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20th Century Insurance Rigs a Tight Ship for Industry Squall

May 28, 1985|JOHN NIELSEN | Times Staff Writer

Behind his desk on the seventh floor of the 20th Century Insurance office building in Warner Center, President G. Robert Thompson has a picture of a sailboat. Appropriately, it is a tightly rigged boat sailing full tilt through rough waters.

"Yes, the waves look pretty big," Thompson said with a laugh. "But we've got our storm gear together. We're weathering pretty well."

As metaphors go, the picture on Thompson's wall is a fair enough clue to the state of affairs at the Woodland Hills-based insurance company. Long known for its skill at cost-cutting and selective marketing, the fast-growing firm is doing its best to make headway in a generally depressed industry.

A recent study by Best's Insurance Management Reports, an authoritative source of industry statistics, says 20th Century Insurance is the fastest-growing property and casualty insurance company in the country. Sales in 1984 were up 34% over those in 1983, with a 31% gain reported in the first three months of 1985.

Record Income

In the last decade, the firm has become the sixth-largest automobile insurer in California. Both its assets and its income from premiums have nearly doubled in the past two years, to more than $200 million. Net income was a record high of $12,780,519 in 1984.

At the same time, there are signs of some turbulence: The company posted its first underwriting loss in 25 years during 1984--paying out $103.50 in claims for every $100 it received in premiums. The company posted a net loss of more than $1 million in the first three months of 1985. And rates were increased in February because of increased operating expenses, with a second increase scheduled for August, 1985.

On balance, though optimistic, Thompson acknowledges being worried. Even at an insurance company known for its growth, there is reason to believe that "something's got to give" before long.

What gives will not be the company, because 20th Century is financially stable. But there is concern among its officials that industry trends pose a formidable challenge for the 27-year-old company.

Rising Costs

Thompson's point of view is nothing new in the property and casualty end of the insurance business, which lately has been fighting steadily rising costs. In the past several years, the number of claims and the costs of claims have risen faster than the rate of inflation, and often more rapidly than income from premiums.

Triggered by ballooning medical and repair fees and by periodic surges in the number of automobile accidents, the costs began to catch up with the nation's insurance companies a few years ago.

The twist at 20th Century Insurance, however, is that bad news wasn't always bad. From the beginning, the company has attempted to undersell its competitors by offering "low-risk" car insurance directly to customers.

Unlike most other insurance firms, the 800-employee company has never employed a sales force, thereby eliminating overhead tied to commissions, salaries and branch offices. Claims and sales are centralized in a gleaming 11-story building in Warner Center. Customers are wooed through a direct-mail network built on closely guarded mailing lists.

Selective About Clients

What's more, the company has long been known as stubbornly selective in its choice of customers, by virtue of general rules excluding first-time buyers, drivers with an accident in the last three years and owners of expensive cars. Because low-risk drivers have fewer accidents, the company has been able to keep its rates low.

As a result, by its own account, 20th Century has made many of its gains by feeding off the competition. Customers rattled by rate increases have turned to the firm for relief, and these gains have led to what Thompson calls a steady "word-of-mouth" business.

For most of its history, 20th Century has been controlled by Louis J. Foster, a former salesman who set up an insurance cooperative downtown in a 600-square-foot Spring Street office in 1958. As president and later chairman of the company, Foster presided over 25 years of steady sales increases, before handing over control of day-to-day operations to Thompson in 1983.

Foster remains involved in the company as chairman of the board of directors, providing what Thompson describes as "active advice on questions of direction."

6% of County Market

The company estimates that 20th Century has about 6% of the Los Angeles County automobile insurance market and 20% of the automobile insurance market in the San Fernando Valley.

About 80% of the firm's business is in Southern California, the industry estimates. The firm does no business outside the state.

As it has grown, 20th Century has drawn mixed reactions from clients and analysts. Although the company boasts of a 95% renewal rating, it lost a highly publicized 1981 court battle with two Los Angeles women who accused the firm of discriminating against minorities. A Superior Court jury awarded the women $3.25 million in damages, a verdict the company appealed.

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