Bermuda-based Compensation Risk Managers (CRM) Holdings Ltd. suffered a $2.9 million net loss during the third quarter of 2008, mainly as a result of exposure to Lehman Brothers securities.

CRM, which provides a range of products and services for the workers' compensation insurance industry, made a loss of 18 cents per share for this year's third quarter, including three cents of impairment charges for a $1 million Lehman Brothers debt security owned by the company, a four-cent charge relating to reserves created against potentially uncollectable receivables, and a 12-cent reserve adjustment for losses accrued in the first and second quarters to bring them in line with the company's higher third quarter reserve ratio for certain primary insurance risks.

The company also stopped providing services to workers' compensation self-insured groups in the State of New York in the third quarter, closing its New York subsidiary responsible for this business, Compensation Risk Managers LLC, and its medical review business carried out through its subsidiary Eimar LLC.

On a comparable basis, in the third quarter ending September 30, 2007, net income was $6.8 million or 42 cents per share. Total revenues in the third quarter of 2008 were down at $29.2 million, compared with $34.1 million in the third quarter the prior year.

Majestic, the firm's insurance segment, saw its net earned premiums drop to $20.5 million, compared to $21.6 million the previous year, as a result of the 40 percent quota share arrangement with an outside reinsurer that started on July 1, 2008.

But the reduction was substantially offset by premiums earned in New York and New Jersey this year.

"Competition remains robust in our markets, with early indications that we are closer to equilibrium," said Daniel Hickey Jr., CRM's chief executive officer.

"The loss of capital by companies with higher risk investment portfolios than CRM's may be acting to mitigate the effects of the inflow of capital that remains attracted by reasonable loss experience. Our growth continues outside California, as we again increased our business in New Jersey and New York.

"Despite a number of unusual items this quarter, our underlying business remains profitable. We have been served well by our high-quality investment portfolio, and we have taken further difficult but necessary cost-cutting actions to strengthen our cost structure."