AMERICAN INTERNATIONAL GROUP, INC.
                                 70 PINE STREET
                           NEW YORK, NEW YORK  10270

Martin J. Sullivan
President and
Chief Executive Officer



January 24, 2007

Board of Directors
21st Century Insurance Group
6301 Owensmouth Avenue
Woodland Hills, California 91367

Dear Board Members:

     American International Group, Inc. ("AIG" or "we") is pleased to propose to
acquire for cash all of the outstanding shares of common stock, par value $0.001
(the "Shares"), of 21st Century Insurance Group (the "Company") not owned by AIG
and its subsidiaries at a purchase price of $19.75 per Share.

     The proposed per Share price represents a 19.0% premium to today's closing
price and a 25.5% premium to the average closing price during the last twelve
months. The proposed per Share price also represents a multiple of 19.6x the
consensus estimates of the Company's 2007 earnings per share (based on a current
First Call estimate of $1.01 per share).

     Through its subsidiaries American Home Assurance Company, Commerce and
Industry Insurance Company, National Union Fire Insurance Company of Pittsburgh,
Pa. and New Hampshire Insurance Company, AIG is the Company's largest
shareholder, owning approximately 61.9% of the outstanding Shares. This proposal
would enable the Company's public shareholders to monetize their investment at a
full and fair value for their Shares. We therefore are confident that our
proposal will be attractive to the Company's public shareholders and that the
Company's combination with AIG would serve the best long-term interests of the
Company and its policyholders.

     The proposed transaction would be effected by means of a merger agreement
with the intention for the Company to become a wholly-owned subsidiary of AIG.
Following completion of the merger, the Company would be able to devote its full
energy and resources to building the business.

     This proposal is subject to AIG's satisfactory completion of due diligence,
satisfaction of regulatory requirements and the approval by a special committee
comprised of directors of the Company who are independent of AIG. AIG is
interested only in acquiring the publicly held Shares of the Company, and has no
interest in selling


its controlling stake in the Company. Please be aware that in making this
proposal, AIG reserves the right both to withdraw this proposal prior to the
execution of a definitive merger agreement and to modify it in any way as a
result of negotiations or for any reason at all, including proposing alternative
acquisition structures.

     Concurrent with sending this proposal to you, AIG is filing an amendment to
its Schedule 13D, as required by the Securities Exchange Act of 1934, and plans
to issue a press release. In connection with this proposal, AIG has engaged Banc
of America Securities LLC and J.P. Morgan Securities Inc. as financial advisors
and Sullivan & Cromwell LLP as legal advisor. We are happy to make them
available to you to help expedite the transaction.

     We look forward to working with you.

                                        Very truly yours,




                                        /s/ Martin J. Sullivan