul F. Farber 4,000 $26,000 77,000 27,500 $ 48,835 $41,250
Robert B. Tschudy -- -- 95,000 24,000 $151,030 $36,000
Richard A. Dinon -- -- 72,500 20,000 $ 97,822 $30,000
Richard A. Andre 5,000 $41,250 42,000 12,000 $ 8,440 $18,000

- ------------------------

(1) In accordance with proxy statement reporting requirements, values of both
exercisable and unexercisable options are based on the difference between
the exercise price of each option and $19.313, the closing price of the
Company's common stock on December 31, 1999, as reported in The Wall Street
Journal, Western Edition.

COMPENSATION COMMITTEE REPORT ON
EXECUTIVE MANAGEMENT COMPENSATION

The Compensation Committee, consisting of nonemployee directors Robert M.
Sandler, William N. Dooley, R. Scott Foster, James P. Miscoll and Gregory M.
Shepard, has furnished the following report on executive compensation:

GENERAL COMPENSATION POLICY

The Board of Directors' fundamental policy has been to offer the Company's
executive officers competitive compensation opportunities based in large part
upon their contributions to the success of the Company, and upon their personal
performance. The Company believes in compensating its executives for
demonstrated and sustained levels of performance in their individual jobs. The
achievement of higher levels of performance and contribution is rewarded by
higher levels of compensation. Each individual officer's compensation package is
comprised of three elements: (i) base salary, perquisites and other personal
benefits designed principally to be competitive with relevant compensation
levels in the industry, (ii) annual variable performance awards paid in cash,
based upon subjective evaluation of individual performance not tied to specific
company performance goals and (iii) long-term stock awards and stock option
grants which strengthen the mutuality of interest between executive officers and
the Company's shareholders.

Some of the more important factors, which the Board considered in
establishing the components of each executive officer's compensation package for
the 1999 fiscal year, are summarized below.

BASE SALARY. Base salary for each officer is set subjectively, after
reviewing personal performance, internal comparability considerations and salary
levels in effect for comparable positions in the market place. The Company uses
salary survey information to assign a salary grade range to each position,
including executive officers. Salary range midpoints are targeted at the 50th
percentile of like business enterprises in the same geographic area, if
possible.

Salary recommendations for the year were based in part upon salary survey
information published by the National Association of Independent Insurers, SNL
Executive Compensation Review for Insurance Companies, and Sibson & Company. The
Committee believes that information provided by these groups presents a broadly
based cross-section of insurance company compensation practices. Individual
salary adjustments for executive officers were based upon analysis of base
salary levels, effectiveness of performance, changes in job responsibilities and
a subjective assessment of their personal contributions to the effectiveness of
the organization as a whole. All of the factors enumerated were applied in a
subjective, non-quantitative manner to establish an executive officer's base
salary. The peer group examined when establishing these compensation levels is
different from the industry group utilized in the Stockholder Return Performance
Graph shown on page 16.

ANNUAL CASH INCENTIVE COMPENSATION. Bonuses were paid to Chief Executive
Officer William L. Mellick and other executive officers for the 1999 fiscal year
based upon subjective evaluation of Company performance relative to key issues
impacting profitability, development of corporate surplus and enhancement of
marketplace competitiveness. At the end of the year, a bonus pool was
established for executive officers other than the Chief Executive Officer.
Thereafter, the Company determined individual executive officer bonuses based
upon that officer's performance and contributions measured subjectively.

LONG-TERM EQUITY INCENTIVE COMPENSATION. Restricted Shares Awards are
currently granted to executive officers through the Equity Based Compensation
Committee with approval by the Board of Directors, consistent with a policy
designed to align the interests of executive officers with those of the
shareholders. The grants provide the executives with a significant incentive to
manage the Company from the perspective of an owner with an equity stake in the
Company. The number of shares subject to each grant is based on the officer's
salary level on the grant date, as reflected in Restricted Shares Plan
guidelines. Prior awards are not considered when a new grant is awarded. A grant
of stock generally vests at 20 percent per year, provided the officer continues
his or her employment with the Company.

In 1995 the Compensation Committee concluded that a stock option plan would
improve the linkage between shareholder value and executive compensation. Upon
this Committee's recommendation, the Board of Directors adopted the 1995 Stock
Option Plan. Shareholders approved the plan and an amendment thereto at the 1995
and 1997 Annual Meetings. Executives and key employees are eligible to receive
stock options from time to time, giving them the right to purchase shares of the
Company's common stock at a specified price in the future. The Plan is currently
administered by the Equity Based Compensation Committee, which has authority to
select optionees and to determine the number of shares granted to them.

CEO COMPENSATION. William L. Mellick's base salary was established by the
Board of Directors upon recommendation of the Compensation Committee, and took
into account the fact that he held the offices of Chief Executive Officer and
President. In 1999, Mr. Mellick was awarded 60,000 stock options under the 1995
Stock Option Plan. Mr. Mellick was awarded a cash bonus of $250,000 for services

rendered in 1999 based upon an evaluation by the Compensation Committee of
Mr. Mellick's 1999 performance. In addition to subjective factors, the factors
considered for both salary and bonus consideration included the Company's
overall underwriting performance as measured by its combined ratio.

The Compensation Committee's recommendations as outlined in this report have
been submitted to, reviewed and approved by the Board of Directors.

The Company has reviewed Section 162(m) of the Internal Revenue Code which
generally limits the deduction of compensation paid to a company's chief
executive officer and each of the other four highest compensated executive
officers to $1,000,000 for each individual, with certain exceptions. The
Company's deductions for compensation paid during 1999 were not limited by
Section 162(m). None of the compensation deduction attributable to stock options
granted by the Company is limited by this section, but compensation deductions
attributable to restricted stock grants, generally equaling the fair market
value of the underlying stock on the date of vesting, do not qualify as an
exception. The deductibility of compensation attributable to restricted stock
grants or other forms of compensation paid by the Company may be limited in the
future. While the Compensation Committee considers Section 162(m) in evaluating
compensation of executive officers, it is only one of several factors considered
in arriving at a compensation package.

Submitted by the Compensation
Committee.

Robert M. Sandler
William N. Dooley
R. Scott Foster
James P. Miscoll
Gregory M. Shepard

COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION

As indicated above, the Company's Compensation Committee consists of Robert
M. Sandler, William N. Dooley, R. Scott Foster, James P. Miscoll and Gregory M.
Shepard. No Committee member is or was an officer or employee of the Company or
any of its subsidiaries.

William L. Mellick, Vice Chairman, Director, Chief Executive Officer, and
President also participated in deliberations concerning executive officers'
compensation during 1999, other than his own. Mr. Mellick had been an officer of
the Company since 1979, Chief Executive Officer since March 1, 1995 and a
director since May 23, 1995. Mr. Mellick resigned the positions mentioned above,
effective February 4, 2000.

STOCKHOLDER RETURN PERFORMANCE GRAPH

Set forth below is a line graph comparing the cumulative total stockholder
return on the Company's Common Stock against the cumulative total return of the
Standard & Poor's 500 Stock Index and the Standard & Poor's Property & Casualty
Insurance Index for the period of five years commencing December 31, 1994 and
ending December 31, 1999. The graph and table assume that $100 was invested on
December 31, 1994 in each of the Company's Common Stock, the Standard & Poor's
500 Stock Index and the Standard & Poor's Property & Casualty Insurance Index,
and that all dividends were reinvested. This data was furnished by Research Data
Group, Inc.

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG 21ST CENTURY INSURANCE GROUP, THE S&P 500 INDEX
AND THE S&P PROPERTY-CASUALTY INSURANCE INDEX

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

21ST CENTURY (TW) S&P 500 S&P P&C

1994 $100 $100 $100
1995 $189 $138 $135
1996 $161 $169 $165
1997 $251 $226 $239
1998 $229 $290 $223
1999 $197 $351 $166

RETIREMENT PLANS

PENSION PLAN

The Company's Pension Plan is a noncontributory defined benefit plan for all
regular employees under which normal retirement is at age 65 and early
retirement can be elected by any participant who has reached age 55 and has at
least 10 years of service. The plan, subject to certain maximum and minimum
provisions, bases pension benefits on an employee's career average compensation
and length of service. The annual pension benefit payable upon normal retirement
is equal to the sum of the accruals for each year a participant was in the plan.

At retirement, the participant has various life and contingent annuity
payment elections. For purposes of this plan, compensation includes base annual
salary plus overtime and bonuses. These pension benefits serve as an offset in
calculating benefits for participants under the Supplemental Executive
Retirement Plan.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

Employees nominated by the Chief Executive Officer and approved by the Board
of Directors are eligible to participate in the Supplemental Executive
Retirement Plan. The plan is a nonqualified defined benefit plan under which
normal retirement is age 65 with at least 5 years of service, and early
retirement can be elected by any participant who has reached age 55 with at
least 10 years of service. The annual retirement benefit payable for 15 years is
equal to 60% of the participant's final average compensation during the three
years preceding retirement, reduced by the participant's benefit under the
Pension Plan and 50% of the participant's social security benefit.

PENSION SUPPLEMENTAL PLAN AND 401(k) SUPPLEMENTAL PLAN

Effective January 1, 1996, the Company adopted the Pension Supplemental Plan
and the 401(k) Supplemental Plan. Each is a non-qualified deferred compensation
plan designed for certain executives and key employees of the Company whose
benefits under the Company's qualified Pension and 401(k) Plans have been
limited by certain provisions of the Internal Revenue Code (the "Code").

The Pension Supplemental Plan provides a benefit equal to the difference
between the pension that would be payable under the Pension Plan, absent the
Code's limitations upon compensation considered in calculating pension benefits,
and the actual benefits payable subject to those limitations. If a participant
in this plan is also entitled to receive benefits under the Supplemental
Executive Retirement Plan, the Pension Supplemental Plan benefits will be
reduced accordingly.

The 401(k) Supplemental Plan permits certain executives and key employees to
defer an amount of current compensation which, in addition to amounts actually
contributed to the 401(k) Plan, allows the participant to defer the full amount
of contributions that could have been deferred under the 401(k) Plan without
regard to limitations which the Code places on contributions and eligible
compensation. To the extent that such limitations preclude a participant's
account from receiving matching contributions under the 401(k) Plan, the
participant will receive a like amount of matching contributions under the
401(k) Supplemental Plan.

The table below sets forth the benefit payable for 15 years after retirement
from the Pension Plan, Supplemental Executive Retirement Plan, the Pension
Supplemental Plan, and one half of the Social Security benefit (assuming the
recipient is entitled to the age 65 Social Security benefit).

NUMBER OF YEARS OF SERVICE
FINAL AVERAGE ----------------------------------
COMPENSATION 5 10 15 OR MORE
- ------------- --------- --------- ----------

$150,000 $ 45,000 $ 67,500 $ 90,000
200,000 60,000 90,000 120,000
250,000 75,000 112,500 150,000
300,000 90,000 135,000 180,000
350,000 105,000 157,500 210,000
400,000 120,000 180,000 240,000
450,000 135,000 202,500 270,000
500,000 150,000 225,000 300,000
550,000 165,000 247,500 330,000
600,000 180,000 270,000 360,000
650,000 195,000 292,500 390,000

Any deduction for Social Security or other offset has already been taken
into account.

As set forth above, compensation used in calculating the Pension,
Supplemental Executive Retirement Plan and Pension Supplemental retirement
benefit includes annual base salary, overtime and bonuses and will approximate
and fall within 10% of the total of 1997 through 1999 salary and bonus amounts
shown in the Summary Compensation Table for the listed individuals.

The credited years for the Named Executives in the Summary Compensation
Table are William L. Mellick -- 20 years; Paul F. Farber -- 15 years; Robert B.
Tschudy -- 4 years; Richard A. Dinon -- 16 years; and Richard A. Andre -- 11
years.

RESTRICTED SHARES PLAN

The shareholders at their meeting held on May 23, 1982 approved the 21st
Century Insurance Group Restricted Shares Plan. Pursuant to the Plan, the Board
of Directors established a committee of its members currently entitled the
Equity Based Compensation Committee (the "Committee") to designate the
participants in the Plan, the amount of benefits thereunder, and to otherwise
administer the Plan. Members of the Committee are not eligible for benefits
under the Plan. Designation of an employee for benefits under the Restricted
Shares Plan does not necessarily entitle the employee to benefits under any
other Company benefit plan.

In general, the shares granted are restricted for a period of five years,
vesting at the rate of 20% per year. If the employment of the participant is
terminated within the five-year period, all shares not then vested are
forfeited. Any shares forfeited may be regranted to an existing participant or
any other employee eligible to be designated as a participant. During the
restricted period, a participant has the right to receive dividends and the
right to vote the shares.

The Plan does not create any right of any employee or class of employees to
receive a grant, nor does it create in any employee or class of employees any
right with respect to continuation of employment by the Company.

STOCK OPTION PLAN

In 1995, the Company's shareholders approved the Company's 1995 Stock Option
Plan in order to enable the Company to attract, retain and motivate key
employees and nonemployee directors and to further align their interests with
those of the Company's shareholders by providing for or increasing their
proprietary interest in the Company. The Stock Option Plan is administered by a
committee comprised of disinterested members of the Board of Directors. The
committee has the authority to select persons to be granted options and to
determine exercise prices, vesting schedules and other provisions not
inconsistent with the provisions of the Stock Option Plan.

Each option gives a grantee the right to purchase shares of the Company's
common stock at a specified price in the future. Shares vest at fixed numbers of
shares per year over varying future periods. The Stock Option Plan provides that
on the day of an annual meeting of shareholders of the Company each nonemployee
director will be granted an option to purchase 4,000 shares of the Company's
common stock. Nonemployee director options have an exercise price equal to the
fair market value of the underlying shares subject to the option on the date of
grant and become exercisable one year after the date of grant.

EXECUTIVE SEVERANCE PLAN

The Company has enacted an Executive Severance Plan covering each of its
executive officers. If an officer is terminated for reasons other than death,
long-term disability, or good cause within a three-year period following a
change of control of the Company, or if the officer resigns after significant
adverse changes in his authority, duties, compensation, benefits or geographical
location, then the officer is entitled to a lump sum severance payment of one to
three times his or her current annual salary and most recent cash bonus. Junior
officers could receive one year of severance payments; senior officers, two
years; and the Chief Executive Officer, three years; with all severance payments
limited to the amount deductible to the Company under the provisions of Internal
Revenue Code Section 280G.

SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and persons who own more than ten percent of a
registered class of the Company's equity securities to file with the Securities
and Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Executive officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.

To the Company's knowledge, based solely on a review of reports furnished to
the Company and written representations that no other reports were required
during the 1999 fiscal year, all Section 16(a) filing requirements were complied
with in a timely manner.

INDEPENDENT AUDITORS
(PROPOSAL 2)

The Board of Directors has approved a resolution retaining Ernst & Young LLP
as its independent auditors for 2000. Ernst & Young LLP has audited the
Company's financial statements since 1991. The appointment was recommended by
the Audit Committee. It is intended that unless otherwise directed by the
shareholders, proxies will be voted for the ratification of this appointment.

Representatives of Ernst & Young LLP are expected to be present at the
annual meeting to make a statement, if they desire, and to be available to
respond to appropriate questions.

SHAREHOLDER PROPOSAL AND SUPPORTING STATEMENT
(PROPOSAL 3)
"SHAREHOLDER PROPOSAL

Gregory M. Shepard, a Director of the Company since 1995, c/o American Union
Insurance Company, 303 East Washington Street, Bloomington, Illinois 61701, who
beneficially owns 5,505,100 shares of common stock of the Company, submitted the
following proposal:

Resolved, that the shareholders of 21st Century Insurance Group recommend
that the Audit Committee of the board of directors immediately engage the
services of a nationally recognized investment banking firm, with which the
Company and its majority holder, American International Group, Inc. "AIG", have
minimal current investment banking involvement, to explore all alternatives to
enhance the value of the Company, including, but not limited to, the possible
sale, merger of the Company, or premium tender share repurchase of a substantial
amount of the stock of the Company, and for the board of directors to present to
the shareholders a plan for maximizing shareholder value within three (3) months
of the annual shareholders' meeting to be held in May 2000.

SUPPORTING STATEMENT

In my opinion, the Company's performance has been disappointing, trailing
the Standard and Poors 500 Stock Index over the five-year period beginning
December 31, 1994 and ending December 31, 1999. $100 invested in the Company on
December 31, 1994 was worth $197 on December 31, 1999; whereas $100 invested in
the S&P 500 Stock Index would have been worth $347.

Federal lawmakers have broadened the universe of potential acquirers of
insurance companies like 21st Century. In my opinion, the Company's low cost
distribution network makes it an acquisition candidate not just for larger
expansion-minded insurance companies but for banks and other financial services
players previously barred from cross-industry acquisitions. Repeal of the
Glass-Steagall Act and its Depression era barriers separating the banking,
insurance and securities industries should lead to new business combinations
throughout the financial services industry.

I believe that the Company's shares trade at a significant discount to their
real value.

At this important transitional time for the Company and the financial
services industry, I believe that it is crucial that the board has the
independence, focus and expertise that a nationally recognized investment banker
can provide to ensure that all alternatives for enhancing shareholder value are
explored.

If other shareholders believe, as I do, that the value of the Company is not
reflected in the current share price, then they should vote for the proposal to
obtain the advice an independent investment banker can provide."

MANAGEMENT'S STATEMENT IN OPPOSITION

The Board of Directors recommends a vote AGAINST this proposal.

Contrary to the proponent's assertion, the Company has not under-performed
over the past five years. Compared to peer companies operating similar
businesses in similar markets, the performance of the Company's stock price has
been admirable. The table below illustrates that the Company's price-to-book and
price-to-earnings ratios have exceeded the ratios of the other companies within
the Merrill Lynch Insurance Index (Personal).

PRICE TO 1999 REPORTED PRICE TO BOOK VALUE AS OF
COMPANIES EARNINGS PER SHARE DECEMBER 31, 1999
- --------- ---------------------- -------------------------

21st Century Insurance Group...................... 19.3x 2.2x
The Allstate Corporation.......................... 7.1x 1.1x
The Commerce Group, Inc........................... 8.9x 1.4x
The Progressive Corporation....................... 18.5x 1.9x
Mercury General Corporation....................... 9.1x 1.3x*
Horace Mann Educators Corporation................. 18.3x 2.0x
Average........................................... 12.4x 1.6x

- ------------------------

* The book value used to calculate the Price to Book Value as of December 31,
1999 is based on an estimate provided to Merrill Lynch by Mercury General
Corporation.

Indeed, the Company has handily outperformed the S&P Property and Casualty
Insurance Index: $100 invested in the Company on December 31, 1994 would have
been worth $197 on December 31, 1999; whereas $100 invested in the S&P Property
and Casualty Insurance Index would have been worth $166. Moreover, the Company
has substantially improved its position since reversals in the wake of the
Northridge Earthquake of 1994, largely because of the investment of American
International Group, Inc. ("AIG").

The Board is fully aware of the business combinations occurring in the
Company's industry. The Board -- whose membership includes shareholders with
large stakes in the Company -- is also interested in, and fully committed to,
maximizing shareholder value. In this regard, the Board regularly reviews the
Company's strategic position and direction.

The Board has carefully considered the foregoing proposal in light of the
fact that the Company is being run profitably following a strategy agreed to by
its majority shareholder and its stock has a superior valuation relative to
other companies in the personal lines business. In that context, the Company
believes that it is not appropriate or beneficial for it to initiate the
expensive and disruptive process of engaging an investment banking firm, thereby
creating uncertainty in the market, simply because certain investors are not
satisfied with the price of the stock.

Unfortunately, proposals of this type merely serve to take the Board's time
and attention and the Company's resources away from what we all agree to be the
primary goal: improving the Company's earnings and enhancing shareholder value.

RECOMMENDATION

The Board of Directors recommends that shareholders vote AGAINST the
foregoing proposal. Proxies solicited by the Board of Directors will be so voted
unless the shareholder giving the proxy specifies otherwise. The affirmative
vote of a majority of the votes cast at the Annual Meeting is required to adopt
this shareholder proposal; however, AIG, the holder of 62.1% of the Company's
common stock, has advised the Company that it intends to vote against the
proposal. If AIG votes against the proposal, the proposal will not be adopted.

SHAREHOLDERS PROPOSALS AT 2001 ANNUAL MEETING OF SHAREHOLDERS

If a shareholder desires to present a proposal at the Annual Meeting of
Shareholders of the Company for the year 2001 (scheduled to be held on May 22,
2001), such proposal must conform with all of the requirements of Rule 14a-8,
paragraphs (a), (b), and (c) under the Securities Exchange Act of 1934, and must
be received at the principal executive offices of the Company at 6301 Owensmouth
Avenue, Woodland Hills, California 91367 no later than December 22, 2000.

ADDITIONAL INFORMATION

The Annual Report to Shareholders for the year ended December 31, 1999 is
being mailed to the shareholders separately from this Proxy Statement.

THE COMPANY WILL PROVIDE WITHOUT CHARGE ON WRITTEN REQUEST A COPY OF 21ST
CENTURY INSURANCE GROUP'S ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION. THE REQUEST SHOULD BE DIRECTED TO THE CORPORATE
RELATIONS DEPARTMENT OF 21ST CENTURY INSURANCE GROUP, 6301 OWENSMOUTH AVENUE,
WOODLAND HILLS, CALIFORNIA 91367.

OTHER BUSINESS

The Company is unaware of any matter to be acted upon at the meeting by
shareholder vote except the election of directors, the ratification of the
appointment of independent auditors and the Shareholder Proposal requesting the
retention of an investment banking firm. In the case of any matter properly
coming before the meeting for shareholder vote, the proxyholders named in the
proxy accompanying this statement shall vote shares held by them in accordance
with their best judgment.

----------------------------------
WHEN PROXY IS OKAYED PLEASE SIGN
& DATE IT ABOVE

PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!

ANNUAL MEETING OF SHAREHOLDERS
21ST CENTURY INSURANCE GROUP

MAY 23, 2000

-- PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED --
- ------------------------------------------------------------------------------

A / X / PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.

WITHHOLD
AUTHORITY
to vote for
all nominees FOR AGAINST ABSTAIN
FOR listed at right NOMINEES: J. B. De Nault, III
W. N. Dooley 2. Proposal to ratify the / / / / / /
1. Election of / / / / R. S. Foster, M.D. appointment of Ernst &
Directors R. M. Gillespie Young LLP as the
B. W. Marlow independent auditors
FOR THE NOMINEES LISTED AT RIGHT WITH J. P. Miscoll of the Company for 2000.
DISCRETIONARY AUTHORITY TO CUMULATE VOTES R. M. Sandler
EXCEPT AS MARKED TO THE CONTRARY BELOW. G. M. Shepard 3. To act upon a shareholder / / / / / /
H. I. Smith proposal requesting TW to
retain an investment
(INSTRUCTION; TO WITHHOLD AUTHORITY TO VOTE banking firm.
FOR ANY INDIVIDUAL NOMINEE, WRITE THAT NOMINEE'S
NAME IN THE SPACE PROVIDED BELOW.) 4. In their discretion, the Proxies are authorized
to vote upon such other business as may
properly come before the meeting.

PLEASE CHECK THIS BOX IF YOU / /
PLAN TO ATTEND THE MEETING.

THIS PROXY, WHEN PROPERLY EXECUTED WILL BE
VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS
1 AND 2 AND AGAINST PROPOSAL 3.

PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.

Signature(s) Dated , 2000
------------------------------------- ---------------

NOTE: Please sign exactly as your name appears hereon. When shares are held by
joint tenants, both should sign. When signing as attorney, or as executor,
administrator, trustee or guardian, please so indicate. If a corporation,
please sign in full corporate name by the President or other authorized
officer. If a partnership, please sign in partnership name by authorized
person.

---------------------------------
WHEN PROXY IS OKAYED PLEASE SIGN
& DATE IT ABOVE

21ST CENTURY INSURANCE GROUP
PROXY

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Robert M. Sandler, Howard I. Smith and
Bruce W. Marlow as Proxies, each with the power to appoint his substitute,
and hereby authorizes them to represent and to vote, as designated on the
reverse side of this card, all the shares of common stock of 21st Century
Insurance Group held of record by the undersigned on April 7, 2000 at the
Annual Meeting of Shareholders to be held at the Marriott Hotel, 21850 Oxnard
Street, Woodland Hills, California on May 23, 2000 at 10:00 a.m. or any
adjournment thereof.

(CONTINUED AND TO BE SIGNED ON OTHER SIDE.)

ANNUAL MEETING OF SHAREHOLDERS OF

21ST CENTURY INSURANCE GROUP

MAY 23, 2000

PROXY VOTING INSTRUCTIONS

TO VOTE BY MAIL
- ---------------
PLEASE DATE, SIGN AND MAIL YOUR PROXY CARD IN THE ENVELOPE PROVIDED AS SOON
AS POSSIBLE.

TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
- --------------------------------------------
PLEASE CALL TOLL-FREE 1-800-PROXIES AND FOLLOW THE INSTRUCTIONS. HAVE YOUR
CONTROL NUMBER AND THE PROXY CARD AVAILABLE WHEN YOU CALL.

TO VOTE BY INTERNET
- -------------------
PLEASE ACCESS THE WEB PAGE AT "WWW.VOTEPROXY.COM" AND FOLLOW THE ON-SCREEN
INSTRUCTIONS. HAVE YOUR CONTROL NUMBER AVAILABLE WHEN YOU ACCESS THE WEB PAGE.

----------------------------
YOUR CONTROL NUMBER IS -->
----------------------------

-- PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED --
- ------------------------------------------------------------------------------

A / X / PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.

PLEASE CHECK THIS BOX IF YOU / /
PLAN TO ATTEND THE MEETING.

PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.

Signature(s) Dated , 2000
------------------------------------- ---------------