It’s hard to imagine an executive describing his company and its peers in the industry as “cigar butt companies where the butt had been dropped in toxic nuclear sludge, [and] rolled in asbestos…”

Marc Adee, the chief executive officer of Crum & Forster, does just that in one of the most memorable passages from a book he wrote about the history of his company, “The Once and Future C&F.”

The analogy comes in Chapter 5 of a six-chapter, 82-page book in which Adee recounts details of what would ultimately begin the best chapters in history of the 200-year-old company. Titled “Fair and Friendly,” Chapter 5 describes a pivotal point on C&F’s road to redemption after being battered during the liability insurance crisis of the late 1980s: the 1998 acquisition by Fairfax Financial for $680 million in 1998, and the long-term vision of Fairfax founder Prem Watsa.

“Prem is a value investor in the school of Ben Graham, who famously recommended buying cigar butt companies ([Graham’s] analogy for finding value in seemingly unattractive situations). A better analogy for P/C insurance companies in the late 1990s would have been cigar butt companies where the butt had been dropped in toxic nuclear sludge, rolled in asbestos, then stepped on a couple of times for good measure. Consequently, Fairfax acquired a few clunkers.”

Fairfax, which takes its name from the idea of “fair and friendly acquisitions” (who knew?), would not immediately realize value from what was then a discarded remnant of Xerox’s failed foray into insurance. (Yes, the photocopier company.) More correctly, Crum & Forster was the last remaining unsold piece of Talegen Holdings—a late 1990s restructuring of all the struggling C&F businesses, designed by turnaround legend Joseph (Jay) W. Brown Jr. before Watsa came on the scene.

Having held several positions with Talegen and Fairfax companies, Adee does a masterful job of recreating that moment in insurance history as a sideline reporter, making it easy to follow the tale even for those who never heard of Talegen or Brown. And it’s a nice refresher to fill in forgotten pieces for those who vaguely remember some lowlights of the bad old days when “good bank-bad bank” first came into the lexicon of the property/casualty insurance industry.

Adee’s first association with C&F came in 1993 in the position of chief actuary of Coregis, a specialty company carved out in the Talegen restructuring. And Adee came back on board in mid-2000 for a closeup view of goings-on at C&F when he joined TIG, a part of the Fairfax family.

Fairfax had also acquired TIG in 1999, and Chapter 5 of Adee’s book recounts the “seven lean years” for both “cigar-butt” targets. During these lean years, Fairfax was still in cleanup mode from still emerging liability losses, some of which were associated commercial multiline package policies written by C&F in the 1960s. That break from a long history of conservative property underwriting practices that dated back the founding of C&F as North River Insurance Company in 1822, meant profit struggles continued when other competitors could take advantage of the post-9/11 hard market.

Part of the primary operation of TIG would eventually wind up in “The Resolution Group,” the runoff entity of Talegen’s “good bank-bad bank” structure—and, in fact, the first runoff company ever created, according to Adee. Adee would help to lead the surviving ongoing primary insurance operation, Fairmont Specialty, which would later merge into C&F in 2006.

There’s a lot more to the story, which is as much a story of the casualty insurance industry as it is one company. I’ve purposely presented a heavily abridged version of Chapter 5, which Adee tells from his insider perspective. And I have barely touched upon the earlier chapters, unearthed through intense research of company files and historical documents. Included in those chapters is some imagined dialogue from a meeting of investors to form the first building block of the group, The North River Insurance Company, and another imagined exchange between Frederick Crum, John Forster and James Ackerman, the creators of one of the earliest examples of a managing general agency known as Crum & Forster.

You’ll want to read the book for all wonderful detail. You’ll be drawn in whether you’re an industry veteran who remembers bits and pieces of the Xerox/Talegen story and the sale of Coregis to GE (who remembers FGIC and ERC?) from the 1980s and 1990s, or you’re just “a person who enjoys reading corporate histories” like Adee, or you’re part of the next generation of property/casualty industry leaders.

The Future, The Past and The Moral of the Story

It’s that last group that Adee had in mind.

“How do we get that next generation ready for whatever may come over the next 40 years or so?” Adee asked rhetorically during an interview.

While Adee doesn’t envision the hallmark of the 1980s crisis—the emergence of 200-plus combined ratios from commercial liability business blithely written in the 1960s and 1970s—he knows there will always be challenges.

Related article: “How a Decentralized Structure Opens Career Paths at C&F“

“How do you weigh the legacy of any management team? While the numbers speak for themselves, your legacy exists in the minds of the next generation. To what extent did you prepare your successor for what could come next? …Were you intentional about how you passed along your management DNA? Did you meaningfully influence the lives of future generations—or are you a distant memory? …..

“I guess I am the future generation my predecessors were influencing—even if that was not always clear to us at the time…..I carry their legacy with me—and look to pass it forward to the next generation.”

The excerpted sentences come near the end of chapter I’ve highlighted here, leading into a final chapter that’s particularly insightful for today’s industry leaders. In that last chapter, titled “C&F Now,” Adee discusses how he and his management team today are applying Fairfax principles of long-term thinking and decentralized structure, and channeling a “great-place-to-work energy” to create a high-trust culture to create a profitable collection of specialty businesses. Writing $1.9 billion in gross premiums in 2015 when he took on the role of chair and CEO, C&F wrote $5.7 billion in 2024 with a combined ratio of 95.0 (IFRS 4).

A final epilogue, titled “Looking Ahead,” reflects on the questions raised by the actions of some of the most colorful leaders of C&F’s past. They include the salesman with a “hardscrabble start” as an insurance company “solicitor” (who was “drumming up business”) during the Depression, who sold C&F to Xerox in 1982. (That’s a long career with one company!)

Adee gives this leader, Bobby Russell, a pass when answering the first question of the epilogue: “Could they have known?”

Adee’s answer: “There is an unknowable element to the insurance business. There are corners we just can’t see around,” he writes, noting that Russell could never have foreseen that C&F would pay out asbestos claims 40 years after he left the company.

But knowable issues and warning signs are not to be ignored, he notes, concluding that “early recognition and prudent action could have blunted the impact.”

The Leaders are The Story

Throughout the book, Adee vividly brings to life leaders like Russell, whose tenures with the enterprise span decades. “Think about the company you could build with a team that stuck together for 50 years,” writes Adee as one point, referring to a “dream team” that Crum, Forster and Ackerman assembled—former office boys-turned underwriters among them—to write New York property business for out-of-state companies.

At a time when long-term careers at one company are no longer the norm, Adee helps today’s leaders and the next generation to prepare for unknowable challenges ahead in a different way. Reading about the decisions of past leaders at each company turning point, one can’t help but ask, “What would I do? Would I recognize the signs? Would I take the prudent actions?”

Will you see yourself in the North River’s Founder Captain Richard Whiley—the “disciplined optimist” whose military career eventually put him in New York at a time when the city was poised for exponential property growth—but who conservatively never allowed his fire insurance company to cover a building above the height of firefighting equipment (80 feet)?

Or maybe the securities analyst and investment banker, Bill Ridgway, who was a builder in more ways than one? According to Adee’s account, Ridgway not only took C&F out of it property roots by acquiring general agencies that expand the product suite, but would kick off two massive construction projects – the first at C&F’s 110 William Street headquarters in New York “while employees were still in the building,” and a second at 305 Madison Avenue in Morristown, N.J.—before passing the torch to Russell.

Or maybe you’ll relate most closely to Adee himself, who recalled the state of 305 Madison and the workforce in his early days as C&F CEO—both of which he set out to change.

“Right outside my office was a giant dumpster collecting the steady flow of tan liquid that was dripping from a pregnant ceiling tile….People did not look happy. Beyond the 37 buckets around the office collecting brown ceiling water, there were subtle cues pointing to low morale.”

During a recent interview about the book and its leadership lessons, Adee focused on the characters that behind the narrative. “That was really one of the things that drove this book forward—these questions you have [as a leader] about the company you run.”

“Who is this guy? How did he start this company?” Adee asks of Captain Whiley. The picture of a stiffly posed in a Revolutionary War era military costume belies the combination of an entrepreneurial spirit and disciplined underwriters described in the initial chapters. “You start digging and find out he’s a fascinating guy and has to go through [a lot] to form the company. And he does a really good job,” Adee said, reflecting on the man raised $350,000 in “hard cash,” after looking out a city of 135,000 and seeing a vision of a growing metropolis that would need fire insurance,

Adee is particularly intrigued by Brown, who he met at the time of the Talegen creation, and Russell, who he did not.

Describing Brown, Adee recalls, “He was an intense guy. And perfect for that job….

“People were afraid of Jay. He was so focused and didn’t have time to monkey around,” he said of the fellow actuary who he likens in the book to “the lion is chasing a herd of wildebeest” that shows up in nature movies. “You see one wildebeest stumble, then the lion pounces and it is all over quickly. Jay was like that in meetings,” Adee writes in the book.

As for Russell, colleagues who met him say “he was a great guy, and a very dapper Southern gentleman,” Adee reports of Russell. “He clearly had something. If you were one of the investors and he sells it to Xerox, you loved this guy. ‘This guy’s a genius.’ He does whatever he does and then sells it. But if you were a leader at Xerox, you were eventually thinking, “Hold on, I still need to work another 20 years and this thing’s bankrupt,” Adee said, reimagining the reactions to Russell.

“Was he a villain or a superstar?” he asks. “It’s hard to say.”

It’s not hard to decide which description fits Watsa from Adee’s description in the book.

“When all else fails, get adopted by lenient parents,” he writes, answering the question of how C&F is still standing today.

“The defining characteristic of Fairfax founder Prem Watsa is his infectious optimism, paired with a keen sense of situational awareness. He believed that—over the long term—we could work our way through any rough patch, no matter how bad. He made you want to walk through walls to prove him right. Prem’s vision—along with his commitment to do what it would take—and his ability to make the rest of us believe—made all the difference in navigating the lean years.”

Read more about C&F and Adee in the related article, “How a Decentralized Structure Opens Career Paths at C&F”

Featured images: AI generated (Adobe/Firefly)