Twentieth Century Industries continues to be the comeback kid of the insurance business.

Teetering at the brink of insolvency just four years ago, the Woodland Hills-based company has paid off almost all of the claims that resulted from the Northridge earthquake, rebuilt its capital base and is proceeding on an expansion plan to enter three new markets this year.

Now a move by American International Group Inc. to acquire a controlling interest in the company could catapult it from a strong regional player in the direct-to-consumer auto insurance business into a national and even international player.

“One step down the road, AIG would probably be looking at a national operation,” said 20th Century spokesman Ric Hill. “The perspective is global. That’s true of most of the involvements they’ve undertaken.”

Earlier this month AIG announced its intention to acquire more than 50 percent of 20th Century’s common stock within the next 13 months. AIG already owns about 42 percent of the outstanding shares, which have been trading in April for about $28. 20th Century’s stock value has risen steadily since 1996, when shares were trading at about $15.

While AIG officials declined to discuss the company’s plans once the company becomes a majority owner, and 20th Century officials claim no knowledge of their suitor’s intentions, the stock purchase would effectively establish 20th Century as a division of AIG.

“It’s two great companies in the financial insurance business,” said John W. Wicher, a managing partner at Russell Miller Inc., a San Francisco-based investment bank that specializes in the insurance industry. “I see it as a strategic combination AIG, which is a huge insurer, with a very strong niche player.”

Twentieth Century holds about 6 percent of the $13.5 billion personal auto insurance market in California, according to Russell Miller. But analysts expect that share to grow as 20th Century’s market niche selling insurance directly to consumers without brokers or sales agents becomes increasingly important.

The direct-marketing channel for auto insurance is expected to show increases of 20 percent a year over the next five years, compared with an annual growth rate of 5 percent for the auto insurance industry overall, said Weston M. Hicks, senior research analyst at Stanford C. Bernstein & Co.

Twentieth Century’s position stands in sharp contrast to its situation a few years ago, when it faced a staggering 46,000 claims from homeowners, amounting to more than $1 billion, following the Northridge earthquake. The company’s poor timing is already the stuff of business legend; it had decided to branch away from its auto insurance base into the homeowners line only a short time before the devastating quake rocked Los Angeles.

AIG’s first investment in 20th Century, in December 1994, provided a cash infusion of more than $200 million and allowed the company to whittle down its earthquake-related homeowner claims to between 100 to 200, according to Hill. While 125 lawsuits still remain, 20th Century has made a strong financial comeback, posting net income in 1997 of $110.9 million ($1.76 per share), compared with a loss of $498 in 1994.

For the first quarter ended March 31, the company reported net income of $27.9 million (44 cents), compared with $26.9 million (42 cents) for the like period a year ago.

Twentieth Century has built back its auto insurance customer base to 1.1 million vehicles, the number it insured just prior to the earthquake.

One visible sign of the rebound was the decision to lease a second building, a $30 million tower adjacent to its current offices in Warner Center. Twentieth Century will initially occupy about 180,000 of the 270,000 square feet available in the $30 million tower to consolidate five departments that have been scattered over several different buildings. It will also move some of the departments in its other high-rise to the new facility.

Meanwhile, the company has begun expanding into new markets. In August 1996, 20th Century opened in Arizona, and in 14 months of operation, “we had placed more business on the books than in the first nine years in California,” Hill said.

Buoyed by that success, the company plans to enter Oregon, Nevada and Washington by the end of the year.

Analysts see a strong market for national expansion as well because of 20th Century’s direct-to-consumer approach. “That segment of the market is growing faster, and because they have such low cost, they have the most competitive prices,” said Barbara Stewart, president of Stewart Economics Inc., Atlanta-based consultants to the insurance industry.

The company has invested millions in technology to automate its sales, customer-service and claims-processing systems. Features like automated phone systems, interactive voice mail, computerized claims adjustment, and online transaction capabilities have resulted in a direct overhead expense of 9 percent to 10 percent, vs. 15 percent to 30 percent for the rest of the industry, Hill said.