A.M. Best Affirms FSR for Commerce Group

February 10, 2005

A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) of Commerce Group Inc. (Webster, Mass.). The rating applies to the lead company, The Commerce Insurance Company (Webster) and its three other inter-company pool members.

Concurrently, A.M. Best has affirmed the “a-” senior debt rating of the existing $300 million 5.95% senior notes due 2013 issued by The Commerce Group Inc. The outlook for all ratings is stable.

The ratings reflect Commerce Group’s strong capitalization and excellent operating performance, which is derived from the group’s strict underwriting principles, adequate rate levels and strong agency relationships.

Partially offsetting these positive factors is the group’s concentration of business in Massachusetts, which represents more than 80% of net premiums written, as well as the group’s limited product scope that consists primarily of personal automobile coverage.

The group remains susceptible to weather-related losses and the highly-regulated Massachusetts personal auto market; however, as the leading writer of personal lines business in Massachusetts, Commerce Group benefits from its brand name recognition, extensive underwriting database and in-depth understanding of the personal lines marketplace.

In addition, the wholly-owned subsidiaries, Commerce West Insurance Company and American Commerce Insurance Company, provide rate flexibility and geographic diversification to the group.

The rating also recognizes the financial flexibility afforded by The Commerce Group Inc., a publicly-traded holding company.

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