Commerce Group’s IFS, Debt Ratings Affirmed

April 28, 2005

Fitch Ratings has affirmed the ‘BBB’ long-term issuer and senior debt ratings of the Commerce Group Inc. (CGI). Additionally, Fitch has affirmed the ‘A’ insurer financial strength ratings on CGI’s four insurance subsidiaries (see list below). The Rating Outlook is Stable.

The ratings are based on a history of underwriting profits, leading market share position in the Massachusetts automobile insurance market, strong capitalization at the operating company level and adequate liquidity.

Offsetting these positives is CGI’s significant reliance on a single market. Although CGI has attempted to diversify its book of business geographically, it continues to be concentrated in Massachusetts with 86% of its premiums written in the state. Substantial changes are being contemplated in the Massachusetts regulatory environment and CGI would be disproportionately affected by those changes. Fitch will continue to watch closely all changes and evaluate their impact on CGI.

Likewise, Fitch believes CGI’s close auto club affinity relationship represents a competitive advantage. However, any significant change in that relationship could materially affect CGI’s ability to attract and retain profitable customers.

On Dec. 31, 2004, CGI had total capital of $1,419 million including the $298 million of debt. The corporation’s debt-to-adjusted total capital ratio, adjusting for FASB 115, was 21.3% as of year-end 2004. Fitch anticipates the corporation will maintain adequate interest coverage levels going forward to support debt servicing requirements.

CGI reported $214 million of net income on net earned premium of $1.6 billion in 2004. The company’s total assets at year-end were $3.6 billion with $1.1 billion of shareholders’ equity. CGI’s statutory combined ratio was 87.7% for full year 2004.

Entity/Issue/Type Action Rating/Outlook

Commerce Group Inc.

–Long-term issuer Affirm ‘BBB’/Stable.

–$300 million 5.95% fixed coupon
senior notes due 02/26/2013 Affirm ‘BBB’/Stable.

Insurer Financial Strength Ratings:

Commerce Insurance Company Affirm ‘A’/Stable.

Citation Insurance Company Affirm ‘A’/Stable.

Commerce West Insurance Company Affirm ‘A’/Stable.

American Commerce Insurance Company Affirm ‘A’/Stable.

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