Fairfax Financial Holdings Limited: Second Quarter Financial Results

TORONTO, ONTARIO, Jul 30 (MARKET WIRE) --
(Note: All dollar amounts in this news release are expressed in U.S.
dollars.)

Fairfax Financial Holdings Limited (TSX: FFH)(NYSE: FFH) announces that
it had net earnings of $275.4 million in the second quarter of 2009
($15.65 per share and $15.56 per diluted share) compared to net earnings
of $27.6 million in the second quarter of 2008 ($0.84 per share and per
diluted share). The year-over-year increase in quarterly net earnings
derived primarily from an underwriting profit at the company's insurance
and reinsurance operations (compared to an underwriting loss in the
second quarter of 2008), increased interest and dividend income, and
significant net investment gains ($330.0 million, compared to net losses
on investments in the second quarter of 2008). In the first six months of
2009, net earnings were $215.0 million ($12.09 per share and $12.02 per
diluted share) compared to $659.4 million in the first six months of 2008
($35.27 per share and $34.72 per diluted share), reflecting the
significant gains on credit default swaps and equity hedges in the first
six months of 2008.

Primarily as a result of the second quarter net earnings and the
increased market value of the company's bond and common stock
investments, book value increased to $315.91 per basic share at June 30,
2009 from $254.95 at March 31, 2009 and $278.28 at December 31, 2008.

"We are pleased that, in a difficult environment, we have maintained our
disciplined underwriting standards, and our insurance and reinsurance
operations have produced a consolidated combined ratio of 98.4% in the
second quarter," said Prem Watsa, Chairman and Chief Executive Officer.
"As to our investments, our continuing focus on high quality common
stocks reflects our view that these should provide excellent returns over
the long term, though the volatility of the equity markets may result in
lumpy quarterly or annual results."

Highlights in the second quarter included the following:

- The combined ratio of the company's insurance and reinsurance
operations in the second quarter of 2009 was 98.4% on a consolidated
basis. Underwriting profit earned by the company's insurance and
reinsurance operations in the second quarter of 2009 improved to $17.3
million from an underwriting loss of $65.0 million in the second quarter
of 2008.

- Interest and dividend income of $184.5 million in the second quarter of
2009 increased 12.0% from $164.7 million in the second quarter of 2008.
The year-over-year increase was primarily attributable to the impact on
portfolio yield in 2009 of the purchases in the fourth quarter of 2008
and the first six months of 2009 of higher yielding municipal and other
tax exempt debt securities and corporate bonds using the proceeds of sale
of lower yielding government bonds and the inclusion of the results of
Advent and Polish Re in the second quarter of 2009. Interest income as
reported is unadjusted for the positive tax effect on yields of the
company's significant holdings of tax-advantaged debt securities
(holdings of $4,358.7 million at June 30, 2009 compared to $424.5 million
at June 30, 2008), and as a result interest income on an after tax basis
increased significantly in the second quarter of 2009 compared to the
second quarter of 2008.

- Operating income of the company's insurance and reinsurance operations
(excluding net gains and losses on investments) in the second quarter of
2009 increased to $173.8 million from $54.7 million in the second quarter
of 2008, principally as a result of the above-described improved
underwriting results and interest and dividend income.

- Net premiums written in the second quarter of 2009 decreased 4.8% to
$1,115.3 million from $1,171.9 million in the second quarter of 2008,
reflecting the impact of weak economic conditions and the operating
companies' disciplined response to competitive conditions in global
insurance and reinsurance markets, partially offset by the inclusion of
the results of Advent and Polish Re in the second quarter of 2009 (net
premiums written of $83.2 million).

- The company held $880.1 million of cash, short term investments and
marketable securities at the holding company level ($862.7 million net of
short sale and derivative obligations) at June 30, 2009, compared to
$861.6 million at March 31, 2009 ($786.4 million net of short sale and
derivative obligations) and $1,564.2 million at December 31, 2008
($1,555.0 million net of short sale and derivative obligations). There
were no significant uses of holding company cash during the second
quarter.

- Holding company debt declined during the second quarter of 2009 by $9.5
million to $1,034.4 million, and subsidiary companies' debt declined by
$5.7 million to $899.9 million. The company's total debt to total capital
ratio decreased to 22.6% at June 30, 2009 from 23.7% at December 31,
2008, primarily as a result of the increase in shareholders' equity
(resulting from the first six months earnings, less common and preferred
share dividends paid, and increased unrealized gains on available for
sale securities), partially offset by the reduction in non-controlling
interests following the privatization of Northbridge.

- At June 30, 2009, common shareholders' equity was $5,510.7 million, or
$315.91 per basic share, compared to $4,866.3 million, or $278.28 per
basic share, at December 31, 2008, a six month increase of 16.4% adjusted
for the $8.00 per share common dividend paid in the first quarter.

Fairfax holds a significant investment in equities and equity-related
securities, which the company believes will significantly appreciate in
value over time. The market value and the liquidity of these investments
are volatile and may vary dramatically either up or down in short
periods, and their ultimate value will therefore only be known over the
long term.

Following is a summary of Fairfax's financial results for the second
quarter and first six months of 2009 and 2008:

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
(unaudited -$ millions, except per share amounts)
2009 2008 2009 2008
---- ---- ---- ----
Total revenue 1,735.5 1,243.5 3,014.9 3,614.0
Earnings (loss) before
income taxes and
non-controlling interests 443.6 (47.8) 373.1 1,103.7
Net earnings 275.4 27.6 215.0 659.4

Net earnings per share $15.65 $0.84 $12.09 $35.27
Net earnings per diluted share $15.56 $0.84 $12.02 $34.72

There were 17.5 million and 18.4 million weighted average shares
outstanding during the second quarters of 2009 and 2008 respectively. At
June 30, 2009 there were 17,443,784 shares effectively outstanding.

Combined ratios of the company's insurance and reinsurance operations in
the second quarter and first six months of 2009 and 2008 were:

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30

2009 2008 2009 2008
---- ---- ---- ----
Insurance - Canada (Northbridge) 105.1% 99.8% 103.5% 98.1%
- U.S. (Crum & Forster) 102.4% 130.0% 101.1% 119.0%
- Asia (Fairfax Asia) 92.7% 74.4% 92.5% 77.7%
Reinsurance - OdysseyRe 96.5% 98.7% 96.5% 98.6%
- Other 89.4% 98.2% 95.2% 93.4%

Consolidated 98.4% 105.8% 98.5% 102.8%

Fairfax's detailed second quarter report can be accessed at its
website www.fairfax.ca. As previously announced, Fairfax will hold a
conference call at 8:30 a.m. Eastern time on Friday, July 31, 2009 to
discuss its second quarter results.

Fairfax Financial Holdings Limited is a financial services 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 income if the reserves of our subsidiaries
(including reserves for asbestos, environmental and other latent claims)
are insufficient; underwriting losses on the risks our subsidiaries
insure that are higher or lower than expected; the lowering or loss of
one of our subsidiaries' financial or claims paying ability ratings; an
inability to realize our investment objectives; exposure to credit risk
in the event our subsidiaries' reinsurers or insureds fail to make
payments; a 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 the Securities and Exchange Commission or
other regulatory bodies; risks associated with current government
investigations of, and class action litigation related to, insurance
industry practice or any other conduct; the passage of new legislation;
and the failure to realize future income tax assets. Additional risks and
uncertainties are described in our most recently issued Annual Report
which is available at www.fairfax.ca and in our Base Shelf Prospectus
(under "Risk Factors") 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.

Contacts:
Fairfax Financial Holdings Limited
Greg Taylor
Chief Financial Officer
(416) 367-4941

Media Contact
Fairfax Financial Holdings Limited
Paul Rivett, Chief Legal Officer
(416) 367-4941

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