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Press release from Business Wire

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

Tuesday, May 24, 2011

A.M. Best Assigns Rating to Fairfax Financial Holdings Limited's Forthcoming Senior Notes10:28 EDT Tuesday, May 24, 2011 OLDWICK, N.J. (Business Wire) -- A.M. Best Co. has assigned a debt rating of “bbb” to the forthcoming CAD 400 million 6.40% senior unsecured notes due 2021 to be issued by Fairfax Financial Holdings Limited (Fairfax) (Toronto) [TSX: FFH] under its existing shelf registration. The assigned outlook is stable. The proceeds will be used primarily to purchase additional notes tendered in response to Fairfax's May 4, 2011 tender offer and to pay costs associated with that offer. Any funds not used for those purposes will be used to augment Fairfax's cash position, to increase short-term investments and marketable securities at the holding company to retire outstanding debt and for other corporate purposes. Fairfax's adjusted debt-to-capital ratio at March 31, 2011 measured 28.6%, increasing to 31.7% when debt is measured relative to adjusted tangible capital. Financial leverage ratios will increase following the issuance of these notes to 29.9% adjusted debt-to-capital and 33.2% debt-to-tangible capital. These calculations include the remaining debt of Fairfax's wholly owned subsidiaries that are capable of servicing their own debt. Following the closing of the offering, Fairfax will have cash and marketable securities of approximately USD 1.1 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 CompanyJennifer Marshall, 908-439-2200, ext. 5327Senior Financial Analystjennifer.marshall@ambest.comorMichael J. Lagomarsino, CFA, 908-439-2200, ext. 5810Assistant Vice Presidentmichael.lagomarsino@ambest.comorRachelle Morrow, 908-439-2200, ext. 5378Senior Manager, Public Relationsrachelle.morrow@ambest.comorJim Peavy, 908-439-2200, ext. 5644Assistant Vice President, Public Relationsjames.peavy@ambest.com