UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
   Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended
    December 31, 2008oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from               to   Commission File Number:
    333-84068
  
 Crum & Forster
    Holdings Corp.
 (Exact Name of Registrant as
    Specified in its Charter)
  Delaware

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

(I.R.S. Employer Identification
    Number)305 Madison Avenue, Morristown, New Jersey 07962(Address of principal
    executive office)(973) 490-6600(Registrants telephone
    number, including area code)   Securities
    registered pursuant to Section 12(b) of the Act:
 None
  Securities
    registered pursuant to Section 12(g) of the Act:
 None
  FORM 10-K
  o þ
  þ o
  o þ
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
 Large accelerated
    filer o

Accelerated
    filer oNon-accelerated
    filer þ

Smaller reporting
    company o
   Rule 12b-2 o þ
   Not applicable
    Class

Number of Shares Outstanding at February 27, 2009Common Stock, $.01 Par Value

100   Documents
    Incorporated by Reference




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##### 






CRUM &
    FORSTER HOLDINGS CORP.
  Form 10-K
  Index
  STATEMENTS REGARDING FORWARD-LOOKING INFORMATION


5PART IITEM 1.


BUSINESSOverview


6Corporate Structure


6Lines of Business


8Geographic Distribution


11Business Development and Methods of Distribution


12Pricing and Underwriting


13Catastrophe Risk Management


14Reinsurance


15Claims Management


21Reserves


22Asbestos, Environmental and Other Latent Exposures


25Investments


25Competition


27Ratings


27Insurance Regulatory Matters


28Employees


34ITEM 1A.


RISK FACTORS


34ITEM 1B.


UNRESOLVED STAFF COMMENTS


44ITEM 2.


PROPERTIES


44ITEM 3.


LEGAL PROCEEDINGS


44Litigation


44Insurance Industry Investigations


44ITEM 4.


SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS


45PART IIITEM 5.


MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
    STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES


45ITEM 6.


SELECTED FINANCIAL DATA


45ITEM 7.


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


47Critical Accounting Policies and Estimates


47Summary of Operations


57Results of Operations


59Liquidity and Capital Resources


68Contractual Obligations


71Regulatory Issues


72Off-Balance Sheet Arrangements


72ITEM 7A.


QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


72Interest Rate Risk


73Equity Price Risk


73Foreign Currency Exchange Rate Risk


74 2




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##### 



ITEM 8.


FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


75Index to Consolidated Financial Statements


75Report of Independent Registered Public Accounting Firm


76Consolidated Balance Sheets at December 31, 2008 and 2007


77Consolidated Statements of Income for the Years Ended
    December 31, 2008, 2007 and 2006


78Consolidated Statements of Shareholders Equity for the
    Years Ended December 31, 2008, 2007 and 2006


79Consolidated Statements of Comprehensive Income for the Years
    Ended December 31, 2008, 2007 and 2006


80Consolidated Statements of Cash Flows for the Years Ended
    December 31, 2008, 2007 and 2006


81Notes to Consolidated Financial Statements


83ITEM 9.


CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
    AND FINANCIAL DISCLOSURE


121ITEM 9A(T).


CONTROLS AND PROCEDURES


121Evaluation of Disclosure Controls and Procedures


121Managements Report on Internal Control Over Financial
    Reporting


121ITEM 9B.


OTHER INFORMATION


121PART IIIITEM 10.


DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE


122Directors and Executive Officers


122Corporate Governance


123Audit Committee and Audit Committee Financial Expert


123Compensation Committee


123Compensation of Directors


123Code of Ethics


123ITEM 11.


EXECUTIVE COMPENSATION


123ITEM 12.


SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
    MANAGEMENT AND RELATED STOCKHOLDER MATTERS


123ITEM 13.


CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
    INDEPENDENCE


124ITEM 14.


PRINCIPAL ACCOUNTANT FEES AND SERVICES


124Audit Fees


124Audit-Related Fees


124Tax Fees


124All Other Fees


124Audit Committee Pre-Approval Policies and Procedures


124 3




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##### 



PART IVITEM 15.


EXHIBITS AND FINANCIAL STATEMENT SCHEDULES


125Financial Statement Schedules


125Exhibits


126SIGNATURES


128POWER OF ATTORNEY


128INDEX TO FINANCIAL STATEMENTS AND RELATED FINANCIAL STATEMENT
    SCHEDULES


129Report of Independent Registered Public Accounting Firm on
    Financial Statement Schedules


130Schedule I  Summary of Investments Other Than
    Investments in Related Parties


131Schedule II  Condensed Balance Sheets of
    Crum & Forster Holdings Corp. at December 31,
    2008 and 2007 (Parent Company Only)


132Schedule II  Condensed Statements of Income of
    Crum & Forster Holdings Corp. for the Years Ended
    December 31, 2008, 2007 and 2006 (Parent Company Only)


133Schedule II  Condensed Statements of Cash Flows of
    Crum & Forster Holdings Corp. for the Years Ended
    December 31, 2008, 2007 and 2006 (Parent Company Only)


134Schedule II  Notes to Condensed Financial Statements


135Schedule V  Valuation and Qualifying Accounts


136EXHIBITS  4




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##### 



Form 10-K
  (973) 490-6600. http://www.cfins.com. Form 10-K, Form 10-Q, Form 8-K Form 10-K
  STATEMENTS
    REGARDING FORWARD-LOOKING INFORMATION
    
    Competitive conditions in the insurance market and the ability
    to retain and attract new business;
    Adverse effect of continuing volatility in the global financial
    markets and current economic downturn;
    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;
    Inability to obtain reinsurance coverage on reasonable terms and
    prices, particularly property catastrophe reinsurance;
    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;
    Lowering or loss of one of the Companys financial strength
    ratings;
    Loss of key producers;
    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;
    Exposure to emerging claims and coverage issues;
    Subordination of debt securities to the obligations and
    liabilities of the Companys insurance subsidiaries;
    Ability of Fairfax to determine the outcome of corporate action
    requiring stockholder approval;
    Changes in governmental regulations; and
    Exposure to credit risks on novated policies.   5




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##### 



PART I
  ITEM 1.  BUSINESS Overview         Corporate
    Structure
     6




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##### 



7




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##### 



Lines of
    Business   Years Ended December 31,2008


2007


2006(dollars in millions)

$


%


$


%


$


%General liability

$
216.3



21.2
%

$
251.5



20.2
%

$
296.0



21.9
%Workers compensation


196.0



19.2



258.9



20.8



277.1



20.5Commercial automobile


164.0



16.1



203.4



16.3



222.5



16.5Property


173.4



17.0



285.2



22.9



375.6



27.8Commercial multi-peril


83.8



8.2



88.2



7.1



83.8



6.2Accident and health


159.7



15.7



127.6



10.3



64.3



4.7Other1


26.4



2.6



30.2



2.4



32.3



2.4Total gross premiums written

$
1,019.6



100.0
%

$
1,245.0



100.0
%

$
1,351.6



100.0
%     1
    Other includes personal automobile,
    homeowners and surety lines of business.  General liability
  sub-prime
 8




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##### 



Years Ended December 31,2008


2007


2006Umbrella liability


46.3
%


42.2
%


36.6
%Products liability


19.7



22.7



25.0Directors and officers liability


8.5



7.2



7.1Employment practices liability


2.6



2.6



2.8All other general liability


22.9



25.3



28.5Total general liability


100.0
%


100.0
%


100.0
%     Workers compensation
  
    guaranteed cost products;
    large deductible policies; and
    retrospectively rated policies.    
    the applicable premium rate, which varies according to the
    employees duties and the business of the employer;
    the policyholders experience modification factor; and
    the policyholders payroll.        Years Ended December 31,2008


2007


2006Guaranteed cost


92.4
%


91.0
%


87.7
%Large deductible


6.5



7.7



9.8Retrospectively rated


1.1



1.3



2.5Total workers compensation


100.0
%


100.0
%


100.0
%     Commercial automobile
 9




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##### 



Property
    Years Ended December 31,2008


2007


2006Fire and allied lines


70.6
%


78.7
%


82.7
%Inland marine


13.9



10.2



8.4Earthquake


5.2



6.5



6.6Other


10.3



4.6



2.3Total property


100.0
%


100.0
%


100.0
%     Commercial multi-peril
  Accident and health
    Years Ended December 31,2008


2007


2006Student medical insurance


30.6
%


29.7
%


36.9
%Employer stop loss insurance


27.9



21.8



28.1Retail travel and accident insurance


16.1



24.7



13.4Pet insurance


15.6



10.1



1.3Other medical insurance


9.8



13.7



20.3Total accident and health


100.0
%


100.0
%


100.0
%  10




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##### 



Other and/or
    Years Ended December 31,2008


2007


2006Bail bonds


45.3
%


43.4
%


36.0
%Personal automobile


29.4



31.3



35.4Homeowners


23.4



22.2



21.9Contract and commercial bonds


1.9



3.1



6.7Total other


100.0
%


100.0
%


100.0
%  Geographic
    Distribution   Years Ended December 31,2008


2007


2006California


13.9
%


14.5
%


16.7
%New York


10.1



9.0



9.4Florida


9.6



9.9



10.7Texas


8.4



8.9



9.6New Jersey


6.9



7.2



8.2Pennsylvania


4.5



4.5



5.0Hawaii


4.4



4.5



1.4Massachusetts


3.9



3.4



3.3Illinois


3.7



3.6



3.3Georgia


2.4



3.0



3.1All other states


32.2



31.5



29.3Total direct premiums written


100.0
%


100.0
%


100.0
%    11




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##### 



Business
    Development and Methods of Distribution     agreed-upon
      Years Ended December 31,2008


2007


2006Wholesale brokers


36.1
%


41.5
%


43.5
%Independent regional retail firms


43.3



38.5



34.4National brokers


20.6



20.0



22.1Total direct premiums written


100.0
%


100.0
%


100.0
%       Years Ended December 31,(dollars in millions)

2008


2007


2006Wholesale brokers

$
100.0


$
173.4


$
264.0Independent regional retail firms


77.1



105.5



106.9National brokers


34.9



53.8



91.7Total gross premiums written from new business

$
212.0


$
332.7


$
462.6    12




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##### 



Certain business practices of the insurance industry have
    become the subject of investigations by government authorities
    and other parties and the subject of class action
    litigation
 Pricing
    and Underwriting       and/or
  The
    Company bears credit risk with respect to its reinsurers and
    certain policyholders, and if one or more of them fails to pay,
    the Company could experience losses, which would reduce its net
    income.
     13




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##### 



Catastrophe
    Risk Management     250-year 100-year
   14




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##### 



Reinsurance   Ceded
    Reinsurance Transactions
    Years Ended December 31,(dollars in millions)

2008


2007


2006Earned premiums ceded to reinsurers

$
(141.3
)

$
(149.0
)

$
(190.9
)Commissions earned on ceded reinsurance premiums


31.3



25.8



30.9Claims incurred ceded to reinsurers


(44.4
)1


52.3



54.1Provision for uncollectible reinsurance


(7.7
)


(8.0
)


(9.5
)Net impact of ceded reinsurance transactions

$
(162.1
)

$
(78.9
)

$
(115.4
)    1
    For the year ended
    December 31, 2008, claims incurred ceded to reinsurers
    include $75.9 million related to losses on commutations.     Maximum Reinsured(dollars in millions)

Maximum Retention

Limits1General Liability:Umbrella

$3.72

$
21.3Management
    protection3 

    primary policies

$3.14,6

$
1.9Management
    protection3 

    excess policies

Quota
    Share5,6

$
7.0Property:Per Insured/Per Risk program (excludes Seneca, C&F
    Specialty and Inland Marine)

$5.0

$
20.0Seneca, C&F Specialty and Inland Marine property per risk
    program

$2.0

$
23.0    1
    Represents the amount of loss
    protection above the net retention on an excess of loss basis,
    unless otherwise noted. Certain layers within these reinsured
    limits are subject to aggregate limits and reinstatement
    provisions.2
    The Company has a 32.5%
    co-participation in the $2 million in excess of
    $3 million layer, resulting in a maximum retention of
    $3.7 million on a full-limit loss.3
    Management protection includes
    directors and officers liability, errors and
    omissions liability, miscellaneous professional liability,
    employment practices liability and fiduciary liability.4
    The Companys retention on
    primary policies up to $5.0 million is $ 1 million.
    The Company has a 52.5% co-participation resulting in a maximum
    retention of $3.1 million on a full limit loss.5
    The Company retains 30% of policies
    with limits in excess of $5 million up to $10 million.6
    On management protection policies
    there is a loss ratio cap of 375% (approximately
    $45.0 million). 15




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##### 



Terrorism Risk
    Insurance Program Reauthorization Act of 2007 Catastrophic
    events could cause unanticipated losses and reduce net
    income
     16




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##### 



At December 31, 2008A.M. Best

Security


Reinsurance


% of(dollars in millions)

Rating
    1

Provided


Recoverable


TotalNorth American Specialty Insurance Company

A+

$
220.8
2


$
349.0




36.0
%TIG Insurance Company (TIG)
    3,4

B+







120.8




12.5Swiss Reinsurance America Corporation

A+







47.6




4.9Fairmont Specialty Insurance
    Company3

B++







38.2




4.0Munich Reinsurance America Inc.

A+







31.3




3.2nSpire3

NR 5


33.5
6



25.2




2.6Travelers Indemnity

A+







16.7




1.7General Reinsurance Corporation

A++


0.1




15.9




1.6Westport Insurance Corp.

A+







15.2




1.6Hannover Ruckversicherungs-Aktiengesellschaft

A


11.0
7



14.5




1.5Other




78.7
8



293.8
9,10



30.4Total reinsurance recoverable



$
344.1



$
968.2




100.0
%    1
    The A.M. Best rating system
    includes ratings of A++ and A+ (which
    are Superior ratings), A and
    A- (which are Excellent ratings),
    B++ and B+ (which are Very
    Good ratings) and nine lower ratings categories. Ratings
    are as of February 20, 2009.2
    Funds held at December 31,
    2008. The unsecured balance due from North America Specialty
    Insurance Company is effectively guaranteed by an upstream
    affiliated insurer in the Swiss Re Group.3
    Fairfax affiliate.4
    Effective December 16, 2002,
    International Insurance Company merged with TIG, a Fairfax
    subsidiary. TIG had statutory capital and surplus at
    December 31, 2008 of $674.0 million. These recoverable
    balances arise principally from a restructuring in 1993, prior
    to Fairfaxs acquisition of Crum & Forster. For
    further discussion, see Note 10 to the consolidated
    financial statements included in Item 8. Financial
    Statements and Supplementary Data.5
    Not rated.6
    Held in irrevocable trusts. The
    trusts are principally comprised of cash and U.S. Treasury
    securities.7
    Includes$5.0 million in trusts and $6.0 million in
    letters of credit.8
    Includes $42.0 million in
    letters of credit, $12.4 million in funds held and
    $24.3 million in trusts.9
    Includes reserves for uncollectible
    reinsurance of $56.0 million. 10
    82% of these gross recoverable
    balances are from companies having an A.M. Best rating of
    A- or better.      Affiliated
    Reinsurers
   17




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##### 



At December 31, 2008TotalReinsurance


Paid


Outstanding(dollars in millions)

Recoverable


Recoverable


Reserves1


CollateralTIG

$
120.8


$



$
120.8


$
Fairmont Specialty Insurance Company


38.2



0.9



37.3



nSpire


25.2



0.2



25.0



33.5Wentworth


13.9



0.1



13.8



19.6Odyssey


9.0



0.4



8.6



Other


2.1







2.1



2.4Total affiliated reinsurance recoverable balances

$
209.2


$
1.6


$
207.6


$
55.5    1
    Includes case and incurred but not
    reported (IBNR) reserves.    Corporate
    Aggregate Reinsurance
          Years Ended December 31,(dollars in millions)

2008


2007


2006Investment income

$
(11.7
)

$
(16.1
)

$
(8.4
)Losses and LAE


65.8



(13.7
)


(10.3
)(Decrease) increase in income before income taxes

$
(77.5
)

$
(2.4
)

$
1.9  18




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##### 



1
    Years EndedDecember 31,(dollars in millions)

2008


20072000 retroactive adverse development contract

$
349.0


$
369.01998 prospective aggregate stop loss contract






367.5
22000 accident year prospective aggregate stop loss contract






28.71998 prospective aggregate stop loss contract amendment
    (retroactive reinsurance)






19.3Total

$
349.0


$
784.5    1
    The amount for 2007 includes the
    $389.0 million discussed below, $28.7 million on the
    2000 accident year prospective aggregate stop loss contract and
    $76.3 million of amortization of deferred gains on the
    retroactive reinsurance contracts.2
    Includes $389.0 million, which
    has been recognized as a reduction of losses and LAE less
    $21.5 million for additional premiums due on
    retrospectively rated insurance policies that inure to the
    benefit of the reinsurer.  Prospective
    Corporate Aggregate Reinsurance
    Years Ended December 31,(dollars in millions)

2008


2007


2006Funds held interest charged to investment income

$
(1.6
)

$
(2.3
)

$
(3.0
)Less: losses and LAE


80.5







Decrease in income before income taxes

$
(82.1
)

$
(2.3
)

$
(3.0
)      19




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##### 



Retroactive
    Corporate Aggregate Reinsurance
    Years Ended December 31,(dollars in millions)

2008


2007


2006Funds held interest charged to investment income

$
(10.1
)

$
(13.8
)

$
(5.4
)Less: losses and LAE


(14.8
)1


(13.7
)


(10.3
)Increase (decrease) in income before income taxes

$
4.7


$
(0.1
)

$
4.9    1
    For the year ended
    December 31, 2008, losses and LAE is comprised of a loss on
    commutation of $4.2 million offset by $8.8 million of
    unamortized deferred income released on commutation as well as
    $10.2 million of recurring deferred income amortization.
    For the years ended December 31, 2007 and 2006, losses and
    LAE is comprised of recurring amortization of deferred income
    only.    Years Ended December 31,(dollars in millions)

2008


2007


2006Decrease in reinsurance recoverable due from reinsurers

$
(20.0
)

$
(3.6
)

$
(37.0
)Less: related premiums paid


(8.2
)


(1.3
)


(33.4
)Decrease in income deferred during the year


(11.8
)


(2.3
)


(3.6
)Amortization of deferred income


(18.9
)


(13.7
)


(12.9
)Decrease in deferred income


(30.7
)


(16.0
)


(16.5
)Deferred income on retroactive reinsurance  beginning
    of year


152.0



168.0



184.5Deferred income on retroactive reinsurance  end of
    year

$
121.3


$
152.0


$
168.0    20




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##### 



Claims
    Management   
    maintenance of timely and adequate reserves for claims and the
    cost-effective delivery of claims services by controlling losses
    and LAE;
    financial integrity through the employment of investigative
    specialists who attempt to limit fraudulent claims activity and
    a program to pursue appropriate subrogation and recovery
    opportunities; and
    exceptional customer service whereby the Company applies its
    resources toward pursuing timely investigation and resolution of
    customer claims and reducing claims costs.   21




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##### 



At December 31,Pending Claims

2008


2007


2006Workers
    compensation1


9,473



10,301



10,974General liability


3,331



3,614



4,086Commercial automobile


4,416



5,125



5,223All other


1,890



2,387



2,539Total pending claims


19,110



21,427



22,822     1 Excludes
    medical only claim counts.
  Years Ended December 31,New Claims

2008


2007


2006Workers
    compensation1


6,595



7,169



7,307General liability


3,247



3,923



3,635Commercial automobile


15,014



15,935



15,502All other


3,361



3,541



3,384Total new claims


28,217



30,568



29,828    1
    Excludes medical only claim counts
    of 11,953, 13,628 and 13,947 for the years ended
    December 31, 2008, 2007 and 2006, respectively.   Reserves        22




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##### 



At December 31, 2008Low End of


High End of(dollars in millions)

Reserves


Actuarial Range


Actuarial RangeGeneral liability

$
671.0


$
491.3


$
766.8Workers compensation


667.2



555.1



709.2Asbestos, environmental and other latent


401.1



310.3



491.9Commercial automobile


255.5



217.4



271.6Property


175.4



137.1



180.8Other


217.3



186.5



221.0Net of per risk reinsurance, gross of corporate aggregate
    reinsurance


2,387.5



1,897.7



2,641.3Corporate aggregate reinsurance


83.9



74.2



92.7Total reserves, net of per risk reinsurance and corporate
    aggregate reinsurance


2,303.6


$
1,823.5


$
2,548.6Ceded unpaid losses and LAE


684.2Gross unpaid losses and LAE

$
2,987.8       Years Ended December 31,(dollars in millions)

2008


2007


2006General liability

$
66.0


$
(20.2
)

$
(31.9
)Workers compensation


(86.9
)


(65.4
)


(58.5
)Commercial automobile


36.6



(6.6
)


(10.9
)Property


(15.2
)


(0.9
)


1.6Asbestos, environmental and other latent


36.2



54.5



33.9Commercial multi-peril


6.6



(18.6
)


(22.8
)Other


(4.3
)


7.0



2.7Total adverse (favorable) development, net of per risk
    reinsurance


39.0



(50.2
)


(85.9
)Amortization of deferred gain on retroactive corporate aggregate
    reinsurance


(18.9
)


(13.7
)


(12.9
)Other corporate aggregate reinsurance activity










2.6Total adverse (favorable) development, net of per risk and
    corporate aggregate reinsurance


20.1



(63.9
)


(96.2
)Add back: Per risk and corporate aggregate reinsurance


(111.6
)


(37.1
)


(16.2
)Total favorable development, gross of reinsurance

$
(91.5
)

$
(101.0
)

$
(112.4
)   Losses and Loss Adjustment
    Expenses
 23




---



##### 



Ten-Year
    Analysis of Consolidated Loss and LAE Development Presented Net
    of Reinsurance With Supplemental Gross Data
  At December 31,(dollars in millions)

1998


1999


2000


2001


2002


2003


2004


2005


2006


2007


2008Reserves for unpaid losses and LAE (net of reinsurance
    recoverable)


2,532



2,225



1,770



1,577



1,494



1,873



2,010



1,990



2,016



1,981



2,304Paid (cumulative) as of:One year later


680



757



676



454



160



460



481



482



571



272Two years later


1,246



1,300



1,026



533



521



809



815



852



637Three years later


1,654



1,565



1,097



824



795



1,065



1,084



816Four years later


1,922



1,626



1,328



1,049



988



1,277



985Five years later


1,919



1,850



1,504



1,208



1,162



1,139Six years later


2,084



2,023



1,637



1,360



986Seven years later


2,237



2,153



1,763



1,168Eight years later


2,350



2,277



1,563Nine years later


2,460



2,094Ten years later


2,267Liability re-estimated as of:One year later


2,546



2,258



1,953



1,596



1,611



1,942



1,941



1,894



1,952



2,001Two years later


2,536



2,445



1,969



1,749



1,718



1,932



1,855



1,840



1,990Three years later


2,600



2,460



2,093



1,857



1,702



1,862



1,830



1,917Four years later


2,614



2,584



2,203



1,836



1,643



1,877



1,908Five years later


2,735



2,680



2,180



1,787



1,660



1,968Six years later


2,801



2,676



2,148



1,804



1,748Seven years later


2,809



2,652



2,152



1,888Eight years later


2,801



2,660



2,242Nine years later


2,814



2,747Ten years later


2,914Cumulative (deficiency)/redundancy


(382
)


(522
)


(472
)


(311
)


(254
)


(95
)


102



73



26



(20
)Gross liability  end of year


3,637



3,529



3,340



3,454



3,250



3,194



3,371



3,673



3,371



3,178



2,988Reinsurance recoverable


1,105



1,304



1,570



1,877



1,756



1,321



1,361



1,683



1,355



1,197



684Net liability  end of year


2,532



2,225



1,770



1,577



1,494



1,873



2,010



1,990



2,016



1,981



2,304Gross re-estimated liability at December 31, 2008


4,207



4,218



3,873



3,662



3,386



3,234



3,214



3,434



3,195



3,086Re-estimated reinsurance recoverable at December 31, 2008


1,293



1,471



1,631



1,774



1,638



1,266



1,306



1,517



1,205



1,085Net re-estimated liability at December 31, 2008


2,914



2,747



2,242



1,888



1,748



1,968



1,908



1,917



1,990



2,001Cumulative gross (deficiency)/redundancy


(570
)


(689
)


(533
)


(208
)


(136
)


(40
)


157



239



176



92  24




---



##### 



Asbestos,
    Environmental and Other Latent Exposures       Years Ended December 31,2008


2007


2006(dollars in millions)

Gross


Net


Gross


Net


Gross


NetUnpaid latent losses and allocated LAE (ALAE),
    beginning of the year

$
580.1


$
442.8


$
586.2


$
443.5


$
617.6


$
475.1Latent losses and ALAE incurred during the year


56.7



36.2



55.9



54.5



66.0



33.9Latent losses and ALAE paid during the year


113.4



77.9



62.0



55.2



97.4



65.5Unpaid latent losses and ALAE, end of the year

$
523.4


$
401.1


$
580.1


$
442.8


$
586.2


$
443.5   .
    Asbestos


Environmental


Other Latent


Total LatentNumber of policyholders open at December 31, 2006


400



243



188



831Opened during the year


48



47



66



161Closed during the year


47



29



50



126Number of policyholders open at December 31, 2007


401



261



204



866Opened during the year


71



80



65



216Closed during the year


135



105



96



336Number of policyholders open at December 31, 2008


337



236



173



746   Losses and Loss Adjustment Expenses
 Investments    25




---



##### 



At December 31,2008


2007Fixed income securities:States, municipalities and political subdivisions


32.6
%


0.1
%United States government and government agencies and authorities


4.2



44.4Other


7.0



2.8Total fixed income securities


43.8



47.3Equity securities  common stocks


25.3



15.1Cash, cash equivalents and short-term
    investments1


17.7



23.7Derivative securities


3.4



5.3Other invested
    assets2


9.8



8.6Total investments


100.0
%


100.0
%    1
    Cash, cash equivalents and
    short-term investments include cash pledged for derivatives and
    short-sale obligations of $4.4 million and
    $735.0 million at December 31, 2008 and 2007,
    respectively.2
    Other invested assets are primarily
    comprised of investments in affiliates of Fairfax and other
    limited partnerships.         At December 31,Rating

2008


2007AAA/Aaa


82.0
%


94.0
%AA/Aa2


2.8



A/A2


1.9



BBB/Baa2






BB/Ba2






B/B2


2.1



CCC/Caa or lower, or not rated


11.2



6.0Total fixed income securities


100.0
%


100.0
%  26




---



##### 



Investment
    Results
 Competition         The Company
    operates in a highly competitive environment, which makes it
    more difficult to attract and retain business
 Ratings  27




---



##### 



Insurance
    Regulatory Matters   General
      Possible
    Legislative and Regulatory Changes
     28




---



##### 



and/or
  12-month and/or
      Certain business practices of the insurance industry have
    become the subject of investigations by government authorities
    and other parties and the subject of class action
    litigation
    Recent
    Regulatory Examinations
     29




---



##### 



Producer
    Compensation Investigations
      Certain business practices of the insurance industry have
    become the subject of investigations by government authorities
    and other parties and the subject of class action
    litigation
  Regulation
    of Dividends and Other Payments from the Companys
    Insurance Subsidiaries
     30




---



##### 



30-day 12-month
  30-day 12-month
        Capital
    Adequacy
   31




---



##### 



NAIC
    IRIS Ratios
    Investment
    Regulation
    Guaranty
    Funds
       32




---



##### 



Shared
    Markets
      state-by-state
    Insurance
    Regulation Concerning Change or Acquisition of
    Control
     33




---



##### 



Terrorism
    Risk Insurance Program Reauthorization Act of 2007
    (TRIPRA)
          Catastrophic
    events could cause unanticipated losses and reduce net
    income
 Employees  ITEM 1A.
    RISK FACTORS Form 10-K,
  The
    Company operates in a highly competitive environment, which
    makes it more difficult to attract and retain
    business.
   34




---



##### 



Results
    in the property and casualty insurance industry are subject to
    fluctuations and uncertainty, which may adversely affect
    managements ability to write policies.
    Continuing
    volatility in the global financial markets and current economic
    conditions could have a material adverse effect on the
    Companys results of operations and financial
    position.
         35




---



##### 



The
    Company may incur a reduction in its net income if its reserves
    are insufficient.
    Losses and Loss Adjustment Expenses
        Reserves
    for asbestos, environmental and other latent claims may be
    insufficient.
     36




---



##### 



Losses and Loss Adjustment Expenses
  Catastrophic
    events could cause unanticipated losses and reduce net
    income.
       37




---



##### 



If the
    Company is unable to realize its investment objectives, its net
    income and financial condition may be adversely
    affected.
  mark-to-market mark-to-market
     38




---



##### 



The
    Company may be unable to obtain reinsurance coverage at
    reasonable prices or on terms that adequately protect
    it.
        The
    Company bears credit risk with respect to its reinsurers and
    certain policyholders, and if one or more of them fails to pay,
    the Company could experience losses, which would reduce its net
    income.
         39




---



##### 



The
    Company is a holding company and is dependent on dividends from
    its insurance subsidiaries to pay its obligations, including
    interest and principal on its debt securities.
      A
    downgrade in the financial strength ratings of the
    Companys insurance subsidiaries, especially in the ratings
    issued by A.M. Best, could make it difficult for the
    Company to write quality new or renewal business, secure
    adequate reinsurance on acceptable terms and retain its key
    management and employees.
   40




---



##### 



The
    loss of any of the Companys key producers could have an
    adverse effect on the Companys ability to generate
    business.
    Certain
    business practices of the insurance industry have become the
    subject of investigations by government authorities and other
    parties and the subject of class action
    litigation.
    Securities
    and Exchange Commission (SEC) requests for
    information may adversely affect the Company
 41




---



##### 



Securities
    and Exchange Commission (SEC) requests for
    information may adversely affect the Company.
    The
    effects of emerging claim and coverage issues on the
    Companys business are uncertain.
    The
    Companys debt securities are effectively subordinate to
    all of the obligations of the Companys insurance
    subsidiaries, including all of the Companys liabilities
    with respect to insurance policies that the Company has written
    or will write in the future.
    Control
    of the Companys corporate actions is retained by Fairfax,
    which may have interests that are different from the interests
    of holders of the Companys debt securities.
    
    electing members of the Companys board of directors and
    appointment of members of the audit committee;
    adopting amendments to the Companys charter documents;
    approving a merger or consolidation, liquidation or sale, of
    all, or substantially all, of the Companys assets;
    approving transactions that would result in a change of control;
    funding its or its affiliates requirements or losses by
    causing the Company to distribute additional amounts to it,
    whether by requiring the Company to incur additional
    indebtedness or otherwise engage in financial or other
    reinsurance, investment, tax sharing or other transactions with
    Fairfax or its affiliates; and
    entering into transactions with Fairfax or its affiliates. 42




---



##### 



The
    Company is subject to extensive government regulation, which may
    limit the rates it can charge or otherwise adversely affect its
    business.
        If
    certain policies with respect to which other insurance companies
    have assumed liability from Crum & Forster have not
    been effectively novated, the Company could be subject to
    increased liabilities that are not reflected on the balance
    sheet, including with respect to asbestos, environmental or
    other latent exposures.
     43




---



##### 



ITEM 1B.
    UNRESOLVED STAFF COMMENTS  ITEM 2.  PROPERTIES  ITEM 3.  LEGAL
    PROCEEDINGS Litigation      Insurance
    Industry Investigations  44




---



##### 



Securities and Exchange Commission (SEC) requests
    for information may adversely affect the Company Certain business
    practices of the insurance industry have become the subject of
    investigations by government authorities and other parties and
    the subject of class action litigation
 ITEM 4.  SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS Form 10-K.
  PART II
  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES   ITEM 6.  SELECTED
    FINANCIAL DATA     45




---



##### 



For the Years Ended December 31,(dollars in thousands)

2008


2007


2006


2005


2004GAAP STATEMENT OF INCOME DATA:Gross premiums written

$
1,019,569


$
1,245,021


$
1,351,631


$
1,097,756


$
1,138,961Net premiums written

$
871,152


$
1,099,635


$
1,166,532


$
868,966


$
918,300Premiums earned

$
998,028


$
1,186,144


$
1,084,023


$
894,173


$
907,709Investment income and realized investment gains and losses

$
604,254


$
377,503


$
392,818


$
215,310


$
164,638Losses and LAE

$
822,867


$
752,969


$
666,079


$
615,505


$
761,512Policy acquisition costs and other underwriting expenses

$
320,447


$
340,196


$
314,403


$
254,452


$
252,987Income before equity in earnings of investees, net of tax

$
333,267


$
269,882


$
299,121


$
138,743


$
11,717Equity in (losses) earnings of investees, net of tax

$
(461
)

$
23,300


$
13,162


$
17,193


$
12,478Net income

$
332,806


$
293,182


$
312,283


$
155,936


$
24,195   At December 31,(dollars in thousands)

2008


2007


2006


2005


2004GAAP BALANCE SHEET DATA:Total investments (including cash and cash equivalents and
    assets pledged for derivatives and short-sale
    obligations)1

$
4,032,034


$
4,547,529


$
3,926,276


$
3,720,538


$
3,495,509Total assets

$
5,598,880


$
6,612,812


$
6,443,554


$
6,482,879


$
6,031,641Unpaid losses and LAE

$
2,987,803


$
3,178,506


$
3,371,549


$
3,673,034


$
3,370,936Long term debt

$
310,502


$
313,220


$
293,170


$
292,470


$
291,841Shareholders equity

$
1,166,432


$
1,293,459


$
1,093,055


$
961,193


$
881,189   Years Ended December 31,2008


2007


2006


2005


2004SELECTED FINANCIAL RATIOS BASED ON GAAP DATA:Loss and LAE ratio


82.5
%


63.5
%


61.5
%


68.8
%


83.9
%Underwriting expense ratio


32.1



28.7



29.0



28.5



27.9Combined ratio


114.6
%


92.2
%


90.5
%


97.3
%


111.8
%Ratio of earnings to fixed
    charges2


11.9x



9.1x



11.0x



4.4x



1.3x   Years Ended December 31,(dollars in thousands)

2008


2007


2006


2005


2004SELECTED COMBINED STATUTORY DATA:Loss and LAE ratio


74.1
%


64.1
%


61.9
%


69.4
%


86.1
%Underwriting expense ratio


34.3



30.0



28.0



28.4



27.7Combined ratio


108.4
%


94.1
%


89.9
%


97.8
%


113.8
%Policyholders surplus

$
1,410,612


$
1,639,751


$
1,406,822


$
1,313,988


$
1,206,547Ratio of net premiums written to policyholders surplus


0.62x



0.67x



0.83x



0.66x



0.76x    1
    Includes $4,416, $1,043,436,
    $535,594, $496,903 and $277,899 of assets pledged for
    derivatives and short-sale obligations at December 31,
    2008, 2007, 2006, 2005 and 2004, respectively.2
    For purposes of determining the
    ratio of earnings to fixed charges, earnings includes income
    before income taxes, adjusted for undistributed income or loss
    from equity method investees and fixed charges. Fixed charges
    consist of interest expense, amortization of capitalized
    expenses related to indebtedness and an estimate of implicit
    interest included in rent expense. The calculation of the ratio
    of earnings to fixed charges is filed as an exhibit to this
    Form 10-K. 46




---



##### 



ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS   Critical
    Accounting Policies and Estimates     Unpaid
    Losses and Loss Adjustment Expenses
           47




---



##### 



year-on-year
               48




---



##### 



Change inUltimate Lossand ALAELine of business

Accident Years

($ millions)Workers Compensation

2001-2008

$
36.3General
    Liability1

2001-2008

$
36.9Commercial Automobile

2007-2008

$
7.8     1
    Excludes asbestos, environmental
    and other latent.    ground-up ground-up policyholder-by-policyholder
         49




---



##### 



Asbestos
    Reserves
         50




---



##### 



At December 31, 2008Attachment Point

Estimated % of


Estimated % of(dollars in millions)

Total Policies


Total Policy Limits$0 to $1


73.7
%


20.9
%$1 to $10


19.1
%


59.4
%$10 to $20


2.5
%


14.3
%$20 to $50


2.7
%


4.7
%Above $50


2.0
%


0.7
%Total policies with asbestos claims


100.0
%


100.0
%         At December 31, 2008Number of


Remaining(dollars in millions)

Bankruptcies


Policy LimitsNo insurance coverage issued to policyholder


58


$
Resolved


18



Potential future exposure


5



40Total


81


$
40    51




---



##### 



policyholder-by-policyholder ground-up,
  policyholder-by-policyholder
        (dollars in millions)

At December 31, 2008Net unpaid losses and ALAE

$
301.93-year
    average net paid losses and ALAE

$
49.03-year
    survival ratios


6.2     Amount


% of
    Total1Crum & Forster (dollars in millions)Paid losses and ALAE at December 31, 2008

$
515.5



63.1
%Net unpaid losses and ALAE (case and IBNR) at December 31,
    2008


301.9



36.9Ultimate losses and ALAE at December 31, 2008

$
817.4



100.0
%Industry, as represented by A.M. Best Company
    (A.M. Best)2(dollars in millions)Paid losses and ALAE at December 31, 2006

$
39,500



60.8
%Net unpaid losses and ALAE (case and IBNR) at December 31,
    2006


25,500



39.2Ultimate losses and ALAE at December 31, 2006

$
65,000



100.0
%    1
    Net of per risk reinsurance, but
    before the benefit of corporate aggregate reinsurance.2
    Extracted from an A.M. Best
    report dated November 26, 2007. 52




---



##### 



Environmental
    Reserves
     53




---



##### 



(dollars in millions)

At December 31, 2008Net unpaid losses and ALAE

$
79.03-year
    average net paid losses and ALAE

$
12.33-year
    environmental survival ratio


6.4     Other
    Latent Reserves
   54




---



##### 



Summary
      Other
    than Temporary Declines in Value of Investments
  available-for-sale
    available-for-sale
   55




---



##### 



Derivative
    Valuations
      Reinsurance
    Recoverable
          Deferred
    Income Tax Assets
   56




---



##### 



and/or
  Income Taxes
     Summary
    of Operations Overview
       57




---



##### 



Market
    Conditions
     58




---



##### 



Results
    of Operations   Years Ended December 31,(dollars in millions)

2008


2007


2006Gross premiums written

$
1,019.6


$
1,245.0


$
1,351.6Net premiums written

$
871.2


$
1,099.6


$
1,166.5Premiums earned

$
998.0


$
1,186.1


$
1,084.0Losses and LAE


822.9



752.9



666.1Underwriting expenses


320.4



340.2



314.4Underwriting (loss) profit


(145.3
)


93.0



103.5Investment income and realized investment gains


604.3



377.5



392.8Interest and other expense


36.7



39.4



41.0Costs related to early retirement of debt


0.4



21.2



Income before income taxes and equity in earnings of investees


421.9



409.9



455.3Income tax expense


88.6



140.0



156.2Income before equity in earnings of investees


333.3



269.9



299.1Equity in (losses) earnings of investees, net of tax


(0.5
)


23.3



13.2Net income

$
332.8


$
293.2


$
312.3Loss and LAE ratio


82.5
%


63.5
%


61.5
%Underwriting expense ratio


32.1



28.7



29.0Combined ratio


114.6
%


92.2
%


90.5
%     mark-to-market
      Losses
    and Loss Adjustment Expenses Investment Results
 59




---



##### 



mark-to-market
  78-9, Accounting for Investments in Real Estate Ventures, mark-to-market  mark-to-market Accounting for
    Derivative Instruments and Hedging Activities Business
    Combinations
    Underwriting
    Results
  Gross
    Premiums Written
    Years Ended December 31,2008





2007Increase/





Increase/(dollars in millions)

2008


2007


(Decrease)


2006


(Decrease)General liability

$
216.3


$
251.5


$
(35.2
)

$
296.0


$
(44.5
)Workers compensation


196.0



258.9



(62.9
)


277.1



(18.2
)Commercial automobile


164.0



203.4



(39.4
)


222.5



(19.1
)Property


173.4



285.2



(111.8
)


375.6



(90.4
)Commercial multi-peril


83.8



88.2



(4.4
)


83.8



4.4Accident and health


159.7



127.6



32.1



64.3



63.3Other


26.4



30.2



(3.8
)


32.3



(2.1
)Total gross premiums written

$
1,019.6


$
1,245.0


$
(225.4
)

$
1,351.6


$
(106.6
)  60




---



##### 



Years Ended December 31,(dollars in millions)

2008


2007


2006Surety

$
12.4


$
14.0


$
13.8Personal automobile


7.8



9.5



11.4Homeowners


6.2



6.7



7.1Total gross premiums written in other

$
26.4


$
30.2


$
32.3         Casualty
    Gross Premiums Written
       61




---



##### 



Property
    Gross Premiums Written
      Other
    Gross Premiums Written
    Net
    Premiums Written
    Years Ended December 31,2008


2007


2006(dollars in millions)

$


%1


$


%1


$


%1General liability

$
172.9



80.0
%

$
213.2



84.8
%

$
247.8



83.7
%Workers compensation


192.1



98.0
%


252.6



97.6
%


272.0



98.2
%Commercial automobile


159.6



97.3
%


199.7



98.2
%


219.4



98.6
%Property


124.7



71.9
%


219.1



76.8
%


276.0



73.5
%Commercial multi-peril


77.8



92.8
%


81.5



92.4
%


78.0



93.1
%Accident and health


117.7



73.7
%


103.9



81.4
%


43.9



68.3
%Other


26.4



100.0
%


29.6



98.0
%


29.4



91.0
%Total net premiums written

$
871.2



85.4
%

$
1,099.6



88.3
%

$
1,166.5



86.3
%     1
    Percentage represents the
    percentage of net premiums written to gross premiums written.     62




---



##### 



Premiums
    Earned
    Years Ended December 31,(dollars in millions)

2008


2007


2006General liability

$
194.3


$
229.0


$
227.7Workers compensation


218.4



258.0



278.8Commercial automobile


187.2



210.4



203.9Property


172.7



273.3



246.2Commercial multi-peril


79.9



80.5



61.9Accident and health


117.7



103.9



43.9Other


27.8



31.0



21.6Total premiums earned

$
998.0


$
1,186.1


$
1,084.0         Losses
    and Loss Adjustment Expenses
    Years Ended December 31,2008





2007





2006(dollars in millions)

Losses


Ratio


Losses


Ratio


Losses


RatioAccident year, as reported

$
802.8



80.4
%

$
816.8



68.9
%

$
762.3



70.3
%(Favorable) adverse development of prior years losses and
    LAE before impact of corporate aggregate reinsurance:Accident year 2007


(17.1
)






Accident year 2006


(39.0
)






(10.2
)






Accident year 2005


(1.9
)






(26.9
)






(10.2
)Accident year 2004


(12.3
)






(41.7
)






(15.9
)Accident year 2003


2.1







(1.0
)






(11.3
)Accident year 2002 and prior


107.2







29.6







(48.5
)Total adverse (favorable) development


39.0



3.9



(50.2
)


(4.2
)


(85.9
)


(7.9
)Impact of corporate aggregate reinsurance:Amortization of deferred gain


(18.9
)






(13.7
)






(12.9
)Other activity


















2.6Total impact of corporate aggregate reinsurance


(18.9
)


(1.8
)


(13.7
)


(1.2
)


(10.3
)


(0.9
)Incurred losses and LAE

$
822.9



82.5
%

$
752.9



63.5
%

$
666.1



61.5
%  63




---



##### 



Accident Years Ended December 31,2008


2007


2006General liability


69.5
%


64.0
%


60.8
%Workers compensation


77.0
%


73.5
%


62.3
%Commercial automobile


77.8
%


70.2
%


73.9
%Property


122.9
%


66.6
%


76.2
%Commercial multi-peril


57.5
%


57.7
%


41.2
%Accident and health


70.8
%


70.9
%


63.5
%Other


44.7
%


43.8
%


43.0
%Accident year loss and LAE ratio


80.4
%


67.4
%


65.8
%    64




---



##### 



Unpaid Losses and Loss Adjustment
    Expenses
  Underwriting
    Expenses
    Years Ended December 31,2008


2007


2006Policy acquisition ratio


15.3
%


15.0
%


14.3
%Other underwriting expense ratio


16.8



13.7



14.7Underwriting expense ratio


32.1
%


28.7
%


29.0
%      65




---



##### 



Investment
    Results
    Years Ended December 31,(dollars in millions)

2008


2007


2006Average investments, including cash and cash equivalents, at
    book
    value1

$
4,345.5


$
4,157.9


$
3,780.9Investment income

$
72.4


$
143.4


$
220.0Realized investment gains


531.9



234.1



172.8Pre-tax equity in earnings of investees


(0.7
)


35.8



20.2Change in unrealized investment gains and losses and foreign
    currency translation


(37.9
)


139.2



(139.0
)Total return on investments

$
565.7


$
552.5


$
274.0Gross investment
    yield2


2.5
%


5.1
%


7.2
%Net investment
    yield2


1.6
%


4.3
%


6.4
%Total return on investments


13.0
%


13.3
%


7.2
%    1
    Includes book value of assets
    pledged for derivatives and short-sale obligations of
    $4.4 million, $1,047.4 million and $540.9 million
    at December 31, 2008, 2007 and 2006, respectively.2
    Including pre-tax equity in
    earnings of investees.    Investment
    Income
  year-over-year
     66




---



##### 



Realized
    Investment Gains
    Years Ended December 31,(dollars in millions)

2008


2007


2006Fixed income securities

$
52.4


$
(26.6
)

$
61.3Equity securities


2.8



27.9



194.2Derivatives and short-sale obligations


713.4



246.6



(73.5
)Other invested assets


(42.0
)


11.6



6.7726.6



259.5



188.7Other than temporary impairment charges:Equity securities


(190.3
)


(22.4
)


(15.9
)Fixed income securities


(4.4
)


(3.0
)


(194.7
)


(25.4
)


(15.9
)Total pre-tax net realized investment gains

$
531.9


$
234.1


$
172.8   mark-to-market held-for-trading
      mark-to-market held-for-trading
  mark-to-market The Fair Value Option for Financial
    Assets and Financial Liabilities  Including an
    Amendment of FASB Statement No. 115
    available-for-sale
 67




---



##### 



Pre-tax
    Equity in Earnings of Investees
       Interest
    and Other Expense
    Income
    Taxes
     Liquidity
    and Capital Resources Holding
    Company
   68




---



##### 



3 4 3 8
    Insurance
    Subsidiaries
      Year Ended December 31,2008


2007


2006Premiums collected

$
935.3


$
1,162.7


$
1,199.6Net paid losses and LAE


(518.7
)


(826.1
)


(707.0
)Commissions and other underwriting expenses paid


(323.7
)


(355.0
)


(329.7
)Cash underwriting income (loss)


92.9



(18.4
)


162.9Investment income received


139.2



131.0



142.2Interest and other expense paid


(31.7
)


(41.6
)


(37.7
)Income taxes paid


(99.5
)


(76.9
)


(178.0
)Cash provided by (used in) operations

$
100.9


$
(5.9
)

$
89.4  69




---



##### 



70




---



##### 



Years Ended December 31,(dollars in millions)

2008


2007


2006Combined policyholders surplus

$
1,410.6


$
1,639.8


$
1,406.8Statutory operating leverage


0.62
x


0.67
x


0.83
x    Contractual
    Obligations   (dollars in millions)

Total


2009


2010 to 2011


2012 to 2013


2014 and beyondUnpaid losses and LAE

$
2,987.8


$
959.0


$
1,055.0


$
519.3


$
454.5Long-term debt, including interest payments


547.4



25.5



51.2



51.2



419.5Operating leases


77.0



13.7



21.0



11.1



31.2Other long-term liabilities


57.5



26.0



3.8



11.9



15.8Total contractual obligations

$
3,669.7


$
1,024.2


$
1,131.0


$
593.5


$
921.0   Unpaid
    Losses and Loss Adjustment Expenses
  The Company may incur a reduction in its
    net income if its reserves are insufficient Unpaid Losses and Loss Adjustment
    Expenses
  Long-Term
    Debt, including Interest Payments
  3 4 Holding Company
 71




---



##### 



Operating
    Leases
    Other
    Long-Term Liabilities
       Regulatory
    Issues  Off-Balance
    Sheet Arrangements Regulation S-K.
 ITEM 7A.  QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK      72




---



##### 



Interest
    Rate Risk   At December 31, 2008


At December 31, 2007Fair Value of Fixed








Fair Value of FixedIncome


Hypothetical


Hypothetical


Income


Hypothetical


Hypothetical(dollars in millions)

Securities


$ Change


% Change


Securities


$ Change


% Change200 basis point decline

$
2,106.5


$
339.2



19.2
%

$
2,717.9


$
564.9



26.2
%100 basis point decline

$
1,958.5


$
191.2



10.8
%

$
2,411.9


$
258.9



12.0
%Base scenario

$
1,767.3










$
2,153.0







100 basis point increase

$
1,584.3


$
(183.0
)


(10.4
)%

$
1,936.2


$
(216.8
)


(10.1
)%200 basis point increase

$
1,425.7


$
(341.6
)


(19.3
)%

$
1,750.9


$
(402.1
)


(18.7
)%    Equity
    Price Risk available-for-sale
   73




---



##### 



Foreign
    Currency Exchange Rate Risk  74




---



##### 



ITEM 8.  FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
  PageNumberReport of Independent Registered Public Accounting Firm


76Consolidated Balance Sheets at December 31, 2008 and 2007


77Consolidated Statements of Income for the Years Ended
    December 31, 2008, 2007 and 2006


78Consolidated Statements of Shareholders Equity for the
    Years Ended December 31, 2008, 2007 and 2006


79Consolidated Statements of Comprehensive Income for the Years
    Ended December 31, 2008, 2007 and 2006


80Consolidated Statements of Cash Flows for the Years Ended
    December 31, 2008, 2007 and 2006


81Notes to Consolidated Financial Statements


83  75




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 
          76




---



##### 



CRUM &
    FORSTER HOLDINGS CORP.CONSOLIDATED BALANCE SHEETS 
    (Dollars in thousands, except per share amounts)
  At December 31,2008


2007ASSETSInvestments:Fixed income securities,
    available-for-sale,
    at fair value (amortized cost of $1,466,114 and $1,741,750 in
    2008 and 2007, respectively)

$
1,533,334


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


233,998



125,848Equity securities, at fair value (cost of $1,106,098 and
    $661,289 in 2008 and 2007, respectively)


1,020,154



684,457Investments at equity


103,959



384,030Derivatives and other invested assets, carried at fair value


426,374



247,477Short-term investments, at fair value


549,937



196,138Total investments


3,867,756



3,356,587Cash and cash equivalents


159,862



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


4,416



1,043,436Accrued investment income


29,378



37,201Premiums receivable


182,158



213,488Reinsurance recoverable


759,028



1,310,192Reinsurance recoverable from affiliates


209,189



229,591Prepaid reinsurance premiums


28,995



21,848Deferred income taxes


239,077



93,161Deferred policy acquisition costs


52,705



72,282Other assets


66,316



87,520Total assets

$
5,598,880


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

$
2,987,803


$
3,178,506Unearned premiums


366,362



486,091Funds held under reinsurance contracts


228,835



250,697Accounts payable and other liabilities


417,669



220,142Deferred income on retroactive reinsurance


121,277



152,041Short-sale obligations






718,656Long-term debt


310,502



313,220Total liabilities


4,432,448



5,319,353Commitments and contingencies (Note 12)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


(7,455
)


44,479Retained earnings


432,894



507,987Total shareholders equity


1,166,432



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

$
5,598,880


$
6,612,812   The accompanying notes are an integral part of the
    consolidated financial statements.
 77




---



##### 



CRUM &
    FORSTER HOLDINGS CORP.CONSOLIDATED STATEMENTS OF INCOME 
    (Dollars in thousands)
   Years Ended December 31,2008


2007


2006REVENUESPremiums earned

$
998,028


$
1,186,144


$
1,084,023Investment income


72,375



143,418



220,044Realized investment gains


531,879



234,085



172,774Total revenues


1,602,282



1,563,647



1,476,841EXPENSESLosses and loss adjustment expenses


822,867



752,969



666,079Policy acquisition costs


152,325



177,408



154,513Other underwriting expenses


168,122



162,788



159,890Interest expense


27,885



29,850



32,986Costs related to early retirement of debt


392



21,187



Other expense


8,821



9,576



8,096Total expenses


1,180,412



1,153,778



1,021,564Income before income taxes and equity in earnings of investees


421,870



409,869



455,277Income tax expense


88,603



139,987



156,156Income before equity in earnings of investees


333,267



269,882



299,121Equity in (losses) earnings of investees, net of tax


(461
)


23,300



13,162NET INCOME

$
332,806


$
293,182


$
312,283   The accompanying notes are an integral part of the
    consolidated financial statements.
 78




---



##### 



CRUM &
    FORSTER HOLDINGS CORP.CONSOLIDATED STATEMENTS OF SHAREHOLDERS
    EQUITY 
    (Dollars in thousands)
  Years Ended December 31,2008


2007


2006COMMON STOCKBalance, beginning and end of year

$



$



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


740,993



740,993



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


44,479



(36,978
)


53,443Cumulative 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
)


Cumulative effect of adoption of Statement of Financial
    Accounting Standards No. 158










(55
)Balance, beginning of year, after cumulative effect of
    adjustments


14,582



(47,124
)


53,388Unrealized investment (losses) gains, net of transfers to
    realized investment gains and losses


(23,586
)


71,285



(91,652
)Foreign currency translation


(1,020
)


19,236



1,286Change in funded status of defined benefit postretirement plans


2,569



1,082



Balance, end of year


(7,455
)


44,479



(36,978
)RETAINED EARNINGSBalance, beginning of year


507,987



389,040



166,757Cumulative 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






9,465



Balance, beginning of year, after cumulative effect of
    adjustments


594,088



398,505



166,757Net income


332,806



293,182



312,283Dividends to shareholder


(494,000
)


(183,700
)


(90,000
)Balance, end of year


432,894



507,987



389,040TOTAL SHAREHOLDERS EQUITY

$
1,166,432


$
1,293,459


$
1,093,055   The accompanying notes are an integral part of the
    consolidated financial statements.
 79




---



##### 



CRUM &
    FORSTER HOLDINGS CORP.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 
    (Dollars in thousands)
  Years Ended December 31,2008


2007


2006NET INCOME

$
332,806


$
293,182


$
312,283Change in components of other comprehensive (loss) income for
    the year, before tax:Unrealized investment (losses) gains, net of transfers to
    realized investment gains and losses


(36,287
)


109,638



(141,004
)Foreign currency translation


(1,569
)


29,594



1,979Change in funded status of defined benefit postretirement plans


3,953



1,664



Other comprehensive (loss) income for the year before tax


(33,903
)


140,896



(139,025
)Deferred income tax benefit (expense) for the year:Deferred income tax benefit (expense) benefit from unrealized
    investment gains and losses


12,701



(38,353
)


49,352Deferred income tax benefit (expense) from foreign currency
    translation


549



(10,358
)


(693
)Deferred income tax expense from change in funded status of
    defined benefit postretirement plans


(1,384
)


(582
)


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


11,866



(49,293
)


48,659Other comprehensive (loss) income for the year, net of tax


(22,037
)


91,603



(90,366
)COMPREHENSIVE INCOME

$
310,769


$
384,785


$
221,917   The accompanying notes are an integral part of the
    consolidated financial statements.
 80




---



##### 



CRUM &
    FORSTER HOLDINGS CORP.CONSOLIDATED STATEMENTS OF CASH FLOWS 
    (Dollars in thousands)
   Years Ended December 31,2008


2007


2006OPERATING ACTIVITIESNet income

$
332,806


$
293,182


$
312,283Adjustments to reconcile net income to net cash from operating
    activities:Amortization of premium (accretion of discount) on fixed income
    securities


103



(7,313
)


(9,951
)Realized investment gains


(531,879
)


(234,085
)


(172,774
)Losses (earnings) of equity method investees, net of dividends


1,185



(30,528
)


(15,136
)Losses (earnings) of investment companies and similar equity
    method investees


51,238



(12,985
)


(87,762
)Loss on commutation


75,470Depreciation and amortization


3,570



3,272



3,174Deferred income tax (benefit) expense


(164,313
)


143,814



(62,007
)Non-cash costs related to early retirement of debt


170



9,216



Other non-cash net income adjustments


15,692



9,313



3,748Changes in:Accrued investment income


8,013



(2,620
)


3,199Premiums receivable


31,430



37,426



(6,465
)Reinsurance recoverable


434,063



175,094



321,169Prepaid reinsurance premiums


(7,147
)


3,582



5,878Deferred policy acquisition costs


19,577



11,682



(13,157
)Other assets


13,890



(3,247
)


5,169Unpaid losses and loss adjustment expenses


(188,558
)


(193,043
)


(301,485
)Unearned premiums


(119,729
)


(90,091
)


76,631Accounts payable and other liabilities


125,301



(118,615
)


26,840Net cash provided by (used in) operating activities


100,882



(5,946
)


89,354INVESTING ACTIVITIESPurchases of fixed income securities


(1,931,145
)


(151,814
)


(518,443
)Proceeds from sales and maturities of fixed income securities


2,361,446



213,856



591,771Purchases of equity securities


(672,716
)


(254,035
)


(590,158
)Proceeds from sales of equity securities


9,422



239,458



635,348Net proceeds from sales of investments at equity


745



10,402



104,528Net proceeds from sales (purchases) of derivatives and other
    invested assets


369,355



26,802



(19,123
)Purchases of short-term investments


(1,807,749
)


(335,404
)


(14,130
)Proceeds from sales and maturities of short-term investments


1,477,084



153,396



Net change in obligation to return short-sale obligations


(649,517
)


333,874



24,931Net change in cash and cash equivalents held as collateral


730,540



(329,484
)


(91,120
)Net settlement of total return swaps and Eurodollar futures
    contracts


366,085







Purchases of fixed assets


(2,604
)


(1,875
)


(1,656
)Net cash provided by (used in) investing activities


250,946



(94,824
)


121,948  The accompanying notes are an integral part of the
    consolidated financial statements.
  81




---



##### 



CRUM &
    FORSTER HOLDINGS CORP.
  CONSOLIDATED STATEMENTS OF CASH FLOWS
  (Dollars in thousands)
  Years Ended December 31,2008


2007


2006FINANCING ACTIVITIESDividends to shareholder


(335,202
)


(128,825
)


(90,000
)Repayment of
    103/8%
    long-term debt


(4,270
)


(295,730
)


Issuance of
    73/4%
    long-term debt






330,000



New debt issuance costs






(23,912
)


Net cash used in financing activities


(339,472
)


(118,467
)


(90,000
)Net change in cash and cash equivalents


12,356



(219,237
)


121,302Cash and cash equivalents, beginning of year


147,506



366,743



245,441Cash and cash equivalents, end of year

$
159,862


$
147,506


$
366,743SUPPLEMENTAL CASH FLOW INFORMATIONCash paid for interest

$
25,797


$
24,907


$
31,125Cash paid to parent for income taxes

$
99,514


$
76,906


$
178,063SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIESNote received as consideration for the sale of an investment in
    affiliate

$
248,066


$



$
Note paid for the purchase of an investment in an affiliate

$
246,066


$



$
In-kind dividend payment to parent in the form of fixed income
    securities

$
158,798


$



$
Note received from parent in partial settlement of the
    Companys tax net operating losses

$



$
41,882


$
Note received from parent in settlement of the sale of a common
    stock investment

$



$
12,993


$
In-kind dividend payment to parent representing cancellation of
    the aforementioned notes received in 2007

$



$
54,875


$
    The accompanying notes are an integral part of the
    consolidated financial statements.
  82




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Dollars in thousands) 1.
    Organization
    and Basis of Presentation            2.
    Summary
    of Significant Accounting Policies    Investments
  available-for-sale, available-for-sale
   83




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
    held-for-trading Held-for-trading
    The Equity Method
    of Accounting for Investments in Common Stock The Fair
    Value Option for Financial Assets and Financial
    Liabilities
    Derivatives
      Cash
    and Cash Equivalents
   84




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
   Deferred
    Policy Acquisition Costs
    Goodwill
    Unpaid
    Losses and Loss Adjustment Expenses
      Reinsurance
        Funds
    held under Reinsurance Contracts
   85




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
   Income
    Taxes
          Premiums
    Foreign
    Currency
  Foreign Currency Translation
  Accumulated
    Other Comprehensive (Loss) Income, Net of Tax
  available-for-sale
 86




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
  Employers
    Accounting for Defined Benefit Pension and Other Postretirement
    Plans  an amendment of FASB Statements No. 87,
    88, 106, and 132(R)
  Recent
    Accounting Pronouncements
  Accounting
    Pronouncements Adopted
  SFAS No. 159. instrument-by-instrument Accounting for Certain Investments in
    Debt and Equity Securities
       87




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (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 FAS 157-2),
  FAS 157-3, Determining the Fair Value of a Financial Asset When the
    Market for That Asset Is Not Active FAS 157-3), 157-3
  SFAS No. 155. Accounting
    for Certain Hybrid Financial Instruments  an
    amendment of FASB Statements Nos. 133 and 140 Accounting for Derivative Instruments
    and Hedging Activities
 88




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
  instrument-by-instrument
  FIN 48. Accounting for
    Uncertainty in Income Taxes  an interpretation of
    FASB Statement No. 109 Accounting for Income
    Taxes
  Accounting
    Pronouncements Not Yet Adopted
   SFAS No. 162. The Hierarchy of Generally
    Accepted Accounting Principles ). The Meaning of Present Fairly in Conformity with Generally
    Accepted Accounting Principles.
  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.
 89




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
   3.
    Investments  available-for-sale held-for-trading
  Available-For-Sale
    Securities
  available-for-sale
  At December 31, 2008Cost or


Gross


GrossAmortized


Unrealized


UnrealizedCost


Gains


Losses


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

$
136,551


$
32,879


$



$
169,430States, municipalities and political subdivisions


1,279,232



54,230



17,997



1,315,465Other corporate


50,331



2,603



4,495



48,439Total fixed income securities


1,466,114



89,712



22,492



1,533,334Equity securities  common stocks


1,106,098



29,422



115,366



1,020,154Total
    available-for-sale
    securities

$
2,572,212


$
119,134


$
137,858


$
2,553,488     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


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). 90




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
   available-for-sale
  At December 31, 2008AmortizedCost


Fair ValueDue in one year or less

$
50,364


$
50,596Due after one year through five years


50,227



47,927Due after five years through ten years


9,512



10,832Due after ten years through twenty years


147,760



178,052Due after twenty years


1,208,251



1,245,927Total fixed income securities

$
1,466,114


$
1,533,334     Years Ended December 31,2008


2007


2006Fixed income securities

$
94,292


$
97,148


$
(24,795
)Equity securities


(108,311
)


(3,670
)


(65,164
)Other, primarily investments at equity


(22,268
)


16,160



(51,045
)Change in unrealized investment gains and losses, net of
    transfers to realized investment gains and losses, before income
    taxes1


(36,287
)


109,638



(141,004
)Deferred income taxes


12,701



(38,353
)


49,352Net change in unrealized investment gains and losses, net of
    transfers to realized investment gains and losses

$
(23,586
)

$
71,285


$
(91,652
)     1
    The amounts are net of transfers
    to realized investment gains and losses of $54,520, $21,904 and
    $108,045 in 2008, 2007 and 2006, respectively.  available-for-sale
    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, government agencies and authorities

$



$







$



$







$



$




States, municipalities and political subdivisions


400,602



17,997



30















400,602



17,997



30Corporate bonds


36,100



4,495



1















36,100



4,495



1Total fixed income securities


436,702



22,492



31















436,702



22,492



31Equity securities


519,602



115,366



14















519,602



115,366



14Total securities in an unrealized loss position

$
956,304


$
137,858



45


$



$







$
956,304


$
137,858



45  91




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
          Less than 12 Months


Greater than 12 Months


TotalNumber








Number








NumberFair


Unrealized


of


Fair


Unrealized


of


Fair


Unrealized


ofValue


Loss


Securities


Value


Loss


Securities


Value


Loss


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

$
41,056


$
171



2


$
1,301,404


$
45,713



6


$
1,342,460


$
45,884



8States, municipalities and political subdivisions


668



12



2















668



12



2Corporate bonds


3,810



466



1















3,810



466



1Total fixed income securities


45,534



649



5



1,301,404



45,713



6



1,346,938



46,362



11Equity securities:Common stocks


243,115



34,301



6















243,115



34,301



6Preferred stocks


7,348



742



2















7,348



742



2Total equity securities


250,463



35,043



8















250,463



35,043



8Total securities in an unrealized loss position

$
295,997


$
35,692



13


$
1,301,404


$
45,713



6


$
1,597,401


$
81,405



19     At December 31, 2008UnrealizedFair Value


LossDue in one year or less

$



$
Due after one through five years


36,747



4,523Due after five through ten years


551



123Due after ten years through twenty years


12,717



2,379Due after twenty years


386,687



15,467Total fixed income securities in an unrealized loss position

$
436,702


$
22,492  92




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
  Fixed
    Income Securities, Designated as
    Held-For-Trading
  held-for-trading held-for-trading held-for-trading held-for-trading
  held-for-trading
  Investments
    at Equity
          At December 31,2008


2007Cash and investments

$
832,936


$
721,210Total assets

$
1,015,502


$
1,032,542Total liabilities

$
674,362


$
644,417Shareholders equity or partners
    capital1

$
341,140


$
388,125     1
    The difference between the
    Companys aggregate share of shareholders equity or
    partners capital and the carrying value on the
    consolidated balance sheets is primarily due to
    mark-to-market
    adjustments for changes in fair value of equity investments for
    which the Company has elected the fair value option under
    SFAS 159. 93




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
     Years Ended December, 312008


2007


2006Total revenues

$
191,205


$
217,052


$
360,264Total expenses

$
200,906


$
150,715


$
195,442Net (loss) income

$
(22,664
)

$
48,831


$
108,011   Derivatives
    and Other Invested Assets
  Derivative
    Securities and Short-Sale Obligations
      December 31, 2008


December 31, 2007FairFair








ValueNotional





Value


Notional





AssetAmount


Cost


Asset


Amount


Cost


(Liability)Credit default swaps

$
3,044,313


$
42,477


$
138,830



$
5,157,897


$
84,529


$
234,053S&P Index call options















867,616



1,615



60Warrants


101,201



10,225








101,201



10,225



5,902Eurodollar futures contracts


1,013,000








2











Securities 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 futures contracts are
    settled daily and therefore have no fair value at
    December 31, 2008.  Credit
    Default Swaps
   94




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
        NotionalAmount


Fair ValueExpiring in one year or less

$
60,000


$
2,100Expiring after 1 year through 5 years


2,441,552



103,615Expiring after 5 years through 10 years


542,761



33,115$
3,044,313


$
138,830   Total
    Return Swaps and Short-Sales
      Other
    Derivatives
     95




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
     Years Ended December 31,2008


2007


2006Credit default swaps

$
283,456


$
229,739


$
(23,854
)Total return swaps


362,059







SPDRs short-sales


65,506



(11,118
)


(45,818
)Common stocks short-sales


4,749



26,498



326S&P Index call options


(499
)


5,274



1,667Warrants


(5,902
)


(3,742
)


(1,192
)Eurodollar futures contracts


4,028







Embedded derivatives










(4,590
)Total net realized investment gains (losses)

$
713,397


$
246,651


$
(73,461
)     Credit


Total





Common


S&PDefault


Return


SPDRs


Stock


Index Call


OtherSwaps


Swaps


Short-Sales


Short-Sales


Options


Derivatives


TotalRealized gains (losses) on disposal

$
336,626


$
362,059


$
(22,523
)

$
5,116


$
(2,009
)

$
4,028


$
683,297Reversal of
    mark-to-market
    (gains) losses recognized in prior years


(130,866
)






88,029



(367
)


1,555







(41,649
)Mark-to-market
    gains (losses) recognized in 2008


77,696















(45
)


(5,902
)


71,749Net realized investment gains (losses)

$
283,456


$
362,059


$
65,506


$
4,749


$
(499
)

$
(1,874
)

$
713,397   Credit


Total





Common


S&PDefault


Return


SPDRs


Stock


Index Call


OtherSwaps1


Swaps


Short-Sales


Short-Sales


Options


Derivatives


TotalRealized gains on disposal

$
19,296


$



$



$
26,454


$
12,637


$



$
58,387Reversal of
    mark-to-market
    (gains) losses recognized in prior years


2,263











(326
)


(5,808
)






(3,871
)Mark-to-market
    gains (losses) recognized in 2007


208,180







(11,118
)


370



(1,555
)


(3,742
)


192,135Net realized investment gains (losses)

$
229,739


$



$
(11,118
)

$
26,498


$
5,274


$
(3,742
)

$
246,651    1
    The notional amount and related
    proceeds of the credit default swaps sold in 2007 was $121,290
    and $22,400, respectively.  mark-to-market
  Other
    Invested Assets
   96




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
    Investments
    in Related Parties
    Ownership PercentageAt December 31, 2008


At December 31, 2007


at December 31, 2008Carrying





Carrying


Crum &Cost


Value


Cost


Value


Forster


FairfaxOdyssey common shares

$
246,066


$
256,570


$



$




8.2
%


70.4
%Odyssey preferred shares

$
8,090


$
5,740


$
8,090


$
7,347



N/A



N/AHWIC Asia Fund

$
35,228


$
57,313


$
35,228


$
82,813



29.4
%


99.0
%Alliance Insurance Company

$
21,572


$
21,440


$



$




20.0
%


20.0
%Advent1

$
20,092


$
11,607


$
15,996


$
15,996



11.7
%


66.6
%Dalton Greater China Fund

$
13,266


$
7,893


$
13,266


$
20,733



39.9
%


66.8
%Arab Orient Insurance Company

$
11,277


$
8,848


$



$




21.9
%


21.9
%TRG Holding Corporation

$
5,025


$
8,091


$
5,025


$
8,314



1.4
%


100.0
%Rutland Fund A

$
4,676


$
4,036


$
4,928


$
5,982



12.7
%


25.4
%Ivy Realty Fund II, L.P.

$
1,169


$
1,118


$



$




11.3
%


22.6
%Northbridge

$



$



$
75,055


$
200,484







63.1
%TPF, L.P.

$



$



$
27,000


$
25,635







TPF, L.P. convertible debenture

$



$



$
2,500


$
2,500







MFXchange Holdings
    Inc.

$



$



$
3,725


$
2,405







100.0
%    1
    At December 31, 2008 and 2007,
    cost has been reduced by an other than temporary impairment
    charge of $7,253.                 97




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
               Regulatory
    and Other Deposits
      Investment
    Income
    Years Ended December 31,2008


2007


2006Interest on fixed income securities

$
103,328


$
102,905


$
106,391Dividends from equity securities


30,192



21,713



17,181(Losses) income from investments at equity and other invested
    assets


(51,262
)


12,985



90,351Other, primarily interest on cash and cash
    equivalents1


27,074



40,030



39,561Gross investment income


109,332



177,633



253,484Interest on funds held under reinsurance contracts


(11,714
)


(16,125
)


(8,427
)Investment expenses


(25,243
)


(18,090
)


(25,013
)Net investment income

$
72,375


$
143,418


$
220,044    1
    Includes interest of $16,394,
    $25,609 and $16,893 in 2008, 2007 and 2006, respectively, on
    cash collateral pledged for derivatives and short-sale
    obligations.   98




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
   Realized
    Investment Gains and Losses
    Years Ended December 31,2008


2007


2006Fixed income securities,
    available-for-sale:Gains

$
154,219


$
5,347


$
62,769Losses


(15,365
)


(3,994
)


(1,491
)Net


138,854



1,353



61,278Fixed income securities,
    held-for-trading:Gains






249



Losses


(90,891
)


(31,153
)


Net


(90,891
)


(30,904
)


Equity securities:Gains


2,814



33,952



194,129Losses


(190,305
)


(28,562
)


(15,857
)Net


(187,491
)


5,390



178,272Investments at equity:Gains






10,959



6,188Losses










Net






10,959



6,188Derivatives and other invested assets:Gains


735,336



270,819



2,638Losses


(63,929
)


(23,532
)


(75,602
)Net


671,407



247,287



(72,964
)Total realized investment gains and losses:Gains


892,369



321,326



265,724Losses


(360,490
)


(87,241
)


(92,950
)Net

$
531,879


$
234,085


$
172,774     Derivative
    Securities and Short-Sale Obligations
  4.
    Fair
    Value Disclosures   99




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
                   Quoted Prices inActive Markets for


Significant Other


SignificantIdentical Assets


Observable Inputs


Unobservable InputsAssets

(Level 1)


(Level 2)


(Level 3)


TotalAvailable-for-sale
    fixed income securities

$



$
1,533,334


$



$
1,533,334Held-for-trading
    fixed income securities






167,605



66,393



233,998Equity securities


998,582



21,572







1,020,154Derivatives and other invested assets


262,310



164,064







426,374Short-term investments






549,937







549,937Total

$
1,260,892


$
2,436,512


$
66,393


$
3,763,797  100




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
    Year EndedDecember 31,2008Balance, beginning of year

$
2,500Purchases, issuances and settlements


68,148Realized losses included in net income


(4,255
)Balance, end of year

$
66,393Total losses for the period recognized in earnings attributable
    to the change in unrealized gains or losses relating to assets
    held at December 31, 2008

$
(2,086
)   5.
    Unpaid
    Losses and Loss Adjustment Expenses    Years Ended December 31,2008


2007


2006Gross unpaid losses and LAE, beginning of year

$
3,178,506


$
3,371,549


$
3,673,034Less ceded unpaid losses and LAE


1,197,496



1,355,253



1,682,768Net unpaid losses and LAE, beginning of year


1,981,010



2,016,296



1,990,266Losses and LAE incurred related to:Current year


802,792



816,823



762,241Prior years


20,075



(63,854
)


(96,162
)Total losses and LAE incurred


822,867



752,969



666,079Losses and LAE paid related to:Current year


228,298



217,261



158,000Prior years


272,015



570,994



482,049Total losses and LAE paid


500,313



788,255



640,049Net unpaid losses and LAE, end of year


2,303,564



1,981,010



2,016,296Add ceded unpaid losses and LAE


684,239



1,197,496



1,355,253Gross unpaid losses and LAE, end of year

$
2,987,803


$
3,178,506


$
3,371,549     2008


2007Ceded unpaid losses and LAE in the table above

$
684,239


$
1,197,496Reconciling items:Reinsurance receivable on paid losses and LAE


18,853



51,797Unamortized retroactive reinsurance recoverable


265,125



312,000Loss sensitive
    cession1






(21,510
)Reinsurance recoverable on the consolidated balance sheets

$
968,217


$
1,539,783     1
    Equals additional premiums due on
    retrospectively rated insurance policies that inure to the
    benefit of the reinsurer. 101




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
              102




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
   6.
    Asbestos
    and Environmental Losses and Loss Adjustment Expenses    Years Ended December 31,2008


2007


2006AsbestosGross unpaid losses and allocated LAE (ALAE),
    beginning of year

$
428,139


$
443,055


$
469,199Less ceded unpaid losses and ALAE


94,497



94,817



92,418Net unpaid losses and ALAE, beginning of year


333,642



348,238



376,781Net losses and ALAE incurred


25,200



24,342



22,700Less: Net losses and ALAE paid


56,954



38,938



51,243Net unpaid losses and ALAE, end of year


301,888



333,642



348,238Add ceded unpaid losses and ALAE


85,336



94,497



94,817Gross unpaid losses and ALAE, end of year

$
387,224


$
428,139


$
443,055     Years Ended December 31,2008


2007


2006EnvironmentalGross unpaid losses and ALAE, beginning of year

$
117,768


$
110,636


$
111,536Less ceded unpaid losses and ALAE


32,725



37,103



37,293Net unpaid losses and ALAE, beginning of year


85,043



73,533



74,243Net losses and ALAE incurred


9,400



22,185



9,898Less: Net losses and ALAE paid


15,464



10,675



10,608Net unpaid losses and ALAE, end of year


78,979



85,043



73,533Add ceded unpaid losses and ALAE


28,969



32,725



37,103Gross unpaid losses and ALAE, end of year

$
107,948


$
117,768


$
110,636    103




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
     Years Ended December 31,2008


2007


2006Other LatentGross unpaid losses and ALAE, beginning of year

$
34,237


$
32,463


$
36,838Less ceded unpaid losses and ALAE


10,109



10,705



12,794Net unpaid losses and ALAE, beginning of year


24,128



21,758



24,044Net losses and ALAE incurred


1,615



8,020



1,299Less: Net losses and ALAE paid


5,485



5,650



3,585Net unpaid losses and ALAE, end of year


20,258



24,128



21,758Add ceded unpaid losses and ALAE


7,959



10,109



10,705Gross unpaid losses and ALAE, end of year

$
28,217


$
34,237


$
32,463     7.
    Reinsurance    Years Ended December 31,2008


2007


2006Premiums written:Direct

$
995,905


$
1,205,545


$
1,202,296Assumed from other companies, pools and associations


23,664



39,476



149,335Ceded to other companies, pools and associations


(148,417
)


(145,386
)


(185,099
)Net premiums written

$
871,152


$
1,099,635


$
1,166,532Premiums earned:Direct

$
1,114,356


$
1,260,828


$
1,157,562Assumed from other companies, pools and associations


24,942



74,292



117,438Ceded to other companies, pools and associations


(141,270
)


(148,976
)


(190,977
)Premiums earned

$
998,028


$
1,186,144


$
1,084,023     Years Ended December 31,2008


2007


2006Earned premiums ceded to reinsurers

$
(141,270
)

$
(148,976
)

$
(190,970
)Commissions earned on ceded reinsurance premiums


31,307



25,774



30,927Claims incurred ceded to reinsurers


(44,415
)1


52,325



54,123Provision for uncollectible reinsurance


(7,700
)


(8,000
)


(9,500
)Net impact of ceded reinsurance transactions

$
(162,078
)

$
(78,877
)

$
(115,420
)     1
    For the year ended
    December 31, 2008, claims incurred ceded to reinsurers
    include $75,866 of losses on commutations. 104




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
     At December 31,2008


2007Reinsurance recoverable on unpaid losses and LAE

$
949,364


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


18,853



51,797Total reinsurance recoverable

$
968,217


$
1,539,783       Corporate
    Aggregate Reinsurance
       105




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
     Years Ended December 31,2008


2007


2006Investment Income

$
(11,714
)

$
(16,125
)

$
(8,427
)Losses and LAE


65,694



(13,673
)


(10,289
)(Decrease) increase in income before income taxes

$
(77,408
)

$
(2,452
)

$
1,862   1
    Years Ended December 31,2008


20072000 retroactive adverse development contract

$
349,000


$
369,0001998 prospective aggregate stop loss contract






367,50022000 accident year prospective aggregate stop loss contract






28,7191998 aggregate stop loss contract amendment






19,248Total

$
349,000


$
784,467    1
    The amount for 2007 includes the
    $389,010 discussed below, $28,719 on the 2000 accident year
    prospective aggregate stop loss contract and $76,248 of
    amortization of deferred gains on the retroactive reinsurance
    contracts.2
    Includes $389,010 which has been
    recognized as a reduction of losses and LAE less $21,510 for
    additional premiums due on retrospectively rated insurance
    policies that inure to the benefit of the reinsurer.  Prospective
    Corporate Aggregate Reinsurance
    Years Ended December 31,2008


2007


2006Funds held interest charged to investment income

$
(1,575
)

$
(2,348
)

$
(3,055
)Less: losses and LAE


80,521







Decrease in income before income taxes

$
(82,096
)

$
(2,348
)

$
(3,055
)      106




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
        Retroactive
    Corporate Aggregate Reinsurance
    Years Ended December 31,2008


2007


2006Funds held interest charged to investment income

$
(10,139
)

$
(13,777
)

$
(5,372
)Less: losses and LAE


(14,827
)1


(13,673
)


(10,289
)Increase (decrease) in income before income taxes

$
4,688


$
(104
)

$
4,917    1
    For the year ended
    December 31, 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 $10,172 of recurring
    deferred income amortization. For the years ended
    December 31, 2007 and 2006, losses and LAE is comprised of
    recurring amortization of deferred income only.    Years Ended December 31,2008


2007


2006Decrease in reinsurance recoverable due from reinsurers

$
(20,000
)

$
(3,577
)

$
(36,983
)Less: related premiums paid


(8,186
)


(1,273
)


(33,392
)Decrease in income deferred during the year


(11,814
)


(2,304
)


(3,591
)Amortization of deferred income


(18,950
)


(13,673
)


(12,889
)Decrease in deferred income


(30,764
)


(15,977
)


(16,480
)Deferred income on retroactive reinsurance  beginning
    of year


152,041



168,018



184,498Deferred income on retroactive reinsurance  end of
    year

$
121,277


$
152,041


$
168,018  107




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
          8.
    Long-Term
    Debt    December 31,


December 31,2008


200773/4%
    Senior Notes due 2017

$
310,502


$
309,036103/8%
    Senior Notes due 2013






4,184Total

$
310,502


$
313,220   3 4
 108




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
   3 8
    2012


103.875
%2013


102.583
%2014


101.292
%2015 and after


100.000
%         9.
    Income
    Taxes    Years Ended December 31,2008


2007


2006Current

$
252,666


$
8,721


$
225,250Deferred


(164,063
)


131,266



(69,094
)Total income tax expense

$
88,603


$
139,987


$
156,156      109




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
     At December 31,2008


2007Deferred tax assets:Investments

$
103,025


$
Unpaid losses and LAE


69,858



52,630Deferred income on retroactive reinsurance


42,447



53,215Unearned premiums


26,420



35,301Employee benefit plans


10,276



18,005Unrealized net depreciation of investments and currency
    translation


4,014



Other


15,509



15,816Deferred tax assets


271,549



174,967   Deferred tax liabilities:Deferred policy acquisition costs


18,447



25,299Capitalized debt costs


7,231



7,826Unrealized net appreciation of investments and currency
    translation






23,950Investments






16,173Other


6,794



8,558Deferred tax liabilities


32,472



81,806Total net deferred tax assets

$
239,077


$
93,161         Years Ended December 31,2008


2007


2006% of





% of





% ofPre-tax





Pre-tax





Pre-taxAmount


Income


Amount


Income


Amount


IncomeIncome taxes computed on pre-tax operating income

$
147,655



35.0
%

$
143,454



35.0
%

$
159,347



35.0
%(Decrease) increase in income taxes resulting from:Recognition of tax credits associated with the sale of an
    investment in affiliate


(51,605
)


(12.2
)














Dividends received deduction and tax-exempt income


(7,119
)


(1.7
)


(3,422
)


(0.8
)


(3,264
)


(0.7
)Other, net


(328
)


(0.1
)


(45
)






73



Total income tax expense

$
88,603



21.0
%

$
139,987



34.2
%

$
156,156



34.3
%  110




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
    Accounting for Income Taxes
    10.
    Related
    Party Transactions  Reinsurance
    At December 31,2008


2007


2006Statements of income:Net premiums written

$
(27,179
)

$
(17,566
)

$
92,472Premiums earned

$
(28,503
)

$
14,876


$
56,990Losses and LAE

$
(38,281
)

$
(2,836
)

$
31,338Balance sheets:Premiums receivable

$
(142
)

$
644


$
7,249Reinsurance recoverable from affiliates

$
209,189


$
229,591


$
254,595Prepaid reinsurance premiums

$
6,903


$
8,246


$
9,611Unpaid losses and LAE

$
28,402


$
54,790


$
52,193Unearned premiums

$
73


$
92


$
33,958Accounts payable and other liabilities

$
2,813


$
5,589


$
8,779      111




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
                 112




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
        Investment
    Agreements
    Other
    Agreements
           113




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
         not-for-profit
      11.
    Employee
    Benefits        114




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
  At December 31,2008


2007Changes in benefit obligation:Benefit obligation at beginning of year

$
9,447


$
10,946Service cost






1Interest cost


459



514Plan participants contributions


1,174



1,105Plan amendment


(3,401
)


Actuarial gain


(320
)


(1,249
)Benefits paid


(1,778
)


(1,870
)Benefit obligation at end of year

$
5,581


$
9,447Change in fair value of plan assets:Fair value of plan assets at beginning of year

$



$
Employer contributions


604



765Plan participants contributions


1,174



1,105Benefits paid


(1,778
)


(1,870
)Fair value of assets at end of year

$



$
Funded status of the plan at end of year

$
(5,581
)

$
(9,447
)     At December 31,2008


2007Net actuarial gain

$
4,947


$
5,033Unrecognized prior service cost


1,333



Transition obligation


(746
)


(3,453
)Total

$
5,534


$
1,580   Years Ended December 31,2008


2007


2006Service cost

$



$
1


$
1Interest cost


459



514



591Amortization of transition obligation


659



817



817Amortization of prior service cost


(21
)






Recognized net actuarial gain


(406
)


(402
)


(288
)Net periodic benefit cost

$
691


$
930


$
1,121      115




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
       Years Ending December 312009

$
5942010

$
5792011

$
5612012

$
5412013

$
5202014 -2018

$
2,241         12.
    Commitments
    and Contingencies  20-year
  2009

$
13,6582010


11,8062011


9,1672012


6,0082013


5,1552014 and thereafter


31,165Total minimum annual rentals

$
76,959  116




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
               117




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
   13.
    Dividend
    Restrictions, Statutory Information and Capitalization          Years Ended December 31,2008


2007


2006Net income

$
484,003


$
191,699


$
253,324Policyholders surplus

$
1,410,612


$
1,639,751


$
1,406,822       14.
    Segment
    Reporting    Years Ended December 31,2008


2007


2006General liability

$
194,266


$
228,973


$
227,740Workers compensation


218,414



257,971



278,761Commercial automobile


187,206



210,490



203,862Property


172,677



273,306



246,255Commercial multi-peril


79,938



80,511



61,885Accident and health


117,653



103,910



43,875Other


27,874



30,983



21,645Total premiums earned

$
998,028


$
1,186,144


$
1,084,023  118




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
    Years Ended December 31,2008


2007


2006Accident year loss and LAE ratios:

Amount


Ratio


Amount


Ratio


Amount


RatioGeneral liability

$
134,998



69.5
%

$
152,556



66.6
%

$
150,810



66.2
%Workers compensation


168,171



77.0
%


196,816



76.3
%


200,242



71.8
%Commercial automobile


145,615



77.8
%


144,308



68.6
%


147,116



72.2
%Property


212,272



122.9
%


186,379



68.2
%


187,773



76.3
%Commercial multi-peril


45,986



57.5
%


51,736



64.3
%


36,785



59.4
%Accident and health


83,279



70.8
%


72,068



69.4
%


29,262



66.7
%Other


12,471



44.7
%


12,960



41.8
%


10,253



47.4
%Total accident year losses and LAE


802,792



80.4
%


816,823



68.9
%


762,241



70.3
%Prior years loss development


20,075



2.1



(63,854
)


(5.4
)


(96,162
)


(8.8
)Calendar year losses and LAE

$
822,867



82.5
%

$
752,969



63.5
%

$
666,079



61.5
%     15.
    Accounting
    Adjustments in Respect of Certain Investments Related to Prior
    Periods  78-9, Accounting for Investments in Real Estate Ventures, mark-to-market  mark-to-market Business Combinations
  Considering the Effects of Prior
    Year Misstatements when Quantifying Misstatements in Current
    Year Financial Statements,
 119




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands)
     16.
    Quarterly
    Financial Data    Three Months Ended(Unaudited)December 31,


September 30,


June 30,


March 31,2008


2007


2008


2007


2008


2007


2008


2007Premiums earned

$
230,358


$
292,241


$
232,978


$
293,375


$
262,882


$
306,821


$
271,810


$
293,707Investment
    income1,2

$
10,583


$
42,121


$
14,706


$
49,759


$
31,248


$
45,256


$
15,129


$
42,128Realized investment gains and
    losses3

$
204,533


$
160,458



162,369


$
70,220


$
9,709


$
(11,067
)

$
155,268


$
14,474Losses and
    LAE4

$
156,005


$
165,351


$
211,506


$
192,468


$
245,746


$
201,690


$
209,610


$
193,460Net income (loss)

$
189,253


$
148,767


$
69,728


$
82,857


$
(19,576
)

$
18,705


$
93,401


$
42,853Combined ratio


99.0%



86.2%



126.9%



95.1%



125.2%



92.6%



106.9%



94.7%    1
    Investment income includes pre-tax
    equity in earnings of investees.2
    The decrease in investment income
    in the fourth quarter of 2008 as compared to the fourth quarter
    of 2007 was primarily attributable to substantially lower
    earnings from investments at equity.3
    The increase in realized investment
    gains in the fourth quarter of 2008 as compared to the fourth
    quarter of 2007 and the third quarter of 2008 was primarily
    attributable to higher realized gains on total return swaps and
    credit default swaps.4
    The decrease in losses and LAE in
    the fourth quarter of 2008 as compared to the third quarter of
    2008 is primarily attributable to catastrophe losses of
    $71.5 million associated with Hurricanes Gustav and Ike
    incurred in the third quarter. 120




---



##### 



ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE   ITEM 9A
    (T). CONTROLS AND PROCEDURES Evaluation
    of Disclosure Controls and Procedures Rules 13a-15(e) Form 10-K.
 Managements
    Report on Internal Control over Financial Reporting Rules 13a-15(f)
         ITEM 9B.
    OTHER INFORMATION  121




---



##### 



PART III
  ITEM 10.  DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Directors
    and Executive Officers   Name

Age

PositionV. Prem Watsa


58


ChairmanDouglas M. Libby


57


President and Chief Executive OfficerMary Jane Robertson


55


Executive Vice President, Chief Financial Officer and TreasurerAlan D.
    Horn1,3


57


DirectorAnthony F.
    Griffiths1,2


78


DirectorRobert J.
    Gunn1


63


DirectorBradley P. Martin


49


Director     1
    Audit committee and compensation
    committee member.2
    Chairman of the compensation
    committee.3
    Chairman of the audit committee.  V. Prem Watsa
  Douglas M. Libby
  Mary Jane Robertson
  Alan D. Horn
  Anthony F. Griffiths
  Robert J. Gunn 1998-2001.
 122




---



##### 



Bradley P. Martin
 Corporate
    Governance  Audit
    Committee and Audit Committee Financial Expert    Compensation
    Committee  Compensation
    of Directors  Code of
    Ethics Form 10-K.
 ITEM 11.  EXECUTIVE
    COMPENSATION Form 10-K.
  ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS  Form 10-K.
 123




---



##### 



ITEM 13.  CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
    INDEPENDENCE Form 10-K.
 ITEM 14.  PRINCIPAL
    ACCOUNTANT FEES AND SERVICES   Years Ended December 31,(dollars in thousands)

2008


2007Audit fees

$
1,385.0


$
1,470.5Audit-related fees


664.0



993.0Tax fees


14.3



9.5All other fees


2.5



1.7Total fees billed by principal accountants

$
2,065.8


$
2,474.7  Audit
    Fees Form 10-Q
 Audit-Related
    Fees 3 8
 Tax
    Fees  All Other
    Fees  Audit
    Committee Pre-Approval Policies and Procedures  124




---



##### 



PART IV
  ITEM 15.  EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES Financial
    Statement Schedules  125




---



##### 



Exhibits  ExhibitNumber

Exhibit

Location*3
.1

Certificate of Incorporation

Exhibit 3.1 to the Registration Statement on Form S-4 (No.
    333-107722) of the Company filed on August 7, 2003.3
.2

Amended and Restated By-Laws

Exhibit 3.2 to the Registration Statement on Form S-4 (No.
    333-107722) of the Company filed on August 7, 2003.4
.1

Indenture between the Company and the Bank of New York dated as
    of May 7, 2007

Exhibit 4.2 to the form 8-K of the Company filed on May 10, 2007.10
.1

Investment Agreement among Hamblin Watsa, Fairfax and North
    River effective as of January 8, 2004

Exhibit 10.1 to the Form 10-K of the Company for the year ended
    December 31, 2004, filed on March 7, 2005.10
.2

Investment Agreement among Hamblin Watsa, Fairfax and CF
    Insurance effective as of January 8, 2004

Exhibit 10.2 to Amendment No. 3 to the Registration Statement on
    Form S-4 (No. 333-107722) of the Company filed on February 24,
    2004.10
.3

Investment Agreement among Hamblin Watsa, Fairfax and Seneca
    Specialty effective as of January 1, 2002

Exhibit 10.3 to the Form 10-K of the Company for the year ended
    December 31, 2004, filed on March 7, 2005.10
.4

Master Repurchase Agreement between North River and Fairfax
    effective as of January 8, 2004

Exhibit 10.4 to Amendment No. 3 to the Registration Statement on
    Form S-4 (No. 333-107722) of the Company filed on February 24,
    2004.10
.5

Master Repurchase Agreement between CF Insurance and Fairfax
    effective as of January 8, 2004

Exhibit 10.5 to Amendment No. 3 to the Registration Statement on
    Form S-4 (No. 333-107722) of the Company filed on February 24,
    2004.10
.6

Investment Management Agreement among Hamblin Watsa, Fairfax and
    the Company effective as of December 21, 2004

Exhibit 10.6 to the Form 10-K of the Company for the year ended
    December 31, 2004, filed on March 7, 2005.10
.7

Investment Agreement among Hamblin Watsa, Fairfax and US Fire
    effective as of October 1, 2002

Exhibit 10.7 to the Registration Statement on Form S-4 (No.
    333-107722) of the Company filed on August 7, 2003.10
.8

Investment Agreement among Hamblin Watsa, Fairfax and Seneca
    effective as of January 1, 2002

Exhibit 10.8 to the Registration Statement on Form S-4 (No.
    333-107722) of the Company filed on August 7, 2003.10
.9

Investment Agreement among Hamblin Watsa, Fairfax and CF
    Indemnity effective as of January 1, 2002

Exhibit 10.9 to the Registration Statement on Form S-4 (No.
    333-107722) of the Company filed on August 7, 2003.10
.10

Investment Agreement among Hamblin Watsa, Fairfax and CF
    Specialty effective as of January 1, 2002

Exhibit 10.10 to the Registration Statement on Form S-4 (No.
    333-107722) of the Company filed on August 7, 2003.10
.11

Intentionally left blank10
.12

Tax Allocation Agreement between Fairfax Inc. and the Company
    effective as of June 5, 2003

Exhibit 10.12 to the Registration Statement on Form S-4 (No.
    333-107722) of the Company filed on August 7, 2003.10
.13

Intercompany Tax Allocation Agreement between Fairfax Inc. and
    US Fire and CF Indemnity and Seneca effective as of December 15,
    2000

Exhibit 10.13 to the Registration Statement on Form S-4 (No.
    333-107722) of the Company filed on August 7, 2003.10
.14

Tax Allocation Agreement among the Company, Fairfax Inc.,
    Odyssey Re Holdings Corp., RiverStone Group, LLC and TIG
    Holdings, Inc. effective as of January 1, 2000

Exhibit 10.14 to the Registration Statement on Form S-4 (No.
    333-107722) of the Company filed on August 7, 2003.10
.15

Master Repurchase Agreement between CF Indemnity and Fairfax
    effective as of July 1, 2000

Exhibit 10.15 to the Registration Statement on Form S-4 (No.
    333-107722) of the Company filed on August 7, 2003.10
.16

Master Repurchase Agreement between US Fire and Fairfax
    effective as of July 1, 2000

Exhibit 10.16 to the Registration Statement on Form S-4 (No.
    333-107722) of the Company filed on August 7, 2003.10
.17

Addendum to the Tax Sharing Agreement between Fairfax Inc. and
    Crum & Forster Holding Inc., effective as of January 1,
    2005.

Exhibit 10.17 to the Form 10-Q of the Company for the period
    ended September 30, 2005, filed on October 28, 2005.10
.23

Put Agreement between US Fire, ORC Re Limited and Fairfax
    effective as of June 28, 2002

Exhibit 10.23 to the Registration Statement on Form S-4 (No.
    333-107722) of the Company filed on August 7, 2003.10
.25

Intentionally left blank10
.27

Intentionally left blank 126




---



##### 



ExhibitNumber

Exhibit

Location*10
.28

Intentionally left blank10
.30

Blended Aggregate Stop Loss Reinsurance Agreement between the
    Company and ORC Re Limited effective as of January 1, 2000

Exhibit 10.30 to the Registration Statement on Form S-4 (No.
    333-107722) of the Company filed on August 7, 2003.10
.36

Addendum to the Tax Sharing Agreement between Fairfax Inc. and
    the Company effective as of January 1, 2005

Exhibit 10.36 to the Form 10-Q of the Company for the period
    ended September 30, 2005, filed on October 28, 2005.10
.37

Amendment Number 1 to the Investment Agreement among Hamblin
    Watsa, Fairfax and CF Specialty effective as of January 1, 2005

Exhibit 10.37 to the Form 10-Q of the Company for the period
    ended September 30, 2005, filed on October 28, 2005.10
.38

Amendment Number 1 to the Investment Agreement among Hamblin
    Watsa, Fairfax and Seneca Specialty effective as of January 1,
    2005

Exhibit 10.38 to the Form 10-Q of the Company for the period
    ended September 30, 2005, filed on October 28, 2005.10
.40

Amendment Number 1 to the Investment Agreement among Hamblin
    Watsa, Fairfax and North River effective as of January 1, 2005

Exhibit 10.40 to the Form 10-Q of the Company for the period
    ended March 31, 2007, filed on May 3, 2007.10
.41

Amendment Number 1 to the Investment Agreement among Hamblin
    Watsa, Fairfax and CF Insurance Company effective as of January
    1, 2005

Exhibit 10.41 to the Form 10-Q of the Company for the period
    ended March 31, 2007, filed on May 3, 2007.10
.42

Amendment Number 1 to the Investment Agreement among Hamblin
    Watsa, Fairfax and US Fire Company effective as of April 1, 2007

Exhibit 10.42 to the Form 10-Q of the Company for the period
    ended June 30, 2007, filed on August 3, 2007.10
.43

Amendment Number 1 to the Investment Agreement among Hamblin
    Watsa, Fairfax and CF Indemnity effective as of April 1, 2007

Exhibit 10.43 to the Form 10-Q of the Company for the period
    ended June 30, 2007, filed on August 3, 2007.10
.45

Fairfax Inc. and Crum & Forster Holdings Corp.
    Inter-Company Tax Allocation Agreement effective as of January
    1, 2007

Exhibit 10.45 to the Form 10-Q of the Company for the period
    ended September 30, 2007, filed on November 1, 2007.10
.46

Amendment Number 1 to the Investment Agreement among Hamblin
    Watsa, Fairfax and Seneca effective as of January 1, 2005.

Filed herewith.12
.1

Statement Regarding Calculation of Ratio of Consolidated
    Earnings to Consolidated Fixed Charges

Filed herewith.14
.1

Code of Ethics for Senior Financial Officers

Exhibit 14.1 to the Form 10-K of the Company for the year ended
    December 31, 2004, filed on March 7, 2005.24
.1

Power of Attorney

Included on the signature page hereof.31
.1

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

Filed herewith.31
.2

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

Filed herewith.32
.1

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

Filed herewith.32
.2

Certification of Executive Vice President, Chief Financial
    Officer and Treasurer pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002

Filed herewith.     *
    
    Exhibits not filed herewith are
    incorporated herein by reference to documents previously filed
    with the Securities and Exchange Commission. 127




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##### 



SIGNATURES   CRUM & FORSTER HOLDINGS CORP.
 (Registrant)
   /s/  Douglas
    M. Libby
      /s/  Mary
    Jane Robertson
     POWER OF
    ATTORNEY Form 10-K
    Signature

Title

DateBy:  /s/  V.
    Prem Watsa          V.
    Prem Watsa

Chairman of the Board

February 27, 2009By:  /s/  Douglas
    M. Libby          Douglas
    M. Libby

President and Chief Executive Officer

February 27, 2009By:  /s/  Mary
    Jane Robertson          Mary
    Jane Robertson

Executive Vice President, Chief Financial Officer and Treasurer

February 27, 2009By:  /s/  Anthony
    F. Griffiths          Anthony
    F. Griffiths

Director

February 27, 2009By:  /s/  Robert
    J. Gunn          Robert
    J. Gunn

Director

February 27, 2009By:  /s/  Bradley
    P. Martin          Bradley
    P. Martin

Director

February 27, 2009By:  /s/  Alan
    D. Horn          Alan
    D. Horn

Director

February 27, 2009  128




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##### 



INDEX TO
    FINANCIAL STATEMENTS AND RELATED FINANCIAL STATEMENT
    SCHEDULES PageNumberConsolidated Financial Statements

75Financial Statement SchedulesReport of Independent Registered Public Accounting Firm on
    Financial Statement Schedules

130Schedule I  Summary of Investments Other Than
    Investments in Related Parties

131Schedule II  Condensed Balance Sheets of
    Crum & Forster Holdings Corp. at December 31,
    2008 and 2007 (Parent Company Only)

132Schedule II  Condensed Statements of Income of
    Crum & Forster Holdings Corp. for the Years Ended
    December 31, 2008, 2007 and 2006 (Parent Company Only)

133Schedule II  Condensed Statements of Cash Flows of
    Crum & Forster Holdings Corp. for the Years Ended
    December 31, 2008, 2007 and 2006 (Parent Company Only)

134Schedule II  Notes to Condensed Financial Statements

135Schedule III  Supplementary Insurance Information

*Schedule IV  Reinsurance

*Schedule V  Valuation and Qualifying Accounts

136Schedule VI  Supplementary Insurance Information

*     *
    
    Schedule omitted as required
    information is contained within the consolidated financial
    statements included in Item 8. Financial Statements
    and Supplementary Data. 129




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##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON
    FINANCIAL STATEMENT SCHEDULES   Form 10-K Form 10-K.
      130




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##### 



SCHEDULE I   CRUM &
    FORSTER HOLDINGS CORP.
    SUMMARY OF INVESTMENTS OTHER THAN INVESTMENTS IN RELATED
    PARTIES
    (Dollars in thousands)
  At December 31, 2008Cost or


Estimated


Amount at whichAmortized


Fair


Shown in theCost


Value


Balance
    Sheet1Fixed income securities:Available-for-sale:United States government and government agencies and authorities

$
136,551


$
169,430


$
169,430States, municipalities and political subdivisions


1,279,232



1,315,465



1,315,465Other


50,331



48,439



48,439Total fixed income securities
    available-for-sale


1,466,114



1,533,334



1,533,334Fixed income securities, held-for-trading:


233,998



233,998



233,998Total fixed income securities


1,700,112



1,767,332



1,767,332Equity securities  common stocks


1,073,248



989,866



989,866Investments at equity


25,508



25,508



25,508Derivatives and other invested assets


151,709



152,457



152,457Short term investments


549,937



549,937



549,937Total investments

$
3,500,514


$
3,485,100


$
3,485,100    1
    Excludes investments in related
    parties at fair value of $382,656 at December 31, 2008. 131




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##### 



SCHEDULE II
  CRUM &
    FORSTER HOLDINGS CORP. (PARENT COMPANY ONLY)
    CONDENSED FINANCIAL INFORMATION OF CRUM & FORSTER
    HOLDINGS CORP.
    BALANCE SHEETS
    (Dollars in thousands)
  At December 31,2008


2007ASSETSCash and cash equivalents

$
3,123


$
2,561Short-term investments at cost, which approximates fair value


5,289



9,652Investments in and advances to/from consolidated subsidiaries


1,485,189



1,617,566Current income taxes


3,607



2,140Accrued investment income


1



34Other assets


5,259



5,984Total assets

$
1,502,468


$
1,637,937LIABILITIESAccounts payable and other liabilities

$
19,612


$
14,882Deferred income taxes


5,922



16,376Long-term debt


310,502



313,220Total liabilities


336,036



344,478SHAREHOLDER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 (loss), net of tax


(7,455
)


44,479Retained earnings


432,894



507,987Total shareholders equity


1,166,432



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

$
1,502,468


$
1,637,937   The condensed financial statements should be read in
    conjunction with the consolidated financial statements and notes
    thereto.
 132




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##### 



SCHEDULE II CRUM &
    FORSTER HOLDINGS CORP. (PARENT COMPANY ONLY)
    CONDENSED FINANCIAL INFORMATION OF CRUM & FORSTER
    HOLDINGS CORP.
    STATEMENTS OF INCOME
    (Dollars in thousands)
  Years Ended December 31,2008


2007


2006REVENUESEquity in earnings of subsidiaries

$
357,610


$
326,962


$
337,879Investment income


310



1,592



702Realized investment gains






8,612



1,667Total revenues


357,920



337,166



340,248EXPENSESInterest expense


27,885



29,850



32,986Costs related to early retirement of debt


392



21,187



Other expense, net


10,199



11,135



8,762Total expenses


38,476



62,172



41,748Income before income taxes


319,444



274,994



298,500Income tax benefit


(13,362
)


(18,188
)


(13,783
)NET INCOME

$
332,806


$
293,182


$
312,283   The condensed financial statements should be read in
    conjunction with the consolidated financial statements and notes
    thereto.
 133




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##### 



SCHEDULE II CRUM &
    FORSTER HOLDINGS CORP. (PARENT COMPANY ONLY)
    CONDENSED FINANCIAL INFORMATION OF CRUM & FORSTER
    HOLDINGS CORP.
    STATEMENTS OF CASH FLOWS
    (Dollars in thousands)
  Years Ended December 31,2008


2007


2006OPERATING ACTIVITIESNet income

$
332,806


$
293,182


$
312,283Adjustments to reconcile net income to net cash from operating
    activities:Equity in earnings of subsidiaries, net of dividends and other
    payments to/receipts from
    subsidiaries1


(5,108
)


(213,135
)


(208,978
)Realized investment (gains) losses






(8,612
)


(1,667
)Amortization and accretion


2,108



1,958



1,861Deferred income tax expense (benefit)






66,321



(13,783
)Other non-cash net income adjustments


170



8,259



Changes in:Other assets


1,495



(2,129
)


(192
)Accounts payable and other liabilities


4,200



(32,211
)


2,351Net cash provided by operating activities


335,671



113,633



91,875INVESTING ACTIVITIESPurchases of short-term investments


(30,701
)


(9,652
)


Proceeds from sales of short-term investments


35,064







Purchases of other invested assets






(13,143
)


(1,900
)Proceeds from sales of other invested assets






28,510



Net cash provided by (used in) investing activities


4,363



5,715



(1,900
)FINANCING ACTIVITIESRepayment of
    103/8%
    long-term debt


(4,270
)


(295,730
)


Issuance of
    73/4%
    long-term debt






330,000



New debt issuance costs






(23,912
)


Dividends paid to shareholder


(335,202
)


(128,825
)


(90,000
)Net cash used in financing activities


(339,472
)


(118,467
)


(90,000
)Net change in cash and cash equivalents


562



881



(25
)Cash and cash equivalents, beginning of year


2,561



1,680



1,705Cash and cash equivalents, end of year

$
3,123


$
2,561


$
1,680SUPPLEMENTAL CASH FLOW INFORMATIONCash paid for interest

$
25,797


$
24,907


$
31,125Cash refund received for income taxes

$
(13,994
)

$
(40,487
)

$
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIESIn-kind dividend payment to parent in the form of fixed income
    securities

$
158,798


$



$
Note received from parent in partial settlement of the
    Companys tax net operating losses

$



$
41,882


$
Note received from parent in settlement of the sale of a common
    stock investment

$



$
12,993


$
In-kind dividend payment to parent representing cancellation of
    the aforementioned notes received from parent in 2007

$



$
54,875


$
     1
    Includes cash dividends received
    from subsidiaries of $352,502, $129,195 and $127,000 in 2008,
    2007 and 2006.  The condensed financial statements should be read in
    conjunction with the consolidated financial statements and notes
    thereto.
  134




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##### 



SCHEDULE II CRUM &
    FORSTER HOLDINGS CORP. (PARENT COMPANY ONLY)
    NOTES TO CONDENSED FINANCIAL STATEMENTS OF CRUM &
    FORSTER HOLDINGS CORP.
    (Dollars in thousands)
  1.
    The accompanying condensed financial statements should be read
    in conjunction with the notes to consolidated financial
    statements of Crum & Forster Holdings Corp. and
    subsidiaries included in Item 8. Financial Statements
    and Supplementary Data.2.
    The Companys ability to satisfy its corporate obligations
    is primarily dependent on the dividend paying capacity of its
    subsidiaries. In 2008, the insurance subsidiaries paid dividends
    totaling $511,300 to the Company, including an extraordinary
    dividend of $350,000, for which the Company received prior
    regulatory approval. The maximum dividend that could be paid by
    the insurance subsidiaries to the Company before
    October 23, 2009, without prior regulatory approval, is
    $46,733. This capacity increases to $141,061 after
    October 23, 2009, when US Fires capacity increases to
    $94,328, provided it has not paid any extraordinary dividends
    prior to that date. 135




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##### 



SCHEDULE V CRUM &
    FORSTER HOLDINGS CORP.
    VALUATION AND QUALIFYING ACCOUNTS
    (Dollars in thousands)
   ChargesBalance at

to Costs

Charged to



Balance atBeginning of

and

Other



End ofYear

Description

Year

Expenses

Accounts

Deductions

Year2007


Reserve for uncollectible premiums

$
25,331







(1,000
)1


(1,796
)2

$
22,5352006


Reserve for uncollectible premiums

$
24,437







2,347
1


(1,453
)2

$
25,3312008


Reserve for uncollectible reinsurance

$
50,021



7,700
3






(1,722
)4

$
55,9992007


Reserve for uncollectible reinsurance

$
42,777



8,000
3






(756
)4

$
50,0212006


Reserve for uncollectible reinsurance

$
34,441



9,500
3






(1,164
)4

$
42,7772008


Reserve for uncollectible loss deductibles

$
12,780



(4,192
)5









$
8,5882007


Reserve for uncollectible loss deductibles

$
8,811



4,008
5






(39
)6

$
12,7802006


Reserve for uncollectible loss deductibles

$
10,003



(1,192
)5









$
8,811    1
    Represents (decreases) increases to
    the reserve for uncollectible premiums charged against premiums
    earned.2
    Represents uncollectible premiums
    written off to the reserve.3
    Represents increases to the reserve
    for uncollectible reinsurance charged to losses and LAE.4
    Represents uncollectible
    reinsurance recoverable balances written off to the reserve.5
    Represents increases (decreases) to
    the reserve for uncollectible loss deductibles charged to losses
    and LAE.6
    Represents uncollectible loss
    deductibles written off to the reserve. 136