Fitch Affirms Commerce Group's IFS and Debt Ratings; Outlook Stable

CHICAGO--May 1, 2006--Fitch Ratings has affirmed the 'BBB+' Issuer Default Rating (IDR) and 'BBB' senior debt ratings of the Commerce Group, Inc. (CGI). Additionally, Fitch has affirmed the 'A' insurer financial strength (IFS) 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 87% of its premiums written in the state. Significant 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. 3, 20051, 2005, CGI had total capital of $1.6 billion including the $298 million of debt. The corporation's debt-to-adjusted total capital ratio, adjusting for FASB 115, was 18.6% as of year-end 2005. Fitch anticipates the corporation will maintain adequate interest coverage levels going forward to support debt servicing requirements.

CGI reported $244 million of net income on net earned premium of $1.7 billion in 2005. The company's total assets at year-end were $3.9 billion with $1.3 billion of shareholders' equity. CGI's statutory combined ratio was 87.3% for full year 2005.

The following ratings have been affirmed by Fitch with a Stable Rating Outlook:

Commerce Group, Inc.

-- Issuer Default Rating (IDR) 'BBB+';

-- $300 million 5.95% fixed coupon senior notes due 02/26/2013 'BBB'.

Fitch also affirms the following Insurer Financial Strength (IFS) ratings with a Stable Rating Outlook:

-- Commerce Insurance Company 'A'.

-- Citation Insurance Company 'A'.

-- Commerce West Insurance Company 'A'.

-- American Commerce Insurance Company 'A'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site. The issuer did not participate in the rating process other than through the medium of its public disclosure.