Earnings Up, Losses Down in Commerce Group 3d Quarter

October 27, 2005

The Commerce Group, Inc. reported 2005 third quarter results showing increased net earnings and decreased losses.

Net earnings were $59.8 million, or $1.77 per diluted share, compared to net earnings of $54.3 million or $1.64 per diluted share for 2004.

During the third quarter of 2005, the company had net realized investment gains of $0.2 million with no reportable per share effect, compared to net realized investment losses of $2.2 million.

Earned premiums were $428.3 million for the third quarter of 2005, compared to $413.8 million for 2004.

The third quarter GAAP consolidated combined ratio was 88.1%, compared to 88.6% 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 third quarter of 2005 decreased to 56.1% from 57.5% during the same period last year. The company credited the improvement to several factors, including: improved current year results and continued favorable prior years’ loss development from Commonwealth Automobile Reinsurers; an increase in average earned premium revenue per automobile; and a decline in the current year personal and commercial automobile bodily injury claim frequency, coupled with a decrease in personal automobile physical damage claim frequency, offset by a reduced amount of favorable voluntary loss reserve development compared to the third quarter of last year.

The company’s GAAP consolidated underwriting ratio increased to 32.0%, as compared to 31.1% for last year’s third quarter, primarily as a result of higher accrued agents’ profit sharing and slightly higher 2005 policy year mandated Massachusetts personal automobile commission rates.

Commerge Group, is based is Webster, Mass. Its property and casualty insurance subsidiaries 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 19th largest personal automobile insurance group in the country by A. M. Best Company, based on 2004 direct written premium information. The Company and its insurance subsidiaries are rated A+ (Superior) by A. M. Best.

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