farifax financial 2008-2009 presentation

Annual MeetinggApril 15, 2009

1Note: All financial disclosure in this presentation is, unless otherwise noted, in US$ and, except per share data, in $ millions

Forward-Looking StatementsCertain statements contained herein may constitute forward-looking statements and are madepursuant to the “safe harbor” provisions of the United States Private Securities Litigation ReformAct of 1995. Such forward-looking statements are subject to known and unknown risks,

Forward Looking Statements

Act of 1995. Such forward looking statements are subject to known and unknown risks,uncertainties and other factors which may cause the actual results, performance or achievementsof Fairfax to be materially different from any future results, performance or achievementsexpressed or implied by such forward-looking statements. Such factors include, but are not limitedto: a reduction in net income if our loss reserves are insufficient; underwriting losses on the risksour subsidiaries insure that are higher or lower than expected; the occurrence of catastrophicevents with a frequency or severity exceeding our estimates; the cycles of the insurance marketevents with a frequency or severity exceeding our estimates; the cycles of the insurance market,which can substantially influence our and our competitors’ premium rates and capacity to writenew business; changes in economic conditions, including interest rates and the securities markets,which could negatively affect our investment portfolio; insufficient reserves for asbestos,environmental and other latent claims; the inability of our subsidiaries to maintain favourablefinancial or claims-paying ability ratings; an inability to realize our investment objectives; exposureto credit risk in the e ent o r s bsidiaries’ reins rers or ins reds fail to make pa ments ato credit risk in the event our subsidiaries’ reinsurers or insureds fail to make payments; adecrease in the level of demand for our subsidiaries’ products, or increased competition; aninability to obtain reinsurance coverage at reasonable prices or on terms that adequately protectour subsidiaries; an inability to obtain required levels of capital; an inability to access cash of oursubsidiaries; risks associated with requests for information from government authorities; risksassociated with current government investigations of, and class action litigation related to,g g ginsurance industry practice; the passage of new legislation; and the failure to realize future incometax assets. Additional risks and uncertainties are described on pages 150 – 153 in our 2008Annual Report which is available at www.fairfax.ca. For a fuller detailing of issues and risksrelating to the company, please see Risk Factors in Fairfax’s most recent Supplemental and BaseShelf Prospectus filed with the securities regulatory authorities in Canada and the United States,which is available on SEDAR and EDGAR. Fairfax disclaims any intention or obligation to update

2

which is available on SEDAR and EDGAR. Fairfax disclaims any intention or obligation to updateor revise any forward-looking statements.

Guiding Principles

Objectives

Guiding Principles

We expect to compound our book value per share over the long term by 15% annually by running Fairfax and its subsidiaries for the long term benefit of customers,subsidiaries for the long term benefit of customers, employees and shareholders – at the expense of short term profits if necessary

O f i l t th i b k l h dOur focus is long term growth in book value per share and not quarterly earnings. We plan to grow through internal means as well as through friendly acquisitions

We always want to be soundly financed

We provide complete disclosure annually to our h h ld

3

shareholders

Guiding Principles

Structure

Guiding Principles

Our companies are decentralized and run by the presidents except for performance evaluation, succession planning, acquisitions and financing, which are done by or withacquisitions and financing, which are done by or with Fairfax. Cooperation among companies is encouraged to the benefit of Fairfax in total

C l t d i ti b t F i f d itComplete and open communication between Fairfax and its subsidiaries is an essential requirement at Fairfax

Share ownership and large incentives are encouraged p g gacross the Group

Fairfax head office will always be a very small holding d t ti

4

company and not an operating company

Guiding Principles

Values

Guiding Principles

Honesty and integrity are essential in all of our relationships and will never be compromisedWe are results-oriented — not political pWe are team players — no "egos”. A confrontational style is not appropriate. We value loyalty — to Fairfax and our colleaguescolleaguesWe are hard working but not at the expense of our families We always look at opportunities but emphasize downside

t ti d l k f t i i i l f it lprotection and look for ways to minimize loss of capitalWe are entrepreneurial. We encourage calculated risk-taking. It is all right to fail but we should learn from our mistakes

5

We will never bet the company on any project or acquisition We believe in having fun — at work!

Financial ResultsFinancial Results

2006 2007 2008Book Value per Share 150 16$ 230 01$ 278 28$Book Value per Share 150.16$ 230.01$ 278.28$

Growth in Book Value per Share 53% 21%

Investments per Share 1,076$ 1,141$

Earnings per Share (diluted) 58.38$ 79.53$

6

2008 Change in Book Value per Share

%23

%11

%10

%8% 7% 6% 5% 5% 3% 3% 3% 3% 2%2

(1%)

(3%)

(3%)

(3%)

(4%)

(5%)

(5%)

(6%)

(7%)

(7%)

(8%)

(8%)

(9%)

(9%)

12%)

3%)

4%)

4%)

4%)

%)

%)

%)

%)

(1 (13

(14

(14

(14

(15%

(16%

(17%

(18%

(18%

)(19%

)(19%

)(19%

)(22%

)(24%

)(31%

)(32%

)37

%)

37%)

)(3 (3(43%

)(48%

)%)

7

(65

(100

%)

SOURCE: Dowling & Partners, IBNR #12Fairfax and AIG calculated using the same methodology as Dowling & Partners, based on company data (AIG excludes government financing)

U.S. P&C Insurance Companies 5-Year BVPS and Share Price5 Year BVPS and Share Price

5-Year Compound Annual Growth Rate2003-2008

BVPS Share Price1 Fairfax (1) 11.2% 11.5%2 Chubb 11.0% 8.4%3 T l 9 9% 2 7%3 Travelers 9.9% 2.7%4 Markel Corp. 9.6% 3.4%5 PartnerRe 8.7% 4.2%6 Loews 8.2% 11.4%7 ACE Ltd. 8.0% 5.0%8 Berkshire Hathaway 6.9% 2.8%9 RenaissanceRe 5.5% 1.0%

10 White Mountains 3.9% (10.3%)11 Leucadia National 2.2% 5.2%12 IPC Re 0.4% (5.1%)13 Hartford (5.6%) (22.6%)14 XL Capital (19.8%) (45.6%)

8

p ( ) ( )15 AIG (49.5%) (52.7%)

(1) BVPS in U.S. dollars. Share price in Canadian dollars

Fairfax Long Term PerformanceFairfax Long Term PerformanceCompound Annual Growth Rate to 2008

Book Value Per Share 5 Years 10 Years 15 Years 23 Years

Ranking 1 4 1 1gGrowth Rate 11.2% 9.5% 17.0% 25.4%

Share PriceShare Price5 Years 10 Years 15 Years 23 Years

Ranking 1 12 2 1Growth Rate 11 5% (3 2%) 13 1% 23 1%

Number of Companies 15 15 12 8

Growth Rate 11.5% (3.2%) 13.1% 23.1%

9For Fairfax: BVPS in U.S. dollars. Share price in Canadian dollars

Companies 15 15 12 8

2008 Subsidiary Financial Results2008 Subsidiary Financial Results

Combined Net Return onRatio Earnings Avg. Equity

N thb id 107 3% 46 3 6%Northbridge 107.3% 46 3.6%

Crum & Forster (US GAAP) 114.6% 333 27.1%

OdysseyRe (US GAAP) 101.2% 549 20.5%

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2008 Underwriting Results2008 Underwriting Results

Crum & Northbridge Forster OdysseyRe Consolidated

As ReportedUnderwriting Loss (78.7) (177.2) (73.5) (457.7)Combined Ratio 107 3% 117 6% 103 5% 110 1%Combined Ratio 107.3% 117.6% 103.5% 110.1%

AdjustmentsForeign Currency Impact 52.8 - 45.8 99.1 Crum & Forster Reinsurance Commutation and Lawsuit Settlement - 109.7 - 109.7 Hurricanes Ike and Gustav Losses 25.0 74.3 136.9 242.5 Advent Underwriting Loss 112 4Advent Underwriting Loss - - - 112.4

Adjusted Underwriting Profit (Loss) (0.9) 6.8 109.2 106.0 Adjusted Combined Ratio 100.1% 99.3% 94.7% 97.6%

11

Importance of Float –Operating Companies

Unlike money management business (royalty on funds managed), results (gains) accrue to owners

Operating Companies

g ), (g )Manage money with a long term perspectiveUnderwriting profit (loss) = benefit (cost) of floatFloat belongs to policy holders but income accrues to shareholders (with 100% or better combined ratios)

Benefit / Avg. Long TermUnderwriting Average (Cost) Canada TreasuryProfit / (Loss) Float of Float Bond Yield

1986 2.5 21.6 11.6% 9.6%

1996 (37) 1,089 (3.4%) 7.6%

2007 281 8,618 3.3% 4.3%

12

,2008 (458) 8,918 (5.1%) 4.1%

Weighted Avg. Financing Differential Since Inception 2.3%

Importance of Float –Operating Companies

Unlike money management business (royalty on funds managed) results (gains) accrue to owners

Operating Companies

managed), results (gains) accrue to ownersManage money with a long term perspectiveUnderwriting profit (loss) = benefit (cost) of float

Benefit / Avg. Long Term

Float belongs to policy holders but income accrues to shareholders (with 100% or better combined ratios)

g gUnderwriting Average (Cost) Canada Treasury InvestmentProfit / (Loss) Float of Float Bond Yield Gains

1986 2.5 21.6 11.6% 9.6% 1

1996 (37) 1,089 (3.4%) 7.6% 91

2007 281 8,618 3.3% 4.3% 9762008 (458) 8,918 (5.1%) 4.1% 1,559

Weighted Avg. Financing Differential Since Inception 2.3% $5.3B (cumulative)

13

Investment PerformanceInvestment Performance

Hamblin Watsa Investment Performance

5 Years to 10 Years to 15 Years toDec. 31 '08 Dec. 31 '08 Dec. 31 '08

Common Stocks with Equity Hedge 12.2% 19.1% 16.1%Common Stocks 1.5% 13.3% 12.3%

S&P 500 (2 2%) (1 4%) 6 5%S&P 500 (2.2%) (1.4%) 6.5%

Bonds 9.6% 9.3% 9.4%Merrill Lynch U.S. Corporate Index 1.6% 4.4% 5.4%

14

Source: Hamblin Watsa Investment Counsel - Annualized Rate of Return (%).Notes: Bonds do not include returns from credit default swaps.

15 year investment performance includes portfolios managed by Hamblin Watsa which were not owned by Fairfax.Past performance is no guarantee of future results.

Other-Than-Temporary Impairment and Mark-to-Market Losses in 2008and Mark to Market Losses in 2008

Crum & ForsterNorthbridge ConsolidatedOdysseyRe

OTTI 274 197 359 996

MTM 103 87 141 504

Total 377 284 500 1,500

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Subsidiary Growth in BookValue Per ShareValue Per Share

2001-20082001-2008Compound Annual

Growth Rate

Northbridge 19.2%

Crum & Forster (US GAAP) 18.9%

OdysseyRe (US GAAP) 21.2%

Three excellent companies:Underwriting cultureConservative reserving

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Conservative reservingTotal return investing

Fairfax - Yesterday and TodayFairfax Yesterday and Today

1985 2008

Net Premiums Written 12.2 4,332

Net Earnings (0.6) 1,474

Investment Portfolio 23.9 18,395

Common Shareholders' Equity 7.6 4,866

Per Share GrowthBook Value 1.52$ 278.28$ 183x

Share Price (C$) 3.25$ 390.00$ 120x

Investments 4.80$ 1,140.85$ 238x

17

Net Premiums Written 2.44$ 247.74$ 102x

International DiversificationIndia – ICICI Lombard General InsuranceIndia ICICI Lombard General Insurance

For the Years Ended March 31In USD millions 2002 2008In USD millions 2002-2008

2002 2008 Average

Gross Premiums Written 6 894Combined Ratio - 105 7% 105 8%Combined Ratio - 105.7% 105.8%Net Income (2) 26

Investment Portfolio 23 626Total Shareholders' Equity 21 264

Customers (millions) 0.0 3.5

Cumulative Investment: $88MM ($30MM after March 2008)

Employees 116 5,570Offices 11 340

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Cumulative Investment: $88MM ($30MM after March 2008)Ownership Interest: 26%

International DiversificationSingapore – First Capital InsuranceSingapore First Capital Insurance

For the Years Ended December 31For the Years Ended December 31In USD millions 2002-2008

2002 2008 Average

Gross Premiums Written 10 195Gross Premiums Written 10 195Combined Ratio 101.8% 65.9% 71.2%Net Income (0) 27


Initial Investment: $32MM in 2001, no additional investment

19

Ownership Interest: 100%

International DiversificationHong Kong – Falcon InsuranceHong Kong Falcon Insurance


2002 2008 Average

Gross Premiums Written 57 28Gross Premiums Written 57 28Combined Ratio 98.5% 158.9% 110.2%Net Income 2 (14)


Cumulative Investment: $40MM

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International DiversificationJordan – Arab Orient InsuranceJordan Arab Orient Insurance


2002 2008 Average

Gross Premiums Written 9 45Gross Premiums Written 9 45Combined Ratio 79.7% 79.3% 85.6%Net Income 1 3


Initial Investment: $11MM in 2008

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International DiversificationDubai – Alliance InsuranceDubai Alliance Insurance


2002 2008 Average

Gross Premiums Written 17 32Gross Premiums Written 17 32Combined Ratio 74.7% 68.4% 68.9%Net Income 5 12



22


International DiversificationPoland – Polish RePoland Polish Re


2002 2008 Average

Gross Premiums Written 37 95Gross Premiums Written 37 95Combined Ratio 96.0% 106.1% 100.0%Net Income 1 (11)



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Financial StrengthFinancial Strength

2003 2004 2005 2006 2007 2008Holdco Cash andMarketable Securities $410 $567 $559 $767 $972 $1,564

Year End Year End Year End2003 2005 2008

Subsidiary Debt 784 933 910 Holdco Obligations 1,587 1,610 1,058 Total Debt 2,371 2,543 1,968 Holdco Cash and Marketable Securities 410 559 1,555 ,Net Debt 1,961 1,984 413

Total Equity & Minority Interests 2,896 3,396 6,352

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Net Debt / Net Total Capital 40.4% 36.9% 6.1% Total Debt / Total Capital 45.0% 42.8% 23.7%

The Perfect Storm in theU.S. Economy SubsidingU.S. Economy Subsiding

1) Risk repriced1) Risk repriced

2) Deleveraging taking place

3) U.S. economy and U.S. stock markets have declined significantlyhave declined significantly

Pessimism rampant

25

U.S. Stock Valuations Back To NormalTo Normal

Stock Market Capitalization as a Percentage of Nominal GDPMonthly - 1924 to Present

140%

160%

180%

100%

120%

40%

60%

80%Average = 60.6%

0%

20%

40%

26Source: Ned Davis Research Inc.

Can the Japanese Experience Be Repeated in the U.S.?Repeated in the U.S.?

Nikkei 225 Index vs. Japanese 10-Year Gov't Bond YieldsMonthly - 1986 to Present

35,000

40,000

7%

8%

9%

25,000

30,000

5%

6%

25 I

ndex

ond

Yiel

d

15,000

20,000

2%

3%

4%

Nik

kei 2

2

10-Y

ear

Bo

5,000

10,000

0%

1%

1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

27

1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

Bond Yields Nikkei 225

Stock Market Crash of 1929Stock Market Crash of 1929Dow Jones Industrial Average vs.Long Term U.S. Treasury Yields

1925 to 1939

350

4005%

geeld

1925 to 1939

200

250

300

3%

4%

dust

rial A

vera

g

S. T

reas

ury

Yie

100

150

00

2%

3%

Dow

Jon

es In

d

Long

Ter

m U

.S

0

50

1%1925 1927 1929 1931 1933 1935 1937 1939

DL

28Source: Bloomberg and Hoisington Investment Management

Long Term U.S. Treasury Yield DJIA

Long Term U.S. Treasury Rate 1872-20081872 2008

14%

10%

12%Onset of Iron and Bamboo Curtains

Fall of Berlin Wall

8%

10%

4%

6%

Average = 4.24%

0%

2%Global marketGlobal market Restricted market

29Source: Hoisington Investment Management

0%1872 1889 1906 1923 1940 1957 1974 1991 2008

High Yield SpreadsHigh Yield Spreads1-10 Year High Yield Spreads

1,600

1,800

2,000

ries

1,200

1,400

,

r U.S

. Tre

asur

600

800

1,000

ead

(bps

) ove

r

0

200

400Spre

30Source: Merrill Lynch

01996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Investment Grade SpreadsInvestment Grade Spreads

800

1-10 Year Investment Grade Spreads

600

700

800

ies

400

500

600

r U.S

. Tre

asur

i

200

300

400

ead

(bps

) ove

r

0

100

200

Spre

31Source: Merrill Lynch

01996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Fairfax’s CDS PortfolioFairfax s CDS Portfolioe

Results of Fairfax's CDS Portfolio Since Inception

16.0

18.0

20.0

2,500

3,000

$ bi

llion

s)

and

Cum

ulat

ive

($ m

illio

ns)

12.0

14.02,000

DS

Port

folio

($

Gai

ns o

n Sa

le a

ales

Pro

ceed

s

6.0

8.0

10.0

1,000

1,500

Am

ount

of C

D

st, C

umul

ativ

e G

ue In

clud

ing

Sa

0 0

2.0

4.0

0

500

Not

iona

l A

Cum

ulat

ive

Cos

Mar

ket V

alu

0.0031-Dec-04 31-Dec-05 31-Dec-06 31-Dec-07 31-Dec-08

C

Notional Amount of CDS Portfolio Market Value Realized Proceeds Cost

U.S. Real Housing Price Index 1890-20081890 2008

220

180

200

220

32% decrease

140

160

19891894

100

120

Average = 101.2

1989124.21979

122.11894 123.9

60

80

33Source: Hoisington Investment Management and Robert Shiller, Yale University

1890 1899 1908 1917 1926 1935 1944 1953 1962 1971 1980 1989 1998 2007

Fairfax Investment Portfolio Positioned For Income & Capital GainsPositioned For Income & Capital Gains

2007 2008Cash and Short Term 21% 32%Cash and Short Term 21% 32%

Government Bonds 50% 16%Municipal Bonds 1% 20%Municipal Bonds 1% 20%Corporate Bonds 4% 7%Total Fixed Income 55% 43%

Yield 4.2% 6.9% (1) Yield 4.2% 6.9%

Common Stocks 17% (2) 22%Other Investments 7% 3%Total 100% 100%

Total Investment Portfolio (3) $19.1B $20.0B

34

(1) Pre-tax equivalent yield(2) Approximately 85% hedged(3) Includes holding company cash and marketable securities

Capital Erosion Has Preceded Several Past Cycle TurnsSeveral Past Cycle Turns

0%'69 '73 '74 '00 '01 '02 '08P

-10%U S P&C

0%U.S. P&C Surplus

S&P 500

GAAP

-20%

-30%

Cumulative real premium growth i th f ll i

16% 30%31%

Sources: Swiss Re, Thomson Financial, A.M. Best, Towers Perrin, Swiss Re Economic Research & Consulting 35

-40%

in three following years

Well Positioned for a Turn in the CycleWell Positioned for a Turn in the Cycle

3,000Northbridge (C$)

2,500

Northbridge (C$)

Odyssey Re

Crum & Forster

1 500

2,000

ums

Writ

ten

1,000

1,500

Gro

ss P

rem

iu

500

G

Soft Market Hard Market

36

01999 2000 2001 2002 2003 2004 2005

Fairfax’s Strengths Demonstrated Over 23 Years

1. Operations – Disciplined operating management focused on underwriting profitability and prudent

Demonstrated Over 23 Years

focused on underwriting profitability and prudent reserving

P&C Insurance Operations• Canada – leading commercial insurance operationCanada leading commercial insurance operation• United States – large commercial operation across

the country• Asia – Hong Kong, Singapore, Thailand and largestAsia Hong Kong, Singapore, Thailand and largest

private operation in India• Middle East – Dubai and Jordan• Eastern Europe – Polandp

P&C Reinsurance Operations• Worldwide – Top 5 broker reinsurer in the U.S., top

37

p , p20 in the world

Fairfax’s StrengthsDemonstrated Over 23 Years

2. Investments – Long term, value-oriented philosophy

Demonstrated Over 23 Years

Worldwide• Stocks• Bonds• Distressed debt

Wh “ l ” il• Wherever “value” prevailsMany large successful investments like Zenith, Russel Metals Hub etcRussel Metals, Hub, etc.

38

Ready for the Next Decade -Building on Fairfax’s Strengths

Our guiding principles have remained intact

Building on Fairfax s Strengths

Excellent long term performanceDemonstrated strengths

Strong operating subsidiaries focused on underwriting profitability and prudent reservingConservative investment management providingConservative investment management providing excellent long term returns

Well positioned for the futureWell positioned for the future

39

farifax financial 2008-2009 presentation

Business

subsidiaries risks

fairfax share ownership

fairfax d

benefit of fairfax

achievements of fairfax

book value

subsidiaries products

share data