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TEXT-S&P rates Fairfax Financial Holdings
March 14, 2012 / 7:18 PM / 6 years ago

TEXT-S&P rates Fairfax Financial Holdings

March 14 - Standard & Poor's Ratings Services said today that it assigned
its 'BB' global scale and 'P-3' Canadian scale ratings to Toronto-based Fairfax
Financial Holdings Ltd.'s pending issuance of up to C$200 million in
preferred shares, with an option on an additional C$50 million available to the
Fairfax intends to issue the preferred shares from its current $2 billion 	
universal shelf filing. We believe the company will use the proceeds to 	
augment its cash position, to increase short-term investments and marketable 	
securities held at the holding company, to retire outstanding debt and other 	
corporate obligations, and for general corporate purposes.	
Fairfax, through its insurance operating subsidiaries--including Odyssey 	
Reinsurance, Northbridge Financial units, Crum & Forster, and Zenith 	
Insurance--maintains a competitive presence in the North American commercial 	
insurance marketplace, as well as in the global reinsurance market. The 	
ratings on Fairfax reflect the group's enhanced and well-diversified global 	
footprint in reinsurance and insurance, strong operating performance mostly 	
driven by consistent total returns on its investment portfolio, and very 	
strong capitalization. Offsetting these positive factors are substantial 	
catastrophe exposure that can create earnings volatility, above-average 	
appetite for market risk, and reserving risk due to long-tail casualty 	
writings and runoff segment.	
In 2011, Fairfax reported a pretax operating loss of $486 million, largely as 	
a result of about $1 billion in catastrophe losses, compared with $220.5 	
million in 2010. Its combined ratio in 2011 for ongoing operations was 	
somewhat high at 114.3%, with 19 percentage points stemming from catastrophe 	
losses in 2011, as compared to 103.5% in 2010. On a pro-forma basis at 	
year-end 2011, upon completion of the issuance and repayment of some 	
outstanding debt, Fairfax's total financial leverage will be approximately 	
31.5%, which marginally exceeds our expectation, and the impact on EBITDA 	
fixed-charge coverage is negligible. In 2012, we expect earnings and capital 	
growth to bring financial leverage back to our expectation of about 30%.	
Fairfax Financial Holdings Ltd.	
 Counterparty Credit Rating         BBB-/Positive/--	
New Ratings	
Fairfax Financial Holdings Ltd.	
 C$250 mil. preferred shares	
  Global scale rating               BB	
  Canadian scale rating             P-3

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