A.M. Best Assigns Ratings to Fairfax Financial Holdings Limited’s New Shelf Registration and Preferred Share Offering

A.M. Best Co. has assigned indicative ratings of “bbb” to senior unsecured debt, “bbb-” to subordinated debt and “bb+” to preferred stock, which may be issued under the recently filed and approved shelf registration statement of Fairfax Financial Holdings Limited (Fairfax) (Toronto, Ontario) (NYSE: FFH; TSX: FFH).

Concurrently, A.M. Best has assigned a debt rating of “bb+” to CAD 250 million cumulative five-year rate reset preferred shares (Series C) of Fairfax. The outlook for all ratings is stable. Fairfax’s issuer credit rating of “bbb”, existing debt ratings and ratings of its insurance operating entities are all unchanged.

The new CAD 2 billion shelf registration replaces Fairfax’s previous shelf registration, which was withdrawn simultaneously with the approval; consequently, A.M. Best has withdrawn its ratings on the previous shelf registration.

The Series C preferred shares have been issued under a supplement to the September 25, 2009 prospectus. The annual dividend rate will be set every five years and will be equal to the five-year Government of Canada bond rate in effect 30 days prior to January 1, 2015, plus 3.15%, and thereafter on every fifth anniversary date. The rate for the initial five-year period will be 5.75%.

Beginning December 31, 2014, and thereafter on every fifth December 31, holders of the Series C preferred shares will have the option to convert their shares to Series D preferred shares, which will be cumulative, floating rate preferred shares, with the interest rate set quarterly based on the Government of Canada’s three-month note, plus 3.15%.

Fairfax’s unadjusted debt-to-total capital ratio is calculated at 27.4%, following the issuance of these preferred securities, an increase from 23.7% at June 30, 2009 (U.S. GAAP). This calculation includes the debt of Odyssey Re Holdings Corp., a majority-owned public company capable of servicing its debt. Fairfax’s financial leverage and coverage ratios remain well within A.M. Best’s guidelines for its debt ratings and are expected to remain so over the near term.

For Best’s Credit Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.

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