A.M. Best Assigns Debt Rating to Fairfax's Debt Exchange Offer.

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--April 30, 2004

A.M. Best Co. has assigned a debt rating of "bb+" to Fairfax Financial Holdings Limited's (Fairfax) (NYSE: FFH, Toronto: FFH) 7.75% senior unsecured notes due 2012 issued as part of its debt exchange offer. The outlook for all debt ratings remains negative.

Fairfax has exchanged a portion of the company's existing $275 million of 7.38% notes due 2006, $170 million of 6.88% notes due 2008 and wholly owned TIG Holdings, Inc. $97.7 million 8.125% notes due 2005 for a combination of cash and a specific amount of the new notes. The new notes have terms and covenants substantially similar to the existing securities.

Fairfax has also announced that it intends to file a $750 million shelf registration that will allow the new 2012 notes exchanged for the TIG Holdings notes to be re-exchanged for similar 2012 notes that will be registered with the U.S. Securities and Exchange Commission. In addition, the shelf registration will allow Fairfax the opportunity to issue additional debt or equity over the next two years.

A.M. Best views Fairfax's exchange offer as a long-term positive move given management's attempt to proactively de-lever the holding company and provide additional short-term financial flexibility over the next few years as the maturity profile of the company's debt is lengthened. The immediate negative impact will be the need to utilize existing holding company cash. However, despite this use of cash, Fairfax's liquidity is sufficient to meet its cash needs in 2004. The company's debt ratings reflect, in part, management's consistent proactive efforts to maintain sufficient holding company liquid assets to meet holding company obligations, as well as flexibility to provide capital support to subsidiaries if needed.

A.M. Best believes that tax-sharing payments and stock dividends derived from quality earnings at Fairfax's investments in Odyssey Re and Northbridge, combined with dividend payments allowed by earnings at its wholly owned Crum & Forster operation, should provide sufficient cash flow to the holding company to meet its obligations. In addition, the expected release of Fairfax's shares of Odyssey Re currently held in trust will provide added financial flexibility in the second quarter. The trust was established with the California Department of Insurance to effect the restructuring of the TIG companies.

The negative outlook reflects A.M. Best's concerns regarding continued negative loss reserve development at Fairfax's run-off operations, which could result in significant earnings volatility and potential disruption of dividends from wholly owned subsidiaries. In 2003, reserve development was offset by sizable realized gains. Despite a history to the contrary, expectations in 2004 are for a more modest level of realized gains.

For a list of A.M. Best's debt ratings, please visit http://www3.ambest.com/debtratings/.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.