FAIRFAX FINANCIAL HOLDINGS
    LIMITED


Corporate
    Profile  Fairfax Financial Holdings Limited
  Canadian
    insurance
  Northbridge Financial
  U.S.
    insurance
  Crum & Forster (C&F)
  Asian
    insurance
  First Capital
  Falcon Insurance
  Reinsurance
  OdysseyRe
  Group Re




---



##### 



Runoff
    The Resolution Group (TRG) the RiverStone Group
  Other
  Hamblin Watsa Investment Counsel
  Notes:
  (1)
    
    All companies are wholly owned
    except for OdysseyRe (70.4%-owned at December 31, 2008).
    Northbridge Financial became wholly owned in February
    2009.(2)
    
    The foregoing lists all of
    Fairfaxs operating subsidiaries (other than wholly-owned
    Polish Re, acquired in early 2009). The Fairfax corporate
    structure also includes a26.0% interest in
    ICICI Lombard (an Indian property and  casualty insurance
    company), a 24.9% interest in Falcon Thailand, an approximate
    20% interest in Arab Orient Insurance (a Jordanian company), an
    approximate 20% interest in Alliance Insurance (a Dubai,
    U. A. E. company), and investments in Advent (66.6%),
    Cunningham Lindsey (45.7%) and Ridley (67.9%). The other
    companies in the Fairfax corporate structure, principally
    investment or intermediate holding companies (including
    companies located in various jurisdictions outside North
    America), are not part of these operating groups; these other
    companies had no insurance, reinsurance, runoff or other
    operations.




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
   To Our
    Shareholders:  1
  (1999-2005), (2006-2008),
    Return onNet


AverageCombined


Earnings


ShareholdersRatio


after Tax


EquityNorthbridge


107.3%



45.7



3.6%Crum & Forster (US GAAP)


114.6%



332.8



27.1%OdysseyRe (US GAAP)


101.2%



549.0



20.5%       2001  2008Annual CompoundGrowth RateNorthbridge


19.2%Crum & Forster (US GAAP)


18.9%OdysseyRe (US GAAP)


21.2%       1 Amounts

    in this letter are in U.S. dollars unless specified
    otherwise. Numbers in the tables in this letter are in
    U.S. dollars and $millions except as otherwise
    indicated.




---



##### 



(30-year) year-end
    Shares Owned


Cost per Share


Amount Invested


Market ValueJohnson & Johnson


7,585,000


$
60.68



460.3



453.4Kraft Foods


10,723,571



26.61



285.4



287.6Wells Fargo Bank


3,515,100



21.93



77.1



103.6




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED




---



##### 



The
    Insurance Cycle
    Insurance
    and Reinsurance Operations
  Net PremiumsCombined Ratio


WrittenYear Ended December 31,


% Change in2008


2007


2006


2008Northbridge


107.3
%


92.3
%


98.0
%


10.3
%Crum & Forster


117.6
%


93.5
%


92.3
%


(20.2
%)Fairfax Asia


92.1
%


70.4
%


78.4
%


22.7
%OdysseyRe


103.5
%


95.5
%


96.5
%


(2.8
%)Other reinsurance


150.0
%


95.6
%


95.7
%


(10.0
%)Consolidated


110.1
%


94.0
%


95.5
%


(3.7
%)       NetPremiums/Net Premiums


Statutory


StatutoryWritten


Surplus


SurplusNorthbridge


1,099.5



1,120.8
(1)


1.0Crum & Forster


878.2



1,410.6



0.6OdysseyRe


2,030.8



2,951.3



0.7   (1)
    Canadian GAAP shareholders equity    Average LongBenefit


Term CanadaUnderwriting





(Cost)


Treasury BondYear

Profit (Loss)


Average Float


of Float


Yield1986


2.5



21.6



11.6
%


9.6
%↕2004


147.4



5,898.7



2.5
%


5.2
%2005


(437.5
)


7,323.9



(6.0
%)


4.4
%2006


212.6



8,212.9



2.6
%


4.3
%2007


281.3



8,617.7



3.3
%


4.3
%2008


(457.7
)


8,917.8



(5.1
%)


4.1
%Weighted average since inception










(2.8
%)


5.1
%Fairfax weighted average financing differential since inception:
    2.3%




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
    TotalInsuranceCanadian


U.S.


Asian





andInsurance


Insurance


Insurance


Reinsurance


Reinsurance


Runoff


Total2004


1,404.2



1,657.1



119.7



3,498.7



6,679.7



741.3



7,421.02005


1,461.8



1,884.9



120.2



4,501.1



7,968.0



788.6



8,756.62006


1,586.0



1,853.8



85.4



4,932.6



8,457.8



2,061.0



10,518.82007


1,887.4



1,812.8



86.9



4,990.4



8,777.5



1,770.5



10,548.02008


1,739.1



2,125.1



68.9



5,125.0



9,058.1



1,783.8



10,841.9       2008


2007UnderwritingInsurance  Canada (Northbridge)


(78.7
)


78.0 U.S.
    (Crum & Forster)


(177.2
)


77.0 Asia
    (Fairfax Asia)


6.7



20.3Reinsurance  OdysseyRe


(73.5
)


94.7 Other


(135.0
)


11.3Underwriting income (loss)


(457.7
)


281.3Interest and dividends


476.1



604.4Operating income


18.4



885.7Net gains on investments


1,558.6



984.0Runoff


392.6



187.6Other


1.4



25.4Interest expense


(158.6
)


(209.5
)Corporate overhead and other


631.9



287.2Pre-tax income


2,444.3



2,160.4Income taxes


(755.6
)


(711.1
)Non-controlling interests


(214.9
)


(353.5
)Net earnings


1,473.8



1,095.8




---



##### 



Reserving
    Financial
    Position
  December 31,2008

2007Holding company cash, short term investments and marketable
    securities,
    net of short sale and derivative obligations


1,555.0


963.4Holding company debt


869.6


1,063.2Subsidiary debt


910.2


915.0Other long term obligations  holding company


187.7


192.6Total debt


1,967.5


2,170.8Net debt


412.5


1,207.4Common shareholders equity


4,866.3


4,121.4Preferred equity


102.5


136.6Non-controlling interests


1,382.8


1,585.0Total equity and non-controlling interests


6,351.6


5,843.0Net debt/total equity and non-controlling interests


6.5%


20.7%Net debt/net total capital


6.1%


17.1%Total debt/total capital


23.7%


27.1%Interest coverage


16.4x


11.3x     Investments




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
   5 Years


10 Years


15 YearsCommon stocks (with equity hedging)


12.2
%


19.1
%


16.1
%S&P 500


(2.2
%)


(1.4
%)


6.5
%Bonds


9.6
%


9.3
%


9.4
%Merrill Lynch U.S. corporate (1-10 year) index


1.6
%


4.4
%


5.4
%     Grants Interest Rate Observer
  3-month
  2005/2006
  1929-32.
  Net investment gains (losses)

2008


2007


2006


2005


2004


2003Equity hedges


2,079.6



143.0



(158.7
)


(53.1
)


(75.1
)


Credit default swaps


1,290.5



1,145.0



(83.5
)


(101.6
)


(13.7
)


(12.5
)Total


3,370.1



1,288.0



(242.2
)


(154.7
)


(88.8
)


(12.5
)




---



##### 



2008


2007Bonds


123.5



76.2Preferred stocks


(2.7
)


(0.9
)Common stocks


(198.5
)


300.9Investments, at equity


356.0



77.7278.3



453.9     2008United States


2,975.1Canada


560.3Other


705.84,241.2
     Miscellaneous




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
         
 V. Prem Watsa
 Chairman and Chief Executive Officer




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
   APPENDIX A
    GUIDING PRINCIPLES FOR FAIRFAX FINANCIAL HOLDINGS
    LIMITED  OBJECTIVES:
  1)
    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.        STRUCTURE:
  1)
    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.2)
    Complete and open communication between Fairfax and subsidiaries
    is an essential requirement at Fairfax.3)
    Share ownership and large incentives are encouraged across the
    Group.4)
    Fairfax will always be a very small holding company and not an
    operating company.  VALUES:
  1)
    Honesty and integrity are essential in all our relationships and
    will never be compromised.2)
    We are results oriented  not political.3)
    We are team players  no egos. A
    confrontational style is not appropriate. We value
    loyalty  to Fairfax and our colleagues.4)
    We are hard working but not at the expense of our families.5)
    We always look at opportunities but emphasize downside
    protection and look for ways to minimize loss of capital.6)
    We are entrepreneurial. We encourage calculated risk taking. It
    is all right to fail but we should learn from our mistakes.7)
    We will never bet the company on any project or acquisition.8)
    We believe in having fun  at work!