Fairfax Financial Holdings Limited · TSX:FFH

Fairfax Financial — Shareholder Meeting (April 2010)

41 slides from Fairfax Financial's shareholder meeting presentation, Apr 22, 2010

1. Slide 1: Annual Meeting

   Annual Meeting g April 22, 2010 Note: All financial disclosure in this presentation is, unless otherwise noted, in US$ and, except per share data, in $ millions

2. Slide 2: Forward-Looking Statements

   Forward-Looking Forward Looking Statements Certain statements contained herein may constitute forward-looking statements and are made pursuant to the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Such forward forward-looking looking statements are su

3. Slide 3: Guiding Principles: Objectives

   Guiding Principles Objectives ƒ 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, employees and shareholders – at the expense of short term profits if necessary Our focus O f is i long l t

4. Slide 4: Guiding Principles: Structure

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

5. Slide 5: Guiding Principles: Values

   Guiding Principles Values ƒ Honesty and integrity are essential in all of our relationships and will never be compromised ƒ We are results-oriented — not politicalp ƒ We are team players — no "egos”. A confrontational style is not appropriate. We value loyalty — to Fairfax and our colleagues ƒ We ar

6. Slide 6: Financial Results

   Financial Results 2006 2007 2008 2009 Book Value per Share $ 150 $ 230 $ 278 $ 370 Growth in Book Value per Share 53% 21% 33% Common Shareholders' Equity (billions) $ 2.7 $ 4.1 $ 4.9 $ 7.4 Investments per Share $ 1,076 $ 1,141 $ 1,064 Earnings per Share (diluted) $ 58.38 $ 79.53 $ 43.75 6

7. Slide 7: 2008-2009 Change in Book Value per Share

   2008-2009 Change in Book Value per Share 61% 41% 37% 36% 36% 36% 35% 33% 32% 31% 30% 30% 30% 28% 27% 25% 24% 23% 23% 22% 22% 9% 18% 18% % 19 15% 14% 12% 12% 9% 7% 7% 6% 5% 4% 2% 0% %) (1% (7%) (12%) %) (30% (39%) (95%) SOURCE: Dowling & Partners. Fairfax calculated using the same methodology as Dowl

8. Slide 8: U.S. P&C Insurance Companies 5-Year BVPS and Share Price

   U.S. P&C Insurance Companies 5-Year 5 Year BVPS and Share Price 5-Year Compound Annual Growth Rate 2004-2009 BVPS Share Price 1 Fairfax (1) 17.8% 15.2% 2 WR Berkley 15.6% 3.3% 3 QBE Insurance Group 12.8% 10.8% 4 Loews 12.7% 9.2% 5 ACE Ltd. 12.5% 3.3% 6 Chubb 12.4% 5.0% 7 Leucadia National 11.4% 0.5%

9. Slide 9: Fairfax Long Term Performance: Book Value Per Share

   Fairfax Long Term Performance Compound Annual Growth Rate to 2009 Book Value Per Share 5Y Years 10 Y Years 15 Y Years 24 Y Years Ranking 1 12 1 1 Fairfax 17.8% 9.0% 18.0% 25.7% Number of Companies 16 16 14 10 S&P 500 1.6% 4.5% 5.8% 5.5% TSX 9.1% 6.1% 5.8% 4.7% For Fairfax: BVPS in U.S. dollars. 9 Fo

10. Slide 10: Fairfax Long Term Performance: Share Price

    Fairfax Long Term Performance Compound Annual Growth Rate to 2009 Share Price 5 Years 10 Years 15 Years 24 Years Ranking 1 13 5 1 Fairfax 15.2% 5.3% 12.8% 22.3% Number of Companies 16 16 14 10 S&P 500 (1.7%) (2.7%) 6.1% 6.5% TSX 4.9% 3.4% 7.1% 5.0% For Fairfax: Share price in Canadian dollars. For T

11. Slide 11: 2009 Subsidiary Financial Results

    2009 Subsidiary Financial Results Combined Net Return on Ratio Earnings Avg. Equity Northbridge 105 9% 105.9% 92 7 0% 7.0% Crum & Forster 104.1% 213 17.7% OdysseyRe 96.7% 487 15.1% Fairfax Asia 82.6% 38 13.3% 11

12. Slide 12: 2009 Underwriting Results

    2009 Underwriting Results Crum & Northbridge Forster OdysseyRe Consolidated Combined Ratio 105.9% 104.1% 96.7% 99.8% 2006-2009 Increase In % Change In Expense Ratio Net Premiums Percentage Points Written (Including ULAE) Northbridge (8 3%) (8.3%) 4 6% 4.6% Crum & Forster (40.1%) 8.5% OdysseyRe (13.4

13. Slide 13: Subsidiary Growth in Book Value Per Share

    Subsidiary Growth in Book Value Per Share 2001-2009 Compound p Annual Growth Rate Northbridge 18.6% Crum & Forster 19.0% OdysseyRe 22.7% Fairfax Asia (1) 24.8% (1) (1) 2002-2009 2002-2009 ƒ Four excellent companies: ¾ Underwriting culture ¾ Conservative C reserving ¾ Total return investing 13

14. Slide 14: Investing for Long Term Growth – Globally

    Investing for Long Term Growth – y Globally Fairfax Asia ƒ First Capital Insurance – 100% (Singapore) ƒ Falcon Insurance – 100% (Hong Kong) ƒ ICICI Lombard General Insurance – 26% (India) ƒ Falcon F l Insurance I Thailand Th il d – 41% (Th (Thailand) il d) ƒ Alltrust Insurance Company – 15% (China)

15. Slide 15: Purchase of Zenith

    Purchase of Zenith Combined Ratio Q1 2010 123.1% 2009 112.4% To December 31, 2009 10 Years 89% 20 Years 94% 30 Years 95% ƒ Zenith to be run independently by Stanley Zax and his management team, with investments centralized at Fairfax ƒ Combination of excellent long term underwriting track record (Ze

16. Slide 16: Free Cash Flow – Operating Companies

    Free Cash Flow – Operating Companies Dividend Capacity At December 31, 2009 ( illi (millions) ) Northbridge $ 263 Crum & Forster $ 164 OdysseyRe $ 351 Total $ 778 16

17. Slide 17: Importance of Float

    Importance of Float Average g Float (Operating Companies) 1986 $22 million 2009 $9 5 billion $9.5 (year-end (year end $9 $9.8 8 billion) ƒ Average cost of float: 2 2.3% 3% ƒ Total float at year-end 2009: $11.6 billion (including runoff) $579 / share 17

18. Slide 18: Importance of Float

    Importance of Float Year-End Year End 2009 Billions Per Share Total Float $ 11 6 11.6 $ 579 Common Shareholders' Equity $ 7.4 $ 370 Net Debt $ 2.3 $ 115 Total Investment Portfolio $ 21.3 $ 1,064 Investment Portfolio in 1985 $24 million $ 5 18

19. Slide 19: Pre-Tax Interest and Dividend Income

    Pre-Tax Pre Tax Interest and Dividend Income $ Millions Per Share 1985 3 70¢ 2009 713 $ 39 2009 - Adjusted for "Munis" 822 $ 40 19

20. Slide 20: Pre-Tax Realized & Unrealized Gains

    Pre-Tax Pre Tax Realized & Unrealized Gains $ Amount Per Share 1985 0.5 million 10¢ 2009 2.0 billion $ 110 Cumulative Gains 10.2 billion 20

21. Slide 21: Long Term Common Stock Holdings

    Long Term Common Stock Holdings At December 31, 2009 Shares Market Unrealized Owned Value Gains ( (millions) ) ( (millions) ) ( (millions) ) Wells Fargo 20.0 $ 540 $ 152 Johnson & Johnson 76 7.6 $ 488 $ 25 US Bancorp 15.9 $ 356 $ 98 Kraft Foods 10 7 10.7 $ 291 $ 6 Total $ 1.7 billion $ 281 21

22. Slide 22: Other Than Temporary Impairments and Mark-to-Market Losses

    Other Than Temporary Impairments and Mark-to-Market Mark to Market and Realized Losses 2008/2009 (billions) Other Than Temporary Impairments $ 1.4 Mark-to-Market Losses $ 0.7 Realized Losses $ 0.3 Total $ 2.4 22

23. Slide 23: Investment Performance

    Investment Performance Hamblin Watsa Investment Performance 5 Years to 10 Years to 15 Years to D Dec. 31 '09 D Dec. 31 '09 D Dec. 31 '09 Common Stocks (with Equity Hedging) 17.1% 19.9% 18.3% Common Stocks 5.9% 13.9% 14.3% S&P 500 0 4% 0.4% (1 0% ) (1.0% 8 0% 8.0% Bonds 11.8% 12.1% 10.6% BofA Merrill

24. Slide 24: Fairfax - Yesterday and Today

    Fairfax - Yesterday and Today 1985 2009 ($ millions) ($ millions) Net Premiums Written 12.2 4,286 Net Earnings g ((0.6)) 857 Investment Portfolio 23.9 21,273 Common Shareholders' Equity 7.6 7,392 Per Share Growth Book Value $ 1 52 1.52 $ 370 243x Share Price (C$) $ 3.25 $ 410 126x Investments $ 4.80

25. Slide 25: Fairfax Employee Share Purchase Plan

    Fairfax Employee Share Purchase Plan To December 31, 2009 Si Since Inception 5 Years 10 Years 15 Years 20 Years 22 Years Compound Annual Return 31% 18% 13% 18% 19% ƒ For an employee earning Cdn $40,000 ƒ Participation at maximum 10% of salary since inception ƒ Shares owned at December 31, 2009: 2,80

26. Slide 26: Fairfax Focused on the Long Term

    Fairfax Focused on the Long Term Quarterly Earnings Not Important 2009 Earnings (Loss) Book Value Per Share Per Share At December 31, 2008 n/a $ 278 Fi t quarter First t $ (3.55) $ 255 Second quarter $ 15.56 $ 316 Third quarter $ 30.88 $ 372 Fourth q quarter $ 1.65 $ 370 26

27. Slide 27: Financial Strength

    Financial Strength 2004 2005 2006 2007 2008 2009 Holdco Cash and Marketable Securities $567 $559 $767 $963 $1,555 $1,243 Year End Year End Year End 2003 2005 2009 Subsidiary Debt 784 933 903 Holdco Obligations 1,587 1,610 1,411 Total Debt 2,371 2,543 2,314 Holdco Cash and Marketable Securities 410 5

28. Slide 28: Can Government Stimulus Work Long Term?

    Can Government Stimulus Work Long Term? “ I have never known much good done by those who affected to trade for the public good.” Adam Smith (Wealth of Nations) 1772 “ Too much public sector borrowing and government directed investment could only crowd out private sector borrowing and risk taking tak

29. Slide 29: Can the Japanese Experience Be Repeated in the U.S.?

    Can the Japanese Experience Be Repeated in the U.S.? Government Debt as a % of GDP, Nominal GDP, Long Term Government Interest Rates and Nikkei Stock Average Index 1989-2009 140 200% 180% 120 160% 100 Base = 100 140% 120% 80 GDP % of G 100% 60 80% 40 60% 40% 20 20% 0 0% 1989 1991 1993 1995 1997 1999

30. Slide 30: The U.S. Experience in the 1930's

    The U.S. Experience in the 1930’s 1930 s Government Debt as a % of GDP, Nominal GDP, Long Term Treasury Rates and S&P 500 Index 1929-1941 140 60% 120 50% Base = 100 100 40% 80 DP % of GD 30% 60 20% 40 10% 20 0 0% 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 Nominal GDP S&P 500 In

31. Slide 31: Deleveraging Has Begun

    Deleveraging Has Begun - Just U.S. Total Private Sector(1) Debt and Total Private Sector Debt/GDP 1953-2009 5,000 300% 4,000 250% Yearr‐Over‐Year Chaange ($ Billionss) 3,000 200% 2,000 1,000 150% 0 100% -1,000 -2,000 50% 1953 1957 1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 Tota

32. Slide 32: Long Term U.S. Treasury Rate

    Long Term U.S. Treasury Rate 1872 2009 1872-2009 Long Term Treasury Rate 1872 - 2009 14% Fall of Berlin Wall 12% Onset of Iron and Bamboo Curtains 10% 8% 6% Average = 4.24% 4% 2% Global Global market Restricted market market 0% 1872 1889 1906 1923 1940 1957 1974 1991 9 2008 Source: Hoisington Invest

33. Slide 33: High Yield Spreads

    High Yield Spreads 1-10 Year High Yield Spreads 2 000 2,000 1,800 Spread (bps) over U.S. Treasurries 1,600 1,400 1,200 1,000 800 600 400 200 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Merrill Lynch 33

34. Slide 34: Investment Grade Spreads

    Investment Grade Spreads 1-10 Year Investment Grade Spreads 800 700 Spread (bps) over U.S. Treasurries 600 500 400 300 200 100 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Merrill Lynch 34

35. Slide 35: U.S. Real Housing Price Index

    U.S. Real Housing Price Index 1890 2009 1890-2009 U.S. Real Housing Price Index 1890 - 2009 220 200 180 160 140 1894 1989 1979 124.2 123.9 122.1 120 Average = 103.6 103 6 100 80 60 1890 1907 1924 1941 1958 1975 1992 2009 Source: Hoisington Investment Management and Robert Shiller, Yale University 35

36. Slide 36: Fairfax Investment Portfolio Positioned For Income & Capital Gains

    Fairfax Investment Portfolio Positioned For Income & Capital Gains 2007 2008 2009 Cash and Short Term 21% 32% 17% Government Bonds 50% 16% 14% Municipal Bonds 1% 20% 26% Corporate Bonds 4% 7% 14% Total Fixed Income 55% 43% 54% Yield 4.2% 6.9% (1) 6.5% (1) Common Stocks 17% (2) 22% 27% (2) Other Inve

37. Slide 37: Well Positioned for a Turn in the Cycle

    Well Positioned for a Turn in the Cycle 3,000 Northbridge (C$) Odyssey Re Crum & Forster 2,500 ums Written 2,000 1 500 1,500 Gross Premiu 1,000 G 500 Soft Market Hard Market 0 1999 2000 2001 2002 2003 2004 2005 37

38. Slide 38: Fairfax's Strengths Demonstrated Over 24 Years: Operations

    Fairfax’s Strengths Demonstrated Over 24 Years 1. Operations – Disciplined operating management focused on underwriting profitability and prudent reserving ¾ P&C Insurance Operations • Canada – leading commercial insurance operation • United States – large commercial operation across the country • A

39. Slide 39: Fairfax's Strengths Demonstrated Over 24 Years: Investments

    Fairfax’s Strengths Demonstrated Over 24 Years 2. Investments – Long term, value-oriented philosophy ¾ Worldwide • Stocks • Bonds • Distressed debt • Wherever Wh “value” “ l ” prevailsil ¾ Excellent long term track record 39

40. Slide 40: Ready for the Next Decade

    Ready for the Next Decade - Building on Fairfax’s Fairfax s Strengths ƒ Our guiding principles have remained intact ƒ Excellent long term performance ƒ Demonstrated strengths ¾ Strong operating subsidiaries focused on underwriting profitability and prudent reserving ¾ Conservative investment managem

41. Slide 41: Fairfax Financial Holdings Limited

    FAIRFAX FINANCIAL HOLDINGS LIMITED

Fairfax Financial Holdings — Shareholder Meeting (April 2010) on 6ix