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Annual Meeting April 16, 2015
Note: All financial disclosure in this presentation
is, unless otherwise noted, in US$
Forward-Looking Statements
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 earnings if our loss reserves are insufficient; underwriting losses on the risks we insure that are higher or lower than expected; the occurrence of catastrophic events with a frequency or severity exceeding our estimates; changes in market variables, including interest rates, foreign exchange rates, equity prices and credit spreads, which could negatively affect our investment portfolio; the cycles of the insurance market and general economic conditions, which can substantially influence our and our competitors' premium rates and capacity to write new business; insufficient reserves for asbestos, environmental and other latent claims; exposure to credit risk in the event our reinsurers fail to make payments to us under our reinsurance arrangements; exposure to credit risk in the event our insureds, insurance producers or reinsurance intermediaries fail to remit premiums that are owed to us or failure by our insureds to reimburse us for deductibles that are paid by us on their behalf; risks associated with implementing our business strategies; the timing of claims payments being sooner or the receipt of reinsurance recoverables being later than anticipated by us; the inability of our subsidiaries to maintain financial or claims paying ability ratings; risks associated with our use of derivative instruments; the failure of our hedging methods to achieve their desired risk management objective; a decrease in the level of demand for insurance or reinsurance products, or increased competition in the insurance industry; the failure of any of the loss limitation methods we employ; the impact of emerging claim and coverage issues; our inability to access cash of our subsidiaries; our inability to obtain required levels of capital on favourable terms, if at all; loss of key employees; our inability to obtain reinsurance coverage in sufficient amounts, at reasonable prices or on terms that adequately protect us; the passage of legislation subjecting our businesses to additional supervision or regulation, including additional tax regulation, in the United States, Canada or other jurisdictions in which we operate; risks associated with government investigations of, and litigation and negative publicity related to, insurance industry practice or any other conduct; risks associated with political and other developments in foreign jurisdictions in which we operate; risks associated with legal or regulatory proceedings; failures or security breaches of our computer and data processing systems; the influence exercisable by our significant shareholder; adverse fluctuations in foreign currency exchange rates; our dependence on independent brokers over whom we exercise little control; an impairment in the carrying value of our goodwill and indefinite-lived intangible assets; our failure to realize deferred income tax assets; and assessments and shared market mechanisms which may adversely affect our U.S. insurance subsidiaries. Additional risks and uncertainties are described in our most recently issued Annual Report which is available at www.fairfax.ca and in our Supplemental and Base Shelf Prospectus (under "Risk Factors") filed with the securities regulatory authorities in Canada, which is available on SEDAR at www.sedar.com. 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 focus is long term growth in book value per share and
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 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 between Fairfax and its
subsidiaries is an essential requirement at Fairfax
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 4
Guiding Principles
Values
Honesty and integrity are essential in all of our relationships and will never be compromised
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 look for ways to minimize loss of capital
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
1.5
2
4 6 8 11
15
18
19
26
31
39 6
3 8
6 1
12
156
148
118
127
167
167
143
157
240
293
393
409
407 431
402
46
8
395
1985 1988 1991 1994 1997 2000 2003 2006 2009 2012
Cumulative Dividend
Book Value
2014
Fairfax – 29 Years Book Value per Share plus Dividends ($)
6
Net Premiums Written – $12 million
Investment Portfolio – $24 million
Common Shareholders’ Equity – $8 million
Net Premiums Written – $6.1 billion*
Investment Portfolio – $26.2 billion
Common Shareholders’ Equity – $8.4 billion
* Ongoing Operations
29 Year Compound Annual Growth Rate
22%
Financial Results
(1) Excludes dividends paid
7
Book Value
per Share (1) % Change
2007 $ 230
2008 $ 278 21%
2009 $ 370 33%
2010 $ 376 2%
2011 $ 365 (3%)
2012 $ 378 4%
2013 $ 339 (10%)
2014 $ 395 16%
8
Historic Performance vs. Peer Group
Compound Growth in Book Value per Share (5 Years ending 2014) (1)
(1) Except for S&P 500 and TSX which are compound index return excluding dividends
19.1%
14.0%13.0%
11.6%
9.8% 9.5% 9.3% 9.0%8.4% 8.3% 8.0%
6.6%
5.4%4.5%
1.3%
23
%
11
%
10
%
8%
7
%
6%
5%
5
%
3%
3
%
3%
3%
2
%
(1%
) (3
%)
(3%
)
(3%
)
(4%
)
(5%
) (5
%)
(6%
)
(7%
)
(7%
) (8
%)
(8%
) (9
%)
(9%
) (1
2%
)
(13
%)
(14
%)
(14
%)
(14
%)
(15
%)
(16
%)
(17
%)
(18
%)
(18
%)
(19
%)
(19
%)
(19
%)
(22
%)
(24
%)
(31
%)
(32
%)
(37
%)
(37
%)
(43
%)
(48
%)
(65
%)
(10
0%
)
SOURCE: Dowling & Partners, IBNR #12
Fairfax and AIG calculated using the same methodology as Dowling & Partners, based on company data (AIG excludes government financing) 9
2008 Change in Book Value per Share
Historic Performance vs. Peer Group
Compound Growth in Book Value per Share (29 Years: since Fairfax’s inception) (1)
10
(1) Except for S&P 500 and TSX which are compound index return excluding dividends
21.1%
16.7% 16.2%
14.4%
12.8% 12.8%
10.0%9.0%
8.2%
5.7%
11
($ millions)
(1) Includes: Runoff underwriting income, Interest expense and corporate overhead & other
Underwriting profit – (combined ratio of 90.8%) 552
Investment income and other 441
Operating income 993
Other (1) (391)
Realized investment gains 778
Pre-tax income including realized investment gains 1,379 Unrealized investment gains (mostly from bonds) 1,153
Hedging losses (195)
Pre-tax income 2,338
Net earnings 1,665
Sources of Net Earnings in 2014
Underwriting Results in 2014
12
Combined Underwriting
Ratio Profit
($ millions)
Northbridge 95.5% 43
Crum & Forster 99.8% 2
Zenith 87.5% 90
OdysseyRe 84.7% 360
Fairfax Asia 86.7% 36
Other Insurance and Reinsurance 94.7% 21
Consolidated 90.8% 552
Equity and equity related investments Equity hedges Net equity Bonds CPI-linked derivatives Other
597
791
Realized
Gains
(Losses) ($ millions)
13
610 103
- 78
Unrealized
Gains
(Losses) ($ millions)
(55) (208)
(263) 1,134
18 56
945
Net
Gains
(Losses) ($ millions)
542 (195)
347 1,237 18 134
1,736
Net Gains on Investments in 2014
13
Equity and equity related investments Equity hedges Net equity Bonds CPI-linked derivatives Other
3,364
3,626
Realized
Gains
(Losses) ($ millions)
(1,331)
2,033 1,724
- (131)
Unrealized
Gains
(Losses) ($ millions)
(146) (2,374)
(2,520) 667 (444) 174
(2,123)
Net
Gains
(Losses) ($ millions)
3,218 (3,705)
(487) 2,391 (444)
43
1,503
Net Gains on Investments 2010 – 2014
14
Accident Year Combined Ratios
15
Cumulative Net
Premiums Average
Written Combined Ratio
($ billions)
Northbridge Cdn 10.8 100.3%
Crum & Forster 10.4 102.2%
OdysseyRe 21.6 93.2%
Fairfax Asia 1.5 87.3%
44.3 96.8%
2005-2014
Accident Year Reserve Redundancies
16
Average Annual
Reserve
Redundancies
Northbridge 11.7%
Crum & Forster 3.9%
OdysseyRe 11.1%
Fairfax Asia 6.7%
2004-2013
Importance of Float
10 year average cost of float: 0.3%
(2005 – 2014)
17
Operating Total
Companies (including Runoff) Per Share
1985 $ 12.5 million $ 12.5 million $ 3
2014 $ 11.6 billion $ 15.1 billion $ 711
Year-End
Importance of Float
18
Year-End 2014
($ millions) Per Share
Total Float 15,065 $ 711
Common Shareholders' Equity 8,361 $ 395
Net Liabilities 2,767 $ 131
Total Investment Portfolio 26,193 $ 1,237
Investment Portfolio in 1985 24 $ 5
Investment Portfolio including Brit 30,229 $ 1,354
Year-End 2014
($ millions) Per Share
($ millions)
Pre-Tax Income – Runoff Operations
19
2007 188
2008 393
2009 31
2010 165
2011 351
2012 184
2013 (229)
2014 273
Cumulative (2007-2014) 1,356
Gains (Losses) Per Share
($ millions)
1985 0.5 10¢
2008 2,144 $ 118
2009 1,981 $ 108
2010 (3) -
2011 691 $ 34
2012 643 $ 31
2013 (1,564) $ (77)
2014 1,736 $ 80
Cumulative Gains $11.7 billion
Pre-Tax Realized and Unrealized Gains
20
Acquisitions in 2014 / 2015
Brit PLC
Pethealth – 100% ownership
Fairfax Indonesia – 80% ownership
MCIS Insurance Berhad (Malaysia)
Union Assurance (Sri Lanka) – 78% ownership
Fairfax Eastern Europe (Slovakia/Hungary/Czech
Republic/Ukraine)
Insurance bolt-on acquisitions
Runoff acquisitions
Fairfax India
21
Investment Performance
Hamblin Watsa Investment Performance
Note: Bonds do not include returns from credit default swaps.
Common stocks (with equity hedging) (2.7)% 6.5% 11.6%
S&P 500 15.5% 7.7% 4.2%
Taxable bonds 10.2% 11.1% 11.5%
Merrill Lynch U.S.corporate
(1-10 year) bond index
5.5% 5.0% 6.1%
5 Years 10 Years 15 Years
As at December 31, 2014
22
Investment Performance
Hamblin Watsa Investment Performance
23
5 Years 10 Years 15 Years
Compound Annual Returns
December 31, 2014
Common stocks (with equity hedging) (2.7%) 6.5% 11.6%
S&P 500 15.5% 7.7% 4.2%
December 31, 2013
Common stocks (with equity hedging) 3.2% 7.6% 13.5%
S&P 500 17.9% 7.4% 4.7%
December 31, 2012
Common stocks (with equity hedging) 5.5% 14.5% 13.5%
S&P 500 1.7% 7.1% 4.5%
Fairfax’s Investment Portfolio
Remains Defensive
24
Investment Portfolio Well Positioned
• No focus on short term earnings
• Capital preservation a priority
• Positioned to take advantage of
opportunities
• Fairfax capital base has benefitted
significantly from investment gains –
locked in common equity gains
• We have not deviated from our long
term value-oriented investment
philosophy
(1) Net of short sale and derivative obligations; investments in associates at carrying value
Fairfax Investment Portfolio
$26.2 billion at December 31, 2014(1)
Cash/Short-Term23%Other
Investments4%
Corporate Bonds
6%
Municipal Bonds
27%
Gov't Bonds15%
Common Stocks
(~90%hedged)25%
Investments not Carried at Market Value
25
Carrying
Value
Fair
Value
Unrealized
Gain
($ millions) ($ millions) ($ millions)
Insurance and reinsurance associates 440 673 234
Non-insurance associates 1,178 1,397 219
Thomas Cook India 270 473 203
Ridley 71 246 174
Total 831
26
Emerging Markets and Asian Footprint
ICICI Lombard (India) 1,129 26% 293
Alltrust Insurance (China) 920 15% 138
Gulf Insurance (Middle East) 608 41% 252
Falcon Insurance (Thailand) 48 41% 19
Singapore Re 116 27% 32
Thai Re 201 30% 60
3,022 795
Total 3,863 1,614
* Full year 2014 premium
Gross Fairfax's Share of
Premiums Gross Premiums
Written Ownership Written
($ millions) ($ millions)
First Capital (Singapore) 420 98% 411
Fairfax Brasil 158 100% 158
Polish Re 54 100% 54
Pacific Insurance (Malaysia) 75 100% 75
Falcon Insurance (Hong Kong) 82 100% 82
Fairfax Indonesia* 11 80% 9
Union Assurance (Sri Lanka)* 40 78% 31
840 820
U.S. Private and Public Debt as % of GDP
27 Source: Hoisington Investment Management
100%
120%
140%
160%
180%
200%
220%
240%
260%
280%
300%
320%
340%
360%
380%
400%
100%
120%
140%
160%
180%
200%
220%
240%
260%
280%
300%
320%
340%
360%
380%
400%
1870 1890 1910 1930 1950 1970 1990 2010
Panic Year 2008
Panic Year 1929
Panic Year 1873
1870-2014 avg.=180.4%
Current total debt = $59 trillionDebt/GDP of 180.4% would require total debt of $32 trillion
28
Total Public and Private Debt
as a % of GDP – Major Countries
Source: Hoisington Investment Management
annual
100%
200%
300%
400%
500%
600%
700%
1979 1984 1989 1994 1999 2004 2009 2014*
100%
200%
300%
400%
500%
600%
700%
Canada
Australia
U.S.
Eurozone
U.K.
Japan
*Through Q2 2014, except U.S. which is through Q4 2014
29
Velocity of Money 1900-2014
Equation of Exchange: GDP (nominal) = M*V
Source: Hoisington Investment Management
annual
1.00
1.25
1.50
1.75
2.00
2.25
1.00
1.25
1.50
1.75
2.00
2.25
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
1918 = 2.0
1946 = 1.2
1997 = 2.2
1.53
Avg. 1900 to present = 1.73
Avg. 1953 to 1983 = 1.75
0%
1%
2%
3%
4%
5%
6%
7%
0%
1%
2%
3%
4%
5%
6%
7%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Debt Induced Panic Years and
Long-Term Government Bond Yields
1. Average low level of interest rates after panic 2.0%
2. Average number of years after panic to lowest level
of interest rates
13.7 years
3. Average level of interest rates 20 years after panic 2.4%
4. Change from low level of interest rates to 20th year 0.5%
Long Term Government Bond Yields
Historic Panic Years
U.S. 2008
U.S. 1929
Japan 1989
30 Source: Hoisington Investment Management
31 Sources: Hoisington Investment Management, Bloomberg
0%
2%
4%
6%
8%
10%
12%
14%
0%
2%
4%
6%
8%
10%
12%
14%
1871 1891 1911 1931 1951 1971 1991 2011
avg. = 4.2%
Global market Restricted Market Global market
Interest rate avg. = 2.9%Inflation rate avg. = 1.0%
Interest rate avg. = 6%Inflation rate avg. = 3.9%
Fall of Berlin Wall
Onset of Iron and Bamboo Curtains
Long Term Treasury Rate
1871- Q1 2015
32
U.S. and German
30 Year Sovereign Yields
Source: Bloomberg
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
1994 1997 2000 2003 2006 2009 2012 2015
GER 30 YR UST 30 YR
Source: Bloomberg
U.S.2.5%
German0.6%
Quarterly, through Q1 2015
33
U.S. and German
30 Year Sovereign Yield Spread
Source: Bloomberg
-150
-100
-50
0
50
100
150
200
250
-150
-100
-50
0
50
100
150
200
250
1994 1997 2000 2003 2006 2009 2012 2015
Source: Bloomberg
Quarterly, through Q1 2015
34
Netherlands 10 Year Sovereign Yield
Source: Bank of America Merrill Lynch
35
Cyclically Adjusted P/E Ratio (S&P 500)
Source: Robert J. Shiller
0
5
10
15
20
25
30
35
40
45
50
0
5
10
15
20
25
30
35
40
45
50
1881 1894 1907 1921 1934 1947 1961 1974 1987 2001 2014
CAPE Ratio
Above February 2015
June 190125
Sept. 192933
Jan. 196624
Dec. 199944
Average at end of recessions = 13.1Range = 5.3 to 19.3
Average
Avg. = 16.6
Source: Robert J. Shiller
The CAPE Ratio is currently 28xSince 1881, it has been higher only twice. Both episodes ended badly:
June - Oct '29 when it peaked at 33xJan '97 - May '02 when it peaked at 44x
Feb. 201528
S&P 500 Index and Profit Margins
36
0
1
2
3
4
5
6
7
8
9
10
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
Jan 1994 Jan 1999 Jan 2004 Jan 2009 Jan 2014
Profit Margin IndexSource: BloombergSource: Bloomberg
0
100
200
300
400
500
600
700
800
900
1000
0
100
200
300
400
500
600
700
800
900
1000
'85 '89 '93 '97 '01 '05 '09 '13
Source: Hoisington Investment Management
Commodity Price Declines
37
S&P GSCI Commodity Index, monthly
Source: Hoisington Investment Management
70
80
90
100
110
120
130
140
150
160
170
70
80
90
100
110
120
130
140
150
160
170
1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015
Source: Hoisington Investment Management
Upward Pressure on the Dollar
38
US Dollar Index, monthly
QE ends
Source: Hoisington Investment Management
39
Deflation in Japan
Source: The World Bank
-15%
-10%
-5%
0%
5%
10%
-3%
-2%
-1%
0%
1%
2%
3%1
99
0
199
1
199
2
199
3
199
4
199
5
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
Cu
mu
lati
ve
An
nu
al
Annual Inflation Annual Deflation
* In April 2014 Japan raised its consumption tax from 5% to 8% * Estimate - Japan Cabinet Office
*
40
U.S. and Euro Area Consumer Prices
y-o-y percent change, monthly
Source: Hoisington Investment Management
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
1990 1994 1998 2002 2006 2010 2015
Through February 2015
Euro Area (-.1%)
U.S. (-.03%)
Source: Hoisington Investment Management
Market Cap. P/E Ratio Price to Sales
($ billions)
Social MediaTwitter 31 (loss) 21x
Netflix 29 111x 5x
Facebook 223 73x 17x
LinkedIn 33 89x 15x
Yelp 3 358x 9x
Yandex 9 19x 6x
Tencent Holdings 164 46x 14x
Other Tech/WebGroupon 6 (loss) 2x
Service Now 12 (loss) 17x
Salesforce.com 40 (loss) 8x
Netsuite 8 (loss) 14x
Source: Bloomberg 41
Public High Tech Speculation
42
CPI-Linked Derivative Contracts
December 31, 2014
Notional Market Unrealized
Amount Cost Value Gain (Loss)
Underlying CPI Index ($ billions) ($ millions) ($ millions) ($ millions)
United States 59 327 151 (175)
European Union 45 286 70 (215)
United Kingdom 5 24 5 (20)
France 3 18 12 (7)
112 655 238 (417)
43
Fairfax Historic Total Return on
Investment Portfolio
-10%
0%
10%
20%
1986 1990 1994 1998 2002 2006 2010 2014
Total Return on
Portfolio
Average Return on
Portfolio 8.9%
1990
Ready for the Next Decade -
Building on Fairfax’s Strengths
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
Fair and friendly Fairfax culture
44
Annual Meeting April 16, 2015
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