UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
11-K
|
x
|
ANNUAL
REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the
fiscal year ended December 31, 2006
OR
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the
transition period from
to
Commission
File Number 1-10828
| A. |
Full
title of the plan and the address of the plan, if different from
that of
the issuer named below:
|
21ST
CENTURY INSURANCE COMPANY SAVINGS AND SECURITY PLAN
| B. |
Name
of issuer of the securities held pursuant to the plan and the address
of
its principal executive office:
|
6301
OWENSMOUTH AVENUE
WOODLAND
HILLS, CALIFORNIA 91367
21ST
CENTURY INSURANCE COMPANY SAVINGS AND SECURITY
PLAN
TABLE
OF CONTENTS
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3
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Financial
Statements:
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4
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5
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6
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Supplemental
Schedule at December 31, 2006*:
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12
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13
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Exhibit
Index
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23
Consent of Independent Registered Public Accounting
Firm
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*
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All
other schedules required by Section 2520.103-10 of the Department
of
Labor’s Rules and Regulations for Reporting and Disclosure under the
Employee Retirement Income Security Act of 1974 have been omitted
because
they are not applicable.
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the
Participants and Administrator of
21st
Century Insurance Company Savings and Security Plan
In
our
opinion, the accompanying statements of net assets available for benefits and
the related statement of changes in net assets available for benefits present
fairly, in all material respects, the net assets available for benefits of
21st
Century Insurance Company Savings and Security Plan (the “Plan”) at December 31,
2006 and 2005, and the changes in net assets available for benefits for the
year
ended December 31, 2006 in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Plan’s management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that
we plan and perform the audit to obtain reasonable assurance about whether
the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
Our
audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets
(held
at end of year) as of December 31, 2006 is presented for the purpose of
additional analysis and is not a required part of the basic financial statements
but is supplementary information required by the Department of Labor's Rules
and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedule is the responsibility of the
Plan’s management. The supplemental schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in
our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/
PricewaterhouseCoopers LLP
Los
Angeles, California
June
22,
2007
21ST
CENTURY INSURANCE COMPANY SAVINGS AND SECURITY
PLAN
STATEMENTS
OF NET ASSETS AVAILABLE FOR BENEFITS
|
At
December 31,
|
|||||||
|
2006
|
2005
|
||||||
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Assets:
|
|||||||
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Cash
|
$
|
94,220
|
$
|
29,522
|
|||
|
Investments,
at fair value:
|
|||||||
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Money
market fund
|
9,917,088
|
7,143,676
|
|||||
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21st
Century Insurance Group common stock
|
4,671,867
|
4,668,684
|
|||||
|
Mutual
funds
|
142,549,814
|
129,333,218
|
|||||
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Participant
loans
|
6,894,774
|
6,220,796
|
|||||
|
Total
investments, at fair value
|
164,033,543
|
147,366,374
|
|||||
|
Receivables:
|
|||||||
|
Unsettled
investment transaction
|
-
|
69,272
|
|||||
|
Accrued
interest income
|
402
|
251
|
|||||
|
Net
assets available for benefits
|
$
|
164,128,165
|
$
|
147,465,419
|
|||
See
accompanying Notes to Financial Statements.
21ST
CENTURY INSURANCE COMPANY SAVINGS AND SECURITY
PLAN
STATEMENT
OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
|
Year
ended
December
31,
2006
|
||||
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Additions
to net assets:
|
||||
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Investment
income:
|
||||
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Net
appreciation in fair value of investments
|
$
|
3,322,199
|
||
|
Interest
and dividends
|
12,689,800
|
|||
|
Participant
loans interest income
|
503,850
|
|||
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Total
investment income
|
16,515,849
|
|||
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Contributions:
|
||||
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Employer
|
4,771,151
|
|||
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Participants
|
10,361,603
|
|||
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Total
contributions
|
15,132,754
|
|||
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Total
additions
|
31,648,603
|
|||
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Deductions
from net assets:
|
||||
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Benefits
paid and other distributions to participants
|
14,873,770
|
|||
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Administrative
expenses
|
112,087
|
|||
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Total
deductions
|
14,985,857
|
|||
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Net
increase in net assets
|
16,662,746
|
|||
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Net
assets available for benefits:
|
||||
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Beginning
of year
|
147,465,419
|
|||
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End
of year
|
$
|
164,128,165
|
||
See
accompanying Notes to Financial Statements.
21STCENTURY
INSURANCE COMPANY SAVINGS AND SECURITY PLAN
NOTES
TO FINANCIAL STATEMENTS
AT
DECEMBER 31, 2006 AND 2005,
AND
FOR THE YEAR ENDED DECEMBER 31, 2006
NOTE
1. DESCRIPTION OF PLAN
The
following description of the 21st Century Insurance Company Savings and Security
Plan (the “Plan”) is provided for general information purposes only.
Participants should refer to the Plan Document for a more complete description
of the Plan provisions.
General
The
Plan
is a defined contribution plan covering substantially all employees of 21st
Century Insurance Group (“21st's Parent”) and its subsidiaries. Any employee who
has attained the age of 20 is eligible to participate in the Plan following
the
date of hire, rehire, or transfer to eligible status. The Plan is sponsored
and
administered by 21st Century Insurance Company (the “Company”), a wholly owned
subsidiary of the 21st Century Insurance Group. The Plan enables participants
to
make contributions, which the Company matches in part. Contributions by and
on
behalf of participants are invested in accordance with the participants’
investment designations in one or more of the available 16 investment fund
options. Effective January 1, 2006 participants can no longer purchase shares
in
21st Century Insurance Group common stock. However, participants are allowed
to
retain their current positions in 21st Century Insurance Group common stock
held
at December 31, 2005.
The
Plan
is subject to the provisions of the Employee Retirement Income Security Act
of
1974 (“ERISA”).
Contributions
Participants
can contribute up to the lesser of $15,000 or 25 percent of earnings on a
before-tax basis and up to an additional 5 percent of earnings on an after-tax
basis. Participants age 50 and over can contribute an additional $5,000 to
a
maximum of $20,000. The Company contributes a matching amount equal to $0.75
for
every pre-tax dollar contributed by a participant up to the first 6 percent
of
eligible earnings. Forfeitures are used to offset future Company-matching
contributions. At December 31, 2006 and 2005, forfeited nonvested accounts
totaled $99,194 and $207,506, respectively. For the year ended 2006, Company
contributions were reduced by $625,000 due to forfeited nonvested
accounts.
Participants
may change their contribution percentages or stop making contributions at any
time during the Plan year. Company contributions follow the participant’s fund
election.
Vesting
Participants
are immediately vested in their own contributions and related investments
earnings. Vesting in Company contributions is based on years of service. A
participant is 25 percent vested after two years of service, and vests an
additional 25 percent for each additional year. A participant is 100 percent
vested after five years of credited service.
21ST
CENTURY
INSURANCE COMPANY SAVINGS AND SECURITY PLAN
NOTES
TO FINANCIAL STATEMENTS (continued)
AT
DECEMBER 31, 2006 AND 2005,
AND
FOR THE YEAR ENDED DECEMBER 31, 2006
Participant
Accounts
Each
participant’s account is credited with his or her contributions, any Company
matching contribution and an allocation of Plan net earnings based on
participant account balances, and is charged with any withdrawals. The benefit
to which a participant is entitled is the benefit that can be provided from
the
participant’s vested account.
Participant
Loans
Each
participant may obtain loans against their vested account balance. Any loans
made to a participant are secured by the participant’s vested interest in their
investment fund subaccounts. No loan may exceed the lesser of 50 percent of
the
participant’s vested account balance or $50,000. Loans made for purposes other
than the purchase of a primary residence are charged interest at the prime
rate
plus 2 percent. Loans made for the purchase of a home are charged interest
at
the prime rate. Generally, loans are payable within 5 years except that the
repayment period for loans made for the purchase of a home may be up to 15
years. Upon termination of employment, including death, any outstanding loan
balance becomes due and payable and the participant may elect to repay it or
treat it as a partial distribution.
Benefits
Upon
termination of service, a participant may generally elect to receive the value
of their account in either a lump-sum amount (if eligible) or in installment
payments for up to 15 years. Benefits become payable to participants upon
termination of employment with 21st's Parent or in the event of elective
withdrawal as permitted by the Plan.
NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Accounting
The
financial statements of the Plan are prepared in conformity with accounting
principles generally accepted in the United States of America
(“GAAP”).
Use
of Estimates
The
preparation of financial statements in accordance with GAAP requires management
to make estimates and assumptions that affect amounts reported in the financial
statements and accompanying notes. Actual results could differ from these
estimates.
Investments
Valuation and Income Recognition
Shares
of
mutual funds are valued at the net asset value of shares held by the Plan at
year end. Common stock is reported at fair value, using quoted market prices.
Participant loans are reported at amounts owed by the participants, which
approximates fair value.
21ST
CENTURY
INSURANCE COMPANY SAVINGS AND SECURITY PLAN
NOTES
TO FINANCIAL STATEMENTS (continued)
AT
DECEMBER 31, 2006 AND 2005,
AND
FOR THE YEAR ENDED DECEMBER 31, 2006
Purchases
and sales of securities are reflected on a trade date basis. The basis for
all
securities sold is determined by average cost. Dividend income is recorded
on
the ex-dividend date and interest income is recorded on the accrual basis.
The
Plan presents in the statement of changes in net assets available for benefits
the net appreciation in the fair value of its investments, which consists of
the
realized gains or losses on the sale of investments during the period and
unrealized appreciation or depreciation of investments held at
year-end.
Benefit
Payments
Benefits
are recorded when paid. Net assets available for benefits at December 31, 2006
and 2005, did not include any amounts payable to participants who have withdrawn
from the Plan, but have not yet been paid vested benefits.
Recent
Accounting Pronouncements
In
September 2006, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 157,
Fair
Value Measurements (“FAS
157”). FAS 157 clarifies the principle that fair value should be based on the
assumptions market participants would use when pricing an asset or liability
and
establishes a fair value hierarchy that prioritizes the information used to
develop those assumptions. Under the standard, fair value measurements would
be
separately disclosed by level within the fair value hierarchy. FAS 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007 and interim periods within those fiscal years, with early
adoption permitted. The Plan has not yet determined the effect, if any, that
the
implementation of FAS 157 will have on its financial statements.
In
September 2006, the Securities and Exchange Commission (“SEC”) issued Staff
Accounting Bulletin No. 108, Considering
the Effects of Prior Year Misstatements when Quantifying Misstatements in
Current Year Financial Statements
(“SAB
108”). SAB 108 provides interpretive guidance on how the effects of the
carryover or reversal of prior year misstatements should be considered in
quantifying a current year misstatement. The SEC staff believes that registrants
should quantify errors using both a balance sheet and an income statement
approach and evaluate whether either approach results in quantifying a
misstatement that, when all relevant quantitative and qualitative factors are
considered, is material. SAB 108 is effective for the Plan’s fiscal year ended
December 31, 2006. The adoption of SAB 108 did not have a material effect on
the
Plan’s financial statements.
NOTE
3. INVESTMENTS
The
Plan’s investments are invested in 21st Century Insurance Group Common Stock,
participant loans and 16 funds administered by Fidelity Investments, which
also
acts as trustee and recordkeeper for the Plan. Funds in transit to and from
any
of the investment options and the Company or the participants or other
investment options are temporarily invested in short-term investments by the
trustee.
21ST
CENTURY
INSURANCE COMPANY SAVINGS AND SECURITY PLAN
NOTES
TO FINANCIAL STATEMENTS (continued)
AT
DECEMBER 31, 2006 AND 2005,
AND
FOR THE YEAR ENDED DECEMBER 31, 2006
The
Plan’s investments that represent five percent or more of the Plan’s net assets
available for plan benefits at December 31, 2006 and 2005 are as
follows:
|
2006
|
2005
|
||||||
|
Investments
at fair value:
|
|||||||
|
Mutual
Funds:
|
|||||||
|
Fidelity
Magellan Fund
|
24,473,091
|
24,921,031
|
|||||
|
Fidelity
Contrafund
|
21,317,818
|
19,658,672
|
|||||
|
Spartan
U.S. Equity Index Fund
|
-
|
* |
7,567,982
|
||||
|
Fidelity
Freedom 2010 Fund
|
12,877,163
|
15,016,616
|
|||||
|
Fidelity
Freedom 2020 Fund
|
20,174,265
|
19,667,160
|
|||||
|
Fidelity
Freedom 2030 Fund
|
16,635,428
|
15,674,159
|
|||||
|
Money
Market Funds:
|
|||||||
|
Fidelity
Retirement Government Fund
|
9,917,088
|
-
|
* | ||||
*
Balance is less than 5%
21ST
CENTURY
INSURANCE COMPANY SAVINGS AND SECURITY PLAN
NOTES
TO FINANCIAL STATEMENTS (continued)
AT
DECEMBER 31, 2006 AND 2005,
AND
FOR THE YEAR ENDED DECEMBER 31, 2006
During
2006, the Plan’s investments (including gains and losses on investments bought
and sold, as well as held during the year) appreciated in fair value as
follows:
|
Year
ended
December
31, 2006
|
||||
|
Mutual
funds
|
$
|
2,849,369
|
||
|
21st
Century Insurance Group Common Stock
|
472,830
|
|||
|
Net
appreciation in fair value of investments
|
$
|
3,322,199
|
||
NOTE
4. RISKS AND UNCERTAINTIES
Investment
securities, in general, are exposed to various risks, such as interest rate,
credit and overall market volatility. Due to the level of risk associated with
certain investment securities, it is at least reasonably possible that changes
in the values of investment securities will occur in the near term and that
such
changes could materially affect participants’ account balances and the amounts
reported in the financial statements.
NOTE
5. TAX STATUS OF THE PLAN
The
Internal Revenue Service (“IRS”) has issued a determination letter dated
November 20, 2002, stating that the Plan qualifies, in form, under Sections
401(a) and 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”),
and the underlying trust is, therefore, exempt from federal income taxes under
Section 501(a) of the Code. The Plan is required to operate in accordance with
the Code to maintain its tax qualification. The Plan administrator is not aware
of any course of actions or series of events that have occurred which might
adversely affect the Plan’s qualified status.
Plan
Amendments subsequent to the effective date of the IRS determination letter
are
not covered by the letter. The Plan administrator believes that the Plan is
currently designed and operated in compliance with the applicable requirements
of the Code. Therefore, no provision for income taxes has been included in
the
Plan’s financial statements.
NOTE
6. PARTY-IN-INTEREST
Certain
Plan investments are shares of mutual funds managed by Fidelity Investments.
Fidelity Investments is the acting Trustee as defined by the Plan and,
therefore, these transactions qualify as party-in-interest transactions for
which a statutory exemption exists. Fees paid to Fidelity for administrative
services amounted to $88,736 for the year ended December 31, 2006.
Effective
January 1, 2006, participants can no longer purchase shares in 21st Century
Insurance Group, but can hold existing positions. Transactions in 21st Century
Insurance Group common stock, which was offered to participants as a plan
investment option, qualify as party-in-interest transactions. During 2006,
the
Plan made sales of $469,916 of the Company’s common stock.
Such
transactions qualify as party-in-interest and are exempt from the prohibited
transaction rules of ERISA and the Code.
21ST
CENTURY
INSURANCE COMPANY SAVINGS AND SECURITY PLAN
NOTES
TO FINANCIAL STATEMENTS (continued)
AT
DECEMBER 31, 2006 AND 2005,
AND
FOR THE YEAR ENDED DECEMBER 31, 2006
NOTE
7. PLAN TERMINATION
Although
it has not expressed any intention to do so, the Company has the right under
the
Plan to terminate the Plan subject to the provisions set forth in ERISA. Should
the Plan terminate, or should contributions be discontinued, at some future
time, the rights of each affected participant to the entire amount credited
to
his or her account on the date of such termination or discontinuance shall
be
non-forfeitable and fully vested. Payment of such amounts to each participant
or
beneficiary, upon the termination of the Plan or upon the complete
discontinuance of contributions under the Plan, shall be made by the Plan
administrator at such time and in such manner as the Plan administrator shall
state, provided, however, that all participants and beneficiaries similarly
situated shall be treated in a nondiscriminatory manner.
NOTE
8. SUBSEQUENT EVENT
On
May
15, 2007, 21st Century Insurance Group and American International Group, Inc.
(“AIG”) announced they have entered into a definitive merger agreement providing
for the acquisition by AIG of all of the outstanding shares of common stock
of
21st Century Insurance Group not currently owned by AIG. 21st Century Insurance
Group will become a wholly owned subsidiary of AIG.
SUPPLEMENTAL
SCHEDULE
21ST
CENTURY INSURANCE COMPANY SAVINGS AND SECURITY PLAN
EIN:
95-2565072 PLAN: 001
FORM
5500,
SCHEDULE
H, PART IV, LINE 4i
SCHEDULE
OF ASSETS (HELD AT END OF YEAR)
AT
DECEMBER 31, 2006
|
(a)
|
(b)
Identity of Issue,
Borrower,
Lessor
or
Similar Party
|
(c)
Description of Investment,
Including
Maturity Date,
Rate
of Interest, Collateral, Par or
Maturity
Value
|
(e)
Current
Value
|
|||||||
|
*
|
Fidelity
Magellan Fund
|
273,381
Mutual Fund Shares
|
$
|
24,473,091
|
||||||
|
*
|
Fidelity
Contrafund
|
326,960
Mutual Fund Shares
|
21,317,818
|
|||||||
|
*
|
Fidelity
Freedom 2020 Fund
|
1,299,051
Mutual Fund Shares
|
20,174,265
|
|||||||
|
*
|
Fidelity
Freedom 2030 Fund
|
1,037,768
Mutual Fund Shares
|
16,635,428
|
|||||||
|
*
|
Fidelity
Freedom 2010 Fund
|
880,791
Mutual Fund Shares
|
12,877,163
|
|||||||
|
*
|
Fidelity
Retirement Government Money Market Fund
|
9,917,088
Money Market Fund Shares
|
9,917,088
|
|||||||
|
*
|
Spartan
U.S. EQ Index Fund
|
159,940
Mutual Fund Shares
|
8,025,777
|
|||||||
|
|
Boston
Company Small Cap Value Fund
|
294,773
Mutual Fund Shares
|
7,333,959
|
|||||||
|
*
|
Fidelity
Freedom 2040 Fund
|
722,320
Mutual Fund Shares
|
6,847,595
|
|||||||
|
*
|
Spartan
Intl Index Fund
|
128,590
Mutual Fund Shares
|
5,675,975
|
|||||||
|
|
Templeton
Foreign CL A Fund
|
401,376
Mutual Fund Shares
|
5,474,769
|
|||||||
|
*
|
21st
Century Insurance Group
|
264,695
Common Stock Shares
|
4,671,867
|
|||||||
|
|
Davis
NY Venture CL A Fund
|
119,340
Mutual Fund Shares
|
4,596,964
|
|||||||
|
|
Vanguard
Ext Mkt Index Inv CL Fund
|
112,619
Mutual Fund Shares
|
4,356,105
|
|||||||
|
*
|
Fidelity
US BD Index Fund
|
250,049
Mutual Fund Shares
|
2,715,536
|
|||||||
|
*
|
Fidelity
Freedom 2000 Fund
|
94,939
Mutual Fund Shares
|
1,182,935
|
|||||||
|
*
|
Fidelity
Freedom Income Fund
|
74,734
Mutual Fund Shares
|
862,434
|
|||||||
|
*
|
Interest-bearing
cash
|
Interest
rates between 4.33% and 5.23%
|
|
94,220
|
||||||
|
*
|
Participant
Loans
|
Interest
rates between 4.00% and 11.50%; Maturity dates of 01/2007 to 08/2021
|
6,894,774
|
|||||||
|
|
|
|
$
|
164,127,763
|
||||||
*
Investment held by a permitted party-in-interest.
See
Report of Independent Registered Public Accounting Firm.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the trustees (or
other persons who administer the employee benefit plan) have duly caused this
annual report to be signed on its behalf by the undersigned hereunto duly
authorized.
|
21st
Century Insurance Company Savings and Security
Plan
|
Date:
June 22, 2007
|
By:
|
/s/
Richard A. Andre
|
|
|
Richard
A. Andre, Senior Vice President
|
||
|
21st
Century Insurance Company (the Plan’s sponsor)
|
||
|
Chairman
Benefits Committee
|
13