8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported) May 10, 2006

21st Century Insurance Group

(Exact Name of Registrant as Specified in Charter)

Delaware	0-6964	95-1935264
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No)

6301 Owensmouth Avenue
Woodland Hills, California	91367
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code (818) 704-3700

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Item 1.01 Entry into a Material Definitive Agreement.

The information provided under Item 5.02 hereof is incorporated herein by reference.

Item 5.02. Appointment of Principal Officers.

On May 9, 2006, 21st Century Insurance Group, a Delaware corporation (the “Company”), announced that its Board of Directors had appointed Steven P. Erwin the Company’s Senior Vice President and Chief Financial Officer, effective May 8, 2006. As of May 8, 2006, Mr. Erwin assumed the responsibilities of the principal financial officer for the Company from Jesus Zaragoza, the Company’s Vice President and Controller who served as the Company’s principal financial officer since April 7, 2006 pending the appointment of a new chief financial officer for the Company. The information contained in the Company’s press release dated May 9, 2006, in connection with the announcement is included as Exhibit 99.1 to this Current Report on Form 8-K and incorporated into this Item 5.02 by reference.

Before joining 21st Century Insurance, Mr. Erwin, who is 62 years old, served as Executive Vice President and CFO with Health Net Inc. from 1998-2002 and with U.S. Bancorp from 1994-1997. He was also Treasurer for BayBanks Inc. and Senior Vice President, CFO and Treasurer for Old National Bancorporation, and has served on the audit staffs at Coopers & Lybrand and Lockheed California Co.

Pursuant to a letter agreement between the Company and Mr. Erwin, Mr. Erwin’s employment with the Company is on an at-will basis.  Mr. Erwin’s initial base salary is $400,000 per year, and he is eligible to participate in the Company’s annual Short Term Incentive Program, with a minimum bonus of $200,000 for the year 2006, and participate in the Company’s Long Term Incentive Program, defined benefit pension plan and Supplemental Executive Retirement Plan. The Company will provide Mr. Erwin with a health plan, a company car or allowance and temporary living expenses.  Mr. Erwin was granted 150,000 stock options with a strike price set to the closing price of the Company’s stock on the New York Stock Exchange on the first day of Mr. Erwin’s employment, with such options to vest rateably over three years. Additionally, Mr. Erwin will receive a grant of 5,000 shares of stock that fully vest on his first day of employment subject to a 24-month holding period. The information contained in the letter agreement, dated May 5, 2006, is included as Exhibit 10.1 to this Current Report on Form 8-K and incorporated into this Item 5.02 by reference.

The Company's agreement with Mr. Erwin requires the Company to pay him severance compensation of two and one half times his base salary subject to the Section 409 A requirements of the Internal Revenue Code in the following two instances: (1) if at any time between six months prior or within three years after an AIG acquisition of the remaining outstanding shares of the Company's stock, Mr. Erwin's employment is terminated for other than "cause" as defined or Mr. Erwin resigns following a significant reduction in his compensation plan or benefits or a request to relocate outside of Los Angeles or Orange Counties in California or (2) if within five years of his hiring, Mr. Erwin is terminated other than for "cause" or unrelated to an AIG acquisition or a change of control.  In the first instance, Mr. Erwin's options will fully vest upon an AIG acquisition.  In the second instance, Mr. Erwin's options will fully vest and the expiration date of his options will be accelerated to the fifth anniversary of his termination date if that date is earlier than the original expiration date of the options.

Item 9.01. Financial Statements and Exhibits.

(c) Exhibits.

Exhibit No.	Description
10.1	Employment Letter between Steven P. Erwin and the Company, dated May 5, 2006.
99.1	Press release of 21st Century Insurance Group dated May 9, 2006.

	21ST CENTURY INSURANCE GROUP
Date: May 10, 2006	By:	/s/ Richard A. Andre
		Name: Richard A. Andre
		Title: Senior Vice President

EX-10.1

May 5, 2006

Re: Summary of Employment Compensation and Benefits

Dear Steve:

This letter will summarize the compensation and benefits offered to you in your new position as Senior Vice President and Chief Financial Officer of 21st Century Insurance Group and its subsidiaries.

Your compensation is comprised of the following three components:

Base Salary:

Your initial base salary will be $400,000 per annum. Your base salary will be reviewed annually beginning the first quarter of 2007.

Short-Term

Incentive: You will participate in an annual STI Program with a target payout of 75% of base salary. STI amounts are calculated against actual earned salary. You will receive a guaranteed minimum bonus of $ 200,000 for the year 2006 payable in the first quarter of 2007. Please review the Company’s STI Program Plan

Long-Term

Incentive: You will participate in the Long Term Incentive Program, which presently comprises an annual award of stock options as determined by the Compensation Committee of the Board of Directors. Recent awards for managers at your level have been for a number of options with a Black-Scholes value equivalent to 150% of your base salary. These options vest ratably over three years and have a ten-year life. Please review the Long Term Incentive Plan and other benefit information of the Company for details.

In addition to Compensation, you will receive the following benefits:

Initial Grant of Stock Options:

150,000 stock options with a strike price set to the closing price of TW stock on your first day of employment. These options will vest ratably over three years, subject to the terms of our standard Stock Option Agreement (copy attached.)

In the event of an AIG acquisition of the remaining outstanding Company shares, all options of this initial grant shall immediately vest.

Grant of Company Stock:

You will receive a grant of 5,000 shares of stock that fully vest on your first day of employment. These shares will have a holding requirement of 24 months.

Benefits: You will be eligible to participate with other senior executives in the health, disability and other benefit plans provided by 21st Century.

You will participate in the Company’s defined benefit pension plan and Supplemental Executive Retirement Plan (SERP) subject to your acceptance of a modification of the Change of Control provision that clarifies that the provision cannot be elected solely at your discretion and will not apply to an AIG acquisition. To the extent that you become eligible to receive a SERP benefit for a non-AIG change of control, in no event will the benefit be less than 50% of the maximum benefit payable. Further, your participation in the SERP is also subject to your agreement that your eligibility for SERP benefits will not vest at age 65 but after five (5) years of employment, unless the Board of Directors imposes a mandatory retirement for you prior to your being employed for at least five years. In that case, you would be eligible for a SERP benefit as though the employment condition had been met.

You will also participate in the Executive Severance Plan. Please review the Executive Severance Plan and other benefit information of the Company for details. The benefits of this plan do not apply to an AIG acquisition.

Vacation: You will be eligible for four weeks, plus company holidays.

Automobile: You will be provided full use of an automobile or a comparable allowance of $1,600 per month per the Company’s Executive Automobile Policy.

Temporary Living Expense:

You will be provided an apartment in Woodland Hills for up to six months prior to your relocation from San Gabriel Valley.

At-Will Employment/Severance:

Your employment with the Company will be on an at-will basis and nothing in this memorandum of understanding or otherwise will confer upon you any rights to continuing employment with the Company or its subsidiaries for any period of time.

Notwithstanding this, at any time between six months prior or within three years after an AIG acquisition of the remaining outstanding Company shares, should your employment be terminated other than for cause (“cause” to include but not be limited to, willful misconduct and gross negligence), your compensation plan or benefits significantly reduced, or you be requested to relocate outside Los Angeles or Orange Counties in California, you will have the option to resign from the Company and receive two and one half times your base salary, subject to 409A requirements.

Should your employment with the Company be terminated other than for cause unrelated to an AIG acquisition or a change of control within five years of your hiring, you will receive two and one half times your base salary, subject to 409A requirements. Your stock option agreements shall provide that if you are terminated by the company other than for cause (as described above) then (A) your options shall fully vest on the date of your termination and (B) the option shall terminate on the earlier of (1) the fifthanniversary of the termination date or (2) the expiration date of the options.

Sincerely,

Bruce W. Marlow

President and Chief Executive Officer

Enclosures

Approved and Agreed to:
	Steven P. Erwin
	Date

EX-99.1

FOR IMMEDIATE RELEASE	CONTACT: RICK ANDRE
May 9, 2006	(818) 704-3750

21ST CENTURY INSURANCE NAMES FINANCIAL VETERAN AS

CHIEF FINANCIAL OFFICER

Woodland Hills, CA - Bruce W. Marlow, President and CEO of 21st Century Insurance (NYSE:TW), announced today the appointment of Steven P. Erwin as Senior Vice President and Chief Financial Officer for the company.

Before joining 21st Century Insurance, Erwin served as Executive Vice President and CFO of U.S. Bancorp and, most recently, Health Net Inc. Earlier in his career, he was Treasurer for BayBanks, Inc. and Senior Vice President, CFO and Treasurer for Old National Bancorporation, and served on the audit staff at Coopers & Lybrand.

“Steve’s experience in the CFO role is an important addition to the management team. His broader financial services perspective and his commitment to staff development will be greatly appreciated.” Marlow said.

21st Century Insurance recently announced its entry into Pennsylvania, Florida and Georgia, with plans to enter three additional states later this year.

At Health Net, Erwin was a key member of an executive team credited with a highly successful turnaround of the company. Erwin received his Executive MBA from the University of Washington and a bachelor of science in Accounting and Finance from California State University, Los Angeles.

"This is an exciting time to be joining 21st Century Insurance,” Erwin said. “21st is poised to become a national player in the auto insurance market, and I’m looking forward to being part of the senior management team.”

About 21st: Good people to call

Founded in 1958, 21st Century Insurance Group is a direct-to-consumer provider of personal auto insurance. With $1.4 billion of revenue in 2005, the company insures over 1.5 million vehicles in California, Texas, Illinois and seven other states. 21st provides superior policy features and 24/7 customer service at a competitive price. Customers can purchase insurance, service their policy or report a claim at 21st.com or on the phone with our licensed insurance professionals at 1-800-211-SAVE, 24 hours a day, 365 days a year. Service is offered in English and Spanish both on the phone and on the Web. 21st Century Insurance Company, 21st Century Casualty Company and 21st Century Insurance Company of the Southwest are rated A+ by Fitch Ratings and Standard & Poor’s.

21st Century Insurance Group is traded on the New York Stock Exchange under the trading symbol TW and is headquartered at 21st Century Plaza, 6301 Owensmouth Avenue, Woodland Hills, CA 91367.