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2009 AGM Slide Presentation

2009 AGM Slide Presentation

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Annual Meeting g

April 15, 2009

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

1

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-looking statements are subject to known and unknown risks, forward looking 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 income if our loss reserves are insufficient; underwriting losses on the risks our subsidiaries insure that are higher or lower than expected; the occurrence of catastrophic events with a frequency or severity exceeding our estimates; the cycles of the insurance market market, which can substantially influence our and our competitors’ premium rates and capacity to write new 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 favourable financial or claims-paying ability ratings; an inability to realize our investment objectives; exposure to credit risk in the e ent o r s bsidiaries’ reins rers or ins reds fail to make pa ments a event our subsidiaries’ reinsurers insureds payments; decrease in the level of demand for our subsidiaries’ products, or increased competition; an inability to obtain reinsurance coverage at reasonable prices or on terms that adequately protect our subsidiaries; an inability to obtain required levels of capital; an inability to access cash of our subsidiaries; risks associated with requests for information from government authorities; risks g g g associated with current government investigations of, and class action litigation related to, insurance industry practice; the passage of new legislation; and the failure to realize future income tax assets. Additional risks and uncertainties are described on pages 150 – 153 in our 2008 Annual Report which is available at www.fairfax.ca. For a fuller detailing of issues and risks relating to the company, please see Risk Factors in Fairfax’s most recent Supplemental and Base Shelf 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 or revise any forward-looking statements.

2

Guiding Principles
Objectives
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 f O focus is long term growth in book value per share and i l t th i b k l h d 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 shareholders h h ld
3

Guiding Principles
Structure
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 Complete and open communication b t C l t d i ti between F i f and it Fairfax d its subsidiaries is an essential requirement at Fairfax p g g Share ownership and large incentives are encouraged across the Group Fairfax head office will always be a very small holding company and not an operating company d t ti
4

Guiding Principles
Values
Honesty and integrity are essential in all of our relationships and will never be compromised p We are results-oriented — not political We are team players — no "egos”. A confrontational style is not appropriate. We value loyalty — to Fairfax and our colleagues We are hard working but not at the expense of our families We always look at opportunities but emphasize downside protection and l k f ways t minimize l t ti d look for to i i i loss of capital f it l We are entrepreneurial. We encourage calculated risk-taking. It is all right to fail but we should learn from our mistakes We will never bet the company on any project or acquisition We believe in having fun — at work!

5

Financial Results

2006 Book Value per Share Growth in Book Value per Share Investments per Share Earnings per Share (diluted) $ 150 16 150.16

2007 $ 230 01 230.01 53% $ 1,076 $ 58.38

2008 $ 278 28 278.28 21% $ 1,141 $ 79.53

6

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%) (1 12%) (13 3%) (14 4%) (14 4%) (14 4%) (15% %) (16% %) (17% %) (18% %) (18%) (19%) (19%) (19%) (22%) (24%) (31%) (32%) (3 37%) (3 37%) (43%) ) (48%) (65%) (100%)

2008 Change in Book Value per Share

SOURCE: Dowling & Partners, IBNR #12 Fairfax and AIG calculated using the same methodology as Dowling & Partners, based on company data (AIG excludes government financing) 7

U.S. P&C Insurance Companies 5 Year 5-Year BVPS and Share Price
5-Year Compound Annual Growth Rate 2003-2008 BVPS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
(1)

Share Price 11.5% 8.4% 2.7% 2 7% 3.4% 4.2% 11.4% 5.0% 2.8% 1.0% (10.3%) 5.2% (5.1%) (22.6%) ( (45.6%) ) (52.7%)
8

Fairfax (1) Chubb Travelers T l Markel Corp. PartnerRe Loews ACE Ltd. Berkshire Hathaway RenaissanceRe White Mountains Leucadia National IPC Re Hartford XL Capital p AIG

11.2% 11.0% 9.9% 9 9% 9.6% 8.7% 8.2% 8.0% 6.9% 5.5% 3.9% 2.2% 0.4% (5.6%) (19.8%) ( ) (49.5%)

BVPS in U.S. dollars. Share price in Canadian dollars

Fairfax Long Term Performance
Compound Annual Growth Rate to 2008

Book Value Per Share g Ranking Growth Rate 5 Years 1 11.2% 10 Years 4 9.5% 15 Years 1 17.0% 23 Years 1 25.4%

Share Price 5 Years Ranking Growth Rate
Number of Companies

10 Years 12 (3.2%) (3 2%)

15 Years 2 13.1% 13 1%

23 Years 1 23.1% 23 1%

1 11.5% 11 5%

15

15

12

8

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

2008 Subsidiary Financial Results

Combined Ratio Northbridge N thb id Crum & Forster (US GAAP) OdysseyRe (US GAAP) 107.3% 107 3% 114.6% 101.2%

Net Earnings 46 333 549

Return on Avg. Equity 3.6% 3 6% 27.1% 20.5%

10

2008 Underwriting Results
Crum & Northbridge Forster As Reported Underwriting Loss Combined Ratio Adjustments Foreign Currency Impact Crum & Forster Reinsurance Commutation and Lawsuit Settlement Hurricanes Ike and Gustav Losses Advent Underwriting Loss Adjusted Underwriting Profit (Loss) Adjusted Combined Ratio (78.7) 107.3% 107 3% (177.2) 117.6% 117 6% OdysseyRe (73.5) 103.5% 103 5% Consolidated (457.7) 110.1% 110 1%

52.8 25.0 (0.9) 100.1%

109.7 74.3 6.8 99.3%

45.8 136.9 109.2 94.7%

99.1 109.7 242.5 112.4 112 4 106.0 97.6%

11

Importance of Float – Operating Companies
Unlike money management business (royalty on funds managed), results (g g ), (gains) accrue to owners ) Manage money with a long term perspective Underwriting profit (loss) = benefit (cost) of float Float belongs to policy holders but income accrues to shareholders (with 100% or better combined ratios)
Underwriting Profit / (Loss) 1986 1996 2007 2008 2.5 (37) 281 (458) Average Float Benefit / (Cost) of Float Avg. Long Term Canada Treasury Bond Yield 9.6% 7.6% 4.3% 4.1% 2.3%
12

21.6 1,089 8,618 , 8,918

11.6% (3.4%) 3.3% (5.1%)

Weighted Avg. Financing Differential Since Inception

Importance of Float – Operating Companies
Unlike money management business (royalty on funds managed), managed) results (gains) accrue to owners Manage money with a long term perspective Underwriting profit (loss) = benefit (cost) of float Float belongs to policy holders but income accrues to shareholders (with 100% or better combined ratios)
Underwriting Profit / (Loss) 1986 1996 2007 2008 2.5 (37) 281 (458) Average Float 21.6 1,089 8,618 8,918 Benefit / (Cost) of Float 11.6% (3.4%) 3.3% (5.1%) Avg. Long Term g g Canada Treasury Bond Yield 9.6% 7.6% 4.3% 4.1% 2.3% Investment Gains

1 91 976 1,559 $5.3B (cumulative)
13

Weighted Avg. Financing Differential Since Inception

Investment Performance
Hamblin Watsa Investment Performance
5 Years to Dec. 31 '08 Common Stocks with Equity Hedge Common Stocks S&P 500 Bonds Merrill Lynch U.S. Corporate Index 12.2% 1.5% (2.2%) (2 2%) 9.6% 1.6% 10 Years to Dec. 31 '08 19.1% 13.3% (1.4%) (1 4%) 9.3% 4.4% 15 Years to Dec. 31 '08 16.1% 12.3% 6.5% 6 5% 9.4% 5.4%

Source: Notes:

Hamblin Watsa Investment Counsel - Annualized Rate of Return (%). 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.

14

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

Northbridge OTTI MTM Total 274 103 377

Crum & Forster 197 87 284

OdysseyRe 359 141 500

Consolidated 996 504 1,500

15

Subsidiary Growth in Book Value Per Share
2001-2008 Compound Annual Growth Rate Northbridge Crum & Forster (US GAAP) OdysseyRe (US GAAP) 19.2% 18.9% 21.2%

Three excellent companies: Underwriting culture Conservative reserving Total return investing
16

Fairfax - Yesterday and Today
1985 Net Premiums Written Net Earnings Investment Portfolio Common Shareholders' Equity Per Share Book Value Share Price (C$) Investments Net Premiums Written $ 1.52 $ 3.25 $ 4.80 $ 2.44 $ 278.28 $ 390.00 $ 1,140.85 $ 247.74 12.2 (0.6) 23.9 7.6 2008 4,332 1,474 18,395 4,866 Growth 183x 120x 238x 102x
17

International Diversification India – ICICI Lombard General Insurance
For the Years Ended March 31 In USD millions 2002 Gross Premiums Written Combined Ratio Net Income Investment Portfolio Total Shareholders' Equity Customers (millions) Employees Offices 6 (2) 23 21 0.0 116 11 2002-2008 2002 2008 Average

2008 894 105.7% 105 7% 26 626 264 3.5 5,570 340

105.8% 105 8%

Cumulative Investment: $88MM ($30MM after March 2008) Ownership Interest: 26%
18

International Diversification Singapore – First Capital Insurance
For the Years Ended December 31 In USD millions 2002 Gross Premiums Written Combined Ratio Net Income Investment Portfolio Total Shareholders' Equity 10 101.8% (0) 33 32

2008 195 65.9% 27 255 130

2002-2008 Average 71.2%

Initial Investment: $32MM in 2001, no additional investment Ownership Interest: 100%
19

International Diversification Hong Kong – Falcon Insurance
For the Years Ended December 31 In USD millions 2002 Gross Premiums Written Combined Ratio Net Income Investment Portfolio Total Shareholders' Equity 57 98.5% 2 59 20

2008 28 158.9% (14) 88 39

2002-2008 Average 110.2%

Cumulative Investment: $40MM Ownership Interest: 100%
20

International Diversification Jordan – Arab Orient Insurance
For the Years Ended December 31 In USD millions 2002 Gross Premiums Written Combined Ratio Net Income Investment Portfolio Total Shareholders' Equity 9 79.7% 1 6 4

2008 45 79.3% 3 25 20

2002-2008 Average 85.6%

Initial Investment: $11MM in 2008 Ownership Interest: 22%
21

International Diversification Dubai – Alliance Insurance
For the Years Ended December 31 In USD millions 2002 Gross Premiums Written Combined Ratio Net Income Investment Portfolio Total Shareholders' Equity 17 74.7% 5 62 18

2008 32 68.4% 12 74 65

2002-2008 Average 68.9%

Initial Investment: $22MM in 2008 Ownership Interest: 20%
22

International Diversification Poland – Polish Re
For the Years Ended December 31 In USD millions 2002 Gross Premiums Written Combined Ratio Net Income Investment Portfolio Total Shareholders' Equity 37 96.0% 1 52 27

2008 95 106.1% (11) 103 39

2002-2008 Average 100.0%

Initial Investment: $57MM in 2009 Ownership Interest: 100%
23

Financial Strength
2003 Holdco Cash and Marketable Securities $410 2004 $567 2005 $559 2006 $767 2007 $972 2008 $1,564

Year End 2003 Subsidiary Debt Holdco Obligations Total Debt Holdco Cash and Marketable Securities Net Debt Total Equity & Minority Interests Net Debt / Net Total Capital Total Debt / Total Capital 784 1,587 2,371 410 1,961 2,896 40.4% 45.0%

Year End 2005 933 1,610 2,543 559 1,984 3,396 36.9% 42.8%

Year End 2008 910 1,058 1,968 1,555 , 413 6,352 6.1% 23.7%
24

The Perfect Storm in the U.S. Economy Subsiding 1) Risk repriced 2) Deleveraging taking place 3) U.S. economy and U.S. stock markets have declined significantly Pessimism rampant
25

U.S. Stock Valuations Back To Normal
Stock Market Capitalization as a Percentage of Nominal GDP
Monthly - 1924 to Present 180% 160% 140% 120% 100% 80% 60% 40% 20% 0%
Average = 60.6%

Source: Ned Davis Research Inc. 26

Can the Japanese Experience Be Repeated in the U.S.?
Nikkei 225 Index vs. Japanese 10-Year Gov't Bond Yields
Monthly - 1986 to Present 9% 8% 7%
30,000
10-Year Bo ond Yield

40,000 35,000

6% 5% 4% 3% 2% 1% 0% 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Bond Yields Nikkei 225

25,000 20,000 15,000 10,000 5,000

Nikkei 22 Index 25

27

Stock Market Crash of 1929
Dow Jones Industrial Average vs. Long Term U.S. Treasury Yields 1925 to 1939
5%
L Long Term U.S Treasury Yie S. eld

400 350
D Dow Jones Ind dustrial Averag ge

4%

300 250

3%

200 00 150

2%

100 50

1% 1925

0 1927 1929 1931 1933 1935 1937
DJIA

1939

Long Term U.S. Treasury Yield
Source: Bloomberg and Hoisington Investment Management

28

Long Term U.S. Treasury Rate 1872 2008 1872-2008
14%
Fall of Berlin Wall

12% 10% 8% 6% 4% 2%
Global market Restricted market Average = 4.24% Onset of Iron and Bamboo Curtains

0% 1872

Global market

1889

1906

1923

1940

1957

1974

1991

2008
29

Source: Hoisington Investment Management

High Yield Spreads
1-10 Year High Yield Spreads
2,000 1,800
Spre (bps) over U.S. Treasur ead r ries

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

Source: Merrill Lynch 30

Investment Grade Spreads
1-10 Year Investment Grade Spreads
800 700
Spre (bps) over U.S. Treasuri ead r ies

600 500 400 300 200 100 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: Merrill Lynch 31

Fairfax s Fairfax’s CDS Portfolio
Results of Fairfax's CDS Portfolio Since Inception
C Cumulative Cos Cumulative Gains on Sale and Cumulative st, G a e Market Valu Including Sa ue ales Proceeds ($ millions)

3,000

20.0 18.0
Notional Amount of CD Portfolio ($ billions) A DS $

2,500

16.0 14.0 12.0

2,000

1,500

10.0 8.0

1,000

6.0 4.0 2.0

500

0 31-Dec-04 31-Dec-05 31-Dec-06
Market Value

0.0 00 31-Dec-07 31-Dec-08
Cost

Notional Amount of CDS Portfolio

Realized Proceeds

U.S. Real Housing Price Index 1890 2008 1890-2008
220 200 180 160 140 120 100 80 60 1890 1899 1908 1917 1926 1935 1944 1953 1962 1971 1980 1989 1998 2007
Source: Hoisington Investment Management and Robert Shiller, Yale University 33

32% decrease

1894 123.9

1979 122.1

1989 124.2

Average = 101.2

Fairfax Investment Portfolio Positioned For Income & Capital Gains
Cash and Short Term Government Bonds Municipal Bonds Corporate Bonds Total Fixed Income Yield Common Stocks Other Investments Total Total Investment Portfolio
(1) Pre-tax equivalent yield (2) Approximately 85% hedged (3) Includes holding company cash and marketable securities

2007 21% 50% 1% 4% 55% 4.2% 17% 7% 100%
(3) (2)

2008 32% 16% 20% 7% 43% 6.9% 22% 3% 100% $20.0B

(1)

$19.1B

34

Capital Erosion Has Preceded Several Past Cycle Turns
'69 0% '73 '74 '00 '01 '02 '08P

U.S. U S P&C Surplus

-10% 0%

GAAP

S&P 500
-20%

-30% Cumulative real premium growth in th i three following f ll i years -40%
Sources: Swiss Re, Thomson Financial, A.M. Best, Towers Perrin, Swiss Re Economic Research & Consulting 35

16%

31%

30%

Well Positioned for a Turn in the Cycle
3,000
Northbridge (C$) Odyssey Re Crum & Forster

2,500
G Gross Premiu ums Written

2,000

1,500 1 500

1,000

500

Soft Market
0 1999 2000 2001 2002

Hard Market

2003

2004

2005
36

Fairfax’s Strengths Demonstrated Over 23 Years
1. Operations – Disciplined operating management focused on underwriting profitability and prudent reserving
P&C Insurance Operations • Canada – leading commercial insurance operation • United States – large commercial operation across the country • Asia – Hong Kong, Singapore, Thailand and largest private operation in India • Middle East – Dubai and Jordan • Eastern Europe – Poland p P&C Reinsurance Operations • Worldwide – Top 5 broker reinsurer in the U.S., top p , p 20 in the world
37

Fairfax’s Strengths Demonstrated Over 23 Years
2. Investments – Long term, value-oriented philosophy
Worldwide • Stocks • Bonds • Distressed debt • Wh Wherever “value” prevails “ l ” il Many large successful investments like Zenith, Russel Metals Hub etc Metals, Hub, etc.

38

Ready for the Next Decade Building on Fairfax’s Strengths Fairfax s
Our guiding principles have remained intact Excellent long term performance Demonstrated strengths Strong operating subsidiaries focused on underwriting profitability and prudent reserving Conservative investment management providing excellent long term returns Well positioned for the future

39

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