Earnings Up in Commerce Insurance Group First Quarter

April 22, 2005

The Commerce Group Inc. in Webster, Mass. reported 2005 first quarter net earnings were $58.0 million, or $1.72 per diluted share, compared to net earnings of $51.0 million or $1.56 per diluted share for 2004.

Included in the 2005 first quarter results are net realized investment gains of $8.3 million or $0.16 per diluted share, compared to gains of $20.5 million or $0.41 per diluted share in the first quarter of 2004.

Earned premiums were $423.2 million for the first quarter of 2005, compared to $395.6 million for the first quarter of 2004.

The first quarter GAAP consolidated combined ratio was 89.1%, compared to 93.7% for 2004. The decrease in the combined ratio was the result of a decrease in the loss ratio partially offset by an increase in the underwriting ratio. The company’s GAAP consolidated loss ratio for the first quarter of 2005 decreased to 66.0% from 71.3% during the same period last year.

The improvement was the result of several factors, including an increase in average earned premium revenue per automobile; more favorable loss reserve development compared to the first quarter of last year;improved results from Commonwealth Automobile Reinsurers, the residual market; and a decrease in the current year personal automobile bodily injury claim frequency, partially offset by an increase in physical damage claim frequency primarily as a result of worse winter weather in the northeast.

The company’s GAAP consolidated underwriting ratio increased to 23.1%, as compared to 22.4% for last year’s first quarter, primarily as a result of significantly higher accrued agents’ profit sharing and slightly higher 2005 policy year mandated Massachusetts personal automobile commission rates. The higher accrued agents’ profit sharing is an outcome of substantially better underwriting results for the first quarter of 2005 versus last year’s first quarter.

Property and casualty insurance subsidiaries of The Commerce Group include The Commerce Insurance Company and Citation Insurance Company in Massachusetts, Commerce West Insurance Company in California, and American Commerce Insurance Company in Ohio.

Through its subsidiaries’ combined insurance activities, the company is ranked as the 20th largest personal automobile insurance group in the country by A. M. Best Company, based on 2003 direct written premium information. The company and its insurance subsidiaries are rated A+ by A. M. Best.

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