The Commerce Group Notes Q3 Numbers

The Commerce Group, Inc. reported 2003 third quarter results. Net earnings were $22.9 million, or $0.71 per diluted share, compared to net earnings of $12.6 million or $0.38 per diluted share for 2002 (as restated).

During the third quarter of 2003, the company had net realized investment gains of $2.6 million or $0.05 per diluted share compared to losses of $13.4 million or $0.52 per diluted share in the third quarter of 2002. The 2002 per diluted share amount was impacted by an increase in the company’s tax valuation allowance related to a deferred tax asset previously established for realized investment losses.

The company also incurred a charge of $6.0 million or $0.12 per diluted share for an estimated assessment from the Massachusetts Insurance Insolvency Fund (MIIF) compared to no charge in the third quarter of 2002. The company however incurred a charge in the fourth quarter of 2002 for a MIIF assessment in the amount of $4.5 million. As of Sept. 30, 2002, the company was unable to reasonably estimate this assessment. Lastly, the company had employee stock option expenses of $1.5 million or $0.03 per diluted share in the third quarter of this year compared to income of $5.7 million or $0.11 per diluted share for the same period last year.

Earned premiums were $372.7 million for the third quarter of 2003 compared to $309.1 million for 2002.

The third quarter statutory combined ratio for property and casualty operations was 98.9% compared to 99.4% for 2002. The decrease in the combined ratio was primarily the result of a decrease in the loss ratio, offset by an increase in the underwriting ratio. The company’s loss ratio for the third quarter of 2003 decreased to 74.9% from 76.0% during the same period last year. The decrease was primarily the result of more favorable experience in the current year personal automobile line of business offset by slightly less favorable loss reserve development compared to the third quarter of last year.

The company’s statutory underwriting ratio increased to 24.0%, as compared to 23.4% for last year’s third quarter, primarily as a result of a charge for an anticipated assessment from the MIIF offset by lower 2003 policy year mandated Massachusetts personal automobile commission rates.

The statutory combined ratio for property and casualty operations was 99.6% for the first nine months of 2003 compared to 98.7% for 2002. The increase in the combined ratio was primarily the result of an increase in the loss ratio, offset by a decrease in the underwriting ratio.

The company’s loss ratio for the first nine months of 2003 increased to 77.4% from 75.8% during the same period last year. The increase was primarily driven by increased claim frequency in the first quarter of this year as a result of the severe winter. The company’s statutory underwriting ratio improved to 22.2%, as compared to 22.9% for 2002, primarily from reduced accrued contingent commissions as a result of the higher loss ratio mentioned previously and lower 2003 policy year mandated Massachusetts personal automobile commission rates offset by the third quarter MIIF assessment.