Warren Buffett Bought 3.2% of 20th Century

A company controlled by renowned investor Warren E. Buffett earlier this year bought a 3.2% stake in 20th Century Industries, a Woodland Hills company that is a major provider of auto insurance in California, insurance records show.

National Indemnity Co., a unit of Berkshire Hathaway Inc., an Omaha conglomerate that is controlled by Buffett, bought 818,900 shares of 20th Century in the first quarter, according to documents National Indemnity filed with the Nebraska Insurance Department in Lincoln.

The company paid slightly more than $18 a share on average for the stock, which closed Thursday at $17 a share, up 12.5 cents, in national over-the-counter trading. 20th Century, whose principal unit is 20th Century Insurance, has about 25.7 million total shares outstanding.

It isn’t clear whether Buffett continued buying the stock or sold shares after the first quarter. National Indemnity hasn’t yet filed its second-quarter report with the Nebraska Insurance Department, and Berkshire Hathaway Treasurer Mark Hamburg said the company as a matter of policy does not comment on its investment plans.

However, if an investor buys 5% or more of a company’s stock it must notify the federal Securities and Exchange Commission, and no such disclosure has been made by Buffett’s entities.

Louis W. Foster, who started 20th Century in 1958 and remains chairman, was unavailable for an interview Thursday. However, 20th Century spokesman Rick Dinon said Foster “feels very positive about Buffett’s recognition of good value” in buying the shares.

Foster, 75, has not been in contact with Buffett, and 20th Century is unaware of any additional trading of 20th Century stock by Buffett’s companies since the first quarter, Dinon added.

Buffett, 58, used savvy stock-picking to parlay $100,000 he raised at age 25 into a fortune now estimated at nearly $2 billion. He is known for making long-term investments in companies and for not making hostile takeover bids.

“My thinking is he wanted to establish a toehold in a company that has a unique franchise,” Gerald S. Haims, an insurance analyst with Seidler Amdec Securities in Los Angeles, said of 20th Century.

20th Century has been one of the fastest growing insurance concerns in the nation. Its revenue has jumped an average 34% annually since 1982, and totaled $509 million last year when the company, which now insures nearly 700,000 vehicles, earned $36.3 million.

The company insures only good drivers, which limits its risks, and rewards those drivers with relatively low premiums. 20th Century also sells its policies directly via the mail, which reduces its costs by eliminating agents’ commissions.

But the company faces big questions in the coming months because of the five propositions on the November state ballot to reform the auto insurance industry. Depending on which one passes, auto insurance premiums could be rolled back 20% or more, which analysts say could significantly erode the profits of companies such as 20th Century that only operate in California.