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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [ ]
Filed by a party other than the registrant [X]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2).
[ ] Definitive proxy statement.
[X] Definitive additional materials.
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12.
21st Century Insurance Group
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(Name of Registrant as Specified in Its Charter)
Gregory M. Shepard
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] $125 per Exchange Act Rules 0-11 (c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22 (a)(2) of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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April 20, 2000
Dear Shareholder:
I am writing to request your support. You should recently have received
21st Century Insurance Group, Inc.'s Proxy Statement for the May 23, 2000 Annual
Meeting of Shareholders. At my request, pursuant to SEC requirements, the
Company has reluctantly included a proposal in that Proxy Statement that reads
as follows:
SHAREHOLDER PROPOSAL:
Gregory M. Shepard, a Director of the Company since 1995, c/o American
Union Insurance Company, 303 E. 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 & Poors 500 Stock Index over the 5-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 law makers 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
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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 have the independence, focus and expertise that a nationally
recognized investment banker can provide to insure 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.
The Company's Board of Directors recommended a vote against the
foregoing proposal.
Based upon a public filing on Schedule 14A, American International
Group, Inc. ("AIG") beneficially owns approximately 62.1% of the outstanding
common stock of the Company as of April 7, 2000. As an owner of a majority of
the outstanding common stock of the Company, AIG's interests may be different
than the interests of the Company's minority shareholders. The following recent
events may give some insight as to AIG's intentions with respect to the Company.
BACKGROUND
On July 15, 1998, AIG filed with the Securities and Exchange Commission
an amendment to its Statement on Schedule 13D disclosing that AIG had purchased
shares of the Company's common stock in open market transactions at prices
ranging from $28.6250 to $28.9375, increasing AIG's ownership to approximately
45.04% computed on a fully diluted basis. That amendment also disclosed that AIG
had entered into a stock purchase agreement with certain members of the family
of a former director to acquire 4,576,001 common shares for $29 per share,
increasing AIG's holdings from approximately 45% of the outstanding common stock
to approximately 50.3%.
KEY EVENTS
On July 23, 1998, AIG filed Amendment No. 9 to its Statement on
Schedule 13D, which included a statement that "AIG has entered into discussions
with the Company concerning changes in the composition of the Board to reflect
AIG's increased ownership of Common Stock...."
On December 28, 1998, 21st Century announced that it had received
approval from the California Department of Insurance to reduce its rates for
California drivers by an average of 6.8%, effective February 15, 1999.
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On May 25, 1999, the Company announced that its Board of Directors had
authorized the expenditure of up to $50 million to purchase shares of the
Company's common stock. The news release stated that "a key factor in making the
decision was the Board of Directors' belief that the Company's current financial
and operational performance is not fully recognized at today's trading levels
and price earnings multiple. 21st Century's current marketing programs, as well
as its aggressive growth and expansion plans, are directed at enhancing
shareholder value through long-term efficiency and profitability. The Board also
believes that stock repurchase is a sound and appropriate use of the Company's
available capital resources." 21st Century's stock closed up 1/4 at 18.0625 on
May 25, 1999.
Given the foregoing events, I believe that AIG's long-term growth
strategy for 21st Century is to emphasize auto policy growth over profits in an
all-out push for market share. It appears the Company is betting that profits
will eventually rise when all of the new customers being attracted with lower
prices renew their policies.
I believe that Wall Street analysts and investors, however, are driven
more by earnings growth then policy growth.
AIG is able to emphasize long-term growth over short-term performance
because the stock market valuation for the Company may not be as important to
AIG as to minority shareholders. Indeed, lower valuations may enable AIG to
increase its ownership at lower prices.
Even at the 12-month high price of $21 1/2 on April 7, 2000 the
Company's common stock is trading down over 41% from its 1998 high of $30 3/8. I
believe that the depressed share price is not entirely a function of the
depressed metrics experienced by the Company's peers in the property and
casualty insurance industry, and that no realistically achievable amount of
policy growth or operating improvement will be able to create the amount of
value in the short or intermediate term that a sale of the Company to AIG or
other third parties would create today. As the second largest shareholder in the
Company, I expect more than to be bought out at a slight premium following some
further dip in the stock price, and you should too.
If you share my extreme frustration with the lack of visible evidence
of AIG's conviction to maximize shareholder value, I strongly urge you to
support my shareholder proposal and encourage the Company to explore all
alternatives to maximizing shareholder value.
Sincerely,
Gregory M. Shepard
