SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C.  20549

                                    FORM 10-Q

                   QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


For Quarter Ended  September 30, 2002             Commission File Number  0-6964

                          21ST CENTURY INSURANCE GROUP
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

CALIFORNIA                                              95-1935264
(State or other jurisdiction of                         (I.R.S. Employer
incorporation or organization)                          Identification number)

6301 OWENSMOUTH AVENUE
WOODLAND HILLS, CALIFORNIA                              91367
(Address of principal executive offices)                (Zip Code)

(818) 704-3700
(Registrant's telephone number, including area code)    Web site: www.21st.com


                                      None
--------------------------------------------------------------------------------
     Former name, former address and former fiscal year, if changed since last
                                     report.


Indicate by check mark whether the registrant (1) has filed all reports required
to  be  filed  by  Section  13  or 15 (d) of the Securities Exchange Act of 1934
during  the  preceding 12 months (or for such shorter period that the registrant
was  required  to  file  such  reports), and (2) has been subject to such filing
requirements  for  the  past  90  days.
Yes [X]   No [ ]


Indicate  the  number  of  shares outstanding of each of the issuer's classes of
common  stock,  as  of  the  latest  practicable  date.

Common Stock, Without Par Value                  Outstanding at October 17, 2002
      (Title of Class)                                  85,431,505 shares


                                                                               1



PART I  -  FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

21ST CENTURY INSURANCE GROUP
CONSOLIDATED BALANCE SHEETS


                                                                 SEPTEMBER 30,    December 31,
                                                                     2002             2001
AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA                           (UNAUDITED)
-----------------------------------------------------------------------------------------------
                                                                           
ASSETS
Fixed maturity investments available-for-sale, at fair value
  (amortized cost: $869,265 and $857,209)                       $       917,865  $     855,724
Cash and cash equivalents                                                58,391         28,909
-----------------------------------------------------------------------------------------------
Total investments and cash                                              976,256        884,633
Accrued investment income                                                13,087         11,733
Premiums receivable                                                      89,371         75,559
Reinsurance receivables and recoverables                                 35,935         40,138
Prepaid reinsurance premiums                                              2,848         15,444
Deferred income taxes                                                    94,455         96,216
Deferred policy acquisition costs                                        35,657         24,662
Property and equipment, at cost less accumulated
  depreciation of $80,915 and $66,462                                   139,984        178,672
Other assets                                                             13,675         24,959
-----------------------------------------------------------------------------------------------
Total assets                                                    $     1,401,268  $   1,352,016
-----------------------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Unpaid losses and loss adjustment expenses                      $       394,510  $     349,290
Unearned premiums                                                       254,315        236,473
Claims checks payable                                                    37,714         36,105
Reinsurance payable                                                         789         12,993
Other liabilities                                                        60,943         57,849
-----------------------------------------------------------------------------------------------
Total liabilities                                                       748,271        692,710
-----------------------------------------------------------------------------------------------

Stockholders' equity:
Common stock, without par value; authorized 110,000,000
  shares, outstanding 85,439,641 in 2002 and 85,361,848 in 2001         418,845        416,991
Retained earnings                                                       208,119        248,635
Accumulated other comprehensive income (loss)                            26,033         (6,320)
-----------------------------------------------------------------------------------------------
Total stockholders' equity                                              652,997        659,306
-----------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity                      $     1,401,268  $   1,352,016
-----------------------------------------------------------------------------------------------



See accompanying notes to consolidated financial statements.


                                                                               2



21ST CENTURY INSURANCE GROUP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

AMOUNTS IN THOUSANDS, EXCEPT PER SHARE        Three Months Ended September 30,     Nine Months Ended September 30,
DATA                                              2002               2001               2002               2001
----------------------------------------------------------------------------------------------------------------------
                                                                                         
REVENUES
Net premiums earned:
  Personal auto lines                      $         234,666   $         210,340  $        669,968   $         629,306
  Homeowner and earthquake lines in runoff                 -               6,291                 -              19,302
Net investment income                                 11,729              10,958            34,378              34,036
Realized investment gains                              3,045                 962             7,343               2,512
----------------------------------------------------------------------------------------------------------------------
Total revenues                                       249,440             228,551           711,689             685,156
----------------------------------------------------------------------------------------------------------------------
LOSSES AND EXPENSES
Net losses and loss adjustment expenses:
  Personal auto lines                                193,081             181,041           559,805             545,150
  Homeowner and earthquake lines in runoff            46,863              14,179            58,677              37,177
Policy acquisition costs                              31,517              25,574            87,836              76,786
Write-off of software                                 37,177                   -            37,177                   -
Other operating expenses                               7,395               6,305            14,363              16,774
----------------------------------------------------------------------------------------------------------------------
Total losses and expenses                            316,033             227,099           757,858             675,887
----------------------------------------------------------------------------------------------------------------------
(Loss) income before federal income taxes            (66,593)              1,452           (46,169)              9,269
Federal income tax benefit                            21,358               1,227            19,116               4,129
----------------------------------------------------------------------------------------------------------------------
Net (loss) income                          $         (45,235)  $           2,679  $        (27,053)  $          13,398
----------------------------------------------------------------------------------------------------------------------

(LOSS) EARNINGS PER COMMON SHARE
  Basic                                    $           (0.53)  $            0.03  $          (0.32)  $            0.16
----------------------------------------------------------------------------------------------------------------------
  Diluted                                  $           (0.53)  $            0.03  $          (0.32)  $            0.16
----------------------------------------------------------------------------------------------------------------------

WEIGHTED-AVERAGE SHARES OUTSTANDING
  Basic                                           85,439,641          85,353,450        85,408,266          85,337,162
----------------------------------------------------------------------------------------------------------------------
  Diluted                                         85,439,641          85,503,127        85,408,266          85,387,616
----------------------------------------------------------------------------------------------------------------------



See accompanying notes to consolidated financial statements


                                                                               3



21ST CENTURY INSURANCE GROUP
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)


                                                               Accumulated
                                                                  Other
                                      Common     Retained     Comprehensive
AMOUNTS IN THOUSANDS                  Stock      Earnings     Income (Loss)     Total
---------------------------------------------------------------------------------------
                                                                  
Balance - January 1, 2002            $416,991  $248,635      $     (6,320)    $659,306
Comprehensive income                            (27,053)(1)        32,353(2)     5,300
Cash dividends paid on common stock             (13,665)                       (13,665)
Other                                   1,854       202                          2,056
---------------------------------------------------------------------------------------
Balance - September 30, 2002         $418,845  $208,119      $     26,033     $652,997
---------------------------------------------------------------------------------------


(1)  Net loss.
(2)  Net change in accumulated other comprehensive income for the nine months
     ended September 30, 2002, is comprised of unrealized gains on
     available-for-sale investments of $37,396 (net of income tax expense of
     $20,137), the reclassification adjustment for gains included in net income
     of $4,841 (net of income tax expense of $2,607), and net changes in minimum
     pension liability in excess of unamortized prior service costs of $202.


See accompanying notes to consolidated financial statements.


                                                                               4



21ST CENTURY INSURANCE GROUP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


AMOUNTS IN THOUSANDS
Year-to-Date September 30,                                 2002        2001
------------------------------------------------------------------------------
                                                              
OPERATING ACTIVITIES
Net (loss) income                                       $ (27,053)  $  13,398
Adjustments to reconcile net (loss) income to net cash
  provided by operating activities:
  Provision for depreciation and amortization              15,113      16,441
  Write-off of software                                    37,177           -
  Amortization of restricted stock grants                     369         500
  (Expense) benefit for deferred income taxes             (15,660)      1,265
  Realized gains on sale of investments                    (7,343)     (2,512)
  Federal income tax benefit                                4,670      10,129
  Reinsurance balances                                      4,596       9,081
  Unpaid losses and loss adjustment expenses               45,220      (6,839)
  Unearned premiums                                        17,842       3,700
  Claims checks payable                                     1,609       1,038
  Other assets                                            (19,381)     (1,322)
  Other liabilities                                         3,457      14,424
------------------------------------------------------------------------------
Net cash provided by operating activities                  60,616      59,303
------------------------------------------------------------------------------
INVESTING ACTIVITIES
Fixed maturities available-for-sale
  Purchases                                              (466,287)   (315,301)
  Calls or maturities                                      18,617       2,158
  Sales                                                   441,928     381,687
Net purchases of property and equipment                   (13,212)    (53,497)
------------------------------------------------------------------------------
Net cash (used in) provided by investing activities       (18,954)     15,047
------------------------------------------------------------------------------
FINANCING ACTIVITIES
Dividends declared and paid                               (13,665)    (20,481)
Proceeds from the exercise of stock options                 1,485         921
------------------------------------------------------------------------------
Net cash used in financing activities                     (12,180)    (19,560)
------------------------------------------------------------------------------

Net increase in cash                                       29,482      54,790

Cash and cash equivalents, beginning of period             28,909       7,240
------------------------------------------------------------------------------
Cash and cash equivalents, end of period                $  58,391   $  62,030
------------------------------------------------------------------------------


SUPPLEMENTAL INFORMATION
------------------------------------------------------------------------------
Income taxes refunded                                   $  12,920   $  11,285
------------------------------------------------------------------------------



See accompanying notes to consolidated financial statements.


                                                                               5

21ST CENTURY INSURANCE GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Unaudited)


NOTE 1.   BASIS OF PRESENTATION
-------------------------------

The accompanying unaudited consolidated financial statements of 21st Century
Insurance Group and subsidiaries (the "Company") have been prepared in
accordance with accounting principles generally accepted in the United States of
America ("GAAP") for interim financial information and the instructions to Form
10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of
the information and footnotes required by GAAP for complete financial
statements.  In the opinion of management, all adjustments (consisting of
normal, recurring accruals) considered necessary for a fair presentation have
been included.  All material intercompany accounts and transactions have been
eliminated.  Operating results for the nine-month period ended September 30,
2002, are not necessarily indicative of the results that may be expected for the
year ending December 31, 2002.  For further information, refer to the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2001.

Certain amounts in the 2001 financial statements have been reclassified to
conform to the 2002 presentation.

Effective January 1, 2002, the Company acquired American International Group,
Inc.'s ("AIG") 51% interest in 21st Century Insurance Company of Arizona ("21st
of Arizona") for $4.4 million, which approximated its GAAP book value.  The
Company previously held a 49% interest in 21st of Arizona, which writes personal
auto insurance exclusively in Arizona.  Beginning in 2002, 21st of Arizona is
reported on a consolidated basis.  Prior to January 1, 2002, the Company's
interest in and advances to 21st of Arizona were included in other assets in the
consolidated balance sheet, and the Company's 49% equity in 21st of Arizona's
net loss, which was immaterial in the third quarter and first nine months of
2001, was included in net investment income in the Company's consolidated
statement of income.

NOTE 2.  HOMEOWNER AND EARTHQUAKE LINES IN RUNOFF
-------------------------------------------------

California Senate Bill 1899 ("SB 1899"), effective from January 1, 2001, to
December 31, 2001, allowed the re-opening of previously closed earthquake claims
arising out of the 1994 Northridge Earthquake.  The Company's constitutional
challenge to SB 1899 came to an unsuccessful end on April 29, 2002, when the
United States Supreme Court refused to hear the Company's case. In the fourth
quarter of 2001, the Company recorded a $50.0 million pre-tax charge for loss
and inspection costs but, at that time, it was impracticable to reasonably
estimate the legal defense costs associated with previously closed earthquake
claims. Based on current information now available to the Company, the Company
recorded an additional $46.9 million pre-tax charge for such legal defense costs
in the third quarter of 2002 ($58.8 million for the nine months ended September
30, 2002).

The Company cautions that the recorded estimates for this event are subject to a
greater than normal degree of uncertainty for a variety of reasons. For example,
the claimants allege facts about earthquake damages that ostensibly occurred on
January 17, 1994, but many of the claimants are represented by legal counsel who
are acting to prevent access of Company personnel to inspect the allegedly
damaged property. Thus, in many cases, the best information currently available
to the Company is several years old. As new information becomes available in the
near term, the Company's estimate of its ultimate


                                                                               6

21ST CENTURY INSURANCE GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002 (CONTINUED)
(Unaudited)


exposure may change by an amount that could be material.  In addition, actual
expenses for legal defense costs are susceptible to a wide range of outcomes
depending on a variety of factors including plaintiff strategies, future
judicial decisions, the percentage of cases which settle, and the period of time
cases remain outstanding before settlement.

On October 10, 2002, a Los Angeles Superior Court granted the Company's motion
for summary judgment in the matter of 21st Century Insurance Company vs. People
of the State of California ex rel. Bill Lockyer, Attorney General et al.  The
court determined that the Company's April 21, 1999, settlement with the
California Department of Insurance with respect to regulatory actions arising
out of the 1994 Northridge Earthquake was fully valid and enforceable.  The
Court denied the Attorney General's motion seeking to have the settlement
declared void and unenforceable, a result that may have allowed the California
Department of Insurance to reinstitute regulatory proceedings with respect to
the Company's handling of claims arising out of the 1994 Northridge Earthquake.
The State of California may appeal the ruling.

The Company has executed various transactions to exit from its homeowner line.
Under a January 1, 2002, agreement with Balboa Insurance Company ("Balboa"), a
subsidiary of Countrywide Credit Industries, Inc. ("Countrywide"), 100% of
homeowner unearned premium reserves and future related losses are reinsured by
Balboa.  Obligations relating to the 1994 Northridge Earthquake are not covered
by the agreements with Balboa. The Company began non-renewing homeowner policies
expiring on February 21, 2002, and thereafter. Substantially all of these
customers are being offered homeowner coverage through an affiliate of
Countrywide.

Loss and loss adjustment expenses for the homeowner and earthquake lines in
runoff were $46.9 million and $58.8 million for the quarter and nine months
ended September 30, 2002, respectively, compared to $14.2 million and $37.2
million for the same periods in 2001.

NOTE 3.  WRITE-OFF OF SOFTWARE
------------------------------

Since 1997, the Company has engaged an external software development company,
Computer Sciences Corporation ("CSC"), to build an advanced personal lines
processing system.  The system has four main components:  Policy, Claims,
Billing, and Customer Service.  The system is still in development and currently
supports less than 2% of the Company's business.  To date, the Company has spent
nearly $100 million on this project, most of which was paid directly to CSC.  In
the third quarter of 2002, it became evident through a series of tests and
reviews conducted by the Company that material components of this new system do
not perform at levels necessary to support the entire operations of the Company.
Consequently, the Company recorded a one-time pre-tax charge to write-off $37.2
million of previously capitalized software costs.  The Company is pursuing
solutions with CSC as well as exploring other alternatives.

NOTE 4.  REINSURANCE
--------------------

In the third quarter of 2002, the Company entered into a catastrophe reinsurance
agreement on its auto lines with AIG, Folksamerica Reinsurance Company and
Transatlantic Reinsurance Company, which reinsures any covered events up to
$30.0 million in excess of $15.0 million.  Effective September 1, 2002, the
Company entered into an agreement to cancel future cessions under its quota
share reinsurance treaty with AIG resulting in a one time pre-tax charge of $0.9
million.  The treaty would have ceded 4% of premiums to AIG in the remainder of
2002 and 2% in 2003.


                                                                               7

21ST CENTURY INSURANCE GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002 (CONTINUED)
(Unaudited)


NOTE 5.  CONTINGENCIES
----------------------

Litigation.  In the normal course of business, the Company is named as a
defendant in lawsuits related to claim and other insurance policy issues.  Some
of the actions request extra-contractual and/or punitive damages.  These actions
are vigorously defended unless a reasonable settlement appears appropriate.  In
the opinion of management, except for the matters discussed above in Note 2, the
ultimate outcome of such litigation is not expected to be material to the
Company's financial condition, results of operations or cash flows.

California Income Taxes.  In a recent court ruling, a statute that allowed a tax
deduction for the dividends received from wholly owned insurance subsidiaries
was held unconstitutional on the grounds that it discriminated against
out-of-state insurance holding companies.  Subsequent to the court ruling, the
staff of the California Franchise Tax Board (FTB) has decided to take the
position that the discriminatory sections of the statute are not severable and
the entire statute is invalid.  As a result, the FTB is disallowing
dividend-received deductions for all insurance holding companies, regardless of
domicile, for open tax years ending on or after December 1, 1997.  Although the
FTB has not made a formal assessment for tax years 1997 through 2000, the
Company anticipates a retroactive disallowance that would result in additional
tax assessments.

The amount of any such possible assessments and the ultimate amounts, if any,
that the Company may be required to pay, are impossible to predict because so
many ostensibly long-settled aspects of California tax law have been thrown into
disarray and uncertainty by the action of the courts that, in the absence of
legislative relief, years of future litigation may be required to determine the
ultimate outcome.  The range of possible loss, net of federal tax benefit,
ranges from close to zero to approximately $20.8 million depending on which
position future courts may decide to uphold or on whether the California
legislature may decide to enact corrective legislation.  The Company has
recorded an amount within that range representing management's current best
estimate of the probable outcome.


                                                                               8

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

FINANCIAL CONDITION

Investment grade bonds comprised 100% of the fair value of the fixed-maturity
portfolio at September 30, 2002.  The Company has no investments in equity
securities as of September 30, 2002.  Of the Company's total investments at
September 30, 2002, approximately 58.5% were invested in tax-exempt,
fixed-income securities, compared to 80.2% at December 31, 2001.  The Company
has begun shifting its investment focus to investment-grade taxable bonds to
accelerate the realization of the tax benefit of its net operating loss
deduction (see Deferred Income Taxes below under Critical Accounting Policies).

As of September 30, 2002, the pre-tax net unrealized gain on investments was
$48.6 million (gross unrealized gains were $52.8 million; gross unrealized
losses were $4.2 million) compared to an after-tax net unrealized loss of $1.0
million at December 31, 2001.  This change is primarily due to declining market
interest rates.  The Company's policy is to investigate on a quarterly basis any
investment for possible "other than temporary" impairment in the event the fair
value of the security falls below its amortized cost, based on all relevant
facts and circumstances (see Investments below under Critical Accounting
Policies).

Premiums receivable were $89.4 million at September 30, 2002, compared to $75.6
million at December 31, 2001, with the increase mainly being attributable to
growth in the Company's customer base and higher premium rates.  Company policy
is to write-off receivable balances when they become past due 180 days, and the
Company historically has not considered an allowance for doubtful accounts to be
necessary.

Prepaid reinsurance premiums and reinsurance payables were $2.8 million and $0.8
million at September 30, 2002, compared to $15.4 million and $13.0 million at
December 31, 2001, respectively.  The decline in balances is primarily due to
the cancellation of the quota share treaty with AIG (see Note 4 to the
consolidated financial statements).

Higher advertising and other costs through September 30, 2002, associated with
increased customer volume contributed to an increase in deferred policy
acquisitions costs (DPAC) of $11.0 million compared to the balance at December
31, 2001.  Of the $11 million increase in DPAC, $1.5 million is attributable to
the decrease in unearned ceding commissions resulting from termination of the
AIG quota share reinsurance program (see Note 4 to the consolidated financial
statements).  The Company's DPAC is estimated to be fully recoverable (see
Deferred Policy Acquisition Costs below under Critical Accounting Policies).

Property and equipment decreased $38.7 million primarily due to the write-off of
certain software in the third quarter of 2002 (see Note 3 to the consolidated
financial statements).  The results of management's third-quarter 2002
recoverability test indicated that the remaining carrying value of the Company's
software under development is likely to be recoverable from future operations
(see Property and Equipment below under Critical Accounting Policies).

Unpaid losses and loss adjustment expenses ("LAE") increased $41.7 million in
the third quarter of 2002 primarily due to the increase in reserves for SB 1899
Northridge Earthquake legal defense costs (see Note 2 to the consolidated
financial statements) and increases in auto reserves.  For the nine months ended
September 30, 2002, loss and LAE reserves increased $45.2 million.  As indicated
in the following table, the Company's auto reserves, gross of reinsurance, have
increased $26.3 million in the nine months ended September 30, 2002:


                                                                               9

21ST CENTURY INSURANCE GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002 (CONTINUED)
(Unaudited)




                           September 30, 2002    December 31, 2001
                           ------------------- -------------------
AMOUNTS IN THOUSANDS         GROSS      NET      Gross      Net
------------------------------------------------------------------
                                             
Unpaid Losses and LAE
  Personal auto lines       $328,300  $311,313  $301,985  $280,781
  Homeowner and earthquake    66,210    61,189    47,305    44,997
------------------------------------------------------------------
Total                       $394,510  $372,502  $349,290  $325,778
------------------------------------------------------------------


The increase in the gross auto reserves for the nine months ended September 30,
2002, comprises $5.0 million due to the consolidation of 21st of Arizona, growth
in reserves attributable to the higher number of insured automobiles of
approximately $10.1 million, and approximately $11.2 million relating to the
effects of higher average loss costs.

The following table summarizes the provision for losses and LAE for the periods
indicated:



                                          Three Months Ended September 30,      Nine Months Ended September 30,
                                        ------------------------------------  -----------------------------------
AMOUNTS IN THOUSANDS                          2002               2001              2002               2001
-----------------------------------------------------------------------------------------------------------------
                                                                                    
Net Losses and LAE incurred related to
  insured events of:
  Current year                          $         192,685  $         182,288  $        542,682  $         526,665
  Prior years                                      47,259             12,932            75,800             55,662
-----------------------------------------------------------------------------------------------------------------
Total                                   $         239,944  $         195,220  $        618,482  $         582,327
-----------------------------------------------------------------------------------------------------------------


The amounts above relating to insured events of prior years represent changes in
previously recorded estimates that have been charged to expense in the current
period.  In the third quarter of 2002, $46.9 million of the changes in estimate
related to the Northridge Earthquake (see Note 2 to the consolidated financial
statements) $1.7 million related to the auto lines and $(1.3) million to
homeowner, compared to $9.3 million, $3.4 million and -0-, respectively, in the
third quarter of 2001.  For the first nine months of 2002, the change in
estimate comprised Northridge Earthquake provisions of $52.6 million, auto
lines provisions of $21.6 million and homeowners provisions of $1.6 million.
The comparable figures for the first nine months of 2001 were $20.1 million,
$34.1 million and $1.5 million, respectively.  The changes in estimates relating
to the auto lines in 2002 were attributable to increased severity  partially
offset by lower frequency, particularly in the first half of the year, while the
2001 changes in estimates relating to the auto lines were attributable to the
Company's under-estimate of loss severity trends.

Stockholders' equity and book value per share decreased to $653.0 million and
$7.64 at September 30, 2002, compared to $659.3 million and $7.72 at December
31, 2001.  The decrease for the nine months ended September 30, 2002, was
primarily due to a net loss of $27.1 million and dividends to stockholders of
$13.7 million, offset in part by the increase in unrealized investment gains of
$32.4 million and other changes in comprehensive income of $2.1 million.

LIQUIDITY AND CAPITAL RESOURCES

Holding Company.  The parent company's main sources of liquidity historically
have been dividends received from its insurance subsidiaries and proceeds from
issuance of debt or equity securities. The parent company currently has no
indebtedness for borrowed money outstanding. The parent's only equity security
currently outstanding is its common stock, which has no mandatory dividend
obligations.


                                                                              10

Cash and investments at the holding company were $13.8 million at September 30,
2002, compared to $52.8 million at December 31, 2001.  The decline in the
parent's cash and investments is primarily due to the payment of dividends and
the repayments of intercompany balances.  On September 25, 2002, the Company's
Board of Directors declared a $6.9 million dividend to stockholders of record on
October 7, 2002.  The dividend will be paid on October 25, 2002.  If necessary,
the Company believes it can access the capital markets should the need arise for
additional capital to support its growth and other corporate objectives.  The
Company's S&P claims-paying rating currently is A+, and its AM Best rating is
A+.

The insurance subsidiaries do not currently have, and likely will not have until
2004, the ability to pay dividends to the parent company without prior written
approval from insurance regulatory authorities.  In addition, recent court
rulings may subject certain dividends from the insurance subsidiaries to
California State income tax (see Note 5 to the consolidated financial
statements).  The Company believes the parent's cash resources at September 30,
2002 are adequate to meet its estimated cash needs for dividends to
shareholders, growth or other general corporate purposes without receiving
additional dividends from its insurance subsidiaries at least through the end of
2002.  However, there is no assurance that insurance regulatory authorities will
approve future dividends from the insurance subsidiaries or that the tax issue
will be favorably resolved in the near term, in which case the Company faces the
prospect of raising additional capital, cutting or ceasing dividends to
shareholders, or both.

Insurance Subsidiaries.  The Company believes it has taken the proper actions to
restore underwriting profitability in its core auto insurance operations and has
thereby enhanced its liquidity. The Company received approval for a 5.7% auto
premium rate increase in California effective May 6, 2002, and also has a
further 6.7% auto premium rate increase pending in California.  Average loss
costs in 2002 have increased at an annualized overall rate of approximately 4.5%
over 2001, although this rate would be somewhat higher but for the favorable
impact on claim frequency of drought conditions that have largely prevailed in
southern California over the past 12 months.  There can be no assurance that
insurance regulators will grant future rate increases that may be necessary to
offset possible future increases in claims cost trends.  Also, the Company
remains exposed to possible upward development in previously recorded reserves
for SB 1899 claims as previously discussed.  As a result of such uncertainties,
underwriting losses could recur in the future. Further, the Company could be
required to liquidate investments to pay claims, possibly during unfavorable
market conditions, which could lead to the realization of losses on sales of
investments.  Adverse outcomes to any of the foregoing uncertainties would
create some degree of downward pressure on the insurance subsidiaries' statutory
surplus, which in turn could negatively impact the Company's liquidity.

As of September 30, 2002, the Company's insurance subsidiaries had a combined
statutory surplus of $351.4 million compared to $393.1 million at December 31,
2001.  The decrease in surplus is primarily due to a statutory net loss of $49.6
million and a $26.4 million decrease in the statutory deferred tax asset,
partially offset by a $36.2 million decrease in non-admitted assets during the
nine months ended September 30, 2002.  The decrease in nonadmitted assets is
primarily related to the write-off of software.  The statutory net loss for the
third quarter of 2002 was $68.6 million.  For the quarter and nine months ended
September 30, 2001, statutory net income was $1.6 million and $8.9 million,
respectively.  The Company's ratio of net premiums written to surplus was 2.6
for the twelve month period ended September 30, 2002, compared to 2.2 for the
year ended December 31, 2001.

On October 23, 2002, California Department of Insurance ("DOI") finalized its
examination report on the 1999 statutory financial statements for the Company's
California-domiciled insurance subsidiaries.  The report did not require the
insurance subsidiaries to restate those financial statements.


                                                                              11

RESULTS OF OPERATIONS

Overall Results. The Company reported a net loss of $45.2 million, or $0.53 loss
per share, on direct premiums written of $257.9 million for the quarter ended
September 30, 2002, compared to net income of $2.7 million, or $0.03 earnings
per share, on direct premiums written of $229.0 million for the same 2001
quarter. The results for the latest quarter included pre-tax charges of $46.9
million for estimated legal defense costs to resolve Northridge Earthquake
claims and $37.2 million to write-off the costs of a software development effort
(see Notes 2 and 3 to the consolidated financial statements). For the nine
months ended September 30, 2002, the net loss was $27.1 million, or $0.32 loss
per share, on direct premiums written of $729.4 million. Net income for the nine
months ended September 30, 2001, was $13.4 million, or $0.16 earnings per share,
on direct premiums written of $701.8 million.

Personal Auto Lines Operating Income, as presented in the following tables, is a
key measure used by management in monitoring the operating results of the
Company's core business.  Personal auto lines operating income includes (a) the
underwriting revenues and expenses attributable to the (i) personal auto lines,
(ii) personal umbrella lines, and (iii) motorcycle lines, plus (b) investment
income excluding  realized capital gains or losses on the investment portfolio;
it also excludes (c) the results of the homeowners and earthquake lines, which
are in runoff, and (d) the write-off of software discussed above. The following
table reconciles the Company's net income to its personal auto lines operating
income:



                                                      Three Months Ended      Year-to-Date
                                                         September 30,       September 30,
AMOUNTS IN THOUSANDS                                   2002       2001      2002       2001
---------------------------------------------------------------------------------------------
                                                                         
Net (loss) income                                    $(45,235)  $ 2,679   $(27,053)  $13,398
Underwriting loss on homeowner and earthquake lines    46,863     8,546     58,768    21,316
Realized capital gains                                 (3,045)     (962)    (7,343)   (2,512)
Write-off of software                                  37,177         -     37,177         -
Federal income tax benefit on above                   (24,574)   (1,766)   (26,710)   (5,225)
---------------------------------------------------------------------------------------------
Personal auto lines operating income, net of tax     $ 11,186   $ 8,497   $ 34,839   $26,977
---------------------------------------------------------------------------------------------



The following table presents the components of the Company's personal auto lines
operating income:



                                                           Three Months Ended      Year-to-Date
                                                              September 30,        September 30,
AMOUNTS IN THOUSANDS                                        2002       2001       2002       2001
----------------------------------------------------------------------------------------------------
                                                                               
Direct premiums written                                   $257,978   $224,379   $726,932   $674,583
----------------------------------------------------------------------------------------------------
Net premiums written                                      $260,034   $210,279   $709,185   $632,455
----------------------------------------------------------------------------------------------------

Net premiums earned                                       $234,666   $210,340   $669,968   $629,306
Loss and loss adjustment expenses incurred                 193,081    181,041    559,805    545,150
Underwriting expenses incurred                              38,912     31,221    102,108     90,119
----------------------------------------------------------------------------------------------------
Pretax underwriting profit (loss) on personal auto lines     2,673     (1,922)     8,055     (5,963)
Investment income                                           11,729     10,958     34,378     34,036
Federal income tax expense on above                         (3,216)      (539)    (7,594)    (1,096)
----------------------------------------------------------------------------------------------------
Personal auto lines operating income, net of tax          $ 11,186   $  8,497   $ 34,839   $ 26,977
----------------------------------------------------------------------------------------------------



                                                                              12

The following table presents the components of the GAAP combined ratio for the
personal auto lines:



                                           Three Months Ended       Year-to-Date
                                              September 30,         September 30,
                                            2002        2001       2002      2001
------------------------------------------------------------------------------------
                                                               
Personal auto lines
  Loss and loss adjustment expense ratio      82.3%        86.1%    83.6%      86.7%
  Underwriting expense ratio                  16.6%        14.8%    15.2%      14.3%
------------------------------------------------------------------------------------
GAAP combined ratio                           98.9%       100.9%    98.8%     101.0%
------------------------------------------------------------------------------------


Comments relating to the underwriting results of the personal auto lines and the
results of the Company's investment activities are presented below.

Underwriting Results - Personal Auto Lines.  Automobile insurance is the primary
line of business written by the Company.  Vehicles insured outside of California
accounted for less than 3% of the Company's direct written premium in the first
nine months of 2002 and 2001.  The Company currently is licensed to write
automobile insurance in 24 states compared to 21 states at the end of 2001.  The
Company currently is evaluating opportunities relating to expansion into new
states but has not yet adopted definitive plans.  Because of the lead times
involved, expansion into new states is not expected to materially affect the
Company's financial results in 2002 or 2003.

Company management remains focused on achieving sustainable 15% growth and a
combined ratio of 96.  Since 1980, the Company has simultaneously met those
benchmarks only twice (1980 and 1981).

Direct premiums written for the auto lines in the third quarter of 2002
increased $33.6 million (15.0%) to $258.0 million from $224.4 million in the
same period last year.  For the first nine months of 2002 direct premiums
written for the auto lines increased $52.3 million (7.8%) to $726.9 million from
$674.6 million in the first nine months of 2001.  The increases in 2002 included
rate increases ($10.0 million for the quarter; $27.5 million year to date) and
the effects of the consolidation of 21st of Arizona ($2.5 million for the
quarter; $7.6 million year to date).  Also, the higher number of insured
vehicles in the third quarter of 2002 caused premiums to be $21.1 million higher
than in the third quarter of 2001 and $17.3 million higher in the first nine
months of 2002 than in the comparable period of 2001.  The third quarter of 2002
increase is greater than the 2002 year-to-date increase, because the number of
insured vehicles in the first half of 2002 was smaller than in the first half of
2001.  California auto retention was 93% in both the third quarter and first
nine months of 2002 compared to 92% in both of the comparable periods of last
year; the improvement in 2002 reflects the fact that the Company's major
competitors have taken significant rate increases in 2002 and, therefore, our
customers are less likely to find more favorable rates elsewhere.

Net premiums earned increased $24.3 million (11.6%) and $40.7 million (6.5%) for
the quarter and nine months ended September 30, 2002, respectively, compared to
the same periods a year ago.  These increases are mainly due to rate increases,
the consolidation of 21st of Arizona and the scheduled decrease in the cession
rate under a quota share reinsurance treaty from 6% in 2001 to 4% in 2002.
Additionally, this quota share treaty was cancelled as of September 1, 2002 (see
Note 4 to the consolidated financial statements).

On April 10, 2002, the Company received approval from the California DOI to
implement, effective May 6, 2002, a 5.7% rate increase on its California
personal auto lines.  The Company has a further 6.7% rate increase pending with
the California DOI.  In May 2002, the Company began offering motorcycle
insurance in the state of California, which is marketed to existing auto
customers.  In August 2002, the Company also began offering a limited-feature


                                                                              13

California auto policy, which provides fewer features than the Company's
standard policy but which generally is comparable to the product offered by many
of the Company's competitors.  It is anticipated that the limited-feature policy
will improve retention by providing a lower cost product to customers who need
fewer features.  Through September 30, 2002, the impact of these two new
products on the results of operations has been immaterial.

Compared to the same periods in 2001, net incurred losses and loss adjustment
expenses increased $12.0 million (6.6%) and $14.7 million (2.7%) during the
quarter and nine months ended September 30, 2002, respectively. The ratio of
loss and loss adjustment expenses to net premiums earned was 82.3% for the three
months ended September 30, 2002, and 86.1% for the same period last year. For
the nine-month periods ended September 30, 2002 and 2001, the loss and loss
adjustment expense ratios were 83.6% and 86.7%, respectively. The improvement in
the loss and loss adjustment expense ratio resulted from the earn-in of earlier
premium rate increases and a reduction in frequency due to drought conditions in
California.

The ratio of net underwriting expenses to net premiums earned was 16.6% and
14.8%, for the three months ended September 30, 2002 and 2001, respectively.
For the nine-month periods ending September 30, 2002 and 2001, the underwriting
expense ratios were 15.2% and 14.3%, respectively.  The increase was primarily
due to growth in advertising expenditures and costs associated with
approximately doubling the capacity of the Company's new business call center,
which has been handling a record volume of new business throughout 2002.
Several productivity enhancement initiatives are underway aimed at reducing per
unit process costs, and lowering fixed costs in corporate support areas, which
management believes will begin favorably impacting the Company's expense ratio
during the next year.

The combined ratio was 98.9% and 98.8% in the quarter and nine months ended
September 30, 2002, respectively, compared to 100.9% and 101.0% for the same
periods of 2001.  The third quarter of 2002 marks the first time since 1988 that
the Company has achieved both an underwriting profit and growth of 15% in direct
premiums written in its auto lines.

In the third quarter the Company entered into a catastrophe reinsurance
agreement with AIG, Folksamerica Reinsurance Company and Transatlantic
Reinsurance Company on its auto lines which reinsures any covered events up to
$30.0 million in excess of $15.0 million.  The premium for this reinsurance
coverage is approximately $0.1 million per month.

Investment Results. The average annual pre-tax yield on invested assets for the
three and nine-month periods ended September 30, 2002, as well as the comparable
periods in 2001 was 5.1%.  On an after-tax basis, the yields were 4.3% and 4.4%
for the quarter and nine months ended September 30, 2002, respectively, compared
to 4.5% for both of the same periods in 2001.

The average fair value of invested assets for the quarters ended September 30,
2002, and September 30, 2001, were $918.4 million and $900.1 million. This 2%
increase in average investments between the periods is due to the investment of
cash flows generated by operations and increased market value of bonds due to
declining interest rates. For the nine months ended September 30, 2002 and 2001,
the average invested assets were $903.0 million and $909.0 respectively.

Of the Company's total investments at September 30, 2002, 58.5% were invested in
tax-exempt, fixed-income securities, compared to 80.2% at December 31, 2001.
The Company has begun shifting its investment focus to investment-grade taxable
bonds to accelerate the realization of the tax benefit of its net operating loss
deduction and to increase pre-tax yields.  Although, the movement to taxable
investments increases the Company's exposure to credit risk, that is mitigated
to some extent by the Company acquiring only investment-grade corporate bonds.


                                                                              14

The Company's policy is to investigate on a quarterly basis any investment for
possible "other than temporary impairment" in the event the fair value of the
security falls below its amortized cost, based on all relevant facts and
circumstances.  Declines in value below cost for fixed maturity investments with
unrealized losses due to market conditions or industry related events, and for
which the Company has the intent to hold the investment for a period of time
believed to be sufficient to allow a market recovery or to maturity, are
considered to be temporary. At September 30, 2002, 49% of the $4.2 million
aggregate gross unrealized loss is attributable to three corporate bonds whose
amortized cost has exceeded their market value for more than twelve months.
Management considers none of these bonds to be at risk of default.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company believes its critical accounting policies are those which require
management to make significant assumptions or estimates, and to ascertain the
appropriateness and timing of any changes in those assumptions or estimates,
that can have a material effect on the Company's financial condition, results of
operation or cash flows.  Specifically, the following areas require management
to make such assumptions and estimates each time the Company prepares its
financial statements:  losses and loss adjustment expenses, particularly the
liability for unpaid losses and loss adjustment expenses included in the
liability section of the Company's balance sheet; the recoverability of certain
property and equipment, deferred income taxes, and deferred policy acquisition
costs included in the asset section of the Company's balance sheet; and the
review of the Company's investments for possible "other than temporary" declines
in fair value.

Management has discussed the Company's critical accounting policies and
estimates, together with any changes therein, with the Audit Committee of the
Company's Board of Directors.  The Company's Disclosure Committee and Audit
Committee have reviewed the Company's disclosures in this document.

Losses and Loss Adjustment Expenses.  The estimated liabilities for losses and
loss adjustment expenses ("LAE") include the accumulation of estimates of losses
for claims reported prior to the balance sheet dates, estimates (based upon
actuarial analysis of historical data) of losses for claims incurred but not
reported and the development of case reserves to ultimate values, and estimates
of expenses for investigating, adjusting and settling all incurred claims.
Amounts reported are estimates of the ultimate costs of settlement, net of
estimated salvage and subrogation. The estimated liabilities are necessarily
subject to the outcome of future events, such as changes in medical and repair
costs as well as economic and social conditions that impact the settlement of
claims. In addition, time can be a critical part of reserving determinations
since the longer the span between the incidence of a loss and the payment or
settlement of the claim, the more variable the ultimate settlement amount can
be.  Accordingly, short-tail claims, such as property damage claims, tend to be
more reasonably predictable than long-tail liability claims.  For the Company's
current mix of auto exposures, which include both property and liability
exposures, an average of approximately 63% of the ultimate losses are settled
within twelve months of the date of loss.

Given the inherent variability in the estimates, management believes the
aggregate reserves are within a reasonable and acceptable range of adequacy,
although the Company continues to caution that the reserve estimates relating to
SB 1899 are subject to a greater than normal degree of variability and possible
future material adjustment as new facts become known (see Note 2 to the
consolidated financial statements).  The methods of making such estimates and
establishing the resulting reserves are reviewed and updated quarterly and any
resulting adjustments resulting are reflected in current operations.  Changes in
the estimates for these liabilities flow directly to the income statement on a
dollar-for-dollar basis.  For example, an upward revision of $1 million in the
estimated liability for unpaid losses and loss adjustment expenses would
decrease underwriting profit, and pre-tax income, by the same $1 million amount.
Conversely, a downward revision of $1 million would increase pre-tax income by
the same $1 million amount.


                                                                              15

Property and Equipment.  Accounting standards require long-term assets to be
tested for possible impairment under certain conditions.  At September 30, 2002,
management believes the Company's remaining capitalized costs for Policy and
Claims software is the only long-term asset that meets the conditions for
impairment testing.  Under the applicable accounting standards, the first step
is to determine whether the carrying value and cost to complete the asset is
recoverable from future operations, based on estimates of future undiscounted
cash flows; if not, then an impairment write down would be required to be
recognized based on the fair value of the asset.  At September 30, 2002,
management has estimated that the $62.5 million carrying value and $25 million
estimated cost to complete such software, or $87.5 million in total, is
recoverable from cost savings from future operations.  This conclusion is based
primarily on the assumptions that the software can be successfully implemented
and can reduce the Company's employee count by at least 125 people (about 5% of
its workforce) for the 10 to 15 years after implementation (i.e., the current
estimate of the probable productive life of the software).  Once the project has
successfully reached the stage where it is substantially complete and ready for
its intended use, the Company anticipates there will be annual depreciation
charges varying from approximately $5.8 million to $8.8 million.  However,
although management believes it is reasonable to assume these future cost
savings, it must be noted that any such estimates are subject to considerable
uncertainty and there can be no assurance that such cost savings will be
achieved.

Deferred Income Taxes.  The Company recognizes deferred tax assets and
liabilities for temporary differences between the financial reporting basis and
the tax basis of the Company's assets and liabilities and expected benefits of
utilizing net operating loss and credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled.  The impact on deferred taxes of changes in tax rates and
laws, if any, are applied to the years during which temporary differences are
expected to be settled and reflected in the financial statements in the period
enacted.  The Company is required to establish a "valuation allowance" for any
portion of the deferred tax asset that management believes will not be realized.
At this time, the Company reasonably expects that the deferred tax asset will be
recovered and, therefore, has not established a valuation allowance.

Realization of deferred tax assets is dependent on the generation of taxable
income in future periods. Favorable loss ratios are a key driver of taxable
income. Uncertainties affecting loss ratios include but are not limited to the
number of vehicles insured by the Company, premium rates and changes in the
regulatory environment.

Deferred Policy Acquisition Costs.  Deferred policy acquisition costs ("DPAC")
include premium taxes and other variable costs incurred in connection with
writing business. These costs are deferred and amortized over the period in
which the related premiums are earned.

Management assesses the recoverability of deferred policy acquisition costs on a
quarterly basis.  The assessment calculates the relationship of actuarially
estimated costs incurred to premiums from contracts issued or renewed for the
period.  The Company does not consider anticipated investment income in
determining the recoverability of these costs.  Based on current indications, no
reduction in DPAC is required unless the loss and loss adjustment expense ratio
should exceed 85.7%.

The loss and LAE ratio used in the recoverability estimate is based primarily on
the assumption that the future loss and LAE ratio will approximate that of the
recent past.  While management believes that is a reasonable assumption, actual
results could differ materially from such estimates.


                                                                              16

Investments.  The Company classifies its investment portfolio as
available-for-sale and carries it at fair value. Unrealized investment gains and
losses, net of any tax effect, are included as an element of accumulated other
comprehensive income (loss), which is classified as a separate component of
stockholders' equity.

Fair values for fixed maturity securities are based on quoted market prices. The
cost of investment securities sold is determined by the specific identification
method.

The Company's policy is to investigate any investment for possible "other than
temporary impairment" in the event the fair value of the security falls below
its amortized cost, based on all relevant facts and circumstances.  Declines in
value below cost for fixed maturity investments with unrealized losses due to
market conditions or industry related events, and for which the Company has the
intent to hold the investment for a period of time believed to be sufficient to
allow a market recovery or to maturity, are considered to be temporary.  Where
declines in values of securities below cost or amortized cost are considered to
be other than temporary, a charge is reflected in income for the difference
between cost or amortized cost and estimated net realizable value.  No such
charges were recorded in the first nine months of 2002 or 2001.

At September 30, 2002, 49% of the $4.2 million aggregate gross unrealized loss
is attributable to three corporate bonds whose amortized cost has exceeded their
market value for more than twelve months.  Management considers none of these
bonds to be at risk of default.

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss from adverse changes in market prices and
interest rates. In addition to market risk, the Company is exposed to other
risks, including the credit risk related to its financial instruments and the
underlying insurance risk related to its core business. As of September 30,
2002, there have been no material changes in the Company's investment
strategies, types of financial instruments held or the risks associated with
such instruments which would materially alter the market risk disclosures made
in the Company's Annual Statement on Form 10-K for the year ended December 31,
2001, except that the Company has begun shifting its investment focus to
investment-grade taxable bonds to accelerate the realization of the tax benefit
of its net operating loss deduction.

The second column of the following table shows the financial statement carrying
value of the Company's financial instruments. The Company's investment portfolio
is carried at fair value. The third column shows the effect on the current
carrying value and estimated fair value assuming a 100 basis point increase in
market interest rates. The following sensitivity analysis summarizes only the
exposure to market interest rate risk as of September 30, 2002.



                                                           Estimated Fair Value
                                                            at Adjusted Market
                                                Carrying       Rates/Prices
(Amounts in millions)                             Value      Indicated Below *
--------------------------------------------------------------------------------
                                                     
Fixed maturity investments available-for-sale   $   917.9  $               852.5


*    Adjusted interest rates assume a 100 basis point increase in market rates
     at September 30, 2002.


                                                                              17

ITEM 4.     DISCLOSURE CONTROLS AND PROCEDURES

The Company's certifying officers have established and maintained disclosure
controls and procedures to ensure that material information is made known to
them for purposes of complying with applicable laws and regulations.  As part of
these procedures, the Company has established a Disclosure Committee comprised
of the senior officers responsible for the Company's operations, including the
Chief Executive Officer and Chief Financial Officer.  The Disclosure Committee
met during September and October 2002 in connection with the preparation of this
report on Form 10-Q, specifically regarding the design and effectiveness of the
internal controls over financial reporting and disclosure.

The Disclosure Committee's evaluation for the quarter ended September 30, 2002,
was completed on or about September 24, 2002.  Based on the Disclosure
Committee's evaluation, the Company's Chief Executive Officer and Chief
Financial Officer reached the following conclusions:

-    There were no significant deficiencies in the design or operation of
     internal controls which could affect the Company's ability to record,
     process, summarize and report financial data in accordance with applicable
     laws and regulations;

-    No material weaknesses in internal controls were noted that should be
     disclosed to the Company's independent auditors, Audit Committee or Board
     of Directors;

-    No fraud, whether or not material, that involves management or employees
     who have a significant role in the Company's internal controls, was
     identified.

Subsequent to the date of the evaluation, the Disclosure Committee and
certifying officers have not become aware of any significant changes in internal
controls or in other factors that could significantly affect internal controls,
including any corrective actions with regard to significant deficiencies or
material weaknesses.

FORWARD-LOOKING STATEMENTS

The Company's management has made in this report, and from time to time may make
in its public filings, press releases, and oral presentations and discussions,
forward-looking statements concerning the Company's operations, economic
performance and financial condition. Forward-looking statements include, among
other things, discussions concerning the Company's potential, expectations,
beliefs, estimates, forecasts, projections and assumptions. Forward-looking
statements are subject to risks and uncertainties. Actual results could differ
materially from those anticipated by forward-looking statements due to a number
of important factors including, but not limited to, those discussed elsewhere in
this report and in the Company's other public communications, as well as the
following: (a) the intensity of competition from other companies in the
insurance industry; (b) the Company's experience with respect to persistency,
underwriting and claims experience including revived claims under SB 1899; (c)
the Company's ability to distribute and administer competitive services in a
timely, cost-effective manner; (d) the Company's visibility in the marketplace
and its financial and claims-paying ratings; (e) regulatory approval for rate
increases and product changes; (f) the effect of changes in laws and regulations
affecting the Company's business, including changes in tax laws affecting
insurance products; (g) market risks related to interest rates; (h) the
Company's ability to develop and deploy information technology and management
information systems to support strategic goals while continuing to control costs
and expenses; (i) the costs of defending litigation or regulating proceedings
and the risk of unanticipated material adverse outcomes in such litigation or
proceedings; (j) changes in accounting and reporting practices; and (k) the
Company's access to adequate financing to support its future business. The
Company does not undertake any obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.


                                                                              18

PART II - OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

In the normal course of business, the Company is named as a defendant in
lawsuits related to claim and insurance policy issues. Some of the actions
request extra-contractual and/or punitive damages. The actions are vigorously
defended unless a reasonable settlement appears appropriate.

On October 10, 2002, a Los Angeles Superior Court granted the Company's motion
for summary judgment in the matter of 21st Century Insurance Company vs. People
of the State of California ex rel. Bill Lockyer, Attorney General et al.  The
court determined that the Company's April 21, 1999 settlement with the
California Department of Insurance with respect to regulatory actions arising
out of the 1994 Northridge Earthquake was fully valid and enforceable.  The
Court denied the Attorney General's motion seeking to have the settlement
declared void and unenforceable, a result that may have allowed the California
Department of Insurance to reinstitute regulatory proceedings with respect to
the Company's handling of claims arising out of the 1994 Northridge Earthquake.
The State of California may appeal the ruling.

Except as disclosed in the Notes to the Consolidated Financial Statements, the
Company does not believe the outcome of any pending legal proceedings will have
a material adverse effect on its financial position, results of operations or
cash flows.

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

     10(o)     Agreement with AIG pursuant to which the quota share reinsurance
               treaty with AIG was terminated

     10(p)     Catastrophe reinsurance agreement re auto lines

     99.1      Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
               Pursuant to the Sarbanes Oxley Act of 2002

(b)  Reports on Form 8-K

     None.


                                                                              19

SIGNATURES


Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.




                                             21ST CENTURY INSURANCE GROUP
                                     -------------------------------------------
                                                   (Registrant)



Date:  October 24, 2002                          /s/ Bruce W. Marlow
      ---------------------          -------------------------------------------
                                                  BRUCE W. MARLOW
                                       President and Chief Executive Officer



Date:  October 24, 2002                         /s/ Douglas K. Howell
      ---------------------          -------------------------------------------
                                                DOUGLAS K. HOWELL
                                          Senior Vice President, Chief
                                         Financial Officer and Treasurer


                                                                              20

CERTIFICATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER
------------------------------------------------------

I, Bruce W. Marlow, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of 21st Century
     Insurance Group:

2.   Based on my knowledge, this quarterly report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this quarterly report, fairly present in all
     material respects the financial condition, results of operations and cash
     flows of the registrant as of, and for, the periods presented in this
     quarterly report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this quarterly
          report is being prepared;

     b)   evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   presented in this quarterly report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

     a)   all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     b)   any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   The registrant's other certifying officers and I have indicated in this
     quarterly report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.


         Date:   October 24, 2002               /s/ Bruce W. Marlow
                ------------------       -------------------------------------
                                                  Bruce W. Marlow
                                         President and Chief Executive Officer


                                                                              21

CERTIFICATION OF CHIEF FINANCIAL OFFICER
----------------------------------------

I, Douglas K. Howell, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of 21st Century
     Insurance Group:

2.   Based on my knowledge, this quarterly report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this quarterly report, fairly present in all
     material respects the financial condition, results of operations and cash
     flows of the registrant as of, and for, the periods presented in this
     quarterly report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this quarterly
          report is being prepared;

     b)   evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   presented in this quarterly report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

     a)   all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     b)   any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   The registrant's other certifying officers and I have indicated in this
     quarterly report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.


         Date:   October 24, 2002               /s/ Douglas K. Howell
                ------------------       --------------------------------------
                                                  Douglas K. Howell
                                         Senior Vice President, Chief Financial
                                                Officer and Treasurer


                                                                              22

                                  EXHIBIT INDEX

Exhibit No. Description

10(o)     Agreement with AIG pursuant to which the quota share reinsurance
          treaty with AIG was terminated

10(p)     Catastrophe reinsurance agreement re auto lines

99.1      Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
          to the Sarbanes-Oxley Act of 2002


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