Liberty Mutual Reports Record Earnings

February 27, 2007

Aided by lower than expected catastrophe losses and strong underwriting, Liberty Mutual Group reported net income of $455 million and $1.626 billion for the fourth quarter and 12 months ended December 31, 2006, respectively, an increase of $202 million and $599 million over the same periods in 2005.

“The strong fourth quarter capped an excellent 2006 for the Liberty Mutual Group. For the 12 months, we had industry leading growth and continued emphasis on balance sheet strength while reporting out
record earnings,” said Edmund F. Kelly, Liberty Mutual Group chairman, president and CEO. “Clearly we benefited from the low level of hurricane activity but the financial fundamentals and the competitive position of each of our business units were the drivers of these very gratifying results.”

Fourth Quarter Highlights

Revenues for the three months ended December 31, 2006 were $6.008 billion, an increase of $494 million or 9.0% over the same period in 2005.

Net written premium for the three months ended December 31, 2006 was $4.815 billion, an increase of $363 million or 8.2% over the same period in 2005.

Pre-tax income for the three months ended December 31, 2006 was $577 million, an increase of $292 million or 102.5% over the same period in 2005. Results in the quarter include a $427 million
decrease in catastrophe losses from the same period in 2005, as prior year results included the impact of the 2005 hurricanes. Results in the period also reflect a decrease in realized capital gains of $112
million.

Cash flow from operations for the three months ended December 31, 2006 was $1.037 billion, an increase of $485 million or 87.9% from the same period in 2005.

The combined ratio before catastrophes, net incurred losses attributable to prior years and the re- estimation of current accident year losses for the three months ended December 31, 2006 was 95.6%, an increase of 2.3 points over the same period in 2005. Including the impact of catastrophes, net incurred losses attributable to prior years and the re-estimation of current accident year losses, the company’s combined ratio for the three months ended December 31, 2006 decreased 7.5 points to
98.1%.

Year-to-Date Highlights

Revenues for the twelve months ended December 31, 2006 were $23.520 billion, an increase of $2.359 billion or 11.1% over the same period in 2005.

Net written premium for the twelve months ended December 31, 2006 was $20.628 billion, an increase of $2.552 billion or 14.1% over the same period in 2005.

Pre-tax income for the twelve months ended December 31, 2006 was $2.258 billion, an increase of $1.128 billion or 99.8% over the same period in 2005. Pre-tax income reflects a $1.095 billion
decrease in catastrophe losses from the same period in 2005. Results in the period also reflect a decrease in realized capital gains of $180 million.

Cash flow from operations for the twelve months ended December 31, 2006 was $3.895 billion, an increase of $189 million or 5.1% from the same period in 2005.

The combined ratio before catastrophes, net incurred losses attributable to prior years and the re-estimation of current accident year losses for the twelve months ended December 31, 2006 was 95.0%, an increase of 0.2 points over the same period in 2005. Including the impact of catastrophes, net incurred losses attributable to prior years and the re-estimation of current accident year losses, the company’s combined ratio for the twelve months ended December 31, 2006 decreased 6.4 points to 99.3%.

Financial Condition as of December 31, 2006

Total assets were $85.498 billion as of December 31, 2006, an increase of $6.674 billion or 8.5% over December 31, 2005.

Policyholders’ equity was $10.895 billion as of December 31, 2006, an increase of $2.037 billion or 23.0% over December 31, 2005.

Statutory surplus as regards policyholders for the combined operations of Liberty Mutual Insurance Company and its U.S. affiliates was $12.131 billion as of December 31, 2006, an increase of
$2.262 billion or 22.9% over December 31, 2005.

The consolidated debt-to-capital ratio including accumulated other comprehensive income as of December 31, 2006 was 23.5%, an increase of 0.1 points over December 31, 2005. Excluding
AOCI, the consolidated debt-to-capital ratio was 24.9%, an increase of 0.7 points over December 31,
2005.

Source: Liberty Mutual

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