AIG Says It Will Increase Its Stake in 20th Century

American International Group, the insurance conglomerate that rescued 20th Century Insurance from near-bankruptcy after the Northridge earthquake, plans to boost its stake to more than 50% in the Woodland Hills-based auto insurer.

In a 13-D filing with the SEC announced Thursday, New York-based AIG said in the coming year it will purchase enough shares to gain majority control of 20th Century, up from the 42% stake it currently owns.

AIG now holds two of 11 seats on 20th Century’s board of directors, and AIG spokesman Joe Norton declined to comment on whether AIG would add members to take control of 20th Century’s board.

Ric Hill, a 20th Century spokesman, said the auto insurer “did not solicit” AIG’s additional stake. But he said that, “We’ve had a good working relationship,” and the added investment “probably says [AIG] is very happy” with 20th Century’s performance.

Hill would not speculate, though, on whether 20th Century’s current management will stay in charge after AIG assembles a majority stake.

20th Century made its name selling low-cost auto insurance directly to customers without using insurance agents. The company diversified into homeowners’ coverage, but the 1994 Northridge temblor nearly put it out of business.

20th Century was hit with 46,000 quake claims and paid out about $1 billion, posting a stunning $498-million loss for 1994. Then in December 1994, AIG saved the company from collapse by agreeing to invest $216 million.

Since then, 20th Century’s fortunes have rebounded. It has almost completely exited the homeowners’ insurance business, and has steadily cut its auto premium rates to win back market share.

Last year, 20th Century’s net income shot up 50%, to $110.9 million on $863.5 million in revenue, its most profitable year since the quake, and analysts expect profit to climb to $135 million this year.

20th Century has also expanded out of state for the first time and now insures 12,000 cars in Arizona. It plans to start writing auto business this year in Nevada, Washington and Oregon.

Analysts speculate that AIG may use 20th Century’s direct-marketing blueprint to eventually expand the firm into a nationwide auto insurer.

The stock market was closed Friday. On Thursday, 20th Century’s stock fell 6 cents to close at $27.88, and AIG’s shares rose $2.63 to close at $127.50. Both trade on the New York Stock Exchange.

AIG is a global insurance concern with $12 billion a year in revenue.