##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
   Form 10-Q þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 or o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended:
    
    Commission File Number:March 31, 2005
    
    333-84068
   (Crum&Forster logo) 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)
 Crum & Forster Holdings Corp.
305 Madison Avenue, Morristown, New Jersey 07962
(973) 490-6600(Address, including zip code, and telephone number,
including area code, of registrants principal executive offices)   Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to the filing requirements for the past 90 days.
    Yes
þ          No o Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Exchange Act). Yes o     No þ Indicate the number of shares outstanding of each of the registrants classes of common stock, as
of the latest practicable date: Class
    
    Number of Shares Outstanding at April 28, 2005Common Stock, $.01 Par Value
    
    100




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##### 



CRUM & FORSTER HOLDINGS CORP. Form 10-Q Index PageNumberPART I  FINANCIAL INFORMATIONITEM 1.
    
    FINANCIAL STATEMENTSConsolidated Balance Sheets as of March 31, 2005 and December 31, 2004
    
    
    3Consolidated Statements of Income for the Three Months Ended March 31, 2005 and 2004
    
    
    4Consolidated Statements of Shareholders Equity for the Three Months Ended March 31, 2005 and 2004
    
    
    5Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2005 and 2004
    
    
    6Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2005 and 2004
    
    
    7Notes to Consolidated Financial Statements
    
    
    8ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    15ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    24ITEM 4.
    
    CONTROLS AND PROCEDURES
    
    
    26PART II  OTHER INFORMATIONITEM 1.
    
    LEGAL PROCEEDINGS
    
    
    26ITEM 6.
    
    EXHIBITS
    
    
    26SIGNATURES
    
    
    27INDEX TO EXHIBITS
    
    
    28
 2




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##### 



PART I  FINANCIAL INFORMATION 
 ITEM 1. Financial Statements CRUM & FORSTER HOLDINGS CORP. 
 CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share amounts) March 31,
    
    
    December 31,2005
    
    
    2004(Unaudited)ASSETSInvestments:Fixed income securities, at fair value (amortized cost of $2,047,182 and
$2,062,246 in 2005 and 2004, respectively)
    
    $
    1,996,881
    
    
    $
    2,039,846Equity
securities, at fair value (cost of $445,384 and $378,598 in 2005 and
2004, respectively)
    
    
    523,876
    
    
    
    455,153Other invested assets
    
    
    348,770
    
    
    
    293,406Total investments
    
    
    2,869,527
    
    
    
    2,788,405Cash and cash equivalents
    
    
    380,303
    
    
    
    429,205Assets pledged for short-sale obligations
    
    
    485,998
    
    
    
    277,899Premiums receivable
    
    
    253,060
    
    
    
    263,420Reinsurance recoverable
    
    
    1,623,288
    
    
    
    1,609,013Reinsurance recoverable from affiliates
    
    
    212,925
    
    
    
    195,799Prepaid reinsurance premiums
    
    
    34,269
    
    
    
    35,142Deferred income taxes
    
    
    183,411
    
    
    
    173,957Deferred policy acquisition costs
    
    
    75,213
    
    
    
    75,006Other assets
    
    
    158,611
    
    
    
    183,795Total assets
    
    $
    6,276,605
    
    
    $
    6,031,641LIABILITIESUnpaid losses and loss adjustment expenses
    
    $
    3,388,400
    
    
    $
    3,356,213Unearned premiums
    
    
    535,565
    
    
    
    528,592Accounts payable and other liabilities
    
    
    345,288
    
    
    
    255,772Funds held under reinsurance contracts
    
    
    276,900
    
    
    
    277,296Deferred income on retroactive insurance
    
    
    219,670
    
    
    
    223,360Short-sale obligations
    
    
    312,700
    
    
    
    217,378Long-term debt
    
    
    291,993
    
    
    
    291,841Total liabilities
    
    
    5,370,516
    
    
    
    5,150,452SHAREHOLDER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 income, net of tax
    
    
    41,220
    
    
    
    55,875Retained earnings
    
    
    123,876
    
    
    
    84,321Total shareholders equity
    
    
    906,089
    
    
    
    881,189Total liabilities and shareholders equity
    
    $
    6,276,605
    
    
    $
    6,031,641
 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) Three MonthsEnded March 31,2005
    
    
    2004(Unaudited)REVENUESPremiums earned
    
    $
    231,554
    
    
    $
    227,539Investment income
    
    
    34,657
    
    
    
    18,179Realized investment gains
    
    
    14,250
    
    
    
    37,733Total revenues
    
    
    280,461
    
    
    
    283,451EXPENSESLosses and loss adjustment expenses
    
    
    153,633
    
    
    
    162,137Policy acquisition costs
    
    
    30,414
    
    
    
    30,711Other underwriting expenses
    
    
    33,395
    
    
    
    32,510Interest expense
    
    
    8,224
    
    
    
    8,439Other expense, net
    
    
    1,308
    
    
    
    936Total expenses
    
    
    226,974
    
    
    
    234,733Income before income taxes and equity in earnings of investees
    
    
    53,487
    
    
    
    48,718Income tax expense
    
    
    18,365
    
    
    
    16,947Income before equity in earnings of investees
    
    
    35,122
    
    
    
    31,771Equity in earnings of investees, net of tax
    
    
    4,433
    
    
    
    3,383NET INCOME
    
    $
    39,555
    
    
    $
    35,154
 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) Three Months EndedMarch 31,2005
    
    
    2004(Unaudited)COMMON STOCKBalance, beginning and end of period
    
    $
    
    
    
    $
    ADDITIONAL PAID-IN CAPITALBalance, beginning and end of period
    
    
    740,993
    
    
    
    740,993ACCUMULATED OTHER COMPREHENSIVE INCOME, NET OF TAXBalance, beginning of period
    
    
    55,875
    
    
    
    43,496Unrealized investment losses, net of transfers to realized investment gains and losses
    
    
    (13,471
    )
    
    
    (18,785
    )Foreign currency translation
    
    
    (1,184
    )
    
    
    (1,057
    )Balance, end of period
    
    
    41,220
    
    
    
    23,654RETAINED EARNINGSBalance, beginning of period
    
    
    84,321
    
    
    
    121,626Net income
    
    
    39,555
    
    
    
    35,154Dividends to shareholder
    
    
    
    
    
    
    (42,500
    )Balance, end of period
    
    
    123,876
    
    
    
    114,280TOTAL SHAREHOLDERS EQUITY
    
    $
    906,089
    
    
    $
    878,927
 The accompanying notes are an integral part of the consolidated financial statements. 5




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##### 



CRUM & FORSTER HOLDINGS CORP. 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Dollars in thousands) Three Months EndedMarch 31,2005
    
    
    2004(Unaudited)NET INCOME
    
    $
    39,555
    
    
    $
    35,154Change in components of other comprehensive income for the period, before tax:Unrealized investment losses
    
    
    (20,726
    )
    
    
    (28,898
    )Foreign currency translation
    
    
    (1,821
    )
    
    
    (1,627
    )Other comprehensive loss for the period, before tax
    
    
    (22,547
    )
    
    
    (30,525
    )Deferred income tax benefit for the period:Deferred income tax benefit from unrealized investment losses
    
    
    7,255
    
    
    
    10,113Deferred income tax benefit from foreign currency translation
    
    
    637
    
    
    
    570Total deferred income tax benefit for the period
    
    
    7,892
    
    
    
    10,683Other comprehensive loss for the period, net of tax
    
    
    (14,655
    )
    
    
    (19,842
    )COMPREHENSIVE INCOME
    
    $
    24,900
    
    
    $
    15,312
 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) Three Months EndedMarch 31,2005
    
    
    2004(Unaudited)OPERATING
ACTIVITIESNet income
    
    $
    39,555
    
    
    $
    35,154Adjustments to reconcile net income to net cash from operating activities:Net accretion of discount on fixed income securities
    
    
    (18
    )
    
    
    (2,763
    )Realized investment gains
    
    
    (14,250
    )
    
    
    (37,733
    )Earnings of equity method investees
    
    
    (14,913
    )
    
    
    (5,394
    )Depreciation and amortization
    
    
    865
    
    
    
    1,366Deferred income tax (benefit) expense
    
    
    (1,562
    )
    
    
    376Other non-cash net income adjustments
    
    
    4,080
    
    
    
    4,648Changes in:Premiums receivable
    
    
    8,485
    
    
    
    9,011Reinsurance recoverable
    
    
    (37,692
    )
    
    
    9,072Prepaid reinsurance premiums
    
    
    873
    
    
    
    (4,219
    )Deferred policy acquisition costs
    
    
    (207
    )
    
    
    (1,256
    )Other assets
    
    
    19,073
    
    
    
    30,686Unpaid losses and loss adjustment expenses
    
    
    32,187
    
    
    
    (13,169
    )Unearned premiums
    
    
    6,973
    
    
    
    7,565Accounts payable and other liabilities
    
    
    36,729
    
    
    
    (10,565
    )Net cash from operating activities
    
    
    80,178
    
    
    
    22,779INVESTING ACTIVITIESPurchases of fixed income securities
    
    
    (93,427
    )
    
    
    (2,729,637
    )Proceeds from sales of fixed income securities
    
    
    42,703
    
    
    
    1,180,351Proceeds from maturities of fixed income securities
    
    
    
    
    
    
    100Purchases of equity securities
    
    
    (109,767
    )
    
    
    (117,778
    )Proceeds from sales of equity securities
    
    
    75,947
    
    
    
    12,653Purchases of other invested assets
    
    
    (39,279
    )
    
    
    (63,067
    )Proceeds from sales of other invested assets
    
    
    664
    
    
    
    3,304Proceeds from short-sale obligations
    
    
    100,013
    
    
    
    Cash pledged for short-sale obligations
    
    
    (105,826
    )
    
    
    Purchases of fixed assets
    
    
    (108
    )
    
    
    (1,123
    )Net cash from investing activities
    
    
    (129,080
    )
    
    
    (1,715,197
    )FINANCING ACTIVITIESDividends to shareholder
    
    
    
    
    
    
    (42,500
    )Deferred financing costs
    
    
    
    
    
    
    (559
    )Net cash from financing activities
    
    
    
    
    
    
    (43,059
    )Net change in cash and cash equivalents
    
    
    (48,902
    )
    
    
    (1,735,477
    )Cash and cash equivalents, beginning of period
    
    
    429,205
    
    
    
    2,081,878Cash and cash equivalents, end of period
    
    $
    380,303
    
    
    $
    346,401SUPPLEMENTAL CASH FLOW INFORMATIONCash paid to parent for income taxes
    
    $
    1,957
    
    
    $
    33,495
 The accompanying notes are an integral part of the consolidated financial statements. 7




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, dollars in thousands)  1.
    Organization and Basis of PresentationCrum & Forster Holdings Corp. (the Company or Crum & Forster) is a Delaware holding
company, which is 100% owned by Fairfax Inc., a Wyoming holding company. Fairfax Inc. is
wholly owned by FFHL Group Ltd., a Canadian holding company, which is owned by Fairfax
Financial Holdings Limited (Fairfax), a Canadian financial services holding company, which
is publicly traded on the Toronto Stock Exchange and on the New York Stock Exchange under the
symbol FFH. The Company, through its subsidiaries, provides a full range of commercial
property and casualty insurance distributed through an independent producer force located
across the United States.These consolidated financial statements have been prepared in conformity with accounting
principles generally accepted in the United States of America (GAAP) and include the
accounts of the Company and its wholly-owned subsidiaries, including Crum & Forster Holding
Inc., United States Fire Insurance Company (US Fire), The North River Insurance Company
(North River), Crum & Forster Indemnity Company and Crum and Forster Insurance Company.
Effective July 1, 2004, Crum & Forster Underwriters Co. of Ohio was merged into US Fire. US
Fire owns 100% of the stock of Crum & Forster Specialty Insurance Company. North River owns
100% of the stock of Seneca Insurance Company, Inc. and its subsidiaries. All material
intercompany accounts and transactions have been eliminated in
consolidation.The preparation of consolidated financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses and disclosure of contingent assets and liabilities. Such
estimates and assumptions may differ from actual results. Certain financial information that
is normally included in annual financial statements, including certain financial statement
footnotes, prepared in accordance with GAAP, is not required for interim reporting purposes
and has been condensed or omitted herein. These consolidated financial statements should be
read in conjunction with the Companys consolidated financial statements, and notes related
thereto, included in the Companys Annual Report on Form 10-K for the year ended
December 31, 2004 filed with the Securities and Exchange
Commission on March 7, 2005.The interim financial data as of March 31, 2005 and for the three months ended March 31, 2005
and 2004 is unaudited. However, in the opinion of management, the interim data includes all
adjustments, consisting of normal recurring accruals necessary for a fair statement of the
Companys results for the interim periods. The results of operations for the interim periods
are not necessarily indicative of the results to be expected for the full year. Certain
amounts in the Companys prior year consolidated financial statements have been reclassified
to conform to the 2005 presentation. 8




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##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, dollars in thousands)  2.
    Unpaid Losses and Loss Adjustment ExpensesChanges in the Companys liability for unpaid losses and loss adjustment expenses (LAE) are
summarized as follows: Three Months EndedMarch 31,2005
    
    
    2004Gross unpaid losses and LAE, beginning of period
    
    $
    3,356,213
    
    
    $
    3,178,166Less ceded unpaid losses and LAE
    
    
    1,360,996
    
    
    
    1,321,004Net unpaid losses and LAE, beginning of period
    
    
    1,995,217
    
    
    
    1,857,162Losses and LAE incurred related to:Current period
    
    
    158,902
    
    
    
    156,559Prior years
    
    
    (5,269
    )
    
    
    5,578Total losses and LAE incurred
    
    
    153,633
    
    
    
    162,137Losses and LAE paid related to:Current period
    
    
    8,980
    
    
    
    9,739Prior years
    
    
    147,855
    
    
    
    135,567Total losses and LAE paid
    
    
    156,835
    
    
    
    145,306Net unpaid losses and LAE, end of period
    
    
    1,992,015
    
    
    
    1,873,993Add ceded unpaid losses and LAE
    
    
    1,396,385
    
    
    
    1,291,004Gross unpaid losses and LAE, end of period
    
    $
    3,388,400
    
    
    $
    3,164,997
  A reconciliation of the ceded unpaid losses and LAE in the table above to the reinsurance
recoverable reflected on the consolidated balance sheet
follows: March
31,2005Ceded unpaid losses and LAE in the table above
    
    $
    1,396,385Reconciling items:Reinsurance recoverable on paid losses and LAE
    
    
    51,148Premiums paid for retroactive reinsurance
    
    
    190,520Deferred income on retroactive reinsurance
    
    
    219,670Loss sensitive cession1
    
    
    (21,510
    )Total reconciling items
    
    
    439,828Reinsurance recoverable on the consolidated balance sheet
    
    $
    1,836,213
   1Equals additional premium due on retrospectively rated insurance
policies that inure to the benefit of the reinsurer. 9




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, dollars in thousands)  3.
    Asbestos and Environmental Losses and Loss Adjustment ExpensesThe Company has exposure to asbestos and environmental claims arising from the sale of
general liability, commercial multi-peril and umbrella insurance policies, the majority of
which were written for accident years 1985 and prior. Estimation of ultimate liabilities for
these exposures is unusually difficult due to such issues as whether or not coverage exists,
definition of an occurrence, determination of ultimate damages and allocation of such damages
to financially responsible parties.Changes in the Companys liability for asbestos and environmental exposures are summarized as
follows: Three Months EndedMarch 31,2005
    
    
    2004AsbestosGross unpaid losses and allocated LAE (ALAE), beginning of period
    
    $
    522,685
    
    
    $
    495,195Less ceded unpaid losses and ALAE
    
    
    113,891
    
    
    
    128,787Net unpaid losses and ALAE, beginning of period
    
    
    408,794
    
    
    
    366,408Net losses and ALAE incurred
    
    
    
    
    
    
    517Net paid losses and ALAE
    
    
    15,766
    
    
    
    11,422Net unpaid losses and ALAE, end of period
    
    
    393,028
    
    
    
    355,503Add ceded unpaid losses and ALAE
    
    
    106,492
    
    
    
    113,750Gross unpaid losses and ALAE, end of period
    
    $
    499,520
    
    
    $
    469,253
 Three Months EndedMarch 31,2005
    
    
    2004EnvironmentalGross unpaid losses and ALAE, beginning of period
    
    $
    123,353
    
    
    $
    130,511Less ceded unpaid losses and ALAE
    
    
    38,190
    
    
    
    31,675Net unpaid losses and ALAE, beginning of period
    
    
    85,163
    
    
    
    98,836Net losses and ALAE incurred
    
    
    
    
    
    
    7Net paid losses and ALAE
    
    
    6,990
    
    
    
    2,668Net unpaid losses and ALAE, end of period
    
    
    78,173
    
    
    
    96,175Add ceded unpaid losses and ALAE
    
    
    36,457
    
    
    
    42,418Gross unpaid losses and ALAE, end of period
    
    $
    114,630
    
    
    $
    138,593
  The Company also maintains reserves for other latent exposures such as those associated with
silica, chemicals, lead, sick building syndrome, gas and vapors, repetitive stress and
mold of $20,869 and $22,024, net of reinsurance, as of March 31, 2005 and December 31, 2004,
respectively. 10




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##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, dollars in thousands)  4.
    ReinsuranceThe components of the Companys net premiums written and premiums earned are summarized as
follows: Three Months EndedMarch 31,2005
    
    
    2004Premiums written:Direct
    
    $
    286,019
    
    
    $
    282,611Assumed from other companies, pools, or associations
    
    
    2,424
    
    
    
    3,325Ceded to other companies, pools or associations
    
    
    (49,043
    )
    
    
    (55,051
    )Net premiums written
    
    $
    239,400
    
    
    $
    230,885Premiums earned:Direct
    
    $
    278,856
    
    
    $
    274,920Assumed from other companies, pools, or associations
    
    
    2,614
    
    
    
    3,451Ceded to other companies, pools or associations
    
    
    (49,916
    )
    
    
    (50,832
    )Premiums earned
    
    $
    231,554
    
    
    $
    227,539
  The components of the
Companys total reinsurance recoverable are summarized as
follows: March 31,
    
    
    December 31,2005
    
    
    2004Reinsurance recoverable on unpaid losses and LAE
    
    $
    1,785,065
    
    
    $
    1,753,366Reinsurance receivable on paid losses and LAE
    
    
    51,148
    
    
    
    51,446Total reinsurance recoverable
    
    $
    1,836,213
    
    
    $
    1,804,812
  Corporate Aggregate ReinsuranceThe Company purchases reinsurance to limit its exposure to loss from any one claim or
occurrence (per risk reinsurance). The Company also purchases reinsurance to limit its
exposure from aggregate loss experience for an accident year that exceeds an amount the
Company is willing to accept and from adverse development of prior years loss and LAE
reserves (corporate aggregate reinsurance). The Companys corporate aggregate reinsurance
contracts cover or covered, in varying amounts and on varying terms, accident years 2002 and
prior and provide either current accident year protection or adverse development protection
related to prior accident years. In general, contracts covering past insurable events, such
as adverse loss development coverage, are categorized as retroactive reinsurance, as opposed
to contracts covering future insurable events, which are referred to as prospective
reinsurance. Coverage under retroactive and prospective reinsurance contracts is generally
triggered when the loss ratio for the subject period exceeds a specified level, or when
reserves related to all periods prior to a certain date exceed a stated amount. The Company
will recover ceded losses and LAE from its reinsurers as it settles the related claims, which
may occur over many years. Retroactive and prospective reinsurance contracts may provide for
future payments to be made by Crum & Forster when it cedes losses under such policies and
generally provide that interest is charged to the Company, for the benefit of the reinsurers,
on any premiums withheld.Amounts ceded under prospective contracts are recognized, as to premiums, as a reduction of
premiums written and earned in the period in which premiums are ceded and, as to losses, as a
reduction of incurred losses as the losses are ceded to the reinsurer. Under retroactive
contracts, the excess of reinsurance recoverable from reinsurers pursuant to the contract
over premiums paid for coverage is deferred and amortized as a
reduction of incurred losses
over the expected period of recovery, generally many years, using the interest method. Under
both prospective and retroactive contracts, funds held interest, if applicable, is recognized
as a reduction of investment income in the period in which the interest is credited to the
funds held account. 11




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##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, dollars in thousands)  The effect of prospective and retroactive corporate aggregate reinsurance on components of
the Companys consolidated statements of income is summarized as
follows: Three Months EndedMarch 31,2005
    
    
    2004Investment income
    
    $
    (4,887
    )
    
    $
    (2,275
    )Losses and LAE
    
    
    (3,690
    )
    
    
    (1,741
    )Increase (decrease) in income before income taxes
    
    $
    (1,197
    )
    
    $
    (534
    )
  As of March 31, 2005, reinsurance recoverable includes $438,756 and $455,508 related to
prospective and retroactive corporate aggregate reinsurance contracts, respectively. Of the
$894,264 in reinsurance recoverable related to corporate aggregate reinsurance, $505,585 has
been recognized to date as a reduction of incurred losses and LAE on the Companys
consolidated statements of income.Prospective Corporate Aggregate ReinsuranceAn analysis of activity in prospective corporate aggregate reinsurance contracts follows: Three Months EndedMarch 31,2005
    
    
    2004Ceded losses and LAE
    
    $
    
    
    
    $
    Less: funds held interest
    
    
    1,265
    
    
    
    1,639Increase (decrease) in income before income taxes
    
    $
    (1,265
    )
    
    $
    (1,639
    )
  The Company entered into an aggregate stop loss agreement with an unaffiliated reinsurer
covering accident year 2000, which provided coverage of $118,493 and has been fully utilized
by the Company. There were no premiums or losses ceded pursuant to the contract during the
three months ended March 31, 2005. As of March 31, 2005 and December 31, 2004, the Company
had reinsurance recoverable balances of $71,256 and $76,547, respectively, related to this
agreement.Retroactive Corporate Aggregate ReinsuranceAn analysis of activity in
retroactive corporate aggregate reinsurance contracts follows: Three Months EndedMarch 31,2005
    
    
    2004Increase in reinsurance recoverable due from insurers
    
    $
    
    
    
    $
    Less: related premiums paid
    
    
    
    
    
    
    1,677Income deferred during the period
    
    
    
    
    
    
    (1,677
    )Amortization of deferred income
    
    
    (3,690
    )
    
    
    (1,741
    )Change in deferred income
    
    
    (3,690
    )
    
    
    (3,418
    )Deferred income on retroactive reinsurancebeginning of period
    
    
    223,360
    
    
    
    180,524Deferred income on retroactive reinsuranceend of period
    
    $
    219,670
    
    
    $
    177,106Funds held interest charged during the period
    
    $
    3,622
    
    
    $
    636
  For additional information on the Companys retroactive corporate aggregate reinsurance
contracts, refer to the Companys Annual Report on Form 10-K for the year ended
December 31, 2004 filed with the Securities and Exchange
Commission on March 7, 2005. 12




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##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, dollars in thousands)  5.
    Investments and Short-Sale ObligationsIn March 2005, Crum & Forster purchased approximately $21,000 of credit default swaps on
securities issued by various U.S. companies, primarily in the banking, mortgage and insurance
industries. These credit default swaps serve as hedges against declines in the fair value of
various financial assets owned by the Company arising from potential financial reverses
associated with any or all of these issuers or the industries in which they operate. As of
March 31, 2005 and December 31, 2004, the fair value of the Companys credit default swaps
was $25,756 and $4,224, respectively. For the three months ended March 31, 2005 and 2004, the Company recorded net realized investment gains of $468 and $318, respectively,
as a result of changes in the fair value of the credit default
swaps.In January 2005, Crum & Forster invested an additional $10,000 in Pacific Century Fund I
(Pacific), a fund wholly owned by Fairfax affiliates, bringing the total investment in
Pacific to $20,000. The Company owned approximately 40% of Pacific as of March 31, 2005 and
its carrying value was $20,955. The investment in Pacific is included in other invested
assets on the consolidated balance sheets.As an economic hedge against a decline in the U.S. equity markets, the Company executed short
sales in July 2004 and January 2005 totaling approximately $300,000 of Standard & Poors
Depositary Receipts (SPDRs). Simultaneously, the Company purchased two-year S&P Index call
options (Options) limiting the potential loss on the future purchase of the SPDRs to
$60,000. The total cost of the Options was $8,217. Both the obligations to purchase the
SPDRs and the Options are carried at fair value in the consolidated financial statements.
The fair value of the obligations to purchase the SPDRs is included in short-sale obligations
and the fair value of the Options is included in other invested assets on the consolidated
balance sheets. For the three months ended March 31, 2005, the change in the fair value of
the SPDRs obligation amounted to a gain of $4,691 and the net change in the fair value of the
options amounted to a loss of $3,680. The net change in fair value of the SPDRs obligation
and the Options is included in realized investment gains on the consolidated statement of
income. The fair values of the SPDRs obligation and the Options at March 31, 2005 amounted to
a liability of $312,700 and an asset of $6,931, respectively. The Company also incurs
additional expense in an amount equal to the dividend earnings on the SPDRs sold. Dividend
earnings on the SPDRs amounted to $1,238 for the three months ended
March 31, 2005 and are included as investment expense on the consolidated statement of income.In connection with the SPDRs transactions described above, the Company has pledged cash and
U. S. Treasury securities as collateral for the obligation to purchase the SPDRs. As of
March 31, 2005, the fair value of the assets pledged for the purchase of the SPDRs totaled
$485,998. These assets are recorded in
assets pledged for short-sale obligations on the consolidated balance sheets.In December 2004, the Company entered into a four-month swap transaction whereby the Company
received the total equity return on a publicly traded security in exchange for payment of a
stated return tied to LIBOR. In March 2005, the Company terminated this swap transaction.
For the three months ended March 31, 2005, the Company recorded a net loss of $2,614, which
was included in realized investment gains on the consolidated statement of income.6.
    Commitments and ContingenciesIn the ordinary course of their business, Crum & Forsters subsidiaries receive claims
asserting alleged injuries and damages from asbestos and other hazardous waste and toxic
substances and are subject to related coverage litigation. The conditions surrounding the
final resolution of these claims and the related litigation continue to change. Currently,
it is not possible to predict judicial and legislative changes and their impact on the future
development of asbestos and environmental claims and litigation. This trend will be affected
by future court decisions and interpretations, as well as changes in applicable legislation
and the possible implementation of a proposed federal compensation scheme for
asbestos-related injuries. As a result of these uncertainties, additional liabilities may
arise for amounts in excess of current reserves for asbestos, environmental and other latent
exposures. These additional amounts, or a range of these additional amounts, cannot
currently be reasonably estimated. As a result of these claims, management continually
reviews required reserves and related reinsurance recoverable. In each of these areas of exposure,
the Company litigates individual cases when appropriate and endeavors to settle claims on
favorable terms. 13




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, dollars in thousands)  In addition, the Companys subsidiaries are involved in various lawsuits and arbitration
proceedings arising in the ordinary course of business. While the outcome of such matters cannot be predicted with certainty, in
the opinion of management, no such matter is likely to have a material adverse effect on the
Companys consolidated financial position or liquidity. However, it should be noted that the
frequency of large damage awards, including punitive damage awards that bear little or no
relation to actual economic damages incurred by plaintiffs in some jurisdictions, continues
to create the potential for an unpredictable judgment in any given matter.7.
    Segment ReportingThe Company operates in the commercial property and casualty insurance business. Premiums
earned for the Companys lines of business are summarized as follows: Three Months EndedMarch 31,2005
    
    
    2004Workers compensation
    
    $
    71,336
    
    
    $
    67,904General liability
    
    
    49,307
    
    
    
    50,323Property
    
    
    47,992
    
    
    
    51,945Commercial automobile
    
    
    45,091
    
    
    
    41,999Commercial multi-peril
    
    
    11,524
    
    
    
    10,162Surety
    
    
    6,304
    
    
    
    5,206Total premiums earned
    
    $
    231,554
    
    
    $
    227,539
  The losses and LAE and losses and LAE ratios of the Companys lines of business are
summarized as follows: Three Months EndedMarch 31,2005
    
    
    2004Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioWorkers compensation
    
    $
    65,128
    
    
    
    91.3
    %
    
    $
    53,949
    
    
    
    79.4
    %General liability
    
    
    32,364
    
    
    
    65.6
    %
    
    
    36,938
    
    
    
    73.4
    %Property
    
    
    16,242
    
    
    
    33.8
    %
    
    
    34,794
    
    
    
    67.0
    %Commercial automobile
    
    
    26,441
    
    
    
    58.6
    %
    
    
    30,551
    
    
    
    72.7
    %Commercial multi-peril
    
    
    6,510
    
    
    
    56.5
    %
    
    
    4,249
    
    
    
    41.8
    %Surety
    
    
    6,948
    
    
    
    110.2
    %
    
    
    1,656
    
    
    
    31.8
    %Total losses and LAE
    
    $
    153,633
    
    
    
    66.3
    %
    
    $
    162,137
    
    
    
    71.2
    %
  The Company does not allocate investment results or certain corporate expenses for purposes
of evaluating financial performance of each line of business.8.
    Subsequent EventIn April 2005 the Company declared and paid a cash shareholder dividend of $22,500 to Fairfax. 14




---



##### 



Item 2.   Managements Discussion and Analysis of Financial Condition and Results of Operations The following
discussion relates to the critical accounting policies and estimates, the consolidated results of operations,
financial condition, liquidity and capital resources of the Company for
the interim periods indicated. Within this discussion, the terms Company or Crum &
Forster refer to Crum & Forster Holdings Corp. and its direct and indirect subsidiaries, including
United States Fire Insurance Company (US Fire), The North River Insurance Company (North
River), Crum & Forster Indemnity Company (CF Indemnity) and Crum and Forster Insurance Company
(CF Insurance). Effective July 1, 2004, Crum & Forster Underwriters Co. of Ohio was merged into
US Fire. US Fire owns 100% of the stock of Crum & Forster Specialty Insurance Company. North
River owns 100% of the stock of Seneca Insurance Company, Inc. and
its subsidiaries. The term
Fairfax refers collectively to Fairfax Inc., Crum & Forsters parent company, and Fairfax
Financial Holdings Limited, which holds a 100% indirect interest in Fairfax Inc. Certain financial information that is normally included in annual financial statements, including
certain financial statement footnotes, prepared in accordance with GAAP, is not required for
interim reporting purposes and has been condensed or omitted herein. This discussion, and the
related consolidated financial statements, should be read in conjunction with the Companys
consolidated financial statements, and notes related thereto, included in the Companys Annual
Report on Form 10-K for the year ended December 31, 2004 filed with the Securities and
Exchange Commission on March 7, 2005. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the full year. All dollar amounts are in thousands, unless otherwise indicated. Statements Regarding Forward-Looking Information This report contains forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These are statements that relate to future periods and include
statements regarding the Companys anticipated performance. Generally, the words anticipates,
believes, expects, intends, estimates, projects, plans, target, potential,
likely, may, could, should and similar expressions identify forward-looking statements.
These forward-looking statements involve known and unknown risks, uncertainties and other important
factors that could cause the Companys actual results, performance or achievements or industry
results to differ materially from any future results, performance or achievements expressed or
implied by these forward-looking statements. These risks, uncertainties and other important
factors include, but are not limited to, the following:  
    Lowering or loss of one of the Companys financial strength ratings;
    Insufficient loss reserves, including reserves for asbestos, environmental and other latent claims;
    Occurrence of natural or man-made catastrophic events;
    Competitive conditions in the insurance market;
    Changes in the business or regulatory environment in which the Company operates
either as a result of recent insurance industry investigations by government
authorities and other parties or otherwise;
    Inability to realize the Companys investment objectives;
    Loss of key producers;
    Exposure to emerging claims and coverage issues;
    Inability of certain of the Companys insurance subsidiaries to pay dividends;
    Inability to obtain reinsurance coverage on reasonable terms and prices;
    Exposure to credit risk in the event reinsurers or insureds that owe the Company
premiums or reimbursement of deductibles paid by the Company on their behalf fail to
pay;
    Adverse developments in the prospects or results of operations of Fairfax or its affiliates;
    Loss of key employees;
    Exposure to credit risks on novated policies; and
    Limited ability to borrow. Although the Company believes that its forward-looking statements are based upon reasonable
assumptions, management can give no assurance that the Companys goals will be achieved. Given
these uncertainties, prospective investors are cautioned not to place undue reliance on these
forward-looking statements. Any forward-looking statements made in this report are made by the
Company as of the date of this report. Except as otherwise required by federal securities laws,
the Company undertakes no obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise. Additional information
regarding these factors, and others that could cause actual results to differ materially from
expectations, is included in the Companys Annual Report on Form 10-K filed with the Securities and
Exchange Commission. The information appearing under Risk
Factors in such Annual Report is incorporated by reference into, and made a part of, Part II of this Form
10-Q. 15




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##### 



Critical Accounting Policies and Estimates The Companys consolidated financial statements and related notes thereto are prepared in
accordance with generally accepted accounting principles in the United States of America (GAAP).
GAAP requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of material contingent assets and liabilities as of the
balance sheet date and the revenues and expenses reported during the relevant period. In general,
managements estimates are based on historical experience, evaluation of current trends,
information from third party professionals and various other assumptions that are believed to be
reasonable under the known facts and circumstances. The accounting policies and estimates discussed below are those that require management to make
assumptions about highly uncertain matters. If management were to make different assumptions about
those matters, or if actual results were to differ significantly from managements estimates, the
Companys reported consolidated results of operations and financial condition could be materially
affected. The Companys significant accounting policies are described in detail in Note 2 to the Companys
consolidated financial statements included in its Annual Report on Form 10-K for the year
ended December 31, 2004 filed with the Securities and Exchange Commission on March 7, 2005. Unpaid Losses and Loss Adjustment Expenses The most significant accounting estimates relate to the Companys reserves for unpaid losses and
LAE. Unpaid losses and LAE include reserves for unpaid reported losses and LAE and for losses
incurred but not reported (IBNR). The reserves for unpaid reported losses generally represent
the estimated ultimate cost of events or conditions that have been reported to the Company. IBNR
reserves include estimates of losses incurred but not reported to the Company, including estimates
of expenses to settle claims, such as legal and other fees and the general expenses of
administering the claims adjustment process. Losses and LAE are charged to income as they are incurred. This includes loss and LAE payments and
any changes in reported case and IBNR reserves. During the loss settlement period, reserves
established in prior years are adjusted as loss experience develops and new information becomes
available. Adjustments to previously estimated reserves, both positive and negative, are reflected
in the Companys financial results in the periods in which they are made, and are referred to as
prior period development. Due to the high level of uncertainty, revisions to these estimated
reserves could have a material impact on the Companys results of operations in the period
recognized and ultimate actual payments for claims and LAE could be significantly different from
estimates. The Company has written general liability, commercial multi-peril and umbrella policies under which
its policyholders continue to present asbestos, environmental and other latent claims. The
majority of these claims, particularly with respect to asbestos and environmental claims, are
presented under policies written prior to 1985. There are significant uncertainties in estimating
the amount of reserves required for asbestos, environmental and other latent exposure claims.
Reserves for these exposures cannot be estimated solely with the traditional loss reserving
techniques, which rely on historical accident year development factors. Among the uncertainties
relating to asbestos, environmental and other latent reserves are a lack of historical data, long
reporting delays and complex unresolved legal issues regarding policy coverage and the extent and
timing of any such contractual liability. Courts have reached different, and frequently
inconsistent, conclusions as to when losses occurred, what claims are covered, under what
circumstances the insurer has an obligation to defend, how policy limits are determined and how
policy exclusions are applied and interpreted. In 2004, based on the Companys internal actuarial review and an independent actuarial firms
ground-up study of the Companys asbestos reserves, the Company strengthened its asbestos,
environmental and other latent reserves by $100,542. Other Than Temporary Declines In Value of Investments Declines in the market value of invested assets below carrying value are evaluated for other than
temporary impairment losses on a quarterly basis. Management considers an impairment as other
than temporary if evidence indicating that an investments carrying amount is recoverable within a
reasonable period of time is outweighed by evidence to the contrary. Recognition of impairment
losses for declines in the value of fixed income and equity
securities is based upon all relevant facts and circumstances for each investment.
Factors considered by management include, but are not limited to, current and expected future
market and economic conditions, the impact of issuer-specific events, the nature of the investment,
the severity and duration of the impairment and the
volatility of the securitys market price. For fixed income
securities management also considers the Companys ability and intent to hold the investment for a period of
time sufficient to allow a market recovery, or to maturity, in the process of evaluating whether a
security with an unrealized loss has suffered an other than temporary decline. 16




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##### 



As of March 31, 2005, the Company had gross unrealized losses on available-for-sale fixed income
and equity securities of $85,598. For the three months ended
March 31, 2005, the Company recorded $3,889 in other than
temporary impairments. No other than temporary impairments were recorded for the three months ended March 31, 2004. See Liquidity and Capital Resources  Insurance
Subsidiaries below for further discussion of investments in an unrealized loss position. Reinsurance Recoverable Amounts recoverable from reinsurers are initially estimated in conjunction with the establishment
of reserves for unpaid losses and LAE. These amounts may be adjusted as actual case reserves are
recorded and reinsured claims are settled. The ceding of risk to reinsurers does not relieve the
ceding company of its primary obligation to policyholders as the direct insurer. Accordingly,
the Company is exposed to the risk that any reinsurer may be unable, or unwilling, to meet the
obligations assumed under its reinsurance agreements. Management attempts to mitigate this risk by
obtaining collateral and by entering into reinsurance arrangements only with reinsurers that have
credit ratings and statutory surplus above certain levels. An estimated allowance for uncollectible reinsurance recoverable is recorded on the basis of
periodic evaluation of balances due from reinsurers, judgments regarding reinsurer solvency, known
disputes, reporting characteristics of the underlying reinsured business, historical experience,
current economic conditions and the state of insurer/reinsurer relations in general, and with Crum
& Forster companies specifically. As of March 31, 2005 and December 31, 2004, reinsurance recoverable was $1,836,213 and $1,804,812,
net of reserves for uncollectible reinsurance of $36,756 and $40,930, respectively. The provision
for uncollectible reinsurance for the three months ended March 31, 2005 was $1,000. While
management believes the allowance for uncollectible reinsurance is adequate based on information
currently available, failure of reinsurers to meet their obligations could have a material adverse
impact on the Companys financial position and results of operations. Deferred Income Tax Assets The Company recognizes deferred tax assets and liabilities based on differences between the
financial statement carrying amounts and the tax bases of assets and liabilities. Management
regularly reviews the Companys deferred tax assets for recoverability based on history of
earnings, expectations for future earnings and expected timing of reversals of temporary
differences. Although realization is not assured, management believes the recorded deferred tax assets are fully
recoverable based on estimates of the future profitability of Crum & Forsters taxable entities and
current forecasts for the periods through which losses may be carried forward. As of March 31, 2005, there are no valuation allowances against the Companys gross deferred tax
assets of $245,167. Should the assumptions of future profitability change or the taxable
income of these entities fall below expectations, a valuation allowance, which could be
significant, may have to be established if management believes any portion of the deferred tax
asset will not be realized. A valuation allowance may also be required if there is a material
change in the tax laws such that the actual effective tax rate or the time periods within which the
underlying temporary differences become taxable or deductible change. Summary of Operations The Company is a national commercial property and casualty insurance company with a focused
underwriting strategy, targeting specialty classes of business and overlooked market opportunities.
Operating through its home office and regional branch network, the Company writes a broad range of
commercial coverage, including workers compensation, general liability, property, commercial
automobile, commercial multi-peril and surety. The Company generally conducts business on a
brokerage basis through more than 1,000 producers located throughout the United States. The
Companys two largest producers accounted for approximately 12% and 6% of gross premiums written
for the three months ended March 31, 2005. The Companys objective is to expand opportunistically into classes of business or market segments
that are consistent with its underwriting expertise and have the potential to generate an
underwriting profit. Management believes the Companys ability
to identify and react to changing
market conditions provides it with a competitive advantage. Based on the experience and
underwriting expertise of management, the Company seeks to write new classes of business and expand existing classes of
business based on market conditions and expected profitability. The Company offers insurance
products designed to meet specific insurance needs of targeted insured groups and underwrites
specific types of coverage for markets that are generally underserved by the industry. 17




---



##### 



The profitability of property and casualty insurance companies is primarily determined by their
underwriting results and investment performance. Underwriting results are the net result of a
companys premiums earned and amounts paid, or expected to be paid, to settle insured claims and
policy acquisition costs and other underwriting expenses. The insurance business is unique in that
premiums charged for insurance coverage are set without certainty of the ultimate claim costs to be
incurred on a given policy. This requires that liabilities be estimated and recorded in
recognition of future loss and settlement obligations. Due to the inherent uncertainty in
estimating these liabilities, there can be no assurance that actual liabilities will not exceed
recorded amounts or premiums received. The ultimate adequacy of
premium rates is affected, at the time the risk is priced, by industry
capacity and other competitive conditions that may exert downward
pressure on rates and, after the risk is priced, by the severity and frequency of claims, which are influenced by many factors, including natural
and man-made disasters, regulatory measures and court decisions that define and expand the extent
of coverage. Premiums collected are invested until funds are required to pay settled claims. Insurance company
investment portfolios generally must provide a balance among total return, capital preservation and
liquidity in order to generate sufficient funds for payment of claims as they are settled. The
Company follows a long-term, value-oriented investment philosophy, with the goal of optimizing
investment returns viewed on a total return basis, without reaching for yield, while maintaining
sensitivity to liquidity requirements. The Company attempts to protect its capital from loss.
Management believes that investing in fixed income and equity securities selling at prices below
intrinsic value helps to protect the Companys capital. Management measures the results of operations by monitoring certain indicators of growth and
profitability. Growth is generally measured in terms of gross premiums written. Management
further monitors growth in its gross premiums written in terms of its rate of retention of existing
insureds, increases or decreases in the pricing of renewed policies and the growth in new business
premiums. Management focuses on underwriting results, which are derived from certain amounts on the
consolidated statements of income and are considered a non-GAAP financial measure, to monitor
performance of the Companys underwriting operations. Underwriting results are measured both in
dollars and by the combined ratio, a standard industry measure. Underwriting profit or loss equals
premiums earned less losses and LAE, policy acquisition expenses and other underwriting expenses,
and excludes investment results, interest expense and other income or expense. The latter are
excluded in order to analyze the direct relationship between the premiums earned and the related
claim costs, including the costs incurred to settle such claims, policy acquisition expenses and
other underwriting expenses. Net realized investment gains and losses relating to the Companys
investment portfolio are excluded by management when analyzing insurance operations, as they are
largely discretionary and are generally driven by economic factors that are not necessarily
consistent with key drivers of underwriting performance. The combined ratio expresses underwriting results as a percentage of premiums earned and generally
comprises two components: the loss and LAE ratio, which is the percentage of losses and LAE to premiums
earned, and the underwriting expense ratio, which is the percentage of the sum of policy acquisition costs and
other underwriting expenses to premiums earned. A combined ratio less than 100% indicates an
underwriting profit; a combined ratio greater than 100% indicates an underwriting loss. The property and casualty insurance business is cyclical and is influenced by many factors,
including price competition, economic conditions, natural and man-made disasters (for example,
hurricanes, earthquakes and terrorism), interest rates, state regulations, court decisions and
changes in the law. Commencing in mid-2000 and through mid-2003, insurers generally achieved
significant rate increases and improved terms and conditions. In mid-2003, however, market
capacity expanded, particularly for property risks. In the fourth quarter of 2003 and through
2004, property risks generally were written at or below expiring prices, and price increases in
casualty lines slowed considerably. Market competition intensified throughout 2004, particularly
in the third and fourth quarters, and this trend has continued through the first quarter of 2005.
Renewal pricing in the Companys casualty lines increased
slightly overall in 2004, but declined
in the third and fourth quarters of 2004 and continued to decline through the first quarter of 2005. The Companys property lines experienced single-digit declines
in renewal pricing in both 2004 and the first quarter of 2005. New business for the first quarter
of 2005 declined by approximately 21% in the casualty lines and 10% in the property lines as
compared to new business written in the first quarter of 2004. 18




---



##### 



Results of Operations The components of the Companys net income, and certain ratios based thereon, are summarized as
follows: Three Months EndedMarch 31,2005
    
    
    2004Gross premiums written
    
    $
    288,443
    
    
    $
    285,936Net premiums written
    
    $
    239,400
    
    
    $
    230,885Premiums earned
    
    $
    231,554
    
    
    $
    227,539Losses and LAE
    
    
    153,633
    
    
    
    162,137Underwriting expenses
    
    
    63,809
    
    
    
    63,221Underwriting results
    
    
    14,112
    
    
    
    2,181Investment income and realized investment gains
    
    
    48,907
    
    
    
    55,912Interest and other expense
    
    
    9,532
    
    
    
    9,375Income before income taxes and equity in earnings of investees
    
    
    53,487
    
    
    
    48,718Income tax expense
    
    
    18,365
    
    
    
    16,947Income before equity in earnings of investees
    
    
    35,122
    
    
    
    31,771Equity in earnings of investees
    
    
    4,433
    
    
    
    3,383Net income
    
    $
    39,555
    
    
    $
    35,154Loss and LAE ratio
    
    
    66.3
    %
    
    
    71.2
    %Underwriting expense ratio
    
    
    27.6
    
    
    
    27.8Combined ratio
    
    
    93.9
    %
    
    
    99.0
    %
 Net income for the
three months ended March 31, 2005 was $39,555 as compared to $35,154 for the
three months ended March 31, 2004. The increase in net income was primarily due to improved
underwriting results arising from higher premiums earned and lower prior year loss development.
The combined ratio improved to 93.9% in 2005 from 99.0% in 2004 reflecting principally the
aforementioned reduction in prior year loss development. Underwriting Results Gross Premiums Written Gross premiums written by line of business are summarized as follows: Three Months Ended March 31,Increase/
    
    
    Percent2005
    
    
    2004
    
    
    (Decrease)
    
    
    ChangeWorkers compensation
    
    $
    75,031
    
    
    $
    75,572
    
    
    $
    (541
    )
    
    
    (0.7
    )%General liability
    
    
    69,996
    
    
    
    70,216
    
    
    
    (220
    )
    
    
    (0.3
    )%Property
    
    
    71,428
    
    
    
    63,131
    
    
    
    8,297
    
    
    
    13.1
    %Commercial automobile
    
    
    52,199
    
    
    
    56,912
    
    
    
    (4,713
    )
    
    
    (8.3
    )%Commercial multi-peril
    
    
    11,338
    
    
    
    12,346
    
    
    
    (1,008
    )
    
    
    (8.2
    )%Surety
    
    
    8,451
    
    
    
    7,759
    
    
    
    692
    
    
    
    8.9
    %Total gross premiums written
    
    $
    288,443
    
    
    $
    285,936
    
    
    $
    2,507
    
    
    
    0.9
    %
 19




---



##### 



For the three months ended March 31, 2005, gross premiums written increased by approximately 1%
over the three months ended March 31, 2004, primarily due to the impact of an increase in the
renewal retention rate of approximately five percentage points, partially offset by modest price
decreases on renewal policies and a reduction in new business of approximately 18%. As the market
continues to soften and competitors are intensely focused on renewing existing business, new
business growth has become very challenging. Casualty Gross Premiums Written For the three months ended March 31, 2005, gross premiums written in casualty lines, which include
the workers compensation, general liability and commercial automobile lines of business, decreased
by $5,474, or 2.7%, as compared to the three months ended March 31, 2004. This decrease was
primarily due to reductions in new business and price decreases on renewal policies, partially
offset by an increase in the renewal retention rate. Property Gross Premiums Written For the three months ended March 31, 2005, gross premiums written in property lines, which include
the property, commercial multi-peril and surety lines of business, increased by $7,981, or 9.6%,
as compared to the three months ended March 31, 2004. This increase was primarily due to an
increase in the renewal retention rate and a higher proportion of
primary property policies, partially
offset by a reduction in new business and price decreases on renewal policies. Net Premiums Written For the three months ended March 31, 2005, net premiums written increased by $8,515, or 3.7%, as
compared to the three months ended March 31, 2004. This increase was in line with the growth in
gross premiums written after giving effect to non-renewal of the Companys terrorism reinsurance
agreement with an affiliated company, effective January 1, 2005. Premiums Earned Premiums earned reflect the amount of net premiums written applicable to the portion of the policy
term that expires in a given period. The Company generally earns premiums on a pro-rata basis over
the period in which the coverage is provided. For the three months ended March 31, 2005, premiums
earned increased by $4,015, or 1.8%, as compared to the three months ended March 31, 2004. The
increase in premiums earned is generally in line with the increase in net premiums written. Losses and Loss Adjustment Expenses For the three months ended March 31, 2005, the Companys calendar year loss and LAE ratio decreased
to 66.3% from 71.2% for the three months ended March 31, 2004. This decrease primarily reflects
$5,269 of favorable prior year loss development in the first quarter of 2005 versus $5,578
of unfavorable prior year loss development in the first quarter of 2004. Included in prior year
loss development was $3,690 and $1,741 in the first quarters of 2005 and 2004, respectively, of
amortization of deferred income on retroactive reinsurance. The accident year loss and LAE ratio was 68.6% for the first quarter of 2005 compared to 68.8% for
the first quarter of 2004. The full year accident year 2004 loss ratio of 75.7% was negatively
affected by four hurricanes in Florida. Underwriting Expenses Underwriting expenses are comprised of policy acquisition costs and other underwriting expenses.
Policy acquisition costs are comprised principally of commissions paid to producers and premium
taxes. Other underwriting expenses consist of all other operating expenses associated with the
Companys underwriting activities, including salaries and benefits, information technology and
rent. The Companys policy acquisition expense ratio decreased to 13.2% for the three months ended March
31, 2005 from 13.5% for the three months ended March 31, 2004. 20




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##### 



The Companys other underwriting expense ratio remained stable at 14.4% for the three months ended
March 31, 2005 and 14.3% for the three months ended March 31, 2004. Investment Results Information on the Companys investment results is summarized as follows: Three Months EndedMarch 31,2005
    
    
    2004Average investments, including cash and cash equivalents, at book value
    
    $
    3,155,193
    
    
    $
    3,095,385Investment income
    
    $
    34,657
    
    
    $
    18,179Realized investment gains
    
    
    14,250
    
    
    
    37,733Pre-tax equity in earnings of investees
    
    
    6,820
    
    
    
    5,205Change in unrealized investment losses and foreign currency translation
    
    
    (22,547
    )
    
    
    (30,525
    )Total return on investments
    
    $
    33,180
    
    
    $
    30,592Annualized total return on investments
    
    
    4.2
    %
    
    
    4.0
    %
 The Company manages
its investment portfolio with an emphasis on total return. Total
annualized rate of
return was 4.2% and 4.0% for the three months ended March 31, 2005 and 2004, respectively. For the
three months ended March 31, 2005, the increase in investment income of $16,478, or 90.6%, was due
to the combined effects of the reinvestment of cash balances into longer-duration fixed income
securities in mid-first quarter of 2004 and approximately $9,117 in earnings from HWIC Asia Fund,
an affiliated equity method investee, partially offset by higher investment expenses, including
interest charges related to higher levels of funds held under reinsurance contracts in 2005 and
interest on the SPDRs obligations in 2005. Realized investment gains were $14,250 in the three months ended March 31, 2005 as compared to
$37,733 in the three months ended March 31, 2004. The decrease in realized investment gains was
primarily due to more favorable economic conditions existing in the first quarter of 2004,
primarily in the U.S. bond markets, resulting in opportunities to
realize significant gains. In addition, realized investment gains in
the first quarter of 2005 include a $3,889 charge for an other than temporary impairment. Pre-tax equity in earnings of investees was $6,820 and $5,205 for the three months ended March 31,
2005 and 2004, respectively. The increase in pre-tax equity in earnings of investees of $1,615 was
primarily attributable to higher earnings from Northbridge Financial Corporation (Northbridge).
Northbridge contributed $6,102 and $5,051 to the Companys pre-tax equity in earnings of investees
in the three months ended March 31, 2005 and 2004, respectively. Interest and Other Expense Interest and other expense remained level at $9,532 and $9,375 for the three months ended March
31, 2005 and 2004, respectively. Liquidity and Capital Resources Holding Company As a holding company with no direct operations, Crum & Forster Holdings Corp.s assets consist
primarily of its investments in the capital stock of its insurance subsidiaries, $16,253 of
restricted cash and investments held in an interest escrow account primarily for the next interest
payment on the Companys senior notes and deferred tax assets associated with holding company net
operating losses. The Company requires cash to meet its annual debt service obligations, to pay
corporate expenses and, ultimately, to repay the $300,000 aggregate principal amount of senior
notes due 2013. Crum & Forsters ability to satisfy its
corporate obligations is primarily dependent on the dividend paying capacity of its subsidiaries. State insurance laws restrict the amount of
shareholder dividends that insurance companies may pay without prior approval of regulatory
authorities. 21




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##### 



The ability of the Companys insurance subsidiaries to pay dividends depends, among other things,
on such subsidiaries having positive statutory earned surplus. The Companys principal insurance
subsidiaries are US Fire and North River. As of March 31, 2005,
US Fire reported statutory earned
surplus of $136,703 and North River reported statutory earned surplus of $11,082. On March 29,
2005, US Fire paid the Company a cash shareholder dividend of $88,500. On April 14, 2005, North
River paid the Company a cash shareholder dividend of $4,900. On April 20, 2005, the Company
paid a cash shareholder dividend of $22,500 to Fairfax. Neither US Fire nor North River may
pay additional shareholder dividends in 2005 without prior regulatory approval. Pursuant to a non-interest bearing standby credit agreement between Fairfax and the Company, under
certain circumstances the Company has the ability to borrow up to $40,000 from Fairfax to meet
certain corporate obligations. Borrowings under this agreement, if any, bear no interest and are
due in June 2018. Through March 31, 2005, there have been no borrowings under this agreement. Under the terms of the Companys senior notes, the Company has significant restrictions on the
amount of new debt that it may incur. In addition, the agreements governing the bank credit
facilities of Fairfax contain restrictive covenants prohibiting Fairfax, with certain exceptions,
from allowing Crum & Forster to borrow money, encumber its property or assets, acquire or attempt
to acquire direct or indirect control of another person or asset where the acquisition is being
contested or resisted, effect a reorganization, consolidation, merger, amalgamation or other
business combination with any person other than a wholly-owned subsidiary of either Crum & Forster
or Fairfax, dispose of property or assets other than in a bona fide disposition for fair value to
an arms length third party or to Fairfax or one of its wholly-owned subsidiaries or enter into any
agreements that limit the amount of dividends or management fees payable by the Company to Fairfax.
Although Crum & Forster is not a party to the Fairfax credit facilities, it is expected, and
should be assumed, that Fairfax will not permit Crum & Forster to borrow additional funds unless it
is permitted to do so pursuant to the Fairfax credit facility. This affects the Companys ability
to incur debt pursuant to bank loans or to raise funds in the capital markets. Cash used in financing activities, which relates principally to holding company activities, was $0
and $43,059 in the three months ended March 31, 2005 and 2004, respectively. In the three months
ended March 31, 2004, the cash used in financing activities was primarily the result of dividends
of $42,500 paid to Fairfax. Shareholders equity was $906,089 at March 31, 2005, as compared to $881,189 at December 31, 2004.
The increase was primarily the result of current year earnings, partially offset by net unrealized
investment losses during the first quarter of 2005. Insurance Subsidiaries At Crum & Forsters insurance subsidiaries, cash provided by operating activities primarily
consists of premium collections, reinsurance recoveries and investment income. Cash provided from
these sources is generally used for payment of losses and LAE, policy acquisition costs, operating
expenses, ceded reinsurance premiums, income taxes and shareholder dividends, when permitted.
Management believes that, for the foreseeable future, cash flows from operations at the Companys
insurance subsidiaries will be sufficient to meet their operating liquidity needs. Cash provided by operating activities for the three months ended March 31, 2005 was $80,178, as
compared to $22,779 for the three months ended March 31, 2004. The principal reasons for the
increase in cash flows from operations in the first quarter of 2005 were increased cash received
from investments and lower income tax payments, partially offset by lower reinsurance recoveries.
Increased cash from investments was primarily the result of the reinvestment of cash and short-term
investments into longer-term, higher yielding investments in mid-first quarter 2004. Lower tax
payments in 2005 were the result of 2004 overpayments of income tax that were utilized to offset
the tax liability for the first quarter of 2005. Reinsurance recoveries for the three months ended
March 31, 2004 included $39,514 in proceeds from a 2003 commutation. Cash used in investing activities for the three months ended March 31, 2005 was $129,080 as
compared to $1,715,197 in the three months ended March 31, 2004. In 2003, sales of fixed income
securities generated proceeds, net of purchases, of over
$1 billion, which were invested in longer-term, higher
yielding investments in the first quarter of 2004. 22




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##### 



US Fire, North River, CF Indemnity and CF Insurance have entered into master securities
repurchase agreements that allow these companies to raise funds through repurchase arrangements
with Fairfax. Under these agreements, US Fire and North River may raise a maximum of $100,000 at
any one time and CF Indemnity and CF Insurance are limited to $5,000 each. These arrangements have
not been utilized since 2000. The aggregate carrying value of the Companys investment portfolio was $3,249,830 at March 31,
2005, and was comprised of available-for-sale securities, other invested assets and cash and cash
equivalents. Investments in available-for-sale fixed income and equity securities are summarized
below: At March 31, 2005Cost or
    
    
    Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueFixed income securities:United States government and government agencies
and authorities
    
    $
    1,706,276
    
    
    $
    6,410
    
    
    $
    51,681
    
    
    $
    1,661,005States, municipalities and political subdivisions
    
    
    6,550
    
    
    
    103
    
    
    
    
    
    
    
    6,653Public utilities
    
    
    5,074
    
    
    
    337
    
    
    
    
    
    
    
    5,411Other corporate bonds
    
    
    329,282
    
    
    
    11,411
    
    
    
    16,881
    
    
    
    323,812Total fixed income securities
    
    
    2,047,182
    
    
    
    18,261
    
    
    
    68,562
    
    
    
    1,996,881Equity securities:Common stocks of banks, trusts and insurance
companies
    
    
    189,853
    
    
    
    82,276
    
    
    
    
    
    
    
    272,129Common stocks of industrial and other companies
    
    
    255,531
    
    
    
    13,252
    
    
    
    17,036
    
    
    
    251,747Total equity securities
    
    
    445,384
    
    
    
    95,528
    
    
    
    17,036
    
    
    
    523,876Total available-for-sale securities
    
    $
    2,492,566
    
    
    $
    113,789
    
    
    $
    85,598
    
    
    $
    2,520,757
 Certain individual available-for-sale securities had gross unrealized losses as of March 31, 2005
totaling $85,598, of which $68,562 was attributed to fixed income securities and $17,036 was
attributed to equity securities. U.S. Treasury securities accounted for $51,681, or 75.4%, of the
$68,562 of gross unrealized losses in the fixed income portfolio. The total gross unrealized
losses of $85,598 represented 4.2% of the cost or amortized cost of such securities in the aggregate. At March 31, 2005, approximately $62,804, or 91.6%, of the fixed income portfolios gross
unrealized losses were attributed to securities in a loss position for greater than 12
consecutive months. Of such securities, $45,999 were U.S. Treasury securities and the remaining
$16,805 represented corporate fixed income securities. Two corporate fixed income securities of
one issuer in the telecommunications industry had gross unrealized losses totaling $7,050, which
exceeded 10% of their amortized cost at March 31, 2005. This issuer maintains a significant cash position to meet its
obligations and the Company has the ability to hold such securities for a period of time sufficient to allow a market recovery, or to maturity, if necessary. At March 31,
2005, approximately $15,255, or 89.5%, of the equity portfolio
gross unrealized losses was attributed to two securities whose unrealized loss
exceeded 10% of their cost at March 31, 2005. Neither of these securities has been in a loss position for greater than 12 consecutive months.
The majority of these losses were attributed to one equity security
in the pharmaceutical industry. The Companys evaluation of this
issuer indicates that it has significant financial strength.
Management believes that it is undervalued based upon a number of
factors, including historical earnings multiples and dividend yields, and trades below its intrinsic value. 23




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##### 



The Companys investment portfolio has exposure to credit risk primarily related to fixed income
securities. Management attempts to control this exposure by emphasizing investment grade credit
quality in the fixed income securities purchased. Management believes that this concentration in
investment grade securities reduces the Companys exposure to credit risk to an acceptable level.
As of March 31, 2005 and December 31, 2004, 93.2% and 95.6%, respectively, of the Companys fixed
income portfolio consisted of securities rated investment grade. The Companys investment portfolio includes investments accounted for using the equity method.
These investments had a total carrying value of $315,626 and $280,346 at March 31, 2005 and
December 31, 2004, respectively, and are included in other invested assets on the consolidated
balance sheets. For the three months ended March 31, 2005 and 2004, earnings of equity method
investees was $16,079 and $6,409, respectively. Earnings of investment companies and similar
equity method investees of $9,259 and $1,204, in the three months ended March 31, 2005 and 2004,
respectively, is included in investment income on the consolidated statements of income. Pre-tax
earnings of other equity method investees of $6,820 and $5,205 in the three months ended March 31,
2005 and 2004, respectively, is included in equity in earnings of investees, net of tax, on the
consolidated statements of income. Dividends received from all equity method investees were $1,166
and $1,015 in the three months ended March 31, 2005 and 2004, respectively. Ratings Financial strength ratings issued by third party rating agencies are used by insurance consumers
and insurance intermediaries as an important means of assessing the financial strength and quality
of insurers. Higher ratings generally indicate relative financial stability and a strong ability
to pay claims. Ratings focus on the following factors: capital resources, financial strength,
demonstrated management expertise in the insurance business,
market position, investment operations, credit analysis, minimum policyholders surplus requirements and capital
sufficiency to meet projected growth, as well as access to such traditional capital as may be
necessary to continue to meet standards for capital adequacy. Crum & Forsters insurance
subsidiaries have an A- financial strength rating (the fourth highest of
fifteen rating categories) with a negative outlook from A.M. Best, a rating agency and publisher for the insurance
industry, and a BBB financial strength rating (the fourth highest of nine rating categories) from
Standard & Poors Insurance Rating Services, also a rating agency for the insurance industry. Crum & Forsters current ratings are the lowest necessary to compete in its targeted markets. The
Company may not maintain its financial strength ratings from the rating agencies. A downgrade or
withdrawal of any rating could severely limit or prevent the Company from writing quality new or
renewal business, securing adequate reinsurance on acceptable terms and retaining its key
management and employees. A.M. Best has advised the Company that, although it is encouraged by the
improved underlying trends exhibited in its recent underwriting performance, the ratings outlook is
negative and contingent upon managements ability to ultimately achieve overall earnings stability,
specifically with regard to adequacy of asbestos reserves, and improved financial flexibility of
the Companys ultimate parent, Fairfax. According to A.M. Best, a negative outlook indicates that
A.M. Best believes that the rated insurer is experiencing unfavorable financial and/or market
trends relative to its rating level and, if such trends continue, it has a good possibility of
having its rating lowered. The Companys ratings are based on a variety of factors, many of which
are outside of its control, including the financial condition of Fairfax and its affiliates, the
financial condition or actions of parties from which the Company has obtained reinsurance and
factors relating to the sectors in which the Company or its reinsurers conduct business and the
statutory surplus of its insurance subsidiaries, which is adversely affected by underwriting losses
and dividends paid by them to Crum & Forster. The financial strength ratings assigned by rating agencies to insurance companies represent
independent opinions of an insurers financial strength and its ability to meet ongoing obligations
to policyholders, and are not directed toward the protection of investors. Ratings by rating
agencies of insurance companies are not ratings of securities or recommendations to buy, hold or
sell any security. 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company is principally exposed to three types of market risk related to its investment
operations. These risks include interest rate risk, equity price risk and foreign currency
exchange risk. The term market risk refers to the risk of loss arising from adverse changes in
market rates and prices, such as interest rates, equity prices and foreign currency exchange rates.
Market sensitive instruments discussed here relate to the Companys investment assets, which are
classified as available-for-sale, unless otherwise noted. 24




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##### 



Computations of the prospective effects of hypothetical interest rate, equity price and foreign
exchange rate changes shown below are based on numerous assumptions, including maintenance of
the existing level and composition of fixed income, equity and foreign currency denominated securities, and should
not be relied on as indicative of future results. Actual values may differ from those projections presented should market conditions
vary from assumptions used in the calculation of the fair value of individual securities,
including, but not limited to, non-parallel shifts in the term structure of interest rates,
changing individual issuer credit spreads and non-parallel movements of foreign exchange rates or
equity prices. Interest Rate Risk As of March 31, 2005, Crum & Forsters investment portfolio included $1,996,881 of fixed income
securities that are subject to interest rate risk. Fluctuations in interest rates have a direct
impact on the market values of these securities. As interest rates rise, market values of fixed
income portfolios fall, and vice versa. The table below displays the potential impact of market
value fluctuations on the Companys fixed income portfolio based on parallel 200 basis point shifts
in interest rates up and down, in 100 basis point increments. This analysis was performed on each
security individually. At March 31, 2005Fair Value ofFixed Income
    
    
    Hypothetical
    
    
    HypotheticalPortfolio
    
    
    $ Change
    
    
    % Change200 basis point decline
    
    $
    2,495,174
    
    
    $
    498,293
    
    
    
    25.0
    %100 basis point decline
    
    $
    2,226,997
    
    
    $
    230,116
    
    
    
    11.5
    %Base scenario
    
    $
    1,996,881
    
    
    $
    
    
    
    
    
    %100 basis point increase
    
    $
    1,801,345
    
    
    $
    (195,536
    )
    
    
    (9.8
    )%200 basis point increase
    
    $
    1,632,622
    
    
    $
    (364,259
    )
    
    
    (18.2
    )%
 Equity Price Risk As of March 31, 2005, the Companys investment portfolio included $523,876 of equity securities.
Marketable equity securities, which represented approximately 15.7% of the Companys investment
portfolio, including cash and cash equivalents, are exposed to equity
price risk, which is defined as the
potential for loss in market value owing to declines in equity prices. A hypothetical 10% decline
in the price of each of these marketable equity securities would result in a total decline of
$50,996 in the fair value of the equity portfolio at March 31, 2005. As of December 31, 2004, a
hypothetical 10% decline in the price of marketable equity securities would have resulted in a
total decline of $44,112 in the fair value of the equity portfolio. The increase in the Companys
exposure to equity price risk is primarily the result of the increase in the value of the equity
portfolio from $455,153 at December 31, 2004 to $523,876 at March 31, 2005. As an economic hedge against a decline in the U.S. equity markets, the Company has executed short
sales totaling approximately $300,000 of SPDRs. Simultaneously, the Company purchased two-year
S&P Index call options, limiting the potential loss on the
future purchases of SPDRs to $60,000. A hypothetical 10% decrease in
the price of the SPDRs would result in approximately a $30,000 decrease in the obligations to purchase the SPDRs. The Company expects that a decline in
the SPDRs obligations will offset losses in the equity portfolio in the event of a decline in the
U.S. equity markets. Foreign Currency Exchange Rate Risk Through investments in foreign securities, including certain equity method investees, the Company
is exposed to foreign currency exchange rate risk. Foreign currency exchange rate risk is the
potential for loss in value in foreign currency denominated assets due to
a decline in the exchange rate of the foreign currency relative to the U.S. dollar. As
of March 31, 2005, the Companys total exposure to foreign currency denominated securities in U.S. dollar
terms was approximately $358,885, or 11.0%, of the Companys total investment portfolio, including
cash and cash equivalents. The primary foreign currency exposures were in Canadian dollar
denominated and Indian Rupee denominated securities, which represented 3.7% and 3.0% of the
Companys investment portfolio, including cash and cash equivalents, respectively. The potential impact of a
hypothetical 10% decline in each of the foreign exchange rates on the valuation of investment
assets denominated in those respective foreign currencies would result in a total decline of
$35,888, or 1.1%, in the fair value of the total investment portfolio, including cash and cash
equivalents, at March 31, 2005. As of December 31, 2004, a hypothetical 10% decline in foreign
currency exchange rates would have resulted in a total decline of $34,875 in the fair value of the
total investment portfolio. The increase in the Companys exposure to foreign exchange rate risk
is the result of an increase in foreign denominated securities within the Companys portfolio. 25




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##### 



Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures The Companys principal executive officer and its principal financial officer have evaluated the
effectiveness of the Companys disclosure controls and procedures, as defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period
covered by this report. Based on that evaluation, such officers have concluded that the Companys
disclosure controls and procedures are effective as of the end of such period. Changes in Internal Control Over Financial Reporting During the period covered by this report, there has been no change in the Companys internal
control over financial reporting that has materially affected, or is reasonably likely to
materially affect, the Companys internal control over financial reporting. The design of any system of controls and procedures is based, in part, upon certain assumptions
about the likelihood of future events. There can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions, regardless of how remote. 
 Part II  OTHER INFORMATION 
 Item 1. Legal Proceedings In the ordinary
course of their business, Crum & Forsters subsidiaries receive claims asserting
alleged injuries and damages from asbestos and other hazardous waste and toxic substances and are
subject to related coverage litigation. The conditions surrounding the final resolution of these
claims and the related litigation continue to change. Currently, it is not possible to predict
judicial and legislative changes and their impact on the future development of asbestos and
environmental claims and litigation. This trend will be affected by future court decisions and
interpretations, as well as changes in applicable legislation and the possible implementation of a
proposed federal compensation scheme for asbestos-related injuries. As a result of these
uncertainties, additional liabilities may arise for amounts in excess of current reserves for
asbestos, environmental and other latent exposures. These additional amounts, or a range of these
additional amounts, cannot currently be reasonably estimated. As a result of these claims,
management continually reviews required reserves and reinsurance recoverable. In each of these
areas of exposure, the Company litigates individual cases when appropriate and endeavors to settle
other claims on favorable terms. In addition, the Companys subsidiaries are involved in various lawsuits and arbitration
proceedings arising in the ordinary course of business. While the outcome of such matters cannot
be predicted with certainty, in the opinion of management, no such matter is likely to have a
material adverse effect on the Companys consolidated financial condition, results of operations or
liquidity. However, it should be noted that the frequency of large damage awards, including
punitive damage awards that bear little or no relation to actual economic damages incurred by
plaintiffs in some jurisdictions, continues to create the potential for an unpredictable judgment
in any given matter. Item 6. Exhibits See Index to Exhibits. 26




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##### 



SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized. CRUM & FORSTER HOLDINGS CORP.
(Registrant)Date:  April 29, 2005
    By:
    /s/  Nikolas AntonopoulosNikolas AntonopoulosPresident and Chief Executive OfficerDate:  April 29, 2005
    By:
    /s/ Mary Jane RobertsonMary Jane RobertsonExecutive Vice President, Chief Financial Officer and Treasurer 27




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##### 



INDEX TO EXHIBITS Exhibit No.* 31.1
    
    Certification of President and Chief Executive Officer pursuant to Section 302 of theSarbanes-Oxley Act of 2002.* 31.2
    
    Certification of Executive Vice President, Chief Financial Officer and Treasurerpursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* 32.1
    
    Certification of President and Chief
Executive Officer pursuant to Section 906 of theSarbanes-Oxley Act of 2002.* 32.2
    
    Certification of Executive Vice President, Chief Financial Officer and Treasurerpursuant 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 sectionentitled "Risk factors" in the Companys Annual Report on Form 10-K for the year endedDecember 31, 2004 filed with the Securities and Exchange Commission on March 7, 2005).
   *
    
    Filed herewith 28