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:September 30, 2008

333-84068    
  Crum & Forster Holdings
    Corp.
 (Exact Name of Registrant as
    Specified in its Charter)
   Delaware(State or Other Jurisdiction of
    Incorporation or Organization)

04-3611900(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
    October 30, 2008Common Stock, $.01 Par Value


100




---



##### 



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

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


3Consolidated Statements of Income for the Three
    and Nine Months Ended September 30, 2008 and 2007 (Unaudited)


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


5Consolidated Statements of Comprehensive Income
    for the Three and Nine Months Ended September 30, 2008 and 2007
    (Unaudited)


6Consolidated Statements of Cash Flows for the
    Nine Months Ended September 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


28ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK


45ITEM 4T.

CONTROLS AND PROCEDURES


47PART II
    OTHER INFORMATIONITEM 1.

LEGAL PROCEEDINGS


48ITEM 6.

EXHIBITS


48SIGNATURES


49INDEX TO EXHIBITS


50   2




---



##### 



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


December 31,2008


2007ASSETSInvestments:Fixed income securities, available-for-sale, at fair value
    (amortized cost of $2,090,561 and $1,741,750 in 2008 and 2007,
    respectively)

$
2,050,396


$
1,718,637Fixed income securities, designated as held for trading, at fair
    value


174,673



125,848Equity securities, at fair value (cost of $704,340 and $661,289
    in 2008 and 2007, respectively)


691,577



684,457Investments at equity


126,713



384,030Derivatives and other invested assets (includes $499,441 and
    $240,015 in 2008 and 2007, respectively, carried at fair value)


512,436



247,477Short-term investments at cost, which approximates fair value


135,793



196,138Total investments


3,691,588



3,356,587Cash and cash equivalents


423,302



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


239,094



1,043,436Accrued investment income


25,654



37,201Premiums receivable


187,166



213,488Reinsurance recoverable


811,677



1,310,192Reinsurance recoverable from affiliates


213,467



229,591Prepaid reinsurance premiums


26,580



21,848Deferred income taxes


113,814



93,161Deferred policy acquisition costs


60,147



72,282Other assets


71,942



87,520Total assets

$
5,864,431


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

$
3,111,196


$
3,178,506Unearned premiums


409,800



486,091Funds held under reinsurance contracts


238,134



250,697Accounts payable and other liabilities


353,025



220,142Deferred income on retroactive reinsurance


131,966



152,041Short-sale obligations






718,656Long-term debt


310,121



313,220Total liabilities


4,554,242



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


(38,445
)


44,479Retained earnings


607,641



507,987Total shareholders equity


1,310,189



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

$
5,864,431


$
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 INCOME
  (Dollars in thousands)
  (Unaudited)
  Three Months Ended


Nine Months EndedSeptember 30,


September 30,2008


2007


2008


2007REVENUESPremiums earned

$
232,978


$
293,375


$
767,670


$
893,903Investment income


14,706



34,296



61,792



109,226Net realized investment gains


162,369



70,220



327,346



73,627Total revenues


410,053



397,891



1,156,808



1,076,756EXPENSESLosses and loss adjustment expenses


211,506



192,468



666,862



587,618Policy acquisition costs


41,669



45,629



118,615



131,311Other underwriting expenses


42,407



40,928



129,836



122,428Interest expense


6,920



6,971



20,952



22,835Costs related to early retirement of debt










392



21,188Other expense, net


2,527



1,149



4,179



960Total expenses


305,029



287,145



940,836



886,340Income before income taxes and equity in earnings of investees


105,024



110,746



215,972



190,416Income tax expense


35,296



37,940



71,958



64,147Income before equity in earnings of investees


69,728



72,806



144,014



126,269Equity in earnings (losses) of investees, net of tax






10,051



(461
)


18,146NET INCOME

$
69,728


$
82,857


$
143,553


$
144,415   The accompanying notes are an integral part of the
    consolidated financial statements.
 4




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##### 



CRUM &
    FORSTER HOLDINGS CORP.
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY



(Dollars in thousands)



(Unaudited)  Nine Months EndedSeptember 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) gains, net of transfers to
    realized investment gains and losses


(52,920
)


24,856Foreign currency translation


(311
)


18,209Amortization of actuarial gain and transition obligation
    included in net periodic benefit costs


204



Balance, end of period


(38,445
)


(4,059
)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


143,553



144,415Dividends to shareholder


(130,000
)


(170,700
)Balance, end of period


607,641



372,220TOTAL SHAREHOLDERS EQUITY

$
1,310,189


$
1,109,154   The accompanying notes are an integral part of the
    consolidated financial statements.
 5




---



##### 



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


Nine Months EndedSeptember 30,


September 30,2008


2007


2008


2007NET INCOME

$
69,728


$
82,857


$
143,553


$
144,415Change in components of other comprehensive (loss) income for
    the period, before tax:Unrealized investment (losses) gains, net of transfers to
    realized investment gains and losses


(31,622
)


75,307



(81,414
)


38,210Foreign currency translation


(607
)


12,717



(479
)


28,014Amortization of actuarial gain and transition obligation
    included in net periodic benefit costs


105







314



Other comprehensive (loss) income for the period, before tax


(32,124
)


88,024



(81,579
)


66,224Deferred income tax benefit (expense) for the period:Deferred income tax benefit (expense) from unrealized investment
    losses


11,067



(26,338
)


28,494



(13,354
)Deferred income tax benefit (expense) from foreign currency
    translation


213



(4,451
)


168



(9,805
)Deferred income tax expense from amortization of actuarial gain
    and transition obligation included in net periodic benefit costs


(37
)






(110
)


Total deferred income tax benefit (expense) for the period


11,243



(30,789
)


28,552



(23,159
)Other comprehensive (loss) income for the period, net of tax


(20,881
)


57,235



(53,027
)


43,065COMPREHENSIVE INCOME

$
48,847


$
140,092


$
90,526


$
187,480   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)  Nine Months EndedSeptember 30,2008


2007OPERATING ACTIVITIESNet income

$
143,553


$
144,415Adjustments to reconcile net income to net cash from operating
    activities:Amortization of premium (discount) on discount on fixed income
    securities


1,318



(7,136
)Realized investment gains


(327,346
)


(73,627
)Losses (earnings) of equity method investees, net of dividends


1,051



(23,995
)Losses (earnings) of investment companies and similar equity
    method investees


24,924



(10,022
)Loss on commutation


75,470



Depreciation and amortization


2,631



2,382Deferred income tax (benefit) expense


(22,363
)


72,522Costs related to early retirement of debt


170



9,216Other non-cash net income adjustments


12,195



6,982Changes in:Accrued investment income


11,547



16,354Premiums receivable


26,896



21,811Reinsurance recoverable


398,710



114,050Prepaid reinsurance premiums


(4,732
)


3,182Deferred policy acquisition costs


12,135



3,346Other assets


15,273



207Unpaid losses and loss adjustment expenses


(65,165
)


(95,735
)Unearned premiums


(76,291
)


(36,552
)Accounts payable and other liabilities


35,803



(97,468
)Net cash provided from operating activities


265,779



49,932INVESTING ACTIVITIESPurchases of fixed income securities


(760,148
)


(149,314
)Proceeds from sales and maturities of fixed income securities


520,777



213,437Purchases of equity securities


(147,403
)


(202,957
)Proceeds from sales of equity securities


9,422



203,094Net sales of derivatives and other invested assets


270,517



36,293Net sales (purchases) of short term investments


60,345



(49,394
)(Settlement of) proceeds from short-sale obligations


(649,517
)


231,688Net change in cash and cash equivalents held as collateral


734,263



(253,516
)Net settlement of total return swaps and futures contracts


107,305



Purchases of fixed assets


(1,274
)


(804
)Net cash provided from investing activities


144,287



28,527FINANCING ACTIVITIESDividends to shareholder


(130,000
)


(128,818
)Issuance of
    73/4%
    long-term debt






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


(4,270
)


(295,730
)New debt issuance costs






(23,912
)Net cash used in financing activities


(134,270
)


(118,460
)Net change in cash and cash equivalents


275,796



(40,001
)Cash and cash equivalents, beginning of period


147,506



366,743Cash and cash equivalents, end of period

$
423,302


$
326,742SUPPLEMENTAL CASH FLOW INFORMATIONCash paid for interest

$
13,009


$
12,324Cash paid to parent for income taxes

$
40,262


$
43,261SUPPLEMENTAL NON-CASH OPERATING AND FINANCING ACTIVITIESNote received from parent in partial settlement of the
    Companys tax net operating losses

$



$
41,882In-kind dividend payment to parent representing cancellation of
    the aforementioned note

$



$
41,882   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    wholly-owned
    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 Accounting for Derivative Instruments and
    Hedging Activities,
  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 Accounting
    for Certain Investments in Debt and Equity Securities,
   9




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited, dollars in thousands)
       SFAS No. 157, FSP
    FAS 157-2
    and FSP
    FAS 157-3. Fair Value Measurements
  FAS 157-2, Effective Date of FASB Statement No. 157 (FSP FAS 157-2), non-financial
  FAS 157-3, Determining the Fair Value of a Financial Asset When the
    Market for That Asset Is Not Active FAS 157-3), FAS 157-3
 10




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited, dollars in thousands)
  3.
    Investments    Available-For-Sale
    Securities
    At September 30, 2008Cost or


Gross


GrossAmortized


Unrealized


UnrealizedCost


Gains


Losses


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

$
1,923,698


$
13,719


$
33,354


$
1,904,063States, municipalities and political subdivisions


406,793



11



25,443



381,361Other corporate fixed income securities


3,515



23



165



3,373Total fixed income securities


2,334,006



13,753



58,962



2,288,797Equity securities:Common stocks


696,250



42,556



52,977



685,829Preferred stocks


8,090







2,342



5,748Total equity securities


704,340



42,556



55,319



691,577Total available-for-sale securities

$
3,038,346


$
56,309


$
114,281


$
2,980,374
     1
    Includes U.S. Treasury securities pledged for derivatives at a
    fair value of $238,401(amortized cost of $243,445).    At December 31, 2007Cost or


Gross


GrossAmortized


Unrealized


UnrealizedCost


Gains


Losses


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

$
2,046,766


$
19,240


$
45,884


$
2,020,122States, municipalities and political subdivisions


2,527



22



12



2,537Other corporate fixed income securities


4,896



28



466



4,458Total fixed income securities


2,054,189



19,290



46,362



2,027,117Equity securities:Common stocks


653,199



58,211



34,301



677,109Preferred stocks


8,090







742



7,348Total equity securities


661,289



58,211



35,043



684,457Total available-for-sale securities

$
2,715,478


$
77,501


$
81,405


$
2,711,574
     1
    Includes U.S. Treasury securities pledged for short-sale
    obligations at a fair value of $308,480 (amortized cost of
    $312,439). 11




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited, dollars in thousands)
   Fixed
    Income Securities Designated as Held for Trading
    Investments
    at Equity
    Derivatives
    and Other Invested Assets
    Derivatives,
    Hybrid Financial Instruments and Short Sales
   12




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited, dollars in thousands)
     December 31, 2007September 30, 2008








Fair ValueNotional





Fair Value


Notional





AssetAmount


Cost


Asset


Amount


Cost


(Liability)Credit default swaps

$
3,731,964


$
56,001


$
224,258


$
5,157,897


$
84,529


$
234,053Total return swaps


845,392







45,558











S&P Index call options


310,464



77



1



867,616



1,615



60Warrants


101,201



10,225



3,250



101,201



10,225



5,902Eurodollar futures contracts


488,000







2











Hybrid financial instruments


217,546



211,827



168,115



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.2
    Eurodollar future contracts are settled daily and therefore have
    no fair value at September 30, 2008.    Asset DerivativesBalance SheetLocation

Fair ValueCredit default swaps

Derivatives and other invested assets

$
224,258Total return swaps

Derivatives and other invested assets

$
45,558S&P Index call options

Derivatives and other invested assets

$
1Warrants

Derivatives and other invested assets

$
3,250Hybrid financial instruments

Fixed income securities designated as held for trading

$
168,115
   Offsetting of Amounts Related to
    Certain Contracts FIN 39-1, Amendment of FASB Interpretation No. 39
 13




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##### 



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


Fair ValueExpiring in one year or less

$
150,928


$
9,134Expiring after 1 year through 5 years


2,934,989



169,707Expiring after 5 years through 10 years


646,047



45,417$
3,731,964


$
224,258
   Total
    Return Swaps and Short Sales
   14




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##### 



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


Nine Months EndedSeptember 30,


September 30,2008


2007


2008


2007Credit default swaps

$
119,316


$
73,510


$
275,961


$
85,319SPDRs short-sales






(12,555
)


65,506



(35,292
)Total return swaps


141,263







153,060



Common stock short-sales






12,085



4,749



12,936Hybrid financial instruments


(34,191
)


(8,172
)


(32,414
)


(19,189
)S&P Index call options


(45
)


3,453



(498
)


5,612Other1


622



1,846



(2,848
)


(1,949
)Total net realized investment gains (losses)

$
226,965


$
70,167


$
463,516


$
47,437
     1
    Other includes warrants and futures contracts. 15




---



##### 



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





S&PCredit





Total


Stock


Hybrid


IndexDefault


SPDRs


Return


Short-


Financial


CallSwaps


Short-Sales


Swaps


Sales


Instruments


Options


Other


TotalRealized gains (losses) on disposal

$
107,710


$



$
110,119


$



$



$
(362
)

$



$
217,467Reversal of previously recognized mark-to-market (gains)


(55,486
)






(14,414
)










362







(69,538
)Mark-to-market gains (losses) recognized in current period


67,092







45,558







(34,191
)


(45
)


622



79,036Total net realized investment gains (losses)

$
119,316


$



$
141,263


$



$
(34,191
)

$
(45
)

$
622


$
226,965
   Nine Months Ended September 30, 2008Common





S&PCredit





Total


Stock


Hybrid


IndexDefault


SPDRs


Return


Short-


Financial


CallSwaps


Short-Sales


Swaps


Sales


Instruments


Options


Other


TotalRealized gains (losses) on disposal

$
257,228


$
(22,523
)

$
107,502


$
5,116


$



$
(1,977
)

$



$
345,346Reversal of previously recognized mark-to-market (gains) losses


(125,975
)


88,029







(367
)






1,555







(36,758
)Mark-to-market gains (losses) recognized in current period


144,708







45,558







(32,414
)


(76
)


(2,848
)


154,928Total net realized investment gains (losses)

$
275,961


$
65,506


$
153,060


$
4,749


$
(32,414
)

$
(498
)

$
(2,848
)

$
463,516
   Related
    Party Transactions
     16




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited, dollars in thousands)
   Accounting for Certain Investments in
    Debt and Equity Securities,
    Significant
    Subsidiary
  Regulation S-X.
  Three Months Ended


Nine Months EndedSeptember 30,
    2008


September 30,
    2008Total revenues

$
24,563


$
157,904Total expenses

$
44,130


$
132,447(Loss) income from continuing operations

$
(19,567
)

$
25,457Net (loss) income

$
(12,852
)

$
16,451
   4.
    Fair
    Value Disclosures      FAS 157-2,
 17




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited, dollars in thousands)
   FAS 157-3, Determining the Fair Value of a Financial Asset When the
    Market for That Asset Is Not Active FAS 157-3), FSP FAS 157-3
  Fair
    Value Hierarchy
               18




---



##### 



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)


TotalAssetsAvailable-for-sale fixed income securities

$



$
2,050,396


$



$
2,050,396Held for trading fixed income securities






165,549



9,124



174,673Equity securities


681,741



9,836







691,577Derivatives and other invested
    assets1


213,312



286,129







499,441Short-term investments






135,793







135,793Assets pledged for derivatives






238,4012







238,401Total

$
895,053


$
2,886,104


$
9,124


$
3,790,281
     1
    Excludes investments which are carried under the cost method of
    accounting totaling $12,995.2
    Excludes cash pledged as collateral of $693.    Three Months Ended


Nine Months EndedSeptember 30,
    2008


September 30,
    2008Beginning balance

$
2,498


$
2,500Net purchases


6,440



6,440Realized gains included in net income


186



184Balance, end of period

$
9,124


$
9,124Total gains for the period recognized in earnings attributable
    to the change in unrealized gains or losses relating to assets
    held at September 30, 2008

$
186


$
184
  19




---



##### 



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


Nine Months EndedSeptember 30,


September 30,2008


2007


2008


2007Gross unpaid losses and LAE, beginning of period

$
3,119,544


$
3,317,465


$
3,178,506


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


724,587



1,287,904



1,197,496



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


2,394,957



2,029,561



1,981,010



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


246,842



202,331



629,824



624,280Prior years


(35,336
)


(9,863
)


37,038



(36,662
)Total losses and LAE incurred


211,506



192,468



666,862



587,618Losses and LAE paid related to:Current period


69,761



75,124



155,373



139,452Prior years


137,497



130,880



93,294



448,437Total losses and LAE paid


207,258



206,004



248,667



587,889Net unpaid losses and LAE, end of period


2,399,205



2,016,025



2,399,205



2,016,025Add ceded unpaid losses and LAE


711,991



1,259,789



711,991



1,259,789Gross unpaid losses and LAE, end of period

$
3,111,196


$
3,275,814


$
3,111,196


$
3,275,814
         September 30,
    2008Ceded unpaid losses and LAE in the table above

$
711,991Reconciling items:Reinsurance receivable on paid losses and LAE


29,153Retroactive reinsurance recoverable


284,000Reinsurance recoverable on the consolidated balance sheet

$
1,025,144
  20




---



##### 



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


Nine Months EndedSeptember 30,


September 30,2008


2007


2008


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

$
421,617


$
421,380


$
428,139


$
443,055Less ceded unpaid losses and ALAE


82,349



92,426



94,497



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


339,268



328,954



333,642



348,238Net losses and ALAE incurred










25,500



Net paid losses and ALAE


27,128



8,268



47,002



27,552Net unpaid losses and ALAE, end of period


312,140



320,686



312,140



320,686Add ceded unpaid losses and ALAE


83,488



89,498



83,488



89,498Gross unpaid losses and ALAE, end of period

$
395,628


$
410,184


$
395,628


$
410,184
     Three Months Ended


Nine Months EndedSeptember 30,


September 30,2008


2007


2008


2007EnvironmentalGross unpaid losses ALAE, beginning of period

$
109,740


$
96,813


$
117,768


$
110,636Less ceded unpaid losses and ALAE


30,887



32,250



32,725



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


78,853



64,563



85,043



73,533Net losses and ALAE incurred














Net paid losses and ALAE


2,815



(136
)


9,005



8,834Net unpaid losses and ALAE, end of period


76,038



64,699



76,038



64,699Add ceded unpaid losses and ALAE


28,550



30,957



28,550



30,957Gross unpaid losses and ALAE, end of period

$
104,588


$
95,656


$
104,588


$
95,656
    21




---



##### 



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


Nine Months EndedSeptember 30,


September 30,2008


2007


2008


2007Premiums written:Direct

$
224,533


$
286,480


$
777,357


$
937,519Assumed from other companies, pools or associations


7,142



10,412



16,550



31,899Ceded to other companies, pools or associations


(35,962
)


(30,113
)


(107,260
)


(108,885
)Net premiums written

$
195,713


$
266,779


$
686,647


$
860,533Premiums earned:Direct

$
260,031


$
309,585


$
852,646


$
939,386Assumed from other companies, pools or associations


7,444



14,565



17,552



66,584Ceded to other companies, pools or associations


(34,497
)


(30,775
)


(102,528
)


(112,067
)Premiums earned

$
232,978


$
293,375


$
767,670


$
893,903
     September 30,


December 31,2008


2007Reinsurance recoverable on unpaid losses and LAE

$
995,991


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


29,153



51,797Total reinsurance recoverable

$
1,025,144


$
1,539,783
     Corporate
    Aggregate Reinsurance
   22




---



##### 



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


Nine Months EndedSeptember 30,


September 30,2008


2007


2008


2007Funds held interest charged to investment income

$
(3,862
)

$
(4,214
)

$
(12,969
)

$
(12,552
)Losses and LAE


(3,693
)


(4,045
)


64,569



(10,819
)Decrease in income before income taxes

$
(169
)

$
(169
)

$
(77,538
)

$
(1,733
)
           Prospective
    Corporate Aggregate Reinsurance
    Three Months Ended


Nine Months EndedSeptember 30,


September 30,2008


2007


2008


2007Funds held interest charged to investment income

$



$
(572
)

$
(1,575
)

$
(1,809
)Losses and LAE










80,521



Decrease in income before income taxes

$



$
(572
)

$
(82,096
)

$
(1,809
)
  23




---



##### 



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


Nine Months EndedSeptember 30,


September 30,2008


2007


2008


2007Funds held interest charged to investment income

$
(3,862
)

$
(3,642
)

$
(11,394
)

$
(10,743
)Losses and LAE


(3,693
)


(4,045
)


(15,952
)1


(10,819
)(Decrease) increase in income before income taxes

$
(169
)

$
403


$
4,558


$
76
     1
    For the nine months ended September 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 $11,297 of recurring deferred income amortization.    Three Months Ended


Nine Months EndedSeptember 30,


September 30,2008


2007


2008


2007Increase in reinsurance recoverable due from insurers

$



$



$



$
Less: related premiums paid














Income deferred during the period














Amortization of deferred income


(3,693
)


(4,045
)


(20,075
)


(10,819
)Decrease in deferred income


(3,693
)


(4,045
)


(20,075
)


(10,819
)Deferred income on retroactive reinsurance  beginning
    of period


135,659



161,244



152,041



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

$
131,966


$
157,199


$
131,966


$
157,199
     Form 10-K
 24




---



##### 



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


December 31,2008


200773/4% Senior
    Notes due 2017

$
310,121


$
309,036103/8% Senior
    Notes due 2013






4,184Total

$
310,121


$
313,220
   3 4
  3 8
     25




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited, dollars in thousands)
   9.
    Commitments
    and Contingencies         26




---



##### 



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


Nine Months EndedSeptember 30,


September 30,2008


2007


2008


2007General liability

$
45,661


$
55,944


$
152,225


$
177,570Workers compensation


55,332



64,076



173,685



197,218Commercial automobile


44,781



52,599



146,588



159,678Property


35,962



66,976



136,872



209,406Commercial multi-peril


19,687



21,940



60,461



57,983Accident and health


24,608



24,209



76,832



68,317Other1


6,947



7,631



21,007



23,731Total premiums earned

$
232,978


$
293,375


$
767,670


$
893,903
     1
    
    Other includes surety, homeowners
    and personal automobile lines of business.    Three Months Ended


Nine Months EndedSeptember 30,


September 30,2008


2007


2008


2007Amount


Ratio


Amount


Ratio


Amount


Ratio


Amount


RatioAccident year loss and LAE ratios:General liability

$
32,744



71.7
%

$
40,326



72.1
%

$
110,574



72.6
%

$
123,751



69.7
%Workers compensation


41,323



74.7
%


50,455



78.7
%


136,504



78.6
%


153,777



78.0
%Commercial automobile


32,589



72.8
%


31,953



60.7
%


107,605



73.4
%


102,344



64.1
%Property


107,991



300.3
%


46,270



69.1
%


175,849



128.5
%


151,149



72.2
%Commercial multi-peril


12,420



63.1
%


12,765



58.2
%


37,636



62.2
%


35,528



61.3
%Accident and health


16,576



67.4
%


17,666



73.0
%


52,313



68.1
%


48,968



71.7
%Other


3,199



46.0
%


2,896



38.0
%


9,343



44.5
%


8,763



36.9
%Total accident year losses and LAE


246,842



106.0
%


202,331



69.0
%


629,824



82.0
%


624,280



69.8
%Prior years loss development


(35,336
)


(15.2
)


(9,863
)


(3.4
)


37,038



4.9



(36,662
)


(4.1
)Calendar year losses and LAE

$
211,506



90.8
%

$
192,468



65.6
%

$
666,862



86.9
%

$
587,618



65.7
%
       11.
    Subsequent
    Event     27




---



##### 



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. 28




---



##### 



Form 10-K Form 10-Q.
  Critical
    Accounting Policies and Estimates
      Form 10-K
  Unpaid
    Losses and Loss Adjustment Expenses
         29




---



##### 



Other
    than Temporary Declines in Value of Investments
      Insurance
    Subsidiaries
 30




---



##### 



Derivatives
    and Hybrid Financial Instruments Valuation
        Reinsurance
    Recoverable
       31




---



##### 



Deferred
    Income Tax Assets
    and/or
      Summary
    of Operations
  Overview
       32




---



##### 



Market
    Conditions
       33




---



##### 



Reinsurance
    Programs
            34




---



##### 



Results
    of Operations
    Three Months Ended


Nine Months EndedSeptember 30,


September 30,2008


2007


2008


2007Gross premiums written

$
231,675


$
296,892


$
793,907


$
969,418Net premiums written

$
195,713


$
266,779


$
686,647


$
860,533Premiums earned

$
232,978


$
293,375


$
767,670


$
893,903Losses and LAE


211,506



192,468



666,862



587,618Underwriting expenses


84,076



86,557



248,451



253,739Underwriting (loss) income


(62,604
)


14,350



(147,643
)


52,546Investment income and realized investment gains and losses


177,075



104,516



389,138



182,853Interest and other expense


9,447



8,120



25,131



23,795Costs related to early retirement of debt










392



21,188Income before income taxes and equity in earnings of investees


105,024



110,746



215,972



190,416Income tax expense


35,296



37,940



71,958



64,147Income before equity in earnings of investees


69,728



72,806



144,014



126,269Equity in (losses) earnings of investees, net of tax






10,051



(461
)


18,146Net income

$
69,728


$
82,857


$
143,553


$
144,415Loss and LAE ratio


90.8
%


65.6
%


86.9
%


65.7
%Underwriting expense ratio


36.1



29.5



32.3



28.4Combined ratio


126.9
%


95.1
%


119.2
%


94.1
%      
    A significant increase in investment earnings primarily
    attributable to higher earnings from the Companys
    investments in credit default swaps and total returns swaps,
    partially offset by lower partnership income, higher other than
    temporary impairment charges and mark-to-market losses
    associated with the Companys investment in Northbridge
    Financial Corporation (Northbridge), an affiliated
    company.
    Substantially lower underwriting income. Underwriting income in
    the third quarter of 2008 was adversely affected by catastrophe
    losses of $77,200 (33.1 combined ratio points) associated with
    hurricanes Gustav and Ike, partially offset by higher favorable
    prior year loss development of $35,336 (15.2 combined ratio
    points) in the third quarter of 2008 compared to $9,863 (3.4
    combined ratio points) in the third quarter of 2007. For the
    nine months ended September 30, 2008, in addition to the
    effect of the aforementioned hurricanes (10.1 combined ratio
    points), underwriting results were also adversely affected by a
    pre-tax charge of $75,470 (9.8 combined ratio points) arising
    from the commutation of one of the Companys finite
    reinsurance contracts as well as a pre-tax loss of $25,500 (3.3
    combined ratio points) attributable to the settlement of an
    asbestos related lawsuit, partially offset by higher favorable
    prior year loss development. Excluding the effects of the loss
    on commutation and the asbestos lawsuit, favorable prior year
    loss development was $63,932 (8.3 combined ratio points) for the
    nine months ended September 30, 2008 compared to $36,662
    (4.1 combined ratio points) for the same period in 2007.
    Lower equity in earnings of investees primarily due to lower
    earnings from Northbridge, which was previously accounted for as
    an equity method investment. 35




---



##### 



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


Percent2008


2007


(Decrease)


ChangeGeneral liability

$
49,254


$
58,201


$
(8,947
)


(15.4
)%Workers compensation


50,793



69,887



(19,094
)


(27.3
)%Commercial automobile


36,864



52,288



(15,424
)


(29.5
)%Property


31,858



55,010



(23,152
)


(42.1
)%Commercial multi-peril


21,411



24,159



(2,748
)


(11.4
)%Accident and health


33,077



27,850



5,227



18.8
%Other


8,418



9,497



(1,079
)


(11.4
)%Total gross premiums written

$
231,675


$
296,892


$
(65,217
)


(22.0
)%   Nine Months Ended September 30,Increase/


Percent2008


2007


(Decrease)


ChangeGeneral liability

$
172,768


$
198,310


$
(25,542
)


(12.9
)%Workers compensation


158,433



204,547



(46,114
)


(22.5
)%Commercial automobile


136,772



158,941



(22,169
)


(13.9
)%Property


138,574



235,559



(96,985
)


(41.2
)%Commercial multi-peril


63,764



67,436



(3,672
)


(5.4
)%Accident and health


103,900



81,532



22,368



27.4
%Other


19,696



23,093



(3,397
)


(14.7
)%Total gross premiums written

$
793,907


$
969,418


$
(175,511
)


(18.1
)%      36




---



##### 



Casualty gross premiums written
    Property gross premiums written
      Other gross premiums written
    Net
    Premiums Written
    Premiums
    Earned
   37




---



##### 



Losses
    and Loss Adjustment Expenses
      Underwriting
    Expenses
       38




---



##### 



Investment
    Results
    Three Months Ended


Nine Months EndedSeptember 30,


September 30,2008


2007


2008


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

$
4,291,043


$
4,161,348


$
4,419,599


$
4,077,203Investment income

$
14,706


$
34,296


$
61,792


$
109,226Net realized investment gains


162,369



70,220



327,346



73,627Pre-tax equity in earnings (losses) of investees






15,463



(709
)


27,917Change in unrealized investment (losses) gains and foreign
    currency translation


(32,229
)


88,024



(81,893
)


66,224Total return on investments

$
144,846


$
208,003


$
306,536


$
276,994Annualized total return on investments


13.5
%


20.0
%


9.2
%


9.1
%     1
    
    Includes book value of assets
    pledged for derivatives and short-sale obligations of $243,445
    at September 30, 2008 ($883,035 at September 30, 2007).      Investment Income
    Three Months Ended


Nine Months EndedSeptember 30,


September 30,2008


2007


2008


2007Interest on fixed income securities

$
28,092


$
25,574


$
78,779


$
77,300Dividends from equity securities


6,954



5,527



21,421



16,898(Losses) earnings from other invested assets


(15,071
)


1,339



(24,924
)


10,022Other, primarily interest on cash and cash equivalents


6,566



11,548



22,437



28,983Gross investment income


26,541



43,988



97,713



133,203Interest on funds held under reinsurance contracts


(3,862
)


(4,214
)


(12,969
)


(12,552
)Investment expenses


(7,973
)


(5,478
)


(22,952
)


(11,425
)Investment income

$
14,706


$
34,296


$
61,792


$
109,226  39




---



##### 



Realized Investment Gains
    Three Months Ended


Nine Months EndedSeptember 30,


September 30,2008


2007


2008


2007Fixed income securities

$
8,785


$



$
20,263


$
4,391Equity securities


2,815



15,437



2,815



36,947Short-sales, derivatives and hybrid financial instruments


226,965



70,167



463,516



47,437Other invested assets


(41,498
)


387



(83,472
)


623197,067



85,991



403,122



89,398Other than temporary impairment charges:Fixed income securities


(1,265
)






(1,265
)


Equity securities


(33,433
)


(15,771
)


(74,511
)

$
(15,771
)(34,698
)


(15,771
)


(75,776
)


(15,771
)Total pre-tax net realized investment gains

$
162,369


$
70,220


$
327,346


$
73,627        40




---



##### 



The Fair Value Option for Financial
    Assets and Financial Liabilities  Including an
    Amendment of FASB Statement No. 115
  Pre-tax Equity in Earnings of Investees
    Interest
    and Other Expense
    Liquidity
    and Capital Resources
  Holding
    Company
   41




---



##### 



3 4 3 8
    Insurance
    Subsidiaries
       42




---



##### 



Investment
    Portfolio
        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

$
1,443,354


$
(29,615
)


8


$
64,172


$
(3,739
)


1


$
1,507,526



(33,354
)


9States, municipalities and political subdivisions


318,479



(25,443
)


26















318,479



(25,443
)


26Corporate bonds


2,935



(165
)


3















2,935



(165
)


3Total fixed income securities


1,764,768



(55,223
)


37



64,172



(3,739
)


1



1,828,940



(58,962
)


38Equity securities:Common stocks


290,476



(52,977
)


10















290,476



(52,977
)


10Preferred stocks


5,747



(2,342
)


2















5,747



(2,342
)


2Total equity securities


296,223



(55,319
)


12















296,223



(55,319
)


12Total securities in an unrealized loss position

$
2,060,991


$
(110,542
)


49


$
64,172


$
(3,739
)


1


$
2,125,163


$
(114,281
)


50      43




---



##### 



Recent
    Accounting Pronouncements Adopted
  Fair Value Measurements
      Ratings
   44




---



##### 



ITEM 3.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK         45




---



##### 



Interest
    Rate Risk
  held-for-trading,
  At September 30, 2008Fair Value ofFixed Income


Hypothetical


HypotheticalPortfolio


$ Change


% Change200 basis point decline

$
3,156,963


$
693,493



28.2%100 basis point decline

$
2,788,174


$
324,704



13.2%Base scenario

$
2,463,470


$




%100 basis point increase

$
2,182,396


$
(281,074
)


(11.4)%200 basis point increase

$
1,943,455


$
(520,015
)


(21.1)%     Equity
    Price Risk
   46




---



##### 



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
     47




---



##### 



PART II
    OTHER INFORMATION  ITEM 1.
    LEGAL
    PROCEEDINGS          ITEM 6.
    EXHIBITS   48




---



##### 



SIGNATURES    CRUM & FORSTER HOLDINGS CORP.
    (Registrant)
  Date: October 30, 2008

By:  /s/  Douglas
    M. LibbyDouglas
    M. Libby
    President and Chief Executive Officer   Date: October 30, 2008

By:  /s/  Mary
    Jane RobertsonMary
    Jane Robertson
    Executive Vice President, Chief
    Financial Officer and Treasurer  49




---



##### 



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 50