Farmers buying 21st Century from AIG for $1.9 billion

LOS ANGELES -- Farmers Insurance Group said Thursday that it was acquiring another Southern California auto insurer, 21st Century Insurance, for $1.9 billion in a deal with troubled American International Group.

The sale, if approved by state regulators, would make Farmers the third-largest U.S. auto and homeowners insurer. Farmers, a unit of Zurich Financial Services in Switzerland, expects to complete the acquisition by the end of September. The deal also would give Farmers a major opportunity to market directly to customers via the Internet and the telephone, said Robert Woudstra, Farmers' chief executive.

"Farmers takes great pride in being a customer-focused, growth-oriented organization, and this acquisition represents the perfect strategic fit," he said. "This will dramatically transform the insurance landscape by positioning Farmers as the leading multi-line, multi-channel insurer in the United States."

Analysts said the 21st Century deal and other recent acquisitions were positive signs that AIG would have success selling some of its other subsidiaries, including International Lease Finance Corp., the Los Angeles aircraft leasing company.

AIG has been reeling from risky investments that pushed it into the government's arms last fall. It has received $182.5 billion in federal aid commitments, the largest single bailout of financial companies.

"What is very encouraging is that there are now buyers for these assets," said David Lutz, a trader and managing director of listed securities at Stifel Nicolaus & Co. "Three months ago, there were no buyers.""That shows not only that there's demand but also decent, if not great, pricing" in the market now, he said.

AIG acquired 21st Century in September 2007 and was in the process of re-branding the company as aig.direct.com when the financial tsunami hit last year. But with AIG pilloried for its near-collapse and continuing payout of executive bonuses, the company decided to restore the 21st Century brand in November.

The name change, though, apparently hasn't had the desired effect.

21st Century said earlier this month that it would lay off 500 of its 6,500 workers amid a slump in sales of auto, home and other insurance lines. The company also said it would shutter four offices.

21st Century should thrive under the Zurich-Farmers umbrella, said Jim Rogers, an auto insurance consultant in the San Francisco Bay Area. "It's a bold and smart move," he said. "It's probably a perfect fit if they want to grow the business and compete with other multi-channel companies such as Progressive and Allstate."