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Press release from Business Wire

A.M. Best Assigns Rating to Fairfax Financial Holdings Limited's Forthcoming Senior Notes

Thursday, May 05, 2011

A.M. Best Assigns Rating to Fairfax Financial Holdings Limited's Forthcoming Senior Notes09:46 EDT Thursday, May 05, 2011 OLDWICK, N.J. (Business Wire) -- A.M. Best Co. has assigned a debt rating of “bbb” to the forthcoming $500 million 5.80% senior unsecured notes due 2021 to be issued in a private offering by Fairfax Financial Holdings Limited (Fairfax) (Toronto) [TSX: FFH and FFH.U]. The assigned outlook is stable. The proceeds will be used to fund a tender offer made May 4, 2011, under which Fairfax will purchase, for cash, securities from several existing series issued by Fairfax and certain wholly owned subsidiaries. Fairfax's unadjusted debt-to-capital ratio at March 31, 2011 measured 28.6%, increasing to 31.7% when debt is measured relative to tangible capital. Financial leverage ratios will remain essentially unchanged following the issuance of the notes to the extent that proceeds are used to refinance existing and callable indebtedness. These calculations include the remaining debt of Fairfax's wholly owned subsidiaries, which are capable of servicing their own debt. Following the closing of the offering, Fairfax will have cash and marketable securities in excess of USD 1 billion, affording it a significant level of liquidity at the holding company level. The company's financial leverage and coverage ratios remain within A.M. Best's guidelines for its debt ratings and are expected to remain so over the near term. The principal methodology used in determining these ratings is Best's Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best's rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “A.M. Best's Ratings & the Treatment of Debt” and “Equity Credit for Hybrid Securities.” Methodologies can be found at www.ambest.com/ratings/methodology. Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com. Copyright © 2011 by A.M. Best Company, Inc.ALL RIGHTS RESERVED. A.M. Best Co.Jennifer MarshallSenior Financial Analyst908-439-2200, ext. 5327jennifer.marshall@ambest.comorMichael J. Lagomarsino, CFAAssistant Vice President908-439-2200, ext. 5810michael.lagomarsino@ambest.comorRachelle MorrowSenior Manager, Public Relations908-439-2200, ext. 5378rachelle.morrow@ambest.comorJim PeavyAssistant Vice President, Public Relations908-439-2200, ext. 5644james.peavy@ambest.com