CHIEF EXECUTIVE OFFICER SHORT TERM INCENTIVE PLAN 2004

APPENDIX B



21ST CENTURY INSURANCE GROUP

CHIEF EXECUTIVE OFFICER SHORT TERM INCENTIVE PLAN

PURPOSE

The 21st Century Insurance Group Chief Executive Officer Short
Term Incentive Plan (the "Plan") is an annual incentive compensation
plan designed to focus the CEO on various pre-established corporate performance
goals, business challenges and opportunities for each fiscal year. While each
year's annual results should be maximized, it should be done in context with the
steady, long-term development of 21st Century and its franchise with consumers.
The Plan is intended to preserve 21st Century's corporate tax deduction for
bonus compensation paid to executive officers by meeting the qualified
performance-based compensation provisions under Section 162(m) of the
Internal Revenue Code of 1986, as amended ("Code").

SECTION I    ELIGIBILITY AND
PARTICIPATION PERIOD

Section 1.1 Participation in the Plan will be limited to
the Chief Executive Officer of 21st Century Insurance Group
("Company"). Based upon the Compensation Committee's determination and
subject to a retirement/ termination and promotion/new hire, participation of
more than one chief executive officer within the same Plan Year is possible.

SECTION II    PLAN YEAR AND PERFORMANCE

Section 2.1 The Plan Year shall be the Company's fiscal
year, which is currently the calendar year.

Section 2.2 The Compensation Committee shall establish in
writing, within 90 days of the beginning of each Plan Year, one or more of
the following specific performance goals: net income, combined loss and expense
ratio, increase in written premium, stock price, earnings per share, book value,
expansion of geographic and/or product markets, dividends, investment income,
and return on equity.

SECTION III    CERTIFICATION OF
PERFORMANCE GOALS AND PAYMENT

Section 3.1 As soon as practicable after each Plan Year,
the Compensation Committee shall evaluate actual performance in comparison to
the established performance goals and certify in writing to what extent such
goals have been attained. Based on attained performance, the Compensation
Committee shall compute the amount of Short Term Incentive Compensation ("STI")
to be paid. The Compensation Committee shall have no discretion to increase the
amount of the STI to be paid but may reduce the amount of such payment based on
the CEO's performance or any other factors considered material to the purpose or
administration of the Plan.

Section 3.2 The STI award shall be paid or payable by the
Company in cash or stock as soon as practicable after certification pursuant to
Section 3.1.

Section 3.3 An STI award that would have otherwise been
payable to a participant who is not employed by the Company or a subsidiary or
affiliate as of the last day of the Plan Year, may be prorated or may not be
paid at all based on rules established by the Compensation Committee.

Section 3.4 The maximum amount of STI award that may be
paid to any single participant under the Plan shall not exceed $5,000,000.

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Section 3.5 The Company or any of its subsidiaries may
deduct and withhold any applicable payroll taxes or any amounts owed by the
employee to the Company or any of its subsidiaries.

SECTION IV    STOCKHOLDER APPROVAL AND
OTHER LIMITATIONS

Section 4.1 No STI award shall be approved or paid under
the Plan unless and until the material provisions of the plan are approved by
the Company's stockholders by a majority of the votes cast in a separate vote on
this matter.

Section 4.2 No person shall have a legal claim to an
award under the STI.

Section 4.3 Except as required by law, awards are not
subject to alienation, transfer, sale, assignment, pledge, encumbrance or levy
of any kind. All payments shall be made from general assets of the Company and
no participant shall have any claim to any specific assets of the Company.

Section 4.4 Neither the Plan nor any action taken with
respect to the Plan shall be construed as giving any employee the right to be
retained in the employ of the Company or any subsidiary.

SECTION V    ADMINISTRATION

Section 5.1 The Compensation Committee shall consist
solely of three or more members of the Company's Board of Directors who qualify
as "outside directors" as defined by Code Section 162(m).

Section 5.2 The Compensation Committee shall have full
power and authority to administer and interpret the provisions of the Plan and
to adopt such rules, regulations, agreements, guidelines and instruments for the
administration of the Plan and for the conduct of its business as the Committee
deems necessary or advisable.

Section 5.3 Except with respect to matters which under
the Code are required to be determined in the sole and absolute discretion of
the Compensation Committee, the Compensation Committee shall have full power to
delegate to any officer or employee of the Company the authority to administer
and interpret the procedural aspects of the Plan, subject to the Plan's terms.

Section 5.4 The Compensation Committee may rely on
opinions, reports or statements of officers or employees of the Company or any
subsidiary thereof and of Company counsel (inside or retained counsel), public
accountants and other professional or expert persons in administering the Plan.

Section 5.5 The Board of Directors of the Company
reserves the right to amend or terminate the Plan in whole or in part at any
time. Unless otherwise prohibited by applicable law, any amendment required to
conform the Plan to the requirements of the Code may be made by the Compensation
Committee.

Section 5.6 The Company shall indemnify and hold harmless
all members of the Compensation Committee against any and all claims, losses,
damages, expenses or liabilities arising from any action or failure to act with
respect to the Plan, except in the case of willful misconduct.

Section 5.7 The Plan does not constitute an employee
benefit plan as defined by the Employee Retirement Income Security Act of 1974
("ERISA"). The provisions of the Plan shall be construed and
interpreted solely in accordance with the laws of the State of California.

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