Company: FRFXF
Filing Date: 2025-03-14
Form Type: F-4
Source: 0001104659-25-024010
Chunk: 66

Company: FAIRFAX FINANCIAL HOLDINGS LTD/ CAN
Filing Date: 2025-03-14
Form: F-4
Chunk 66
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 some or all of our shareholders might consider to be desirable.

Regulation of Dividends and Other Payments

The Company is a legal entity
separate and distinct from its subsidiaries. As a holding company with no other business operations, the Company’s primary sources
of cash to meet its obligations, including principal and interest payments with respect to indebtedness and preferred share dividend
payments, are available dividends and other statutorily permitted payments, such as tax allocation payments and management and other
fees, from our operating insurance subsidiaries. Our operating insurance subsidiaries are subject to various statutory and regulatory
restrictions in their respective states of domicile that limit the amount of dividends or distributions an insurance company may pay
to its shareholders without prior regulatory approval. Ordinary dividends, for which no regulatory approval is generally required, are
limited to amounts determined by formula, which varies by state. The formula typically is based on the level of statutory surplus at
the end of the prior year, as well as on some measure of statutory earnings for the prior year, in relation to total dividends paid during
the prior 12 months. In addition, dividends generally may be paid only out of “earned surplus” as defined by each state.
In every case, capital and surplus subsequent to the payment of any dividends must be reasonable in relation to an insurance company’s
outstanding liabilities and must be adequate to meet its financial needs. For these purposes, both surplus and earnings are determined
in accordance with Statutory Accounting Principles (SAP), which differs in certain respects from IFRS Accounting Standards and U.S. generally
accepted accounting principles.

No assurance can be given
that some or all of our operating insurance subsidiaries’ domiciliary states will not adopt statutory provisions more restrictive
than those currently in effect.

If insurance regulators
determine that payment of a dividend or any other payments to an affiliate (such as payments under a tax-sharing agreement or payments
for employee or other services) would, because of the financial condition of the paying insurance company or otherwise, result in such
insurance company being in a hazardous financial condition or would otherwise be prohibited by applicable law, the regulators may prohibit
such payments that would otherwise be permitted without prior approval.

Statutory Surplus, Risk-Based Capital and Group Capital

An insurance regulator may
limit or prohibit the writing of new business by an insurance company within its jurisdiction when, in the regulator’s judgment,
the insurance company is not maintaining adequate statutory capital and surplus. We do not currently anticipate that any regulator would
limit the amount of