UNITED STATES
    SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
    20549
      Form 10-Q
  þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR
    15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR
    15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934
   For the Quarterly Period Ended:

Commission File Number:June 30, 2008

333-84068    
  Crum & Forster
    Holdings Corp.
 (Exact Name of Registrant as
    Specified in its Charter)
   Delaware

04-3611900(State or Other Jurisdiction of
    Incorporation or Organization)

(I.R.S. Employer Identification Number)   305
    Madison Avenue, Morristown, New Jersey 07962 (Address
    of principal executive office)
  (973) 490-6600
 (Registrants telephone number, including area code)
  o þ
  Rule 12b-2
  Large accelerated
    filer  o

Accelerated
    filer  oNon-accelerated
    filer  þ (Do
    not check if a smaller reporting company)

Smaller reporting company  o
   Rule 12b-2 o þ
    Class

Number of Shares Outstanding at
    July 31, 2008Common Stock, $.01 Par Value


100




---



##### 



CRUM &
    FORSTER HOLDINGS CORP.
  Form 10-Q
  Index
  PageNumberPART I
    FINANCIAL INFORMATIONITEM 1.

FINANCIAL STATEMENTSConsolidated Balance Sheets at June 30, 2008 (Unaudited)
    and December 31, 2007


3Consolidated Statements of Operations for the Three and Six
    Months Ended June 30, 2008 and 2007 (Unaudited)


4Consolidated Statements of Shareholders Equity for the Six
    Months Ended June 30, 2008 and 2007 (Unaudited)


5Consolidated Statements of Comprehensive (Loss) Income for the
    Three and Six Months ended June 30, 2008 and 2007
    (Unaudited)


6Consolidated Statements of Cash Flows for the Six Months ended
    June 30, 2008 and 2007 (Unaudited)


7Notes to the Consolidated Financial Statements


8ITEM 2.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
    CONDITION AND RESULTS OF OPERATIONS


25ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


42ITEM 4T.

CONTROLS AND PROCEDURES


43PART II
    OTHER INFORMATIONITEM 1.

LEGAL PROCEEDINGS


44ITEM 5.

OTHER INFORMATION


45ITEM 6.

EXHIBITS


45SIGNATURES


46INDEX TO EXHIBITS


47  2




---



##### 



PART I
    FINANCIAL INFORMATION  ITEM 1.
    FINANCIAL
    STATEMENTS  CRUM &
    FORSTER HOLDINGS CORP.CONSOLIDATED BALANCE SHEETS 
    (Dollars in thousands, except per share amounts)
    (Unaudited)
 June 30,


December 31,2008


2007ASSETSInvestments:Fixed income securities, at fair value (amortized cost of
    $1,807,381 and $1,741,750 in 2008 and 2007, respectively)

$
1,761,622


$
1,718,637Equity securities, at fair value (cost of $732,818 and $661,289
    in 2008 and 2007, respectively)


761,364



684,457Other invested assets (includes $442,662 and $240,015 in 2008
    and 2007, respectively, carried at fair value)


604,766



631,507Hybrid financial instruments, at fair value


202,415



125,848Short-term investments at cost, which approximates fair value


120,702



196,138Total investments


3,450,869



3,356,587Cash and cash equivalents


480,605



147,506Assets pledged for derivatives and short-sale obligations


206,775



1,043,436Accrued investment income


40,219



37,201Premiums receivable


213,804



213,488Reinsurance recoverable


837,485



1,310,192Reinsurance recoverable from affiliates


213,697



229,591Prepaid reinsurance premiums


25,116



21,848Deferred income taxes


87,593



93,161Deferred policy acquisition costs


66,055



72,282Other assets


77,903



87,520Total assets

$
5,700,121


$
6,612,812LIABILITIESUnpaid losses and loss adjustment expenses

$
3,119,544


$
3,178,506Unearned premiums


445,601



486,091Funds held under reinsurance contracts


233,053



250,697Accounts payable and other liabilities


195,170



220,142Deferred income on retroactive reinsurance


135,659



152,041Short-sale obligations






718,656Long-term debt


309,752



313,220Total liabilities


4,438,779



5,319,353Commitments and contingencies (Note 9)SHAREHOLDERS EQUITYCommon stock, $0.01 par value; 1,000 shares
    authorized; 100 issued and outstanding






Additional paid-in capital


740,993



740,993Accumulated other comprehensive (loss) income, net of tax


(17,564
)


44,479Retained earnings


537,913



507,987Total shareholders equity


1,261,342



1,293,459Total liabilities and shareholders equity

$
5,700,121


$
6,612,812   The accompanying notes are an integral part of the
    consolidated financial statements.
 3




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##### 



CRUM &
    FORSTER HOLDINGS CORP.CONSOLIDATED STATEMENTS OF OPERATIONS 
    (Dollars in thousands)
    (Unaudited)
  Three Months Ended


Six Months EndedJune 30,


June 30,2008


2007


2008


2007REVENUESPremiums earned

$
262,882


$
306,821


$
534,692


$
600,528Investment income


31,245



39,517



47,086



74,930Realized investment gains and losses


9,709



(11,067
)


164,977



3,407Total revenues


303,836



335,271



746,755



678,865EXPENSESLosses and loss adjustment expenses


245,746



201,690



455,356



395,150Policy acquisition costs


38,497



42,705



76,946



85,682Other underwriting expenses


44,821



39,723



87,429



81,500Interest expense


7,012



7,604



14,032



15,864Costs related to early retirement of debt


392



21,188



392



21,188Other (income) expense, net


(490
)


586



1,652



(189
)Total expenses


335,978



313,496



635,807



599,195(Loss) income before income taxes and equity in earnings of
    investees


(32,142
)


21,775



110,948



79,670Income tax (benefit) expense


(12,564
)


6,800



36,662



26,207(Loss) income before equity in earnings of investees


(19,578
)


14,975



74,286



53,463Equity in earnings (losses) of investees, net of tax


2



3,730



(461
)


8,095NET (LOSS) INCOME

$
(19,576
)

$
18,705


$
73,825


$
61,558   The accompanying notes are an integral part of the
    consolidated financial statements.
 4




---



##### 



CRUM &
    FORSTER HOLDINGS CORP.CONSOLIDATED STATEMENTS OF SHAREHOLDERS
    EQUITY 
    (Dollars in thousands)
    (Unaudited)
  Six Months EndedJune 30,2008


2007COMMON STOCKBalance, beginning and end of period

$



$
ADDITIONAL PAID-IN CAPITALBalance, beginning and end of period


740,993



740,993ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXBalance, beginning of period


44,479



(36,978
)Cumulative effect of adoption of Statements of Financial
    Accounting Standards Nos. 157 and 159


(29,897
)


Cumulative effect of adoption of Statement of Financial
    Accounting Standards No. 155






(10,146
)Balance, beginning of period, after cumulative effect of
    adjustments


14,582



(47,124
)Unrealized investment losses, net of transfers to realized
    investment gains and losses


(32,365
)


(24,113
)Foreign currency translation


83



9,943Amortization of actuarial gain and transition obligation
    included in net periodic benefit costs


136



Balance, end of period


(17,564
)


(61,294
)RETAINED EARNINGSBalance, beginning of period


507,987



389,040Cumulative effect of adoption of Statements of Financial
    Accounting Standards Nos. 157 and 159


86,101



Cumulative effect of adoption of Statement of Financial
    Accounting Standards No. 155 and equity method investee
    adoption of FASB Interpretation No. 48






9,465Balance, beginning of period, after cumulative effect of
    adjustments


594,088



398,505Net income


73,825



61,558Dividends to shareholder


(130,000
)


(91,000
)Balance, end of period


537,913



369,063TOTAL SHAREHOLDERS EQUITY

$
1,261,342


$
1,048,762   The accompanying notes are an integral part of the
    consolidated financial statements.
 5




---



##### 



CRUM &
    FORSTER HOLDINGS CORP.CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)
    INCOME 
    (Dollars in thousands)
    (Unaudited)
  Three Months Ended


Six Months EndedJune 30,


June 30,2008


2007


2008


2007NET (LOSS) INCOME

$
(19,576
)

$
18,705


$
73,825


$
61,558Change in components of other comprehensive loss for the period,
    before tax:Unrealized investment losses, net of transfers to realized
    investment gains and losses


(36,074
)


(28,576
)


(49,792
)


(37,097
)Foreign currency translation


(187
)


13,791



128



15,297Amortization of actuarial gain and transition obligation
    included in net periodic benefit costs


91







209



Other comprehensive loss for the period, before tax


(36,170
)


(14,785
)


(49,455
)


(21,800
)Deferred income tax benefit (expense) for the period:Deferred income tax benefit from unrealized investment losses


12,626



10,002



17,427



12,984Deferred income tax benefit (expense) from foreign currency
    translation


65



(4,827
)


(45
)


(5,354
)Deferred income tax expense from amortization of actuarial gain
    and transition obligation included in net periodic benefit costs


(31
)






(73
)


Total deferred income tax benefit for the period


12,660



5,175



17,309



7,630Other comprehensive loss for the period, net of tax


(23,510
)


(9,610
)


(32,146
)


(14,170
)COMPREHENSIVE (LOSS) INCOME

$
(43,086
)

$
9,095


$
41,679


$
47,388   The accompanying notes are an integral part of the
    consolidated financial statements.
 6




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##### 



CRUM &
    FORSTER HOLDINGS CORP.CONSOLIDATED STATEMENTS OF CASH FLOWS 
    (Dollars in thousands)
    (Unaudited)
  Six Months EndedJune 30,2008


2007OPERATING ACTIVITIESNet income

$
73,825


$
61,558Adjustments to reconcile net income to net cash from operating
    activities:Amortization of premium (discount) on fixed income securities


929



(4,540
)Realized investment gains


(164,977
)


(3,407
)Losses (earnings) of equity method investees, net of dividends


944



(9,860
)Losses (earnings) of investment companies and similar equity
    method investees


9,853



(8,786
)Loss on commutation


75,470



Depreciation and amortization


1,752



1,577Deferred income tax benefit


(7,387
)


(24,963
)Costs related to early retirement of debt


170



9,216Other non-cash net income adjustments


9,325



5,564Changes in:Accrued investment income


(3,005
)


(995
)Premiums receivable


933



205Reinsurance recoverable


373,479



63,195Prepaid reinsurance premiums


(3,268
)


2,520Deferred policy acquisition costs


6,227



(756
)Other assets


16,698



(821
)Unpaid losses and loss adjustment expenses


(58,962
)


(54,084
)Unearned premiums


(40,490
)


(9,294
)Accounts payable and other liabilities


(23,988
)


(13,564
)Net cash provided from operating activities


267,528



12,765INVESTING ACTIVITIESPurchases of fixed income securities


(188,148
)


(149,214
)Sales and maturities of fixed income securities


228,849



211,177Purchases of equity securities


(113,091
)


(135,590
)Sales of equity securities






114,062Purchases of other invested assets


(16,367
)


(24,040
)Sales of other invested assets


158,219



39,391(Purchases) sales of hybrid financial instruments


(75,000
)


2,259Purchases of short term investments


(474,450
)


(74,758
)Sales and maturities of short term investments


549,887



51,668Net change in short-sale obligations


(649,517
)


25,011Net change in cash collateral


783,114



(47,289
)Net settlements of total return swaps


(2,616
)


Purchases of fixed assets


(1,039
)


(408
)Net cash provided from investing activities


199,841



12,269FINANCING ACTIVITIESDividends to shareholder


(130,000
)


(91,000
)Issuance of
    73/4%
    long-term debt






330,000Repayment of
    103/8%
    long-term debt


(4,270
)


(295,730
)New debt issuance costs






(23,423
)Net cash used in financing activities


(134,270
)


(80,153
)Net change in cash and cash equivalents


333,099



(55,119
)Cash and cash equivalents, beginning of period


147,506



366,743Cash and cash equivalents, end of period

$
480,605


$
311,624SUPPLEMENTAL CASH FLOW INFORMATIONCash paid for interest

$
13,009


$
12,324Cash paid to parent for income taxes

$
34,802


$
43,261   The accompanying notes are an integral part of the
    consolidated financial statements.
 7




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Unaudited, dollars in thousands) 1.
    Organization
    and Basis of Presentation        Form 10-K
    2.
    Recent
    Accounting Pronouncements  SFAS No. 162. The Hierarchy of Generally Accepted Accounting
    Principles ). The Meaning of Present
    Fairly in Conformity with Generally Accepted Accounting
    Principles.
 8




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited, dollars in thousands)
  SFAS No. 161. Disclosures about Derivative
    Instruments and Hedging Activities  an Amendment of
    FASB Statement No. 133
  SOP 07-1. 07-1, Clarification of the Scope of the Audit and Accounting Guide
    for Investment Companies and Accounting by Parent Companies and
    Equity Method Investors for Investments in Investment Companies (SOP 07-1), SOP 07-1 SOP 07-1-1, Effective Date of AICPA Statement of Position
    07-1, SOP 07-1.
  SFAS No. 159. The Fair Value Option for Financial
    Assets and Financial Liabilities  Including an
    Amendment of FASB Statement No. 115 instrument-by-instrument The Equity Method of
    Accounting for Investments in Common Stock
   9




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited, dollars in thousands)
    SFAS No. 157 and FSP
    FAS 157-2. Fair
    Value Measurements
  FAS 157-2, Effective Date of FASB Statement No. 157 (FSP FAS 157-2),
 10




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited, dollars in thousands)
  3.
    Investments  Derivatives,
    Hybrid Financial Instruments and Short Sales
      June 30, 2008


December 31, 2007Fair Value








Fair ValueNotional





Asset


Notional





AssetAmount


Cost


(Liability)


Amount


Cost


(Liability)Credit default swaps

$
4,723,236


$
68,870


$
225,521


$
5,157,897


$
84,529


$
234,053Total return swaps


848,642







14,414











S&P Index call options


884,512



393







867,616



1,615



60Warrants


101,201



10,225



2,432



101,201



10,225



5,902Hybrid financial instruments


217,546



211,827



202,415



142,546



136,827



125,848Securities sold short:SPDRs


















(619,587
)


(707,615
)1Common stocks


















(12,522
)


(12,156
)
     1
    The fair values of the Standard & Poors
    Depositary Receipts (SPDRs) and common stock
    short-sales in the table above have been restated as of
    December 31, 2007, to reflect the adoption of
    SFAS 157. The Company uses the bid price for long positions
    (assets) and the ask price for short positions (liabilities).
    Previously, the Company used a price within the bid-ask spread.    Asset Derivatives


Liability DerivativesBalance Sheet

Fair


Balance Sheet

FairLocation

Value


Location

ValueCredit default swaps

Other invested assets

$
225,521


N/A

$
Total return swaps

Other invested assets

$
18,652


Other invested assets

$
4,238S&P Index call options

Other invested assets

$



N/A

$
Warrants

Other invested assets

$
2,432


N/A

$
Hybrid financial instruments

Hybrid financial instruments

$
202,415


N/A

$

   Offsetting of Amounts Related to
    Certain Contracts FIN 39-1, Amendment of FASB Interpretation No. 39
 11




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited, dollars in thousands)
        Notional Amount

Fair ValueExpiring in one year or less

$
145,581

$
6,265Expiring after 1 year through 5 years


3,092,182


138,418Expiring after 5 years through 10 years


1,485,473


80,838$
4,723,236

$
225,521
      12




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##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited, dollars in thousands)
    Accounting for Certain Hybrid Financial
    Instruments  an Amendment of FASB Statements Nos. 133
    and 140
    Three Months Ended


Six Months EndedJune 30,


June 30,2008


2007


2008


2007Credit default swaps

$
2,672


$
1,140


$
156,645


$
11,809SPDRs short-sales


(4,009
)


(21,862
)


65,506



(22,737
)Total return swaps


11,797







11,797



Common stock short-sales


(112
)


499



4,749



851Hybrid financial instruments


580



(7,529
)


1,777



(11,017
)S&P Index call options


(33
)


7,055



(453
)


2,159Warrants


(2,240
)


(2,558
)


(3,470
)


(3,795
)Total net realized investment gains (losses)

$
8,655


$
(23,255
)

$
236,551


$
(22,730
)
  13




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##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited, dollars in thousands)
    Three Months Ended June 30, 2008CommonCredit


SPDRs


Total


Stock


Hybrid

S&P IndexDefault


Short-


Return


Short-


Financial

CallSwaps


Sales


Swaps


Sales


Instruments

Options


Warrants


TotalRealized gains (losses) on disposal

$
25,982


$
(22,523
)

$
(2,617
)

$
2,053


$


$
(228
)

$



$
2,667Reversal of previously recognized mark-to-market (gains) losses


(21,911
)


18,514







(2,165
)





228







(5,334
)Mark-to-market gains (losses) recognized in period


(1,399
)






14,414







580


(33
)


(2,240
)


11,322Net gains realized
    investment gains (losses)

$
2,672


$
(4,009
)

$
11,797


$
(112
)

$
580

$
(33
)

$
(2,240
)

$
8,655
   Six Months Ended June 30, 2008CommonCredit


SPDRs


Total


Stock


Hybrid

S&P IndexDefault


Short-


Return


Short-


Financial

CallSwaps


Sales


Swaps


Sales


Instruments

Options


Warrants


TotalRealized gains (losses) on disposal

$
149,518


$
(22,523
)

$
(2,617
)

$
5,116


$


$
(1,615
)

$



$
127,879Reversal of previously recognized mark-to-market (gains) losses


(103,545
)


88,029







(367
)





1,555







(14,328
)Mark-to-market gains (losses) recognized in period


110,672







14,414







1,777


(393
)


(3,470
)


123,000Net gains realized
    investment gains (losses)

$
156,645


$
65,506


$
11,797


$
4,749


$
1,777

$
(453
)

$
(3,470
)

$
236,551
   Related
    Party Transactions
  Accounting for Certain Investments in Debt and Equity
    Securities,
   14




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##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited, dollars in thousands)
  Significant
    Subsidiary
  Regulation S-X.
  Three Months Ended


Six Months EndedJune 30, 2008


June 30, 2008Total revenues

$
69,220


$
133,341Total expenses

$
44,268


$
88,317Income from continuing operations

$
24,952


$
45,024Net income

$
16,771


$
29,303
   4.
    Fair
    Value Disclosures      FAS 157-2,
  Fair
    Value Hierarchy
     15




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited, dollars in thousands)
            Quoted Prices in

Significant Other

SignificantActive Markets for

Observable

UnobservableIdentical Assets

Inputs

Inputs(Level 1)

(Level 2)

(Level 3)

TotalAssetsFixed income securities

$


$
1,761,622

$


$
1,761,622Equity securities


761,364








761,364Other invested
    assets1


248,454


242,367





490,821Hybrid financial instruments





199,917


2,498


202,415Short-term investments





120,702





120,702Assets pledged for derivatives





206,775





206,775Total

$
1,009,818

$
2,531,383

$
2,498

$
3,543,699
     1
    Excludes investments which are carried under the equity method
    and cost method of accounting totaling $162,104 and the
    obligation to return cash collateral of $48,159 which has been
    netted against the fair value of derivative positions under a
    master netting arrangement.   16




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited, dollars in thousands)
  5.
    Unpaid
    Losses and Loss Adjustment Expenses    Three Months Ended


Six Months EndedJune 30,


June 30,2008


2007


2008


2007Gross unpaid losses and LAE, beginning of period

$
3,172,873


$
3,364,042


$
3,178,506


$
3,371,549Less ceded unpaid losses and LAE


1,139,807



1,335,078



1,197,496



1,355,253Net unpaid losses and LAE, beginning of period


2,033,066



2,028,964



1,981,010



2,016,296Losses and LAE incurred related to:Current period


186,720



216,002



382,982



421,949Prior years


59,026



(14,312
)


72,374



(26,799
)Total losses and LAE incurred


245,746



201,690



455,356



395,150Losses and LAE paid related to:Current period


58,095



48,707



85,612



64,328Prior years


(174,240
)


152,386



(44,203
)


317,557Total losses and LAE paid


(116,145
)


201,093



41,409



381,885Net unpaid losses and LAE, end of period


2,394,957



2,029,561



2,394,957



2,029,561Add ceded unpaid losses and LAE


724,587



1,287,904



724,587



1,287,904Gross unpaid losses and LAE, end of period

$
3,119,544


$
3,317,465


$
3,119,544


$
3,317,465
       June 30,2008Ceded unpaid losses and LAE in the table above

$
724,587Reconciling items:Reinsurance receivable on paid losses and LAE


38,902Retroactive reinsurance recoverable


287,693Reinsurance recoverable on the consolidated balance sheet

$
1,051,182
  17




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited, dollars in thousands)
  6.
    Asbestos
    and Environmental Losses and Loss Adjustment Expenses       Three Months Ended

Six Months EndedJune 30,

June 30,2008

2007

2008

2007AsbestosGross unpaid losses and allocated LAE (ALAE),
    beginning of period

$
434,194

$
429,596

$
428,139

$
443,055Less ceded unpaid losses and ALAE


83,178


88,565


94,497


94,817Net unpaid losses and ALAE, beginning of period


351,016


341,031


333,642


348,238Net losses and ALAE incurred








25,500


Net paid losses and ALAE


11,748


12,077


19,874


19,284Net unpaid losses and ALAE, end of period


339,268


328,954


339,268


328,954Add ceded unpaid losses and ALAE


82,349


92,426


82,349


92,426Gross unpaid losses and ALAE, end of period

$
421,617

$
421,380

$
421,617

$
421,380
     Three Months Ended

Six Months EndedJune 30,

June 30,2008

2007

2008

2007EnvironmentalGross unpaid losses ALAE, beginning of period

$
114,387

$
106,073

$
117,768

$
110,636Less ceded unpaid losses and ALAE


31,754


33,476


32,725


37,103Net unpaid losses and ALAE, beginning of period


82,633


72,597


85,043


73,533Net losses and ALAE incurred











Net paid losses and ALAE


3,780


8,034


6,190


8,970Net unpaid losses and ALAE, end of period


78,853


64,563


78,853


64,563Add ceded unpaid losses and ALAE


30,887


32,250


30,887


32,250Gross unpaid losses and ALAE, end of period

$
109,740

$
96,813

$
109,740

$
96,813
    18




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited, dollars in thousands)
  7.
    Reinsurance    Three Months Ended


Six Months EndedJune 30,


June 30,2008


2007


2008


2007Premiums written:Direct

$
274,775


$
335,239


$
552,824


$
651,039Assumed from other companies, pools or associations


4,864



10,356



9,408



21,487Ceded to other companies, pools or associations


(33,358
)


(34,288
)


(71,298
)


(78,772
)Net premiums written

$
246,281


$
311,307


$
490,934


$
593,754Premiums earned:Direct

$
289,728


$
320,356


$
592,615


$
629,801Assumed from other companies, pools or associations


5,222



21,689



10,108



52,019Ceded to other companies, pools or associations


(32,068
)


(35,224
)


(68,031
)


(81,292
)Premiums earned

$
262,882


$
306,821


$
534,692


$
600,528
     June 30,

December 31,2008

2007Reinsurance recoverable on unpaid losses and LAE

$
1,012,280

$
1,487,986Reinsurance receivable on paid losses and LAE


38,902


51,797Total reinsurance recoverable

$
1,051,182

$
1,539,783
     Corporate
    Aggregate Reinsurance
   19




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited, dollars in thousands)
      Three Months Ended


Six Months EndedJune 30,


June 30,2008


2007


2008


2007Funds held interest charged to investment income

$
(3,798
)

$
(4,186
)

$
(9,107
)

$
(8,338
)Losses and LAE


71,669



(3,387
)


68,262



(6,774
)Decrease in income before income taxes

$
(75,467
)

$
(799
)

$
(77,369
)

$
(1,564
)
           Prospective
    Corporate Aggregate Reinsurance
    Three Months Ended


Six Months EndedJune 30,


June 30,2008


2007


2008


2007Funds held interest charged to investment income

$



$
(606
)

$
(1,575
)

$
(1,237
)Losses and LAE


80,125







80,521



Decrease in income before income taxes

$
(80,125
)

$
(606
)

$
(82,096
)

$
(1,237
)
  20




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited, dollars in thousands)
       Retroactive
    Corporate Aggregate Reinsurance
    Three Months Ended


Six Months EndedJune 30,


June 30,2008


2007


2008


2007Funds held interest charged to investment income

$
(3,798
)

$
(3,580
)

$
(7,532
)

$
(7,101
)Losses and LAE


(8,456
)1


(3,387
)


(12,259
)2


(6,774
)Increase (decrease) in income before income taxes

$
4,658


$
(193
)

$
4,727


$
(327
)
     1
    For the three months ended June 30, 2008, losses and LAE is
    comprised of a loss on commutation of $4,123 offset by $8,778 of
    unamortized deferred income released on commutation as well as
    $3,801 of recurring deferred income amortization.2
    For the six months ended June 30, 2008, losses and LAE is
    comprised of a loss on commutation of $4,123 offset by $8,778 of
    unamortized deferred income released on commutation as well as
    $7,604 of recurring deferred income amortization.    Three Months Ended


Six Months EndedJune 30,


June 30,2008


2007


2008


2007Increase in reinsurance recoverable due from insurers

$



$



$



$
Less: related premiums paid














Income deferred during the period














Amortization of deferred income


(12,579
)


(3,387
)


(16,382
)


(6,774
)Decrease in deferred income


(12,579
)


(3,387
)


(16,382
)


(6,774
)Deferred income on retroactive reinsurance  beginning
    of period


148,238



164,631



152,041



168,018Deferred income on retroactive reinsurance  end of
    period

$
135,659


$
161,244


$
135,659


$
161,244
     Form 10-K
 21




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited, dollars in thousands)
  8.
    Long-Term
    Debt    June 30,


December 31,2008


200773/4% Senior
    Notes due 2017

$
309,752


$
309,036103/8% Senior
    Notes due 2013






4,184Total

$
309,752


$
313,220
   3 4
  3 8
   22




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited, dollars in thousands)
  9.
    Commitments
    and Contingencies         23




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited, dollars in thousands)
  10.
    Segment
    Reporting    Three Months Ended


Six Months EndedJune 30,


June 30,2008


2007


2008


2007General liability

$
52,532


$
59,876


$
106,564


$
121,626Workers compensation


60,654



69,299



118,353



133,142Commercial automobile


48,250



53,234



101,807



107,079Property


44,920



72,391



100,910



142,430Commercial multi-peril


20,208



19,373



40,774



36,043Accident and health


29,301



24,440



52,224



44,108Other1


7,017



8,208



14,060



16,100Total premiums earned

$
262,882


$
306,821


$
534,692


$
600,528
     1
    
    Other includes surety, homeowners
    and personal automobile lines of business.    Three Months Ended


Six Months EndedJune 30,


June 30,2008


2007


2008


2007Amount


Ratio


Amount


Ratio


Amount


Ratio


Amount


RatioAccident year loss and LAE ratios:General liability

$
37,622



71.6
%

$
39,358



65.7
%

$
77,830



73.0
%

$
83,425



68.6
%Workers compensation


46,651



76.9
%


49,376



71.3
%


95,181



80.4
%


103,322



77.6
%Commercial automobile


35,666



73.9
%


35,056



65.9
%


75,016



73.7
%


70,391



65.7
%Property


31,587



70.3
%


57,681



79.7
%


67,858



67.2
%


104,879



73.6
%Commercial multi-peril


12,438



61.5
%


12,901



66.6
%


25,216



61.8
%


22,763



63.2
%Accident and health


20,039



68.4
%


18,827



77.0
%


35,737



68.4
%


31,302



71.0
%Other


2,717



38.7
%


2,803



34.1
%


6,144



43.7
%


5,867



36.4
%Total accident year losses and LAE


186,720



71.0
%


216,002



70.4
%


382,982



71.6
%


421,949



70.3
%Prior years loss development


59,026



22.5
%


(14,312
)


(4.7
)%


72,374



13.6
%


(26,799
)


(4.5
)%Calendar year losses and LAE

$
245,746



93.5
%

$
201,690



65.7
%

$
455,356



85.2
%

$
395,150



65.8
%
    24




---



##### 



ITEM 2.  MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS    Form 10-K
    Statements
    Regarding Forward-Looking Information
    
    Competitive conditions in the insurance market;
    Insufficient loss reserves, including reserves for asbestos,
    environmental and other latent claims;
    Occurrence of natural or man-made catastrophic events;
    Inability to realize the Companys investment objectives;
    Adverse effect of recent credit market events on the
    Companys financial results;
    Inability to obtain reinsurance coverage on reasonable terms and
    prices, particularly property catastrophe reinsurance;
    Lowering or loss of one of the Companys financial strength
    ratings;
    Loss of key producers;
    Exposure to emerging claims and coverage issues;
    Exposure to credit risk, in the event reinsurers or
    policyholders fail to pay the Company amounts owed to it;
    Restrictions on the ability of the Companys insurance
    subsidiaries to pay dividends;
    Subordination of debt securities to the obligations and
    liabilities of the Companys insurance subsidiaries;
    Adverse developments in the prospects or results of operations
    of Fairfax or its affiliates;
    Changes in the business or regulatory environment in which the
    Company operates as a result of recent insurance industry
    investigations by government authorities and other parties;
    SEC requests for information from the Company;
    Changes in governmental regulations; and
    Exposure to credit risks on novated policies. 25




---



##### 



Form 10-K Form 10-Q.
  Critical
    Accounting Policies and Estimates
      Form 10-K
  Unpaid
    Losses and Loss Adjustment Expenses
         26




---



##### 



Other
    than Temporary Declines in Value of Investments
      Insurance Subsidiaries
 27




---



##### 



Derivatives
    and Hybrid Financial Instruments Valuation
      Reinsurance
    Recoverable
        Deferred
    Income Tax Assets
   28




---



##### 



and/or
      Summary
    of Operations
  Overview
       29




---



##### 



Market
    Conditions
     30




---



##### 



Reinsurance
    Programs
           31




---



##### 



Results
    of Operations
    Three Months Ended


Six Months EndedJune 30,


June 30,2008


2007


2008


2007Gross premiums written

$
279,639


$
345,595


$
562,232


$
672,526Net premiums written

$
246,281


$
311,307


$
490,934


$
593,754Premiums earned

$
262,882


$
306,821


$
534,692


$
600,528Losses and LAE


245,746



201,690



455,356



395,150Underwriting expenses


83,318



82,428



164,375



167,182Underwriting (loss) income


(66,182
)


22,703



(85,039
)


38,196Investment income and realized investment gains and losses


40,954



28,450



212,063



78,337Interest and other expense


6,522



8,190



15,684



15,675Costs related to early retirement of debt


392



21,188



392



21,188(Loss) income before income taxes and equity in earnings of
    investees


(32,142
)


21,775



110,948



79,670Income tax (benefit) expense


(12,564
)


6,800



36,662



26,207(Loss) income before equity in earnings of investees


(19,578
)


14,975



74,286



53,463Equity in earnings (losses) of investees, net of tax


2



3,730



(461
)


8,095Net (loss) income

$
(19,576
)

$
18,705


$
73,825


$
61,558Loss and LAE ratio


93.5
%


65.7
%


85.2
%


65.8
%Underwriting expense ratio


31.7



26.9



30.7



27.8Combined ratio


125.2
%


92.6
%


115.9
%


93.6
%        32




---



##### 



Underwriting
    Results
  Gross
    Premiums Written
    Three Months Ended June 30,Increase/


Percent2008


2007


(Decrease)


ChangeGeneral liability

$
59,679


$
63,126


$
(3,447
)


(5.5
)%Workers compensation


52,922



67,812



(14,890
)


(22.0
)%Commercial automobile


41,674



52,516



(10,842
)


(20.6
)%Property


58,352



97,569



(39,217
)


(40.2
)%Commercial multi-peril


22,900



28,927



(6,027
)


(20.8
)%Accident and health


37,613



27,413



10,200



37.2
%Other


6,499



8,232



(1,733
)


(21.1
)%Total gross premiums written

$
279,639


$
345,595


$
(65,956
)


(19.1
)%   Six Months Ended June 30,Increase/


Percent2008


2007


(Decrease)


ChangeGeneral liability

$
123,514


$
140,109


$
(16,595
)


(11.8
)%Workers compensation


107,640



134,660



(27,020
)


(20.1
)%Commercial automobile


99,908



106,653



(6,745
)


(6.3
)%Property


106,716



180,549



(73,833
)


(40.9
)%Commercial multi-peril


42,353



43,277



(924
)


(2.1
)%Accident and health


70,823



53,682



17,141



31.9
%Other


11,278



13,596



(2,318
)


(17.0
)%Total gross premiums written

$
562,232


$
672,526


$
(110,294
)


(16.4
)%     Casualty gross premiums written
   33




---



##### 



Property gross premiums written
      Other gross premiums written
    Net
    Premiums Written
    Premiums
    Earned
    Losses
    and Loss Adjustment Expenses
     34




---



##### 



Underwriting
    Expenses
        Investment
    Results
    Three Months Ended


Six Months EndedJune 30,


June 30,2008


2007


2008


2007Average investments, including cash and cash equivalents, at
    book
    value1

$
4,391,345


$
4,008,966


$
4,421,123


$
4,000,328Investment income

$
31,245


$
39,517


$
47,086


$
74,930Realized investment gains (losses)


9,709



(11,067
)


164,977



3,407Pre-tax equity in earnings (losses) of investees


3



5,738



(709
)


12,454Change in unrealized investment losses and foreign currency
    translation


(36,261
)


(14,785
)


(49,664
)


(21,800
)Total return on investments

$
4,696


$
19,403


$
161,690


$
68,991Annualized total return on investments


0.4
%


1.9
%


7.3
%


3.4
%     1
    
    Includes book value of assets
    pledged for derivatives and short-sale obligations of $216,145
    at June 30, 2008 ($538,553 at June 30, 2007). 35




---



##### 



Investment Income
    Three Months Ended


Six Months EndedJune 30,


June 30,2008


2007


2008


2007Interest on fixed income securities

$
26,396


$
26,530


$
50,687


$
51,726Dividends from equity securities


7,559



6,013



14,467



11,371Earnings (losses) from other invested assets


3,827



5,558



(9,853
)


8,683Other, primarily interest on cash and cash equivalents


5,918



7,880



15,871



17,435Gross investment income


43,700



45,981



71,172



89,215Interest on funds held under reinsurance contracts


(3,797
)


(4,186
)


(9,106
)


(8,338
)Investment expenses


(8,658
)


(2,278
)


(14,980
)


(5,947
)Investment income

$
31,245


$
39,517


$
47,086


$
74,930     Realized Investment Gains
    Three Months Ended


Six Months EndedJune 30,


June 30,2008


2007


2008


2007Fixed income securities

$
538


$
(671
)

$
11,478


$
4,391Equity securities






12,665







21,510Short-sales, derivatives and hybrid financial instruments


8,655



(23,255
)


236,551



(22,730
)Other invested assets


681



194



(41,974
)


2369,874



(11,067
)


206,055



3,407Other than temporary impairment charges


(165
)






(41,078
)


Total pre-tax net realized investment gains (losses)

$
9,709


$
(11,067
)

$
164,977


$
3,407  36




---



##### 



Pre-tax Equity in Earnings of Investees
  The Equity Method of Accounting
    for Investments in Common Stock
  Interest
    and Other Expense
    Liquidity
    and Capital Resources
  Holding
    Company
   37




---



##### 



3 4 3 8
    Insurance
    Subsidiaries
       38




---



##### 



Investment
    Portfolio
      At June 30, 2008Cost or


Gross


GrossAmortized


Unrealized


UnrealizedCost


Gains


Losses


Fair ValueFixed income securities:United States government and government agencies and
    authorities1

$
1,927,342


$
10,778


$
63,854


$
1,874,266States, municipalities and political subdivisions


92,670



14



2,118



90,566Other corporate fixed income securities


3,515



126



76



3,565Total fixed income securities


2,023,527



10,918



66,048



1,968,397Equity securities:Common stocks


724,728



97,964



68,419



754,273Preferred stocks


8,090







999



7,091Total equity securities


732,818



97,964



69,418



761,364Total available-for-sale securities

$
2,756,345


$
108,882


$
135,466


$
2,729,761     1
    
    Includes U.S. Treasury securities
    pledged for derivatives and short-sale obligations at a fair
    value of $206,775 (amortized cost of $216,145).   39




---



##### 



Less than 12 Months


Greater than 12 Months


TotalGross


Number





Gross


Number





Gross


NumberFair


Unrealized


of


Fair


Unrealized


of


Fair


Unrealized


ofValue


Loss


Securities


Value


Loss


Securities


Value


Loss


SecuritiesFixed income securities:U.S. government and government agencies and authorities

$
1,331,897


$
56,571



7


$
90,950


$
7,283



2


$
1,422,847


$
63,854



9States, municipalities and political subdivisions


88,718



2,118



11















88,718



2,118



11Corporate bonds


2,819



76



1















2,819



76



1Total fixed income securities


1,423,434



58,765



19



90,950



7,283



2



1,514,384



66,048



21Equity securities:Common stocks


354,116



68,419



12















354,116



68,419



12Preferred stocks


7,091



999



2















7,091



999



2Total equity securities


361,207



69,418



14















361,207



69,418



14Total securities in an unrealized loss position

$
1,784,641


$
128,183



33


$
90,950



7,283



2


$
1,875,591


$
135,466



35            40




---



##### 



Recent
    Accounting Pronouncements Adopted
        Ratings
         41




---



##### 



ITEM 3.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK          Interest
    Rate Risk
    At June 30, 2008Fair Value ofFixed Income

Hypothetical

HypotheticalPortfolio

$ Change

% Change200 basis point decline

$
2,765,149

$
594,337


27.4%100 basis point decline

$
2,444,034

$
273,222


12.6%Base scenario

$
2,170,812

$



%100 basis point increase

$
1,939,534

$
(231,278)


(10.7)%200 basis point increase

$
1,740,198

$
(430,614)


(19.8)%    42




---



##### 



Equity
    Price Risk
      Foreign
    Currency Exchange Rate Risk
    ITEM 4T.
    CONTROLS
    AND PROCEDURES  Evaluation
    of Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e)
  Internal
    Control Over Financial Reporting
     43




---



##### 



Part II
    OTHER INFORMATION  ITEM 1.
    LEGAL
    PROCEEDINGS      and/or and/or
     44




---



##### 



ITEM 5.
    OTHER
    INFORMATION  Changes
    of Directors and Officers
    ITEM 6.
    EXHIBITS   45




---



##### 



SIGNATURES    CRUM & FORSTER HOLDINGS CORP.
    (Registrant)
  Date: July 31, 2008

By:  /s/  Douglas
    M. LibbyDouglas
    M. Libby
    President and Chief Executive Officer   Date: July 31, 2008

By:  /s/  Mary
    Jane RobertsonMary
    Jane Robertson
    Executive Vice President, Chief
    Financial Officer and Treasurer  46




---



##### 



INDEX TO
    EXHIBITS  Exhibit No.*  31
.1

Certification of President and Chief Executive Officer pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002.*  31
.2

Certification of Executive Vice President, Chief Financial
    Officer and Treasurer pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002.*  32
.1

Certification of President and Chief Executive Officer pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002.*  32
.2

Certification of Executive Vice President, Chief Financial
    Officer and Treasurer pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.99
.1

Risk Factors (incorporated into Part II of this
    Form 10-Q
    by reference to the section entitled Risk Factors in
    the Companys Annual Report on
    Form 10-K
    for the year ended December 31, 2007 filed with the
    Securities and Exchange Commission on February 29, 2008).     *
    
    Filed herewith 47