News Today – North River Insurance Co. — Moody’s affirms Crum & Forster’s Baa1 insurance financial strength rating; outlook remains positive

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Rating Action:

Moody’s affirms Crum & Forster’s Baa1 insurance

financial strength rating; outlook remains positive

17 December 2021

New York, December 17, 2021 – Moody’s Investors Service (”Moody’s”) has affirmed the Baa1

insurance financial strength rating on United States Fire Insurance Co. and North River Insurance

Co., the primary operating subsidiaries in the intercompany pool of Crum & Forster Holdings Corp.

(collectively, Crum & Forster). Crum & Forster is wholly owned by Fairfax Financial Holdings Limited

(Baa3 senior, stable). The rating outlook for Crum & Forster is positive.
RATINGS RATIONALE
According to Moody’s, the rating affirmation reflects the company’s diversified product mix in

specialty and standard commercial insurance markets and good underwriting profitability in the

past several years. The company also benefits from being part of Fairfax, a large and diversified

organization. These strengths are offset by significant exposure to high risk assets relative to

statutory surplus, potential volatility from casualty reserves, large catastrophe events in the northeast

region, and high financial leverage at Fairfax Financial.
The positive outlook reflects Crum & Forster’s stable underwriting results coupled with a shift to

niche specialty lines that are generally more profitable than standard commercial lines. The group’s

significant exposure to high risk assets in its investment portfolio has resulted in volatile net income

and fluctuations in the company’s capital; however, Fairfax has provided capital support as needed.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The following factors could result in an upgrade for Crum & Forster: 1) reduction in high-risk assets

relative to shareholder’s equity; 2) continued development of the core franchise while maintaining a

moderate catastrophe risk profile; 3) combined ratio below 100%; and 4) gross underwriting leverage

at or below 4.5x.
Given the positive outlook, a downgrade is unlikely. However, the following factors could lead to

a return to a stable outlook for Crum & Forster: 1) a decline in shareholder’s equity of more than

10%; 2) significant adverse reserve development; 3) combined ratio materially above 100%; and 4)

adjusted financial leverage consistently above 35% and earnings coverage consistently less than 2x

at Fairfax Financial.
The following ratings have been affirmed:
United States Fire Insurance Co. – insurance financial strength at Baa1;
North River Insurance Co. – insurance financial strength at Baa1.
The outlook for each entity remains positive.
Crum & Forster’s operating subsidiaries mostly write specialty insurance coverages, with specific

targets by product, geography or customer group. Products offered include umbrella liability, accident

and health, pet health insurance, and general liability. The group’s excess and surplus casualty

division primarily provides liability insurance for security-related, construction, manufacturing

and other classes, as well as umbrella liability on mainly smaller accounts. Crum & Forster also

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writes property coverage through its small-risk insurer, Seneca, and through certain other specialty

businesses. As of September 30, 2021, Crum & Forster reported statutory surplus of approximately

$1.8 billion.
The principal methodology used in these ratings was Property and Casualty Insurers

Methodology published in September 2021 and available at

https://www.moodys.com/

researchdocumentcontentpage.aspx?docid=PBC_1254163

. Alternatively, please see the Rating

Methodologies page on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody’s key rating assumptions and sensitivity analysis, see

the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure

form. Moody’s Rating Symbols and Definitions can be found at:

https://www.moodys.com/

researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement

provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or

note of the same series, category/class of debt, security or pursuant to a program for which the

ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices.

For ratings issued on a support provider, this announcement provides certain regulatory disclosures

in relation to the credit rating action on the support provider and in relation to each particular credit

rating action for securities that derive their credit ratings from the support provider’s credit rating.

For provisional ratings, this announcement provides certain regulatory disclosures in relation to the

provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent

to the final issuance of the debt, in each case where the transaction structure and terms have not

changed prior to the assignment of the definitive rating in a manner that would have affected the

rating. For further information please see the ratings tab on the issuer/entity page for the respective

issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies)

of this credit rating action, and whose ratings may change as a result of this credit rating action, the

associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach

exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated

entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no

amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited

Credit Ratings available on its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the

related rating outlook or rating review.
Moody’s general principles for assessing environmental, social and governance (ESG) risks in

our credit analysis can be found at

http://www.moodys.com/researchdocumentcontentpage.aspx?

docid=PBC_1288235.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s

affiliates outside the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt

am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No

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1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the

Moody’s office that issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s

affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada

Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK.

Further information on the UK endorsement status and on the Moody’s office that issued the credit

rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the

Moody’s legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory

disclosures for each credit rating.
Chris Scott

AVP-Analyst

Financial Institutions Group

Moody’s Investors Service, Inc.

250 Greenwich Street

New York, NY 10007

U.S.A.

JOURNALISTS: 1 212 553 0376

Client Service: 1 212 553 1653
Sarah Hibler

Associate Managing Director

Financial Institutions Group

JOURNALISTS: 1 212 553 0376

Client Service: 1 212 553 1653
Releasing Office:

Moody’s Investors Service, Inc.

250 Greenwich Street

New York, NY 10007

U.S.A.

JOURNALISTS: 1 212 553 0376

Client Service: 1 212 553 1653

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licensors and affiliates (collectively, “MOODY’S”). All rights reserved.
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OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS,

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from JPY125,000 to approximately JPY550,000,000.
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requirements.



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