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Fairfax Financial Holdings Limited: Second Quarter Financial Results

TORONTO, ONTARIO — (Marketwired) — 08/03/17 — (Note: All dollar amounts in this news release are expressed in U.S. dollars except as otherwise noted. The financial results are prepared using the recognition and measurement requirements of International Financial Reporting Standards except as otherwise noted, and are unaudited.)

Fairfax Financial Holdings Limited (TSX: FFH) (TSX: FFH.U) announces net earnings of $311.6 million ($12.67 net earnings per diluted share after payment of preferred share dividends) in the second quarter of 2017 compared to net earnings of $238.7 million ($9.58 net earnings per diluted share after payment of preferred share dividends) in the second quarter of 2016. Book value per basic share at June 30, 2017 was $377.97 compared to $367.40 at December 31, 2016 (an increase of 5.7% adjusted for the $10 per common share dividend paid in the first quarter of 2017).

The realized net gain on investment of $233 million after tax (book value per basic share of $8.30 on a pro-forma basis after giving effect to the issuance of subordinate voting shares to acquire Allied World) on the sale of about one-third of the company–s equity interest in ICICI Lombard, the agreement for which sale was announced in May 2017, is not included in the second quarter results as that sale closed on July 6, 2017.

“Our insurance companies continued to have excellent underwriting performance in the second quarter and first half of 2017 with a consolidated combined ratio of 94.9% and 94.7% respectively. All of our insurance companies again had combined ratios less than 100%, with Fairfax Asia at 85.9%, Zenith National at 89.5% and OdysseyRe at 90.5% and our operating income was strong at $184.4 million. We closed our transformative acquisition of Allied World on July 6, 2017. The investment actions we took in the fourth quarter of 2016 to remove all our defensive equity index hedges and reduce the duration of our bond portfolios to approximately one year have resulted in our having cash and short term investments in excess of $11 billion at June 30, 2017,” said Prem Watsa, Chairman and Chief Executive Officer of Fairfax. “We continue to be soundly financed, with quarter-end cash and marketable securities in the holding company of about $1 billion.”

The table below shows the sources of the company–s net earnings, set out in a format which the company has consistently used as it believes it assists in understanding Fairfax:

Highlights in the second quarter of 2017 (with comparisons to the second quarter of 2016 except as otherwise noted) included the following:

Subsequent to June 30, 2017:

There were 23.1 million and 23.2 million weighted average shares outstanding during the second quarters of 2017 and 2016 respectively. At June 30, 2017, there were 23,050,956 common shares effectively outstanding.

Unaudited consolidated balance sheet, earnings and comprehensive income information, along with segmented premium and combined ratio information, follow and form part of this news release. Fairfax–s detailed second quarter report can be accessed at its website .

As previously announced, Fairfax will hold a conference call to discuss its second quarter 2017 results at 8:30 a.m. Eastern time on Friday, August 4, 2017. The call, consisting of a presentation by the company followed by a question period, may be accessed at 1 (800) 857-9641 (Canada or U.S.) or 1 (517) 308-9408 (International) with the passcode “Fairfax”. A replay of the call will be available from shortly after the termination of the call until 5:00 p.m. Eastern time on Friday, August 18, 2017. The replay may be accessed at 1 (866) 491-2908 (Canada or U.S.) or 1 (203) 369-1716 (International).

Fairfax Financial Holdings Limited is a holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and investment management.

Certain statements contained herein may constitute forward-looking statements and are made pursuant to the “safe harbour” provisions of the United States Private Securities Litigation Reform 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 achievements of Fairfax to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to: a reduction in net earnings if our loss reserves are insufficient; underwriting losses on the risks we insure that are higher or lower than expected; the occurrence of catastrophic events with a frequency or severity exceeding our estimates; changes in market variables, including interest rates, foreign exchange rates, equity prices and credit spreads, which could negatively affect our investment portfolio; the cycles of the insurance market and general economic conditions, which can substantially influence our and our competitors– premium rates and capacity to write new business; insufficient reserves for asbestos, environmental and other latent claims; exposure to credit risk in the event our reinsurers fail to make payments to us under our reinsurance arrangements; exposure to credit risk in the event our insureds, insurance producers or reinsurance intermediaries fail to remit premiums that are owed to us or failure by our insureds to reimburse us for deductibles that are paid by us on their behalf; our inability to maintain our long term debt ratings, the inability of our subsidiaries to maintain financial or claims paying ability ratings and the impact of a downgrade of such ratings on derivative transactions that we or our subsidiaries have entered into; risks associated with implementing our business strategies;

the timing of claims payments being sooner or the receipt of reinsurance recoverables being later than anticipated by us; risks associated with our use of derivative instruments; the failure of our hedging methods to achieve their desired risk management objective; a decrease in the level of demand for insurance or reinsurance products, or increased competition in the insurance industry; the impact of emerging claim and coverage issues or the failure of any of the loss limitation methods we employ; our inability to access cash of our subsidiaries; our inability to obtain required levels of capital on favourable terms, if at all; the loss of key employees; our inability to obtain reinsurance coverage in sufficient amounts, at reasonable prices or on terms that adequately protect us; the passage of legislation subjecting our businesses to additional supervision or regulation, including additional tax regulation, in the United States, Canada or other jurisdictions in which we operate; risks associated with government investigations of, and litigation and negative publicity related to, insurance industry practice or any other conduct; risks associated with political and other developments in foreign jurisdictions in which we operate; risks associated with legal or regulatory proceedings or significant litigation; failures or security breaches of our computer and data processing systems; the influence exercisable by our significant shareholder; adverse fluctuations in foreign currency exchange rates; our dependence on independent brokers over whom we exercise little control; an impairment in the carrying value of our goodwill and indefinite-lived intangible assets; our failure to realize deferred income tax assets; technological or other change which adversely impacts demand, or the premiums payable, for the insurance coverages we offer; and assessments and shared market mechanisms which may adversely affect our U.S. insurance subsidiaries. Additional risks and uncertainties are described in our most recently issued Annual Report which is available at and in our Supplemental and Base Shelf Prospectus (under “Risk Factors”) filed with the securities regulatory authorities in Canada, which is available on SEDAR at . Fairfax disclaims any intention or obligation to update or revise any forward-looking statements.


(unaudited – US$ millions)

Net premiums written and net premiums earned by the insurance and reinsurance operations (excluding Runoff) in the second quarters and first six months ended June 30, 2017 and 2016 were:

Combined ratios of the insurance and reinsurance operations (excluding Runoff) in the second quarters and first six months ended June 30, 2017 and 2016 were:

(1) Actually 99.99%.

John Varnell
Vice President, Corporate Development
(416) 367-4941

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