Liberty Mutual Group Chairman Pleased with 2005 Numbers

March 1, 2006

Liberty Mutual Group reported net income of $253 million and $1.027 billion for the three and 12 months ended Dec. 31, 2005, respectively, representing decreases of $312 million and $218 million from the same periods in 2004. Results in the quarter and year-to-date include $352 million and $949 million, respectively, of after-tax losses related to the 2005 hurricanes.

“We are pleased with our results for 2005,” said Edmund Kelly, Liberty Mutual Group chairman, president and CEO. “The fundamental strength of our businesses and our continued exceptional investment performance allowed us to absorb the unprecedented costs of the hurricane season and still report very good net income.”

Fourth Quarter highlights

* Revenues for the three months ended Dec. 31, 2005 were $5.514 billion, an increase of $240 million or 4.6% over the same period in 2004.
* Net written premium for the three months ended Dec. 31, 2005 was $4.452 billion, an increase of $343 million or 8.3% over the same period in 2004.
* Pre-tax income for the three months ended Dec. 31, 2005 was $285, a decrease of $267 million or 48.4% from the same period in 2004.
* Cash flow from operations for the three months ended Dec. 31, 2005 was $552 million, a decrease of $120 million or 17.9% from the same period in 2004.
* The combined ratio before catastrophes, net incurred losses attributable to prior years and discount accretion for the three months ended Dec. 31, 2005 was 92.8%, an increase of 1.1 points over the same period in 2004. Including the impact of catastrophes, net incurred losses attributable to prior years and discount accretion, the Company’s combined ratio increased 7.3 points to 105.6% in 2005.

Year-to-Date highlights

* Revenues for the 12 months ended Dec. 31, 2005 were $21.161 billion, an increase of $1.520 billion or 7.7% over the same period in 2004.
* Net written premium for the 12 months ended Dec. 31, 2005 was $18.076 billion, an increase of $755 million or 4.4% over the same period in 2004.
* Pre-tax income for the 12 months ended Dec. 31, 2005 was $1.130 billion, a decrease of $89 million or 7.3% from the same period in 2004.
* Cash flow from operations for the 12 months ended Dec. 31, 2005 was $3.706 billion, an increase of $518 million or 16.2% over the same period in 2004.
* The combined ratio before catastrophes, net incurred losses attributable to prior years and discount accretion for the 12 months ended Dec. 31, 2005 was 94.2%, a decrease of 0.8 points from the same period in 2004. Including the impact of catastrophes, net incurred losses attributable to prior years and discount accretion, the Company’s combined ratio increased 2.8 points to 105.7% in 2005.

Financial Condition as of Dec. 31, 2005

* Total assets increased to $78.824 billion as of Dec. 31, 2005, an increase of $6.367 billion or 8.8% over Dec. 31, 2004.
* Policyholders’ equity was $8.858 billion as of Dec. 31, 2005, an increase of $161 million or 1.9% over Dec. 31, 2004.
* After-tax net unrealized gains on fixed maturities, as of Dec. 31, 2005 were $279 million, a decrease of $580 million or 67.5% from Dec. 31, 2004.
* Statutory surplus as regards policyholders for the combined operations of Liberty Mutual Insurance Company (“LMIC”) and its U.S. affiliates was $9.869 billion, an increase of $1.130 billion or 12.9% over Dec. 31, 2004.
* The consolidated debt-to-capital ratio including accumulated other comprehensive income (“AOCI”) as of Dec. 31, 2005 was 23.4%, an increase of 2.3 points over Dec. 31, 2004. Excluding AOCI, the consolidated debt-to-capital ratio was 24.2%, an increase of 0.4 points over Dec. 31, 2004.

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