Managements
    Responsibility for the Financial Statements      (Form 40-F)
      Managements
    Report on Internal Control over Financial Reporting
        March 6,
    2009
  -s- V. Prem Watsa

-s- Greg TaylorV. Prem Watsa

Greg TaylorChairman and Chief Executive Officer

Vice President and Chief Financial Officer




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
   Independent
    Auditors Report  To the
    Shareholders of Fairfax Financial Holdings Limited
    Consolidated
    financial statements
          Internal
    control over financial reporting
  Internal Control 
    Integrated Framework




---



##### 








---



##### 



Consolidated
    Financial Statements  Consolidated
    Balance Sheets as
    at December 31, 2008 and 2007
  2008


2007(US$ millions)AssetsHolding company cash, short term investments and marketable
    securities (including assets pledged for short sale and
    derivative obligations  $19.7; 2007  nil)


1,564.2



971.8Accounts receivable and other


1,688.7



1,906.9Recoverable from reinsurers (including recoverables on paid
    losses  $298.9; 2007  $371.8)


4,234.2



5,038.57,487.1



7,917.2Portfolio investmentsSubsidiary cash and short term investments (cost $5,492.3;
    2007  $3,218.8)


5,508.5



3,218.1Bonds (cost $8,302.1; 2007  $9,971.7)


8,425.8



10,049.9Preferred stocks (cost $41.2; 2007  $20.8)


38.2



19.9Common stocks (cost $3,964.1; 2007- $2,314.9)


3,816.9



2,617.5Investments, at equity (fair value $575.3; 2007 
    $485.7)


219.3



408.0Derivatives and other invested assets (cost $157.3;
    2007  $339.7)


398.0



979.6Assets pledged for short sale and derivative obligations (cost
    $8.3; 2007  $1,800.9)


8.3



1,798.718,415.0



19,091.7Deferred premium acquisition costs


321.9



371.1Future income taxes


699.4



344.3Premises and equipment


133.1



53.8Goodwill and intangible assets


123.2



89.4Other assets


125.7



74.327,305.4



27,941.8         -s- V. P. Watsa
    Director

-s- V. P. Watsa
    Director




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
   2008


2007(US$ millions)LiabilitiesSubsidiary indebtedness


21.1



Accounts payable and accrued liabilities


1,326.5



1,232.6Income taxes payable


656.3



68.9Short sale and derivative obligations (including at the holding
    company  $9.2; 2007  $8.4)


29.4



1,062.8Funds withheld payable to reinsurers


355.1



362.62,388.4



2,726.9Provision for claims


14,728.4



15,048.1Unearned premiums


1,890.6



2,153.0Long term debt  holding company borrowings


869.6



1,063.2Long term debt  subsidiary company borrowings


889.1



915.0Other long term obligations  holding company


187.7



192.618,565.4



19,371.9Non-controlling interests


1,382.8



1,585.0Contingencies (note 13)Shareholders EquityCommon stock


2,124.9



2,067.4Other paid in capital






57.9Treasury stock, at cost


(22.7
)


(22.6
)Preferred stock


102.5



136.6Retained earnings


2,871.9



1,658.2Accumulated other comprehensive income (loss)


(107.8
)


360.54,968.8



4,258.027,305.4



27,941.8




---



##### 



Consolidated
    Statements of Earnings for
    the years ended December 31, 2008, 2007 and 2006
  2008


2007


2006(US$ millions exceptper share amounts)RevenueGross premiums written


5,061.4



5,214.5



5,486.6Net premiums written


4,332.2



4,498.4



4,789.7Net premiums earned


4,529.1



4,648.8



4,850.6Interest and dividends


626.4



761.0



746.5Net gains on investments


2,720.5



1,639.4



765.6Net gain on secondary offering










69.7Other


99.4



434.5



371.37,975.4



7,483.7



6,803.7ExpensesLosses on claims


3,720.9



3,132.0



3,822.4Operating expenses


823.8



820.0



757.9Commissions, net


729.8



760.3



780.7Interest expense


158.6



209.5



210.4Other costs and expenses


98.0



401.5



353.75,531.1



5,323.3



5,925.1Earnings from operations before income taxes


2,444.3



2,160.4



878.6Provision for income taxes


755.6



711.1



485.6Net earnings before non-controlling interests


1,688.7



1,449.3



393.0Non-controlling interests


(214.9
)


(353.5
)


(165.5
)Net earnings


1,473.8



1,095.8



227.5Net earnings per share

$
80.38


$
61.20


$
12.17Net earnings per diluted share

$
79.53


$
58.38


$
11.92Cash dividends paid per share

$
5.00


$
2.75


$
1.40Shares outstanding (000)(weighted average)


18,037



17,700



17,763




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
   Consolidated
    Statements of Comprehensive Income for
    the years ended December 31, 2008, 2007 and 2006
  2008


2007


2006(US$ millions)Net earnings


1,473.8



1,095.8



227.5Other comprehensive income (loss),net of income taxesChange in net unrealized gains and losses on available for sale
    securities(1)


(548.0
)


293.0



Reclassification of net realized (gains) losses to
    earnings(2)


248.6



(95.4
)


Change in unrealized foreign currency translation gains and
    losses(3)


(186.6
)


114.9



31.9Reclassification of foreign currency translation (gains) losses
    on disposition of investee company


24.9



(13.7
)


Changes in gains and losses on hedges of net investment in
    foreign
    subsidiary(4)


(7.2
)






Other comprehensive income (loss)


(468.3
)


298.8



31.9Comprehensive income


1,005.5



1,394.6



259.4   (1)
    
    Net of income tax recovery of $213.4 (2007  income
    tax expense of $142.2).(2)
    
    Net of income tax expense of $86.1 (2007  income
    tax recovery of $35.3).(3)
    
    Net of income tax expense of $45.3 (2007  income
    tax recovery of $7.6; 2006  income tax recovery of
    $9.5).(4)
    
    Net of income tax recovery of $2.8 (2007 and 2006 
    nil).




---



##### 



Consolidated
    Statements of Shareholders Equity for
    the years ended December 31, 2008, 2007 and 2006
  2008


2007


2006(US$ millions)Common stock Subordinate voting shares  beginning of year


2,063.6



2,068.1



2,075.8Issuances on conversion of convertible senior debentures


192.3







Purchases for cancellation


(134.8
)


(4.5
)


(7.7
)Subordinate voting shares  end of year


2,121.1



2,063.6



2,068.1Multiple voting shares  beginning and end of year


3.8



3.8



3.8Common stock


2,124.9



2,067.4



2,071.9Other paid in capital beginning of year


57.9



57.9



59.4Conversion of convertible senior debentures


(57.9
)






Purchases of convertible senior debentures










(1.5
)Other paid in capital end of year






57.9



57.9Treasury shares (at cost) beginning of year


(22.6
)


(18.3
)


(17.3
)Net acquisitions


(0.1
)


(4.3
)


(1.0
)Treasury shares (at cost) end of year


(22.7
)


(22.6
)


(18.3
)Preferred stock Series A  beginning of year


51.2



51.2



51.2Purchases for cancellation


(12.8
)






Series A  end of year


38.4



51.2



51.2Series B  beginning of year


85.4



85.4



85.4Purchases for cancellation


(21.3
)






Series B  end of year


64.1



85.4



85.4Preferred stock


102.5



136.6



136.6Retained earnings beginning of year


1,658.2



596.6



405.6Transition adjustment  financial instruments






29.8



Net earnings for the year


1,473.8



1,095.8



227.5Excess over stated value of common shares purchased for
    cancellation


(147.2
)


(2.5
)


Excess over stated value of preferred shares purchased for
    cancellation


(13.9
)






Common share dividends


(88.9
)


(49.0
)


(25.1
)Preferred share dividends


(10.1
)


(12.5
)


(11.4
)Retained earnings end of year


2,871.9



1,658.2



596.6Accumulated other comprehensive income (loss) beginning of year


360.5



12.2



(19.7
)Transition adjustment  financial instruments






49.5



Other comprehensive income (loss)


(468.3
)


298.8



31.9Accumulated other comprehensive income (loss) end of year


(107.8
)


360.5



12.2Retained earnings and accumulated other comprehensive
    income


2,764.1



2,018.7



608.8Total shareholders equity


4,968.8



4,258.0



2,856.9




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
   2008


2007


2006Number of shares outstandingCommon stock Subordinate voting shares  beginning of year


16,918,020



16,981,970



17,056,856Issuances on conversion of convertible senior debentures


886,888







Purchases for cancellation


(1,066,601
)


(38,600
)


(67,800
)Net treasury shares acquired


(252
)


(25,350
)


(7,086
)Subordinate voting shares  end of year


16,738,055



16,918,020



16,981,970Multiple voting shares  beginning and end of year


1,548,000



1,548,000



1,548,000Interest in shares held through ownership interest in
    shareholder  beginning and end of year


(799,230
)


(799,230
)


(799,230
)Common stock effectively outstanding  end of year


17,486,825



17,666,790



17,730,740Preferred stock Series A  beginning of year


3,000,000



3,000,000



3,000,000Purchases for cancellation


(750,000
)






Series A  end of year


2,250,000



3,000,000



3,000,000Series B  beginning of year


5,000,000



5,000,000



5,000,000Purchases for cancellation


(1,250,000
)






Series B  end of year


3,750,000



5,000,000



5,000,000




---



##### 



Consolidated
    Statements of Cash Flows for
    the years ended December 31, 2008, 2007 and 2006
  2008


2007


2006(US$ millions)Operating activitiesEarnings before non-controlling interests


1,688.7



1,449.3



393.0Amortization


22.4



27.0



24.9Bond discount amortization


(3.9
)


(17.6
)


(67.9
)(Earnings) loss on investments, at equity


49.4



(7.7
)


(78.0
)Future income taxes


(342.9
)


323.5



375.2Loss on significant commutations


84.2







412.6Net gains on investments










(835.3
)Net (gains) losses on available for sale securities


334.7



(130.7
)


Other net gains on investments


(3,055.2
)


(1,508.7
)


(1,222.6
)


135.1



224.5Changes in:Provision for claims


186.6



(981.6
)


(741.2
)Unearned premiums


(200.0
)


(172.4
)


(274.6
)Accounts receivable and other


292.1



19.9



555.6Recoverable from reinsurers


582.5



665.2



1,154.2Funds withheld payable to reinsurers


(25.6
)


(28.3
)


(97.5
)Accounts payable and accrued liabilities


(158.0
)


69.3



21.0Income taxes payable


614.0



67.8



1.1Other


50.9



(19.8
)


62.0Cash provided by (used in) operating activities


119.9



(244.8
)


905.1Investing activitiesInvestments  purchases










(3,971.3
) sales










3,999.2Net sales of assets and liabilities classified as held for
    trading


3,157.3



482.6



Net sales (purchases) of securities designated as held for
    trading


(3,814.6
)


40.9



Available for sale securities  purchases


(6,333.0
)


(3,693.5
)


 sales


9,233.7



2,273.8



Net purchases of available for sale short term investments


(1,762.9
)


(1,538.4
)


Net decrease (increase) in restricted cash and cash equivalents


196.3



(107.9
)


8.0Net sales of marketable securities










51.3Net sales (purchases) of investments, at equity


(54.2
)


381.3



(2.8
)Net sales of other invested assets






7.6



Net purchases of premises and equipment and intangible assets


(23.7
)


(18.0
)


(13.2
)Net proceeds on secondary offerings










337.6Proceeds on partial disposition of investee company






60.0



Sale (purchase) of subsidiaries, net of cash acquired


(11.0
)


1.8



Cash provided by (used in) investing activities


587.9



(2,109.8
)


408.8




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
   2008


2007


2006(US$ millions)Financing activitiesSubsidiary indebtednessIssuances






6.9



4.3Repayment


(13.2
)


(73.4
)


Long term debt  holding companyRepayment


(62.1
)


(107.8
)


(115.7
)Debt issuance costs






(15.0
)


Long term debt  subsidiary companiesIssuances


3.3



330.0



140.0Repayment


(118.6
)


(295.7
)


(59.3
)Debt issuance costs






(23.4
)


Other long term obligations  holding
    company  repayment


(4.9
)


(4.5
)


(43.7
)Repurchase of subsidiary securities


(419.5
)


(121.5
)


Repurchase of subordinate voting shares


(282.0
)


(7.0
)


(7.7
)Repurchase of preferred shares


(48.0
)






Purchase of shares for treasury


(0.2
)


(4.4
)


(2.1
)Common share dividends


(88.9
)


(49.0
)


(25.1
)Preferred share dividends


(10.1
)


(12.5
)


(11.4
)Dividends paid to non-controlling interests


(25.6
)


(27.3
)


(22.1
)Cash provided by (used in) financing activities


(1,069.8
)


(404.6
)


(142.8
)Foreign currency translation


(224.8
)


107.9



2.3Increase (decrease) in cash and cash equivalents


(586.8
)


(2,651.3
)


1,173.4Cash and cash equivalents  beginning of year


3,112.5



5,763.8



4,590.4Cash and cash equivalents  end of year


2,525.7



3,112.5



5,763.8        December 31,2008


2007


2006(US$ millions)Holding company cash and short term investments


293.8



31.3



540.2Subsidiary cash and short term investments


2,338.8



2,164.8



4,602.7Subsidiary cash and short term investments pledged for short
    sale and derivative obligations


8.3



1,244.2



829.32,640.9



3,440.3



5,972.2Subsidiary restricted cash and short term investments


(115.2
)


(327.8
)


(208.4
)2,525.7



3,112.5



5,763.8




---



##### 



Notes
    to Consolidated Financial Statementsfor
    the years ended December 31, 2008, 2007 and 2006 
    (in US$ and $millions except per share amounts and as otherwise
    indicated)  1.
    Business
    Operations   2.
    Summary
    of Significant Accounting Policies   Principles
    of consolidation
   Canadian Insurance
  
  U.S. Insurance
  
  Asian Insurance
  Fairfax Asia consists of:
      
  Reinsurance
      which underwrites business in:
      Runoff
      
        Other




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
     Investments
   Held for trading
  Available for sale
  Held to maturity
  Other than temporary impairments




---



##### 



Pricing
  Recognition
    Other
  Derivative
    financial instruments
     Cash
    and cash equivalents
   Loans
    and receivables and other financial liabilities




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
   Insurance
    contracts
 Revenue recognition
  Provision for claims 
    Reinsurance




---



##### 



Deferred premium acquisition costs
  Business
    combinations, goodwill and other intangible assets
     Income
    taxes
   Pensions
   (i)
    Actuarial valuations of benefit liabilities for pension and post
    retirement benefit plans are performed as at December 31 of each
    year for all benefit plans using the projected benefit method
    prorated on service, based on managements assumptions on
    the discount rate, rate of compensation increase, retirement
    age, mortality and the trend in the health care cost rate. The
    discount rate is determined by management with reference to
    market conditions at year end. Other assumptions are determined
    with reference to long-term expectations.(ii)
    Expected return on plan assets is calculated based on the fair
    value of those assets.




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
    (iii)
    Actuarial gains (losses) arise from the difference between the
    actual long term rate of return and the expected long term rate
    of return on plan assets for that period or from changes in
    actuarial assumptions used to determine the benefit obligation.
    Only gains or losses in excess of 10% of the greater of the
    benefit obligations or the fair value of plan assets are
    amortized over the average remaining service period of active
    employees.(iv)
    Prior service costs arising from plan amendments are amortized
    on a straight line basis over the average remaining service
    period of employees active at the date of amendment.(v)
    When a restructuring of a benefit plan gives rise to both a
    curtailment and a settlement of obligations, the curtailment is
    accounted for prior to the settlement.  Translation
    of foreign currencies
     Comprehensive
    income (loss)
   Animal
    nutrition products
   first-in,
  Non-controlling
    interest
   Comparative
    figures




---



##### 



Change in
    accounting policies
 Current
    year
   Prior
    year
         Accounting
    pronouncements to be adopted in the future
 Goodwill
    and intangible assets
   Business
    combinations and non-controlling interest




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
       International
    Financial Reporting Standards (IFRS)
   3.
    Cash and
    Investments    December 31, 2008


December 31, 2007Classified


Designated


Classified








Classified


Designated


Classifiedas


as


as





Total


as


as


as





Totalheld for


held for


available





carrying


held for


held for


available





carryingtrading


trading


for sale


Other


value


trading


trading


for sale


Other


valueHolding company:Cash and short term investments


275.4







521.1







796.5



31.3







413.0







444.3Assets pledged for short sale and derivative
    obligations  cash and short term investments


18.4







1.3







19.7



















Bonds






216.6



12.2







228.8







17.6



12.2







29.8Preferred stocks










12.1







12.1



















Common stocks










424.3







424.3











235.0







235.0Derivatives


82.8















82.8



262.7















262.7376.6



216.6



971.0







1,564.2



294.0



17.6



660.2







971.8Short sale and derivative obligations


(9.2
)














(9.2
)


(8.4
)














(8.4
)367.4



216.6



971.0







1,555.0



285.6



17.6



660.2







963.4Portfolio investments:Cash and short term investments


2,338.8



355.2



2,814.5







5,508.5



2,164.8







1,053.3







3,218.1Bonds






4,463.3



3,962.5







8,425.8







1,215.9



8,834.0







10,049.9Preferred stocks










38.2







38.2











19.9







19.9Common stocks






80.7



3,736.2







3,816.9











2,617.5







2,617.5Investments, at equity














219.3



219.3















408.0



408.0Derivatives


372.7















372.7



950.7















950.7Other invested assets














25.3



25.3















28.9



28.92,711.5



4,899.2



10,551.4



244.6



18,406.7



3,115.5



1,215.9



12,524.7



436.9



17,293.0Assets pledged for short sale and derivative obligations:Cash and short term investments


8.3















8.3



1,244.2







121.9







1,366.1Bonds






























432.6







432.68.3















8.3



1,244.2







554.5







1,798.72,719.8



4,899.2



10,551.4



244.6



18,415.0



4,359.7



1,215.9



13,079.2



436.9



19,091.7Short sale and derivative obligations


(20.2
)














(20.2
)


(1,054.4
)














(1,054.4
)2,699.6



4,899.2



10,551.4



244.6



18,394.8



3,305.3



1,215.9



13,079.2



436.9



18,037.3




---



##### 



December 31,
    2008
  DesignatedAvailable for sale


as heldCost or


Gross


Gross





for trading


Totalamortized


unrealized


unrealized


Carrying


Carrying


carryingcost


gains


losses


value


value


valueHolding company:Short term
    investments:(1)Canadian government


136.7







(1.4
)


135.3







135.3U.S. treasury


387.1











387.1







387.1523.8







(1.4
)


522.4







522.4Bonds:U.S. treasury


12.0











12.0







12.0U.S. states and municipalities


















88.0



88.0Corporate and other


0.4







(0.2
)


0.2



109.7



109.9Mortgage backed securities


















18.9



18.912.4







(0.2
)


12.2



216.6



228.8Preferred stocks:Canadian


11.8



0.3







12.1







12.111.8



0.3







12.1







12.1Common stocks:Canadian


58.4







(11.1
)


47.3







47.3U.S.


397.2



12.4



(56.8
)


352.8







352.8Other


20.0



4.2







24.2







24.2475.6



16.6



(67.9
)


424.3







424.3Portfolio investment:Short term investments:Canadian government


196.9







(0.1
)


196.8



2.8



199.6U.S. treasury


2,307.9







(3.4
)


2,304.5



255.8



2,560.3Other government


297.1



16.1







313.2



96.6



409.82,801.9



16.1



(3.5
)


2,814.5



355.2



3,169.7Bonds:Canadian government


928.1



57.0







985.1



741.2



1,726.3U.S. treasury


739.2



140.4







879.6



93.4



973.0U.S. states and municipalities


999.7



12.7



(32.7
)


979.7



3,036.9



4,016.6Other government


856.8



24.3



(66.6
)


814.5



38.9



853.4Corporate and other


315.0



7.2



(18.6
)


303.6



420.1



723.7Mortgage backed securities


















132.8



132.83,838.8



241.6



(117.9
)


3,962.5



4,463.3



8,425.8Preferred stocks:Canadian


10.2











10.2







10.2U.S.


0.6







(0.5
)


0.1







0.1Other


30.4







(2.5
)


27.9







27.941.2







(3.0
)


38.2







38.2Common stocks:Canadian


535.8



43.6



(66.4
)


513.0







513.0U.S.


2,731.1



95.8



(250.9
)


2,576.0



46.3



2,622.3Other


616.5



44.2



(13.5
)


647.2



34.4



681.63,883.4



183.6



(330.8
)


3,736.2



80.7



3,816.9   (1)
    Includes $1.3 of short term investments included in assets
    pledged for short sale and derivative obligations.




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
    December 31,
    2007
  DesignatedAvailable for sale


as heldCost or


Gross


Gross





for trading


Totalamortized


unrealized


unrealized


Carrying


Carrying


carryingcost


gains


losses


value


value


valueHolding company:Short term investments:U.S. treasury


413.0











413.0







413.0413.0











413.0







413.0Bonds:U.S. treasury


12.0



0.2







12.2







12.2Corporate and other


















17.6



17.612.0



0.2







12.2



17.6



29.8Common stocks:Canadian


30.3



3.2



(0.2
)


33.3







33.3U.S.


177.4



3.7



(8.9
)


172.2







172.2Other


29.1



0.4







29.5







29.5236.8



7.3



(9.1
)


235.0







235.0Portfolio investment:Short term investments:Canadian government


87.7



0.9







88.6







88.6U.S. treasury


863.1







(1.8
)


861.3







861.3Other government


103.4











103.4







103.41,054.2



0.9



(1.8
)


1,053.3







1,053.3Bonds:Canadian government


1,325.0



60.3



(0.4
)


1,384.9



904.1



2,289.0U.S. treasury


6,020.6



45.0



(76.3
)


5,989.3







5,989.3U.S. states and municipalities


185.7



6.5



(0.3
)


191.9







191.9Other government


990.1



60.0



(7.8
)


1,042.3







1,042.3Corporate and other


234.4







(8.8
)


225.6



311.8



537.48,755.8



171.8



(93.6
)


8,834.0



1,215.9



10,049.9Preferred stocks:Canadian


12.8











12.8







12.8U.S.


2.1







(0.9
)


1.2







1.2Other


5.9











5.9







5.920.8







(0.9
)


19.9







19.9Common stocks:Canadian


682.7



143.5



(20.7
)


805.5







805.5U.S.


1,276.5



98.4



(69.4
)


1,305.5







1,305.5Other


355.7



154.7



(3.9
)


506.5







506.52,314.9



396.6



(94.0
)


2,617.5







2,617.5Assets pledged for short sale and derivative obligations:Short term investments:Canadian government


53.6











53.6







53.6U.S. treasury


68.3











68.3







68.3121.9











121.9







121.9Bonds:Canadian government


2.0











2.0







2.0U.S. treasury


432.8







(2.2
)


430.6







430.6434.8







(2.2
)


432.6







432.6




---



##### 



December 31, 2008


December 31, 2007Amortized


Fair


Amortized


Faircost


value


cost


valueDue in 1 year or less


804.7



825.7



382.1



393.6Due after 1 year through 5 years


2,048.0



1,567.0



2,939.5



2,992.9Due after 5 years through 10 years


5,099.5



5,235.4



2,493.6



2,542.2Due after 10 years


943.6



1,026.5



4,625.4



4,583.68,895.8



8,654.6



10,440.6



10,512.3Effective interest rate






5.5
%






4.2
%       December 31,
    2008
  Less than 12 Months


Greater than 12 Months


TotalGross








Gross








GrossFair


unrealized


Number of


Fair


unrealized


Number of


Fair


unrealized


Number ofvalue


losses


securities


value


losses


securities


value


losses


securitiesBonds:U.S. states and municipalities


541.1



(32.7
)


30















541.1



(32.7
)


30Other government


327.1



(66.6
)


8















327.1



(66.6
)


8Corporate and other


127.7



(18.8
)


8















127.7



(18.8
)


8995.9



(118.1
)


46















995.9



(118.1
)


46Preferred stocks:U.S.


0.1



(0.5
)


2















0.1



(0.5
)


2Other


27.9



(2.5
)


4















27.9



(2.5
)


428.0



(3.0
)


6















28.0



(3.0
)


6Common stocks:Canadian


303.3



(77.5
)


5















303.3



(77.5
)


5U.S.


1,214.6



(307.7
)


13















1,214.6



(307.7
)


13Other


284.3



(13.5
)


20















284.3



(13.5
)


201,802.2



(398.7
)


38















1,802.2



(398.7
)


382,826.1



(519.8
)


90















2,826.1



(519.8
)


90   December 31,
    2007
  Less than 12 Months


Greater than 12 Months


TotalGross








Gross








GrossFair


unrealized


Number of


Fair


unrealized


Number of


Fair


unrealized


Number ofvalue


losses


securities


value


losses


securities


value


losses


securitiesBonds:Canadian government














136.7



(0.4
)


1



136.7



(0.4
)


1U.S. treasury


1,715.0



(3.9
)


10



2,255.1



(74.6
)


7



3,970.1



(78.5
)


17U.S. states and municipalities


10.3



(0.1
)


4



22.4



(0.2
)


6



32.7



(0.3
)


10Other government


303.8



(7.8
)


3















303.8



(7.8
)


3Corporate and other


136.6



(8.8
)


8















136.6



(8.8
)


82,165.7



(20.6
)


25



2,414.2



(75.2
)


14



4,579.9



(95.8
)


39Preferred stocks:U.S.


0.5



(0.9
)


1















0.5



(0.9
)


1Common stocks:Canadian


426.6



(20.9
)


11















426.6



(20.9
)


11U.S.


655.0



(78.3
)


8















655.0



(78.3
)


8Other


23.0



(3.9
)


17















23.0



(3.9
)


171,104.6



(103.1
)


36















1,104.6



(103.1
)


363,270.8



(124.6
)


62



2,414.2



(75.2
)


14



5,685.0



(199.8
)


76




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
       and/or
  1.
    Quoted prices in active markets for identical
    instrument  Inputs represent unadjusted quoted prices
    for identical instruments exchanged in active markets. The fair
    value of the majority of the companys preferred and common
    stocks and positions in securities sold but not yet purchased
    (including in prior periods, the S&P 500 index based
    Standard and Poors Depository receipts (SPDRs)
    short position) are determined based on quoted prices in active
    markets obtained from external pricing sources.2.
    Significant other observable inputs  Inputs include
    directly or indirectly observable inputs other than quoted
    prices for identical instruments exchanged in active markets.
    These inputs include quoted prices for similar instruments
    exchanged in active markets; quoted prices for identical or
    similar instruments exchanged in inactive markets; inputs other
    than quoted prices that are observable for the instruments, such
    as interest rates and yield curves, volatilities, prepayment
    speeds, loss severities, credit risks and default rates where
    available; and inputs that are derived principally from or
    corroborated by observable market data by correlation or other
    means.




---



##### 



3.
    Significant unobservable inputs  Inputs include
    unobservable inputs used in the measurement of financial
    instruments. Management is required to use its own assumptions
    regarding unobservable inputs as there is little, if any, market
    activity in these assets or liabilities or related observable
    inputs that can be corroborated at the measurement date.
    Unobservable inputs require management to make certain
    projections and assumptions about the information that would be
    used by market participants in pricing assets or liabilities. To
    verify pricing, the company assesses the reasonability of the
    fair values by comparing to industry accepted valuation models,
    to movements in credit spreads and to recent transaction prices
    for similar assets where available.    SignificantTotal fair





other


Significantvalue asset


Quoted


observable


unobservable(liability)


prices


inputs


inputsCash and short term investments


6,333.0



6,303.9



29.1



Bonds


8,654.6







8,488.0



166.6Preferred
    stocks(1)


38.2



10.1



28.1



Common
    stocks(1)


4,064.1



3,816.7



243.6



3.8Derivatives and other invested assets


480.8



39.4



441.4



Short sale and derivative obligations


(29.4
)


(20.2
)


(9.2
)


Portfolio investments measured at fair value  ($)


19,541.3



10,149.9



9,221.0



170.4 (%)


100.0
%


51.9
%


47.2
%


0.9
%   (1)
    Excluded from these totals are available for sale investments
    of $12.1 and $177.1 in preferred stocks and partnership trusts
    respectively which are carried at cost as they do not have
    quoted market values in active markets.




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
     CommonBonds


stocksBalance at January 1, 2008


23.3



10.6Net gains (losses) included in the consolidated statement of
    earnings


(37.4
)


7.9Net purchases (sales)


180.7



(12.2
)Transfer out of category






(2.5
)Balance at December 31, 2008


166.6



3.8   Investment
    Income
    2008Classified as


Designated as


Classified asheld for


held for


availabletrading


trading


for sale


Other


TotalInterest income:Cash and short term investments


100.4







30.8







131.2Bonds






81.9



372.7







454.6Derivatives and other


14.8











6.4



21.2115.2



81.9



403.5



6.4



607.0Dividends:Preferred stocks










1.5







1.5Common stocks










74.5







74.5







76.0







76.0Losses from investments, at equity














(49.4
)


(49.4
)Expenses














(7.2
)


(7.2
)115.2



81.9



479.5



(50.2
)


626.4Net gains (losses) on investments:Bonds:Gains










651.8







651.8Losses






(356.1
)


(22.0
)






(378.1
)



(356.1
)


629.8







273.7Preferred stocks:Gains










3.0







3.0Losses


























3.0







3.0Common stocks:Gains










44.0







44.0Losses






(20.8
)


(2.6
)






(23.4
)



(20.8
)


41.4







20.6Financial instruments classified as held for trading


3,433.6















3,433.6Foreign currency gains (losses) on cash, cash equivalents and
    short term investments


(75.7
)


71.8



(7.3
)






(11.2
)Foreign currency translation loss on disposition of investee
    company














(24.9
)


(24.9
)Other






1.2







20.9



22.1Other than temporary impairments of investments










(996.4
)






(996.4
)3,357.9



(303.9
)


(329.5
)


(4.0
)


2,720.53,473.1



(222.0
)


150.0



(54.2
)


3,346.9




---



##### 



2007


2006Classified as


Designated as


Classified asheld for


held for


availabletrading


trading


for sale


Other


Total


TotalInterest income:Cash and short term investments


182.8







29.6







212.4



268.6Bonds






47.4



399.4







446.8



356.4Derivatives and other


20.8















20.8



(14.8
)203.6



47.4



429.0







680.0



610.2Dividends:Preferred stocks










1.2







1.2



0.7Common stocks










80.5







80.5



71.9







81.7







81.7



72.6Earnings from investments, at equity














7.7



7.7



78.0Expenses














(8.4
)


(8.4
)


(14.3
)203.6



47.4



510.7



(0.7
)


761.0



746.5Net gains (losses) on investments:Bonds:Gains










93.7







93.7



216.3Losses






(42.0
)


(1.0
)






(43.0
)


(7.3
)



(42.0
)


92.7







50.7



209.0Preferred stocks:Gains






















1.6Losses










































1.6Common stocks:Gains










158.2







158.2



799.4Losses










(17.7
)






(17.7
)


(4.3
)







140.5







140.5



795.1Investments, at equity














220.5



220.5



Financial instruments classified as held for trading


1,274.7















1,274.7



(251.0
)Foreign currency gains (losses) on cash, cash equivalents and
    short term investments


24.0















24.0



72.6Repurchase of debt














1.8



1.8



(15.7
)Secondary offerings  OdysseyRe






















69.7Other














40.0



40.0



(8.2
)Other than temporary impairments of investments










(102.6
)


(10.2
)


(112.8
)


(37.8
)1,298.7



(42.0
)


130.6



252.1



1,639.4



835.31,502.3



5.4



641.3



251.4



2,400.4



1,581.8




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
     Designated asClassified as held for trading


held for tradingCommonstock and


Creditequity index


default











Commonshort positions


swaps


Other


Total


Bonds


stocksFor the year ended December 31, 2008Inception-to-date realized gains (losses) on positions closed in
    the year


1,989.9



1,802.9



62.5



3,855.3



(2.1
)


Reversal of mark-to-market (gains) losses recognized in prior
    periods on positions closed in the year


89.9



(750.6
)


2.9



(657.8
)


0.1



Mark-to-market gains (losses) arising on positions remaining
    open at year end


(0.2
)


238.2



(1.9
)


236.1



(354.1
)


(20.8
)Net gains (losses)


2,079.6



1,290.5



63.5



3,433.6



(356.1
)


(20.8
)For the year ended December 31, 2007Inception-to-date realized gains (losses) on positions closed in
    the year


106.0



173.6



(1.4
)


278.2



19.1



Reversal of mark-to-market (gains) losses recognized in prior
    periods on positions closed in the year


(15.9
)


11.1



(2.1
)


(6.9
)


(12.6
)


Mark-to-market gains (losses) arising on positions remaining
    open at year end


52.9



960.3



(9.8
)


1,003.4



(48.5
)


Net gains (losses)


143.0



1,145.0



(13.3
)


1,274.7



(42.0
)


For the year ended December 31, 2006Inception-to-date realized gains (losses) on positions closed in
    the year


(162.0
)






(12.1
)


(174.1
)






Reversal of mark-to-market (gains) losses recognized in prior
    periods on positions closed in the year


69.1







4.0



73.1







Mark-to-market gains (losses) arising on positions remaining
    open at year end


(65.8
)


(83.5
)


(0.7
)


(150.0
)






Net gains (losses)


(158.7
)


(83.5
)


(8.8
)


(251.0
)











---



##### 



4.
    Securities
    Sold but not yet Purchased and Derivative Transactions    December 31, 2008


December 31, 2007Notional


Fair value





Notional


Fair valueCost


value


Assets


Liabilities


Cost


value


Assets


LiabilitiesSecurities sold shortSPDRs


















819.7











975.4Common stock


















74.8











72.8Short positions effected by equity contractsEquity index total return swaps






















1,629.8



59.5



6.8Equity total return swaps






1.3















247.0



19.2



3.8S&P 500 index call options


0.1



518.4











3.6



2,480.0



0.3



Credit contractsCredit default swaps


161.5



8,873.0



415.0







340.0



18,539.2



1,119.1



Warrants


19.2



342.6



0.6







20.5



418.2



15.3



Other










39.9



29.4















4.0Total










455.5



29.4











1,213.4



1,062.8           December 31, 2008


December 31, 2007Notional value


Fair value


Notional value


Fair valueExpiring in 1 year or less


60.0



2.1



647.0



7.2Expiring after 1 year through 5 years


7,208.8



315.6



12,152.1



741.7Expiring after 5 years through 10 years


1,604.2



97.3



5,740.1



370.28,873.0



415.0



18,539.2



1,119.1




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
     5.
    Provision
    for Claims      December 31,2008


2007


2006Provision for claims  beginning of year 
    net


10,624.8



10,633.8



9,332.8Foreign exchange effect of change in provision for claims


(580.3
)


328.8



78.3Incurred loss occurring due to Swiss Re commutation










412.6Provision for claims occurring:In the current year


3,405.4



3,122.5



3,126.9In the prior years


55.4



22.8



288.1Paid on claims during the year related to:The current year


(835.5
)


(786.3
)


(748.4
)The prior years


(2,034.2
)


(2,696.8
)


(2,443.9
)Proceeds from the Swiss Re commutation










587.4Provision for claims of acquired companies at December 31


372.9







Provision for claims at December 31 before the undernoted


11,008.5



10,624.8



10,633.8CTR Life


34.9



21.5



24.8Provision for claims  end of year  net


11,043.4



10,646.3



10,658.6Reinsurers share of provision for claims


3,685.0



4,401.8



4,843.7Provision for claims  end of year  gross


14,728.4



15,048.1



15,502.3




---



##### 



December 31, 2008


December 31, 2007Fair value


Carrying value


Fair value


Carrying valueInsurance contracts


17,120.6



16,619.0



16,956.7



17,201.1Ceded reinsurance contracts


3,861.9



3,909.9



4,360.6



4,650.8         December 31, 2008


December 31, 2007Fair value


Fair value


Fair value


Fair valueof


of


of


ofinsurance


reinsurance


insurance


reinsurancecontracts


contracts


contracts


contractsChange in interest rates100 basis point increase


16,627.4



3,741.0



16,545.5



4,242.2100 basis point decrease


17,607.3



3,977.6



17,475.8



4,504.1   6.
    Significant
    Commutations      7.
    Reinsurance




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
           2008


2007


2006Earned premiums ceded to reinsurers


(713.5
)


(725.0
)


(747.2
)Commissions earned on ceded reinsurance premiums


144.9



147.3



143.7Claims incurred ceded to
    reinsurers(1)


483.5



235.9



(98.0
)Provision for uncollectible reinsurance


(15.0
)


(46.2
)


(46.5
)Net impact of ceded reinsurance transactions (pre-tax)


(100.1
)


(388.0
)


(748.0
)   (1)
    In 2008 included an $84.2 loss on Crum &
    Forsters commutation of an aggregate stop loss contract.
    In 2006 included a $412.6 loss on the commutation of the Swiss
    Re corporate adverse development cover.




---



##### 



8.
    Subsidiary
    Indebtedness and Long Term Debt  December 31, 2008


December 31, 2007Total





Totalcarrying





carryingPrincipal


value(a)


Principal


value(a)Subsidiary indebtedness consists of the following balances:Ridley secured revolving term facility:Cdn $30.0 or U.S. dollar equivalent at floating rate due
    October 31,
    2011(1)


14.7



14.4







U.S. $20.0 at floating rate due October 31,
    2011(1)


7.0



6.7







21.7



21.1







Long term debt consists of the following balances:Fairfax unsecured notes:6.875% due April 15,
    2008(1)










62.1



62.17.75% due April 15,
    2012(2)


181.6



177.4



181.6



176.78.25% due October 1,
    2015(2)(3)


90.9



90.6



90.9



90.57.75% due June 15,
    2017(2)(4)


282.6



263.9



282.6



261.77.375% due April 15,
    2018(2)(3)


144.2



143.7



144.2



143.68.30% due April 15,
    2026(3)


91.8



91.3



91.8



91.37.75% due July 15,
    2037(3)


91.3



89.9



91.3



89.9Fairfax convertible senior debentures at 5.0% due July 15,
    2023(1)










137.0



134.3Other debt  secured loan at 6.15% due
    January 28,
    2009(9)


12.8



12.8



13.1



13.1Long term debt  holding company borrowings


895.2



869.6



1,094.6



1,063.2OdysseyRe unsecured senior notes:7.65% due November 1,
    2013(5)


225.0



223.7



225.0



224.76.875% due May 1,
    2015(6)


125.0



123.6



125.0



124.4Series A, floating rate due March 15,
    2021(7)


50.0



49.7



50.0



50.0Series B, floating rate due March 15,
    2016(7)


50.0



49.7



50.0



50.0Series C, floating rate due December 15,
    2021(8)


40.0



39.8



40.0



40.0Crum & Forster unsecured senior notes:10.375% due June 15,
    2013(1)(2)










4.3



4.27.75% due May 1,
    2017(2)


330.0



305.2



330.0



303.1Long term debt  operating companies


820.0



791.7



824.3



796.4Consolidated debt of investments:Cunningham Lindsey unsecured Series B debentures of Cdn$125
    at 7.0% due June 16,
    2008(1)










126.7



126.7Advent subordinated notes:floating rate due June 3,
    2035(1)


34.0



32.9







12.0 million, floating rate due June 3,
    2035(1)


16.7



16.2







Advent unsecured senior notes:floating rate due January 15,
    2026(1)


26.0



25.0







floating rate due December 15,
    2026(1)


20.0



19.3







Ridley economic development loan at 1% due August 10,
    2019(1)


0.8



0.7







MFXchange, equipment loans at 7.2% due March 31, 2011


3.3



3.3







100.8



97.4



126.7



126.7Less: Cunningham Lindsey debentures held by
    Fairfax(1)










(8.1
)


(8.1
)Long term debt  subsidiary company borrowings


920.8



889.1



942.9



915.01,816.0



1,758.7



2,037.5



1,978.2   (a)
    Principal net of unamortized issue costs and discounts.(1)
    During 2008, the company or one of its subsidiaries completed
    the following transactions with respect to its debt:  (a)
    Effective November 4, 2008, the company consolidated the
    long term debt of Ridley pursuant to the transactions described
    in note 17. The interest rate on the revolving term
    facility is the bankers acceptance rate for Canadian dollar debt
    or LIBOR for U.S. dollar debt plus a margin of 1.00% to
    1.50% based on a specific debt ratio. Subsequent to its
    acquisition by the company, Ridley repaid $13.2 of its secured
    revolving term facilities.




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
    (b)
    Effective September 11, 2008, the company consolidated
    the long term debt of Advent pursuant to the transaction
    described in note 17. The interest rates and call features
    of Advents long term debt are as follows: U.S. dollar
    notes at the three month LIBOR plus 3.90% and euro subordinated
    notes at the three month EURIBOR plus 3.85% due June 3,
    2035 may be called at par after June 3, 2010;
    U.S. dollar unsecured senior notes at the three month LIBOR
    plus 4.50% due January 15, 2026 may be called at par
    after January 16, 2011; and U.S. dollar unsecured
    senior notes due December 15, 2026 at the three month LIBOR
    plus 4.15% may be called at par after December 15, 2011.(c)
    On June 16, 2008, Crum & Forster redeemed for
    cash all $4.3 principal amount of its outstanding notes due 2013
    for total consideration of $4.5.(d)
    On June 16, 2008, Cunningham Lindsey repaid the
    outstanding Cdn$125.0 of its Series B debentures which
    matured on that date. This transaction decreased subsidiary
    company borrowings by $118.6 net of $8.1 of these
    debentures owned by the company.(e)
    On April 15, 2008, the company repaid the outstanding
    $62.1 principal amount of its notes which matured on that
    date.(f)
    On January 9, 2008, the company called for redemption
    all of its 5.0% convertible senior debentures due 2023. On
    February 13, 2008, $188.5 principal amount of these
    debentures were converted by their holders into 886,888
    subordinate voting shares of the company and the company paid a
    nominal amount of cash to redeem the unconverted debentures and
    in lieu of fractional shares. The conversion was recorded as a
    $192.3 increase of common stock and a $134.4 and $57.9 reduction
    of long term debt and other paid in capital respectively.  (2)
    During 2007, the company or one of its subsidiaries completed
    the following transactions with respect to its debt:  (a)
    The company closed its note exchange offer (which was
    accounted for as a modification of debt), under which $282.6 of
    outstanding notes due in 2012 were exchanged for a cash early
    participation payment of $11.2 and the issue of $282.6 of new
    7.75% senior notes due in 2017, plus accrued interest to
    the settlement date. Of the $3.8 of additional transaction
    costs, $2.9 qualified for deferral and amortization pursuant to
    debt modification accounting treatment and was classified as a
    reduction to the carrying value of the debt.(b)
    Crum & Forster completed a private placement debt
    offering of $330.0 principal amount of 7.75% senior notes
    due May 1, 2017 at an issue price of 100%. Pursuant to
    Crum & Forsters tender offer to purchase for
    cash any and all of its outstanding 10.375% senior notes
    due 2013, the net proceeds of the offering of $325.2 (after
    commissions and expenses), together with available cash on hand,
    were used to purchase $295.7 of the 2013 senior notes for total
    consideration of $325.7, plus accrued and unpaid interest of
    $12.1. Interest expense for 2007 includes $21.2 of one-time debt
    extinguishment and transaction costs on Crum &
    Forsters tender offer and debt offering which did not
    qualify for deferral and amortization pursuant to debt
    modification accounting treatment. The new Crum &
    Forster unsecured senior notes due 2017 are redeemable at
    Crum & Forsters option at any time beginning
    May 1, 2012 at specified redemption prices. A registration
    statement on
    Form S-4
    with respect to the 7.75% senior notes due 2017 was
    declared effective on July 13, 2007.(c)
    The company repaid the outstanding $60.4 of its notes which
    matured on February 27, 2007. The company purchased $40.0
    of its notes due 2018 and $9.1 of its notes due 2015 for cash
    payments of $38.1 and $9.3 respectively.(d)
    Following OdysseyRes calling the outstanding $23.5
    principal amount of its 4.375% convertible senior debentures due
    2022 for redemption, all holders had their debentures converted
    into common stock of OdysseyRe with the result that no
    convertible debentures thereafter remained outstanding.  (3)
    During 2002, the company closed out the swaps for this debt
    and deferred the resulting gain which is amortized to earnings
    over the remaining term to maturity. The unamortized balance at
    December 31, 2008 is $33.3 (2007  $36.1).(4)
    Redeemable at Fairfaxs option at any time on or after
    June 15, 2012, June 15, 2013, June 15, 2014 and
    June 15, 2015 at $103.9, $102.6, $101.3 and $100.0 per
    bond, respectively .(5)
    Redeemable at OdysseyRes option at any time at a price
    equal to the greater of (a) 100% of the principal amount to
    be redeemed or (b) the sum of the present values of the
    remaining scheduled payments of principal and interest thereon
    (exclusive of interest accrued to the date of redemption)
    discounted to the redemption date on a semi-annual basis at the
    treasury rate plus 50 basis points, plus, in each case,
    accrued interest thereon to the date of redemption.(6)
    Redeemable at OdysseyRes option at any time at a price
    equal to the greater of (a) 100% of the principal amount to
    be redeemed or (b) the sum of the present values of the
    remaining scheduled payments of principal and interest thereon




---



##### 



(exclusive of interest accrued to the date of redemption)
    discounted to the redemption date on a semi-annual basis at the
    treasury rate plus 40 basis points, plus, in each case,
    accrued interest thereon to the date of redemption.  (7)
    The Series A and Series B notes are callable by
    OdysseyRe in 2011 and 2009, respectively, at their par value
    plus accrued and unpaid interest. The interest rate on each
    series of debentures is equal to three month LIBOR, which is
    calculated on a quarterly basis, plus 2.20%.(8)
    The Series C notes are due in 2021 and are callable by
    OdysseyRe in 2011 at their par value plus accrued and unpaid
    interest. The interest rate is equal to three month LIBOR plus
    2.5% and is reset after every payment date.(9)
    On the maturity date, January 28, 2009, the company
    repaid the outstanding $12.8 of its 6.15% secured loan.          2009


14.42010


1.72011


0.32012


181.62013


225.1Thereafter


1,392.9   9.
    Other
    Long Term Obligations  Holding Company    December 31, 2008


December 31, 2007Carrying


Fair


Carrying


Fairvalue


value


value


valuePurchase consideration payable


169.8



169.8



174.7



174.7Trust preferred securities of subsidiaries


17.9



11.4



17.9



17.0187.7



181.2



192.6



191.7




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
   10.
    Shareholders
    Equity  Capital Stock
  Authorized
    capital
    Issued
    capital
        Treasury
    shares
    Capital
    transactions
  (a)
    Under the terms of normal course issuer bids, during 2008 the
    company repurchased for cancellation 1,066,601 (2007 
    38,600; 2006  67,800) subordinate voting shares for a
    net cost of $282.0 (2007  $7.0; 2006 
    $7.7), of which $147.2 (2007  $2.5; 2006 
    nil) was charged to retained earnings.  (b)
    On January 9, 2008, the company called for redemption all
    of its 5% convertible senior debentures due 2023. On
    February 13, 2008, $188.5 principal amount of these
    debentures were converted by their holders into 886,888
    subordinate voting shares of the company and the company paid a
    nominal amount of cash to redeem the unconverted debentures and
    in lieu of fractional shares. The conversion was recorded as a
    $192.3 increase of common stock and a $134.4 and $57.9 reduction
    of long term debt and other paid in capital respectively.  (c)
    During 2008, the company paid $18.3 to repurchase for
    cancellation 750,000 Series A preferred shares with stated
    capital of $12.8 (Cdn$18.8), and $29.7 to repurchase for
    cancellation 1,250,000 Series B preferred shares with
    stated capital of $21.3 (Cdn$31.2). These transactions resulted
    in a charge to retained earnings of $13.9, representing the
    excess paid over the stated capital of the preferred shares
    repurchased, resulting from movement in the
    Canadian-U.S. dollar exchange rate.




---



##### 



Accumulated
    Other Comprehensive Income (Loss)
    December 31, 2008


December 31, 2007Income tax








Income taxPre-tax


(expense)


After-tax


Pre-tax


(expense)


After-taxamount


recovery


amount


amount


recovery


amountNet unrealized gains (losses) on available for sale securitiesBonds


133.5



(41.8
)


91.7



74.8



(19.9
)


54.9Common stocks and other


(199.7
)


55.7



(144.0
)


285.6



(93.4
)


192.2(66.2
)


13.9



(52.3
)


360.4



(113.3
)


247.1Currency translation account


(32.4
)


(23.1
)


(55.5
)


94.1



19.3



113.4(98.6
)


(9.2
)


(107.8
)


454.5



(94.0
)


360.5   11.
    Income
    Taxes    2008


2007


2006Current


1,098.5



387.6



110.4Future


(342.9
)


323.5



375.2755.6



711.1



485.6     2008


2007


2006Provision for income taxes at the statutory income tax rate


818.9



780.3



317.3Non-taxable investment income


(1.3
)


(6.9
)


(8.0
)Non-taxable portion of sale (2007  Hub;
    2006  OdysseyRe)






(11.9
)


(22.7
)Tax rate differential on (income) and losses incurred outside
    Canada


(3.7
)


(50.8
)


98.3Foreign exchange


(33.5
)


8.8



(0.9
)Change in tax rate for future income taxes


3.5



(2.9
)


13.4Provision (recovery) relating to prior years reassessment


2.9



(8.9
)


(42.2
)Change in unrecorded tax benefit of losses


(31.3
)


10.9



91.2Other including permanent differences


0.1



(7.5
)


39.2Provision for income taxes


755.6



711.1



485.6




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
       December 31,2008


2007Operating and capital losses


196.7



373.2Claims discount


294.8



280.4Unearned premium reserve


65.5



78.1Deferred premium acquisition cost


(62.7
)


(73.6
)Allowance for doubtful accounts


19.6



20.5Investments and other


350.5



(63.2
)864.4



615.4Valuation allowance


(165.0
)


(271.1
)Future income taxes


699.4



344.3
     U.S.


Canada


Ireland


U.K.


TotalLess than 1 year






9.3











9.3From 1 to 5 years






52.3











52.3From 6 to 10 years


















From 11 to 20 years


45.3



50.3











95.6No expiration date










366.2



326.6



692.845.3



111.9



366.2



326.6



850.0         12.
    Statutory
    Requirements




---



##### 



13.
    Contingencies
    and Commitments  SEC
    Subpoenas




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
     Lawsuits
  (a)
    During 2006, several lawsuits seeking class action status were
    filed against Fairfax and certain of its officers and directors
    in the United States District Court for the Southern District of
    New York. The Court made an order consolidating the various
    pending lawsuits and granted the single remaining motion for
    appointment as lead plaintiffs. The Court also issued orders
    approving scheduling stipulations filed by the parties to the
    consolidated lawsuit. On February 8, 2007, the lead
    plaintiffs filed an amended consolidated complaint (the
    Amended Consolidated Complaint), which states that
    the lead plaintiffs seek to represent a class of all purchasers
    and acquirers of securities of Fairfax between May 21, 2003
    and March 22, 2006 inclusive. The Amended Consolidated
    Complaint names as defendants Fairfax, certain of its officers
    and directors, OdysseyRe and Fairfaxs auditors. The
    Amended Consolidated Complaint alleges that the defendants
    violated U.S. federal securities laws by making material
    misstatements or failing to disclose certain material
    information regarding, among other things, Fairfaxs and
    OdysseyRes assets, earnings, losses, financial condition,
    and internal financial controls. The Amended Consolidated
    Complaint seeks, among other things, certification of the
    putative class; unspecified compensatory damages (including
    interest); unspecified monetary restitution; unspecified
    extraordinary, equitable
    and/or
    injunctive relief; and costs (including reasonable
    attorneys fees). These claims are at a preliminary stage.
    Pursuant to the scheduling stipulations, the various defendants
    filed their respective motions to dismiss the Amended
    Consolidated Complaint, the lead plaintiffs filed their
    oppositions thereto, the defendants filed their replies to those
    oppositions and the motions to dismiss were argued before the
    Court in December 2007. The Court has not yet issued a ruling on
    these motions. The ultimate outcome of any litigation is
    uncertain and should the consolidated lawsuit be successful, the
    defendants may be subject to an award of significant damages,
    which could have a material adverse effect on Fairfaxs
    business, results of operations and financial condition. The
    consolidated lawsuit may require significant management
    attention, which could divert managements attention away
    from the companys business. In addition, the company could
    be materially adversely affected by negative publicity related
    to this lawsuit. Any of the possible consequences noted above,
    or the perception that any of them could occur, could have an
    adverse effect upon the market price for the companys
    securities. Fairfax, OdysseyRe and the named officers and
    directors intend to vigorously defend against the consolidated
    lawsuit and the companys financial statements include no
    provision for loss.  (b)
    On July 26, 2006, Fairfax filed a lawsuit seeking
    $6 billion in damages from a number of defendants who, the
    complaint (as subsequently amended) alleges, participated in a
    stock market manipulation scheme involving Fairfax shares. The
    complaint, filed in Superior Court, Morris County, New Jersey,
    alleges violations of various state laws, including the New
    Jersey Racketeer Influenced and Corrupt Organizations Act,
    pursuant to which treble damages may be available. The
    defendants removed this lawsuit to the District Court for the
    District of New Jersey but pursuant to a motion filed by
    Fairfax, the lawsuit was remanded to Superior Court, Morris
    County, New Jersey. Most of the defendants filed motions to
    dismiss the lawsuit, all of which were denied during a Court
    hearing in September 2007. In October 2007, defendants filed a
    motion for leave to appeal to the Appellate Division from the
    denial of their motions to dismiss. In December 2007, that
    motion for leave was denied. Subsequently, two of the defendants
    filed a motion seeking leave to appeal certain limited issues to
    the New Jersey Supreme Court. That motion for leave was denied
    in February 2008. In December 2007, two defendants who were
    added to the action after its initial filing filed motions to
    dismiss the claims against them. Those motions were granted in
    February 2008, with leave being granted to Fairfax to replead
    the claims against those two defendants. Fairfax filed an
    amended complaint in March 2008, which again asserted claims
    against those defendants. Those defendants filed a motion to
    dismiss the amended complaint, which motion was denied in August
    2008. In September 2008, those two defendants also filed a
    counterclaim against Fairfax, as well as third-party claims
    against certain Fairfax executives, OdysseyRe, Fairfaxs
    outside legal counsel and PricewaterhouseCoopers. Fairfax has
    not yet responded to this counterclaim. In December 2007, an
    individual defendant filed a counterclaim against Fairfax.
    Fairfaxs motion to dismiss that counterclaim was denied in
    August 2008. Fairfax intends to vigorously defend against these
    counterclaims. In September 2008, the Court granted a




---



##### 



Other
                14.
    Pensions




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
       Defined benefit


Post retirementpension plans


benefit plansDecember 31,


December 31,2008


2007


2008


2007Fixed income securities


143.4



200.7







Equity securities


76.1



61.6







Other


21.7



7.1







241.2



269.4












---



##### 



Defined benefit


Post retirementpension plans


benefit plansDecember 31,


December 31,2008


2007


2008


2007Change in benefit obligation:Balance  beginning of year


369.5



582.7



67.5



68.9Cost of benefits earned in the year


14.9



19.7



4.1



4.4Interest cost on benefit obligation


19.4



30.9



3.7



3.8Actuarial (gains) losses


(43.5
)


(38.7
)


(8.2
)


(9.5
)Benefits paid


(14.2
)


(18.1
)


(5.2
)


(4.3
)Settlements and
    other(1)


(8.8
)






(3.4
)


Change in foreign currency exchange rate


(59.5
)


36.7



(4.8
)


4.2Business acquisition  Ridley (note 17)


27.4







2.4



Business disposition  Cunningham Lindsey
    (note 17)






(243.7
)






Balance  end of year


305.2



369.5



56.1



67.5Change in fair value of plan assets:Balance  beginning of year


269.4



475.1







Actual return on plan assets


(10.8
)


15.6







Company contributions


35.7



19.6



4.0



3.2Plan participant contributions






2.2



1.2



1.1Benefits paid


(14.2
)


(18.1
)


(5.2
)


(4.3
)Settlements and
    other(1)


(7.8
)










Change in foreign currency exchange rate


(49.7
)


28.5







Business acquisition  Ridley (note 17)


18.6











Business disposition  Cunningham Lindsey
    (note 17)






(253.5
)






Balance  end of year


241.2



269.4







Funded status of plans  surplus (deficit)


(64.0
)


(100.1
)


(56.1
)


(67.5
)Unrecognized net actuarial loss


39.3



58.2



(5.0
)


2.3Unrecognized prior service costs


1.6



1.7



(5.3
)


(1.6
)Unrecognized transitional (asset) obligation


(3.9
)


(5.9
)


3.9



7.8Net accrued liability  end of year


(27.0
)


(46.1
)


(62.5
)


(59.0
)Amounts recognized in the consolidated balance sheet consists
    of:Other assets


6.3



0.1







Accounts payable and accrued liabilities


(33.3
)


(46.2
)


(62.5
)


(59.0
)Net accrued liability  end of year


(27.0
)


(46.1
)


(62.5
)


(59.0
)Weighted average assumptions used to determine benefit
    obligations:Discount rate


6.2
%


5.4
%


6.6
%


5.8
%Rate of compensation increase


4.4
%


4.5
%


4.0
%


4.0
%Assumed overall health care cost trend










9.6
%


9.6
%   (1)
    Relates primarily to the purchase of annuities for those
    individuals whose benefit obligations were settled. The
    settlement triggered the immediate recognition of $1.6 of a
    previously unrecognized actuarial loss and also resulted in a
    decrease of $7.8 to each of the pension benefit obligation and
    the fair value of plan assets.




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
       Defined benefit


Post retirementpension plans


benefit plansDecember 31,


December 31,2008


2007


2006


2008


2007


2006Cost of benefits earned in the year, net of employee
    contributions


14.9



17.5



17.2



2.9



3.3



2.8Interest cost on benefit obligation


19.4



30.9



27.1



3.7



3.8



3.5Actual return on plan assets


10.8



(15.6
)


(30.6
)










Actuarial (gains) losses on benefit obligation


(43.5
)


(38.7
)


(12.3
)


(8.2
)


(9.5
)


0.9Plan amendments










1.3











0.1Settlements and other


1.6







(1.4
)










(2.1
)Annual defined benefit pension and post retirement benefit
    expense if all costs and benefits were recognized as they arose


3.2



(5.9
)


1.3



(1.6
)


(2.4
)


5.2Adjustments to recognize the long term nature of employee future
    benefits costs:(Excess) shortfall of:Actual returns over expected returns on plan assets


(25.9
)


(14.8
)


6.3











Actuarial (gains) losses amortized over actuarial (gains) losses
    arising


46.0



41.5



15.7



8.4



10.0



1.4Prior service costs amortized over plan amendment cost arising


0.3



0.2



(0.3
)


(0.3
)


(0.3
)


(5.9
)Amortization of the transitional (asset) obligation


(1.0
)


(1.4
)


(0.9
)


1.0



1.1



1.119.4



25.5



20.8



9.1



10.8



(3.4
)Annual defined benefit pension and post retirement benefit
    expense recognized in the consolidated statement of earnings


22.6



19.6



22.1



7.5



8.4



1.8Defined contribution benefit expense recognized


21.1



25.6



21.0











Total benefit expense recognized


43.7



45.2



43.1



7.5



8.4



1.8Weighted average assumptions used to determine benefit
    expenseDiscount rate


5.5
%


5.1
%


4.9
%


5.9
%


5.4
%


5.3
%Expected long term rate of return on plan assets


5.9
%


6.2
%


5.6
%










Rate of compensation increase


4.4
%


4.5
%


4.3
%


4.0
%


4.0
%


4.0
%




---



##### 



Defined benefit


Post retirementpension plans


benefit plans2009


15.5



3.02010


11.8



3.22011


11.5



3.32012


13.8



3.52013


15.7



3.62014-2018


97.1



21.7   15.
    Operating
    Leases    2009


48.42010


40.92011


32.42012


18.62013


13.9Thereafter


76.4   16.
    Earnings
    per Share    2008


2007


2006Net earnings


1,473.8



1,095.8



227.5Preferred share dividends


(10.1
)


(12.5
)


(11.4
)Excess over stated value of preferred shares purchased for
    cancellation


(13.9
)






Net earnings available to common shareholders  basic


1,449.8



1,083.3



216.1Interest expense on convertible debt, net of tax


0.3



7.0



7.1Net earnings available to common shareholders  diluted


1,450.1



1,090.3



223.2Weighted average common shares outstanding  basic


18,036,670



17,700,393



17,762,742Effect of dilutive sharesConvertible debt


104,197



886,888



895,848Options to purchase treasury stock acquired


91,890



87,944



60,335Total effect of dilutive shares


196,087



974,832



956,183Weighted average common shares outstanding  diluted


18,232,757



18,675,225



18,718,925Net earnings per common share  basic

$
80.38


$
61.20


$
12.17Net earnings per common share  diluted

$
79.53


$
58.38


$
11.92




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
   17.
    Acquisitions
    and Divestitures  Subsequent
    to December 31, 2008
        Year
    ended December 31, 2008




---



##### 



Year
    ended December 31, 2007
  Cunningham
    Lindsey
          Other




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
       Year
    ended December 31, 2006
        18.
    Financial
    Risk Management        Underwriting
    Risk




---



##### 



Credit
    Risk
      December 31,2008


2007Gross recoverable from reinsurers


4,234.2



5,038.5Bonds


8,654.6



10,512.3Derivatives (primarily credit default swaps)


455.5



1,213.4Accounts receivable


1,688.7



1,906.9Cash and short term investments


6,333.0



5,028.5Total gross exposure


21,366.0



23,699.6   Investments
    in Debt Instruments




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
       December 31, 2008


December 31, 2007Carrying





CarryingIssuer Credit Rating

value


%


value


%AAA


6,512.5



75.2



8,814.3



83.8AA


1,377.8



15.9



1,401.0



13.3A


194.9



2.3



1.4



0.0BBB


2.1



0.0



146.1



1.4BB


10.0



0.1



18.3



0.2B


232.0



2.7



39.1



0.4Lower than B and unrated


325.3



3.8



92.1



0.9Total


8,654.6



100.0



10,512.3



100.0         Reinsurance
    Recoverables and Receivables




---



##### 



December 31, 2008


December 31, 2007Gross


Outstanding


Net unsecured


Gross


Outstanding


Net unsecuredreinsurance


balances for


reinsurance


reinsurance


balances for


reinsurancerecoverable


which security is


recoverable and


recoverable and


which security is


recoverable andA.M. Best Rating

and receivable


held


receivable


receivable


held


receivableA++


187.1



10.9



176.2



263.1



38.9



224.2A+


1,825.2



301.6



1,523.6



2,066.5



399.2



1,667.3A


1,041.0



208.3



832.7



1,546.6



619.1



927.5A-


341.1



94.6



246.5



370.8



78.6



292.2B++


37.1



4.2



32.9



53.2



6.4



46.8B+


47.8



19.0



28.8



27.4



3.3



24.1B or lower


117.3



4.3



113.0



113.0



3.0



110.0Not rated


925.2



352.9



572.3



897.9



308.9



589.0Pools & associations


82.6



26.2



56.4



124.3



15.1



109.24,604.4



1,022.0



3,582.4



5,462.8



1,472.5



3,990.3Provision for uncollectible reinsurance


370.2







370.2



424.3







424.34,234.2







3,212.2



5,038.5







3,566.0   Liquidity
    Risk




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
     Less than








More than1 year


1 - 3 years


3 - 5 years


5 years


TotalNet claims liability


2,739.2



3,221.5



1,916.2



3,166.5



11,043.4Long term debt obligations  principal


14.4



2.0



406.7



1,392.9



1,816.0Long term debt obligations  interest


132.0



263.7



236.7



625.7



1,258.1Operating leases  obligations


48.4



73.3



32.5



76.4



230.6Other long term liabilities  principal


4.6



12.8



8.7



161.6



187.7Other long term liabilities  interest


16.2



30.9



29.0



67.4



143.52,954.8



3,604.2



2,629.8



5,490.5



14,679.3       Market
    Risk
    Interest
    Rate Risk




---



##### 



December 31, 2008Hypothetical $ change effect on:Total fairFair value of


Other


Net


value offixed income


comprehensive


earnings


fixed income


HypotheticalChange in Interest Rates

portfolio


income (pre-tax)


(pre-tax)


portfolio


% change200 basis point increase


7,275.6



(518.7
)


(860.3
)


(1,379.0
)


(15.9
)100 basis point increase


7,887.2



(290.5
)


(476.9
)


(767.4
)


(8.9
)No change


8,654.6















100 basis point decrease


9,507.0



308.1



544.3



852.4



9.8200 basis point decrease


10,309.6



650.2



1,004.8



1,655.0



19.1   December 31, 2007Hypothetical $ change effect on:Total fairFair value of


Other


Net


value offixed income


comprehensive


earnings


fixed income


HypotheticalChange in Interest Rates

portfolio


income (pre-tax)


(pre-tax)


portfolio


% change200 basis point increase


9,104.4



(1,229.1
)


(178.8
)


(1,407.9
)


(13.4
)100 basis point increase


9,743.9



(655.6
)


(112.8
)


(768.4
)


(7.3
)No change


10,512.3















100 basis point decrease


11,550.2



865.6



172.3



1,037.9



9.9200 basis point decrease


12,736.3



1,839.5



384.5



2,224.0



21.2       Market
    Price Fluctuations




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
       2008


2007Effect on other


Effect on


Effect on other


Effect oncomprehensive income


net income


comprehensive income


net incomeChange in global equity markets

(pre-tax)


(pre-tax)


(pre-tax)


(pre-tax)10% increase


398.3



8.1



285.3



(285.7
)10% decrease


(398.3
)


(8.1
)


(285.3
)


285.7       Foreign
    Currency Risk
        Non-U.S. dollar




---



##### 



non-U.S. dollar-denominated pre-tax pre-tax
  pre-tax
    Capital
    Management




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
      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(1)


6.1
%


17.1
%Total debt/total
    capital(2)


23.7
%


27.1
%Interest
    coverage(3)


16.4
x


11.3
x   (1)
    Net total capital is calculated by the company as the sum of
    total shareholders equity, non-controlling interests and
    net debt.(2)
    Total capital is calculated by the company as the sum of
    total shareholders equity, non-controlling interests and
    total debt.(3)
    Interest coverage is calculated by the company as the sum of
    earnings (loss) from operations before income taxes and interest
    expense divided by interest expense.        19.
    Segmented
    Information




---



##### 



Insurance
        Reinsurance
      Runoff
      Other
    Corporate
    and Other




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
   Reporting
    Segment
    2008
  Insurance


Reinsurance














EliminationsCrum &


Fairfax








Ongoing








Corporate


andNorthbridge


Forster


Asia


OdysseyRe


Other


operations


Runoff


Other


and other


adjustments


ConsolidatedNet premiums earned


1,076.1



1,005.0



84.6



2,076.4



269.6



4,511.7



















4,511.7Underwriting expenses


(1,154.8
)


(1,182.2
)


(77.9
)


(2,149.9
)


(404.6
)


(4,969.4
)


















(4,969.4
)Underwriting profit (loss)


(78.7
)


(177.2
)


6.7



(73.5
)


(135.0
)


(457.7
)


















(457.7
)Interest income


94.4



107.4



5.6



256.2



30.1



493.7



71.2







42.1







607.0Dividends


23.0



23.8



2.1



31.1



1.1



81.1



10.0







(15.1
)






76.0Earnings (loss) on investments, at equity


0.6



(32.2
)


(4.9
)


(13.2
)


1.4



(48.3
)


(4.2
)






3.1







(49.4
)Expenses


(10.1
)


(12.8
)


(1.2
)


(23.8
)


(2.5
)


(50.4
)


(8.8
)






(1.3
)


53.3



(7.2
)Interest and dividends


107.9



86.2



1.6



250.3



30.1



476.1



68.2







28.8



53.3



626.4OtherRevenue


























17.4



99.4



53.3



(53.3
)


116.8Expenses


























(165.8
)


(98.0
)










(263.8
)























(148.4
)


1.4



53.3



(53.3
)


(147.0
)Operating income (loss) before:


29.2



(91.0
)


8.3



176.8



(104.9
)


18.4



(80.2
)


1.4



82.1







21.7Net gains (losses) on investments


66.5



605.7



3.2



785.9



118.1



1,579.4



472.8







689.1



(20.8
)


2,720.5Interest expense






(28.3
)






(34.2
)


(2.6
)


(65.1
)






(0.4
)


(93.1
)






(158.6
)Corporate overhead and other


(14.5
)


(8.8
)


(5.5
)


(13.9
)


(1.9
)


(44.6
)










(94.7
)






(139.3
)Pre-tax income (loss)


81.2



477.6



6.0



914.6



8.7



1,488.1



392.6



1.0



583.4



(20.8
)


2,444.3Income taxes










































(755.6
)Non-controlling interests










































(214.9
)Net earnings










































1,473.8   2007
  Insurance


Reinsurance














EliminationsCrum &


Fairfax








Ongoing








Corporate


andNorthbridge


Forster


Asia


OdysseyRe


Other


operations


Runoff


Other


and other


adjustments


ConsolidatedNet premiums earned


1,017.1



1,187.4



68.7



2,120.5



258.4



4,652.1



















4,652.1Underwriting expenses


(939.1
)


(1,110.4
)


(48.4
)


(2,025.8
)


(247.1
)


(4,370.8
)


















(4,370.8
)Underwriting profit


78.0



77.0



20.3



94.7



11.3



281.3



















281.3Interest income


105.1



116.8



9.7



298.4



32.8



562.8



89.8







27.4







680.0Dividends


19.1



20.9



1.2



21.6



0.5



63.3



11.3







7.1







81.7Earnings (loss) on investments, at equity


3.9



3.7



7.3



10.5



(3.4
)


22.0



(1.1
)






(13.2
)






7.7Expenses


(8.9
)


(8.0
)


(0.8
)


(21.2
)


(4.8
)


(43.7
)


(8.4
)






(2.0
)


45.7



(8.4
)Interest and dividends


119.2



133.4



17.4



309.3



25.1



604.4



91.6







19.3



45.7



761.0OtherRevenue


























(3.3
)


434.5



45.7



(45.7
)


431.2Expenses


























(192.5
)


(401.5
)










(594.0
)























(195.8
)


33.0



45.7



(45.7
)


(162.8
)Operating income (loss) before:


197.2



210.4



37.7



404.0



36.4



885.7



(104.2
)


33.0



65.0







879.5Net gains (losses) on investments


188.2



250.3



(0.3
)


554.6



8.5



1,001.3



291.8



(7.6
)


371.2



(17.3
)


1,639.4Interest expense






(51.0
)






(37.7
)






(88.7
)






(15.7
)


(105.1
)






(209.5
)Corporate overhead and other


(12.4
)


(9.6
)


(3.2
)


(13.8
)






(39.0
)










(110.0
)






(149.0
)Pre-tax income (loss)


373.0



400.1



34.2



907.1



44.9



1,759.3



187.6



9.7



221.1



(17.3
)


2,160.4Income taxes










































(711.1
)Non-controlling interests










































(353.5
)Net earnings










































1,095.8




---



##### 



2006
  Insurance


Reinsurance














EliminationsCrum &


Fairfax








Ongoing








Corporate


andNorthbridge


Forster


Asia


OdysseyRe


Other


operations


Runoff


Other


and other


adjustments


ConsolidatedNet premiums earned


1,025.8



1,114.0



67.3



2,225.8



332.4



4,765.3



















4,765.3Underwriting expenses


(1,005.3
)


(1,027.8
)


(52.8
)


(2,148.8
)


(318.0
)


(4,552.7
)


















(4,552.7
)Underwriting profit


20.5



86.2



14.5



77.0



14.4



212.6



















212.6Interest income


88.8



130.3



7.0



252.3



28.1



506.5



87.2







16.5







610.2Dividends


11.6



16.9



1.6



27.6



1.6



59.3



8.9







4.4







72.6Earnings (loss) on investments, at equity


7.8



27.8



(2.6
)


39.9







72.9



4.7







0.4







78.0Expenses


(7.4
)


(18.5
)


(2.7
)


(21.4
)


(2.6
)


(52.6
)


(11.5
)






(3.2
)


53.0



(14.3
)Interest and dividends


100.8



156.5



3.3



298.4



27.1



586.1



89.3







18.1



53.0



746.5OtherRevenue


























85.3



371.3



53.0



(53.0
)


456.6Expenses


























(689.5
)


(353.7
)










(1,043.2
)























(604.2
)


17.6



53.0



(53.0
)


(586.6
)Operating income (loss) before:


121.3



242.7



17.8



375.4



41.5



798.7



(514.9
)


17.6



71.1







372.5Net gains (losses) on investments


115.1



271.4



14.2



358.9



18.9



778.5



132.7







36.0



(111.9
)


835.3Interest expense






(33.0
)






(37.5
)






(70.5
)






(14.7
)


(125.2
)






(210.4
)Corporate overhead and other


(9.8
)


(8.1
)


(3.3
)


(18.8
)






(40.0
)










(78.8
)






(118.8
)Pre-tax income (loss)


226.6



473.0



28.7



678.0



60.4



1,466.7



(382.2
)


2.9



(96.9
)


(111.9
)


878.6Income taxes










































(485.6
)Non-controlling interests










































(165.5
)Net earnings










































227.5     2008


2007


2006Revenues for reporting segmentsNet premiums earned


4,511.7



4,652.1



4,765.3Interest and dividends


626.4



761.0



746.5Other revenue per reportable segment


116.8



431.2



456.6Net gains on investments


2,720.5



1,639.4



835.3Total consolidated revenues


7,975.4



7,483.7



6,803.7   Reporting
    Segment
    Depreciation of premises &Earnings (losses) from investments,


equipment & amortization of


Impairment of available for saleat equity


intangible assets


securities2008


2007


2006


2008


2007


2006


2008


2007


2006Insurance

 Canada (Northbridge)


0.6



3.9



7.8



3.5



6.8



6.9



273.6



21.1



 U.S. (Crum & Forster)


(32.2
)


3.7



27.8



3.8



1.3



1.3



196.6



23.6



9.6 Asia (Fairfax Asia)


(4.9
)


7.3



(2.6
)


0.7



0.5



0.3



1.9







Reinsurance

 OdysseyRe


(13.2
)


10.5



39.9



6.6



9.5



5.1



358.7



54.5



28.2 Other


1.4



(3.4
)


















8.9







Ongoing operations


(48.3
)


22.0



72.9



14.6



18.1



13.6



839.7



99.2



37.8Runoff


(4.2
)


(1.1
)


4.7



1.7



2.1



3.6



76.5



3.4



Other














0.7



4.3



4.6











Corporate and other


3.1



(13.2
)


0.4



5.4



2.5



3.1



80.2







Consolidated


(49.4
)


7.7



78.0



22.4



27.0



24.9



996.4



102.6



37.8




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
       Segment assets


Investments, at equity2008


2007


2008


2007Insurance

 Canada (Northbridge)


4,380.1



5,571.4



2.5



3.0 U.S. (Crum & Forster)


5,363.9



6,472.0



17.4



114.2 Asia (Fairfax Asia)


641.8



534.5



75.4



65.0Reinsurance

 OdysseyRe


9,944.9



9,485.6



36.7



89.1 Other


1,544.3



1,141.6







16.3Ongoing operations


21,875.0



23,205.1



132.0



287.6Runoff


5,483.6



5,601.5







24.5Other


262.6



202.4







58.8Corporate and other


(315.8
)


(1,067.2
)


87.3



37.1Consolidated


27,305.4



27,941.8



219.3



408.0   Product
    Line
    Property


Property non-proportional


Casualty


Automobile


General liability2008


2007


2006


2008


2007


2006


2008


2007


2006


2008


2007


2006


2008


2007


2006Net premiums earnedInsurance

 Northbridge


256.1



227.6



251.7



0.1



0.1



0.4















498.3



477.6



479.1



234.6



238.7



230.1 Crum & Forster


242.8



342.9



295.4















117.7



103.9



43.9



187.2



210.7



206.1



196.5



227.8



246.2 Fairfax Asia


10.7



10.7



9.6















11.0



9.0



9.7



9.4



6.4



7.6



6.4



5.9



5.5Reinsurance

 OdysseyRe


368.1



359.9



386.0



751.5



741.4



776.5



0.4



(0.1
)






186.0



211.3



230.9



583.0



591.0



621.1 Other


35.8



26.5



29.8



64.9



30.8



82.1



0.8











73.8



81.3



163.0



78.9



103.9



32.0Ongoing operations


913.5



967.6



972.5



816.5



772.3



859.0



129.9



112.8



53.6



954.7



987.3



1,086.7



1,099.4



1,167.3



1,134.9Runoff


(0.8
)


(0.2
)


24.9



0.1











(0.5
)


0.3



4.3



0.2



0.5



16.8



4.8



(0.1
)


9.3Total net premiums earned


912.7



967.4



997.4



816.6



772.3



859.0



129.4



113.1



57.9



954.9



987.8



1,103.5



1,104.2



1,167.2



1,144.2   Workers compensation


Marine and aerospace


Other


Total2008


2007


2006


2008


2007


2006


2008


2007


2006


2008


2007


2006Net premiums earnedInsurance

 Northbridge














77.9



64.4



58.1



9.1



8.7



6.4



1,076.1



1,017.1



1,025.8 Crum & Forster


219.8



261.0



283.4



20.0



21.7



22.0



21.0



19.4



17.0



1,005.0



1,187.4



1,114.0 Fairfax Asia


18.0



18.6



22.7



23.8



13.9



9.7



5.3



4.2



2.5



84.6



68.7



67.3Reinsurance

 OdysseyRe


3.7



18.1



(0.7
)


113.9



124.7



127.3



69.8



74.2



84.7



2,076.4



2,120.5



2,225.8 Other


(1.7
)


3.8



3.8



8.8



2.0



10.0



8.3



10.1



11.7



269.6



258.4



332.4Ongoing operations


239.8



301.5



309.2



244.4



226.7



227.1



113.5



116.6



122.3



4,511.7



4,652.1



4,765.3Runoff


12.4



(4.1
)


25.5



0.8







3.8



0.4



0.3



0.7



17.4



(3.3
)


85.3Total net premiums earned


252.2



297.4



334.7



245.2



226.7



230.9



113.9



116.9



123.0



4,529.1



4,648.8



4,850.6Interest and dividends






































626.4



761.0



746.5Net gains on investments






































2,720.5



1,639.4



835.3Other






































99.4



434.5



371.3Total consolidated revenues






































7,975.4



7,483.7



6,803.7




---



##### 



Geographic
    Region
    Canada


United States


International


Total2008


2007


2006


2008


2007


2006


2008


2007


2006


2008


2007


2006Net premiums earnedInsurance

 Northbridge


1,024.5



974.5



950.0



51.3



40.7



61.5



0.3



1.9



14.3



1,076.1



1,017.1



1,025.8 Crum & Forster














1,005.0



1,187.4



1,114.0















1,005.0



1,187.4



1,114.0 Fairfax Asia


























84.6



68.7



67.3



84.6



68.7



67.3Reinsurance

 OdysseyRe


41.2



42.7



37.7



1,154.1



1,227.9



1,323.2



881.1



849.9



864.9



2,076.4



2,120.5



2,225.8 Other


161.5



204.1



236.0



88.3



49.3



85.1



19.8



5.0



11.3



269.6



258.4



332.4Ongoing operations


1,227.2



1,221.3



1,223.7



2,298.7



2,505.3



2,583.8



985.8



925.5



957.8



4,511.7



4,652.1



4,765.3Runoff


(0.2
)










17.6



(3.3
)


86.4











(1.1
)


17.4



(3.3
)


85.31,227.0



1,221.3



1,223.7



2,316.3



2,502.0



2,670.2



985.8



925.5



956.7



4,529.1



4,648.8



4,850.6Interest and dividends






































626.4



761.0



746.5Net gains on investments






































2,720.5



1,639.4



835.3Other






































99.4



434.5



371.3Total consolidated revenues






































7,975.4



7,483.7



6,803.7Allocation of revenue


27.1
%


26.3
%


25.2
%


51.1
%


53.8
%


55.1
%


21.8
%


19.9
%


19.7
%




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
   20.
    US
    GAAP Reconciliation    Consolidated
    Statements of Net Earnings and Comprehensive Income
    2008


2007


2006Net earnings, Canadian GAAP


1,473.8



1,095.8



227.5Recoveries on retroactive
    reinsurance(a)


30.8



16.0



465.8Equity
    accounting(b)


(7.2
)






Fair value of derivatives embedded within bond
    investments(c)










(3.1
)Other than temporary
    declines(d)










7.9Other
    differences(e)


7.5



(11.1
)


(6.5
)Tax
    effect(f)


(9.6
)


(2.0
)


(37.2
)Net earnings, US GAAP


1,495.3



1,098.7



654.4Other comprehensive income (loss), Canadian GAAP


(468.3
)


298.8



31.9Pension liability adjustment pursuant to
    SFAS 158(g)


25.3



22.6



Unrealized net appreciation (depreciation) of
    investments(h)










(221.9
)Minimum pension
    liability(i)










(5.2
)Other differences






2.4



Other comprehensive income (loss), US GAAP


(443.0
)


323.8



(195.2
)Comprehensive income, US GAAP


1,052.3



1,422.5



459.2Net earnings per common share  basic, US GAAP

$
81.57


$
61.37


$
36.20Net earnings per common share  diluted, US GAAP

$
80.71


$
58.54


$
34.73     (a)
    Under Canadian GAAP, recoveries on certain stop loss reinsurance
    treaties are recorded at the same time as the claims incurred
    are ceded. Under US GAAP, these recoveries, which are considered
    to be retroactive reinsurance, are recorded up to the amount of
    the premium paid with the excess of the ceded liabilities over
    the premium paid recorded as a deferred gain. The deferred gain
    is amortized to income over the estimated settlement period over
    which the company expects to receive the recoveries and is
    recorded in accounts payable and accrued liabilities.




---



##### 



(b)
    Under Canadian GAAP, certain of the companys investments
    in partnership trusts that do not have a quoted price in an
    active market are accounted for on the cost basis. Canadian GAAP
    requires the use of the equity method of accounting when the
    company is deemed to exert significant influence over the
    investee, whereas US GAAP requires the use of the equity method
    to account for such investments when the equity interest is more
    than minor. As a result of these differing requirements, a
    pre-tax loss of $7.2 was recognized in the fourth quarter of
    2008 under US GAAP for one of the companys investments in
    a partnership trust, whereas under Canadian GAAP, this
    investment is recorded at cost.(c)
    Prior to January 1, 2007, under Canadian GAAP convertible
    bond securities and other fixed income securities with embedded
    derivatives which were held as investments were carried at
    amortized cost. Under US GAAP, changes in the fair value
    attributable to the embedded option in a convertible bond or
    other security were recognized in earnings through net gains
    (losses) on investments with the host debt instrument accounted
    for as described in (h) below. Canadian GAAP and US GAAP
    were converged for convertible bonds and other fixed income
    securities with embedded derivatives beginning January 1,
    2007.(d)
    Under Canadian and US GAAP, other than temporary declines in the
    value of investment securities are recorded in earnings if they
    have persisted over a period of time and factors indicate that
    recovery is uncertain. Prior to January 1, 2007 under
    Canadian GAAP, the cost or amortized cost of investment
    securities considered to be impaired on an other than temporary
    basis was reduced to net realizable value with a corresponding
    charge to earnings. Under US GAAP, the cost of investment
    securities was written down to quoted market value when
    determined to be impaired on an other than temporary basis.
    Differences in the amounts recorded between Canadian and US GAAP
    were reversed when the related securities were sold. Canadian
    GAAP and US GAAP were converged for other than temporary
    declines beginning January 1, 2007. There were no
    carryforward differences at December 31, 2006.(e)
    Included in other differences for the year ended
    December 31, 2008 is income of $5.2 related to the release
    of the FIN 48 (FASB Interpretation No. 48,
    Accounting for Uncertainty in Income Taxes  an
    interpretation of FASB No. 109) reserve established on
    January 1, 2007 for a tax position which is no longer
    uncertain at December 31, 2008.      (f)
    Differences between consolidated net earnings under Canadian
    GAAP and consolidated net earnings under US GAAP are shown net
    of the following provision for income taxes for the years ended
    December 31:  2008


2007


2006Recoveries on retroactive
    reinsurance(a)


(10.7
)


(5.6
)


(36.3
)Equity
    accounting(b)


1.1







Fair value of derivatives embedded within bond
    investment(c)










2.3Other than temporary
    declines(d)










(2.7
)Other
    differences(e)






3.6



(0.5
)(9.6
)


(2.0
)


(37.2
)   (g)
    Effective December 31, 2006, US GAAP, FASB Statement
    No. 158, Employers Accounting for Defined Benefit
    Pension and Other Postretirement Plans, an amendment of FASB
    Statements No. 87, 88, 106 and 132(R)
    (SFAS 158) requires the recognition of a net
    liability or asset to report the funded status of a
    companys defined benefit pension and other post retirement
    benefit plans on its balance sheet with an offsetting adjustment
    to accumulated other comprehensive income in shareholders
    equity. This adjustment records the change in pension balances
    for the years ended December 31, 2008 and December 31,
    2007.




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
    (h)
    Prior to January 1, 2007, portfolio investments were
    carried at cost or amortized cost under Canadian GAAP net of any
    provisions for declines in value which were considered to be
    other than temporary. Under US GAAP, portfolio investments
    (excluding equity accounted investments) were classified as
    available for sale and recorded at their fair value based on
    quoted market prices with unrealized gains and losses, net of
    taxes, included in other comprehensive income through
    shareholders equity. Canadian GAAP and US GAAP were
    converged with respect to classification and measurement of
    available for sale securities beginning January 1, 2007
    (see note 2).(i)
    For defined benefit plans prior to December 31, 2006, US
    GAAP required that an unfunded accumulated benefit obligation be
    recorded as additional minimum liability and the excess of the
    unfunded accumulated benefit obligation over the unrecognized
    prior service cost be recorded in other comprehensive income.
    The actuarial valuation of the accumulated benefit obligation is
    based on current and past compensation levels and service
    rendered to date.  Consolidated
    Balance Sheets
    December 31, 2008


December 31, 2007Canadian








CanadianGAAP


Differences


US GAAP


GAAP


Differences


US GAAPAssetsHolding company cash, short term investments and marketable
    securities


1,564.2







1,564.2



971.8







971.8Portfolio investmentsCommon
    stocks(i)


3,816.9



(257.8
)


3,559.1



2,617.5







2,617.5Investments, at
    equity(i)


219.3



251.9



471.2



408.0



0.9



408.9All other portfolio investments


14,378.8







14,378.8



16,066.2







16,066.2Future income
    taxes(ii)


699.4



56.1



755.5



344.3



72.5



416.8Goodwill and intangible
    assets(iii)


123.2



29.6



152.8



89.4



29.6



119.0All other assets


6,503.6







6,503.6



7,444.6







7,444.627,305.4



79.8



27,385.2



27,941.8



103.0



28,044.8LiabilitiesAccounts payable and accrued
    liabilities(iv)


1,326.5



152.0



1,478.5



1,232.6



214.4



1,447.0Income taxes payable


656.3







656.3



68.9



8.7



77.6Long term debt  holding company
    borrowings(v)


869.6







869.6



1,063.2



51.5



1,114.7All other liabilities


17,931.6







17,931.6



19,559.4







19,559.420,784.0



152.0



20,936.0



21,924.1



274.6



22,198.7Mandatorily redeemable shares of TRG


169.8







169.8



174.7







174.7Non-controlling interests


1,382.8



(2.2
)


1,380.6



1,585.0



(3.5
)


1,581.51,552.6



(2.2
)


1,550.4



1,759.7



(3.5
)


1,756.2Shareholders Equity


4,968.8



(70.0
)


4,898.8



4,258.0



(168.1
)


4,089.927,305.4



79.8



27,385.2



27,941.8



103.0



28,044.8




---



##### 



December 31,2008


2007Shareholders equity based on Canadian GAAP


4,968.8



4,258.0Accumulated other comprehensive income


(19.4
)


(44.7
)Reduction of common stock on conversion of
    debentures(v)


(6.6
)


Reduction of other paid in
    capital(v)






(57.9
)Cumulative reduction in net earnings under US
    GAAP(vi)


(44.0
)


(65.5
)Shareholders equity based on US GAAP


4,898.8



4,089.9     December 31,2008


2007Pension liability adjustment pursuant to SFAS 158


(29.3
)


(61.4
)Related deferred income taxes


9.9



16.7(19.4
)


(44.7
)     December 31,2008


2007Net actuarial loss


(34.3
)


(60.5
)Prior service costs


3.7



(0.1
)Transitional amounts


1.3



(0.8
)Total


(29.3
)


(61.4
)   (i)
    Under Canadian GAAP, the companys investment of $177.1 in
    partnership trusts that do not have a quoted price in an active
    market are accounted for on the cost basis, whereas US GAAP
    requires the use of the equity method to account for such
    investments in partnership trusts.  The companys investment of $80.7 in limited partnerships
    whose fair value can be reliably measured are recorded in the
    consolidated balance sheet as common stocks designated as held
    for trading. US GAAP requires the use of the equity method to
    account for such investments.  (ii)
    The differences are comprised principally of deferred tax
    adjustments of $42.4 (2007  $53.1) related to the
    unamortized deferred gain on retroactive reinsurance contracts
    and $9.9 (2007  $16.7) related to the pension
    liability adjustment pursuant to SFAS 158.(iii)
    The differences result from differences between Canadian and US
    GAAP related to the purchase equation on the acquisition of TIG
    in 1999 including a reduction of goodwill related to foreign
    exchange losses realized on foreign exchange contracts that
    hedged the acquisition funding which were recorded as goodwill
    for Canadian GAAP. These foreign exchange contracts are not
    considered a hedge for purposes of US GAAP and as a result, the
    goodwill recognized under Canadian GAAP has been reclassified as
    a charge to opening retained earnings for US GAAP.  (iv)
    The differences are comprised of the unamortized deferred gain
    on retroactive reinsurance contracts of $121.3 (2007 
    $152.1) and the pension liability adjustment pursuant to
    SFAS 158 of $30.7 (2007  $62.3).(v)
    Under Canadian GAAP, the value of the conversion option of the
    companys 5.0% convertible senior debentures of $57.9 was
    included in paid in capital. Under US GAAP, the full principal
    amount of the debentures was included in holding company debt.
    Upon conversion of the 5.0% convertible senior debentures in
    February 2008, the full principal amount thereof was
    reclassified as an increase to common stock under US GAAP. The
    impact on common stock of the conversion under Canadian and US
    GAAP is




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
   similar; however, the accretion of the long term debt component
    recognized under Canadian GAAP in prior years has resulted in a
    permanent US GAAP adjustment decreasing common stock under
    Canadian GAAP by $6.6 with a corresponding increase in the
    cumulative reduction of net earnings under US GAAP.  (vi)
    Comprised principally of the cumulative impact of negative US
    GAAP adjustments of $78.9 (2007  $98.9) related to
    the accounting for retroactive reinsurance contracts, partially
    offset by positive US GAAP adjustments of $32.2
    (2007  $32.2) related to the purchase equation on the
    acquisition of TIG in 1999.  Statement
    of Cash Flows
    Accounting
    Pronouncements adopted in 2008
    FAS 157-2, FAS 157-2),
  FAS 157-3, FAS 157-3), FAS 157-3 FAS 157-3
  instrument-by-instrument
  Accounting
    pronouncements to be adopted in the future




---



##### 



14-1, 14-1). 14-1 14-1 14-1