FAIRFAX FINANCIAL HOLDINGS
    LIMITED
   Managements
    Responsibility for the Financial Statements      (Form 40-F)
      Managements
    Report on Internal Control over Financial Reporting
          -s- V. Prem Watsa

-s- John VarnellV. Prem Watsa

John VarnellChairman and Chief Executive Officer

Vice President and Chief Financial Officer




---



##### 



Independent
    Auditors Report      Report on
    the consolidated financial statements
    Managements
    responsibility for the consolidated financial
    statements
   Auditors
    responsibility
       Opinion
   Changes
    in Accounting Policies




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
   Report on
    internal control over financial reporting
    Managements
    responsibility for internal control over financial
    reporting
   Auditors
    responsibility
       Definition
    of internal control over financial reporting
   Inherent
    limitations
   Opinion




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
   Consolidated
    Financial Statements  Consolidated
    Balance Sheets
 as at December 31, 2010
    and 2009
  2010


2009(US$ millions)AssetsHolding company cash, short term investments and marketable
    securities (including assets pledged for short sale and
    derivative obligations  $137.4; 2009 
    $78.9)


1,540.7



1,251.6Accounts receivable and other


1,802.3



1,805.0Income taxes receivable


216.8



50.4Recoverable from reinsurers (including recoverables on paid
    losses  $238.1; 2009  $255.1)


3,993.8



3,818.67,553.6



6,925.6Portfolio investmentsSubsidiary cash and short term investments (cost $3,513.9;
    2009  $3,230.6)


3,513.9



3,244.8Bonds (cost $11,865.8; 2009  $10,742.0)


11,748.2



10,918.3Preferred stocks (cost $581.3; 2009  $292.4)


583.9



292.8Common stocks (cost $3,202.8; 2009  $4,082.4)


4,131.3



4,895.0Investments, at equity (fair value $976.9; 2009 
    $604.3)


715.5



433.5Derivatives and other invested assets (cost $403.9;
    2009  $122.5)


579.4



142.7Assets pledged for short sale and derivative obligations (cost
    $725.1; 2009  $149.2)


709.6



151.521,981.8



20,078.6Deferred premium acquisition costs


357.0



372.0Future income taxes


514.4



318.7Premises and equipment


197.6



168.6Goodwill and intangible assets


949.1



438.8Other assets


184.7



149.731,738.2



28,452.0         -s- V. P. Watsa
    Director

-s- Alan Horn
    Director




---



##### 



2010


2009(1)(US$ millions)LiabilitiesSubsidiary indebtedness


2.2



12.1Accounts payable and accrued liabilities


1,269.6



1,238.1Income taxes payable


25.4



70.9Short sale and derivative obligations (including at the holding
    company  $66.5; 2009  $8.9)


216.9



57.2Funds withheld payable to reinsurers


363.2



354.91,877.3



1,733.2Provision for claims


16,270.3



14,766.7Unearned premiums


2,120.9



1,913.8Long term debt  holding company borrowings


1,498.1



1,236.9Long term debt  subsidiary company borrowings


917.7



891.3Other long term obligations  holding company


311.5



173.521,118.5



18,982.2Contingencies (note 15)EquityCommon shareholders equity


7,761.9



7,391.8Preferred stock


934.7



227.2Shareholders equity attributable to shareholders of Fairfax


8,696.6



7,619.0Non-controlling interests


45.8



117.6Total equity


8,742.4



7,736.631,738.2



28,452.0   (1)
    
    Refer to note 2 for impact of new accounting
    policies.




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
    Consolidated
    Statements of Earnings
 for the years ended December 31, 2010, 2009 and 2008
  2010


2009(1)


2008(1)(US$ millions exceptper share amounts)RevenueGross premiums written


5,362.9



5,094.0



5,061.4Net premiums written


4,449.0



4,286.1



4,332.2Net premiums earned


4,580.6



4,422.0



4,529.1Interest and dividends


762.4



712.7



626.4Net gains on investments


188.5



944.5



2,570.7Excess of fair value of net assets acquired over purchase price


83.1







Other revenue


549.1



556.4



99.46,163.7



6,635.6



7,825.6ExpensesLosses on claims


3,409.0



3,186.9



3,559.1Operating expenses


961.3



831.7



835.8Commissions, net


707.5



701.1



729.8Interest expense


195.4



166.3



158.6Other expenses


538.8



544.0



98.05,812.0



5,430.0



5,381.3Earnings from operations before income taxes


351.7



1,205.6



2,444.3Income taxes


(119.5
)


214.9



755.6Net earnings


471.2



990.7



1,688.7Attributable to:Shareholders of Fairfax


469.0



856.8



1,473.8Non-controlling interests


2.2



133.9



214.9471.2



990.7



1,688.7Net earnings per share

$
21.41


$
43.99


$
80.38Net earnings per diluted share

$
21.31


$
43.75


$
79.53Cash dividends paid per share

$
10.00


$
8.00


$
5.00Shares outstanding (000)(weighted average)


20,436



18,301



18,037   (1)
    
    Refer to note 2 for impact of new accounting
    policies.




---



##### 



Consolidated
    Statements of Comprehensive Income
 for the years ended December 31, 2010, 2009 and 2008
  2010


2009(1)


2008(1)(US$ millions)Net earnings


471.2



990.7



1,688.7Other comprehensive income (loss),net of income taxesChange in net unrealized gains (losses) on available for sale
    securities(2)


363.1



925.9



(548.0
)Reclassification of net realized (gains) losses to net
    earnings(3)


(492.9
)


(47.6
)


248.6Share of other comprehensive income (loss) of investments, at
    equity(4)


14.5



8.2



(41.4
)Change in unrealized foreign currency translation gains
    (losses)(5)


122.3



213.3



(222.3
)Reclassification of foreign currency translation (gains) losses
    on disposition of investee company










24.9Change in gains and losses on hedge of net investment in foreign
    subsidiary(6)


(28.2
)


(25.5
)


(7.2
)Other comprehensive income (loss), net of income taxes


(21.2
)


1,074.3



(545.4
)Comprehensive income


450.0



2,065.0



1,143.3Attributable to:Shareholders of Fairfax


447.7



1,824.9



1,005.5Non-controlling interests


2.3



240.1



137.8450.0



2,065.0



1,143.3   (1)
    
    Refer to note 2 for impact of new accounting
    policies.(2)
    
    Net of income tax expense of $144.2 (2009  income
    tax expense of $417.3; 2008  income tax recovery of
    $213.4).(3)
    
    Net of income tax recovery of $207.6 (2009  income
    tax recovery of $47.2; 2008  income tax expense of
    $86.1).(4)
    
    Net of income tax expense of $3.2 (2009  nil;
    2008  income tax recovery of $2.8).(5)
    
    Net of income tax expense of $11.2 (2009  income
    tax recovery of $22.0; 2008  income tax expense of
    $67.6).(6)
    
    Net of income tax recovery of nil (2009  $2.8;
    2008  $2.8).




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
    Consolidated
    Statements of Shareholders Equity
 for the years ended December 31, 2010, 2009 and 2008
  2010


2009(1)


2008(1)(US$ millions)Common stock Subordinate voting shares  beginning of year


3,054.8



2,121.1



2,063.6Issuances during the year


199.8



989.3



Issuances on conversion of convertible senior debentures










192.3Purchases for cancellation


(7.1
)


(55.6
)


(134.8
)Subordinate voting shares  end of year


3,247.5



3,054.8



2,121.1Multiple voting shares  beginning and end of year


3.8



3.8



3.8Common stock


3,251.3



3,058.6



2,124.9Other paid in capital beginning of year










57.9Conversion of convertible senior debentures










(57.9
)Other paid in capital end of year










Treasury shares (at cost) beginning of year


(28.7
)


(22.7
)


(22.6
)Net acquisitions


(23.7
)


(6.0
)


(0.1
)Treasury shares (at cost)  end of year


(52.4
)


(28.7
)


(22.7
)Share-based compensation  beginning of year










Amortization to net earnings during the year


3.2







Share-based compensation  end of year


3.2







Retained earnings  beginning of year


3,468.8



2,871.9



1,658.2Net earnings for the year


469.0



856.8



1,473.8Excess over stated value of common shares purchased for
    cancellation


(9.7
)


(67.3
)


(147.2
)Excess over stated value of preferred shares purchased for
    cancellation






(41.3
)


(13.9
)Common share dividends


(200.8
)


(140.8
)


(88.9
)Preferred share dividends


(31.4
)


(10.5
)


(10.1
)Retained earnings  end of year


3,695.9



3,468.8



2,871.9Accumulated other comprehensive income (loss) 
    beginning of year


893.1



(107.8
)


360.5Application of the equity method of accounting


(7.9
)


32.8



Other comprehensive income (loss), net of income taxes:Change in net unrealized gains (losses) on available for sale
    securities


363.1



804.5



(548.0
)Reclassification of net realized (gains) losses to net earnings


(492.9
)


(41.1
)


248.6Share of other comprehensive income (loss) of investments, at
    equity


14.5



8.2



(41.4
)Change in unrealized foreign currency translation gains (losses)


122.2



222.0



(145.2
)Reclassification of foreign currency translation (gains) losses
    on disposition of investee company










24.9Change in gains and losses on hedge of net investment in foreign
    subsidiary


(28.2
)


(25.5
)


(7.2
)Other comprehensive income (loss), net of income taxes


(21.3
)


968.1



(468.3
)Accumulated other comprehensive income (loss) 
    end of year


863.9



893.1



(107.8
)Common shareholders equity


7,761.9



7,391.8



4,866.3




---



##### 



2010


2009(1)


2008(1)(US$ millions)Preferred stock Series A  beginning of year






38.4



51.2Purchases for cancellation






(38.4
)


(12.8
)Series A  end of year










38.4Series B  beginning of year






64.1



85.4Purchases for cancellation






(64.1
)


(21.3
)Series B  end of year










64.1Series C  beginning of year


227.2







Issuances during the year






227.2



Series C  end of year


227.2



227.2



Series E  beginning of year










Issuances during the year


183.1







Series E  end of year


183.1







Series G  beginning of year










Issuances during the year


235.9







Series G  end of year


235.9







Series I  beginning of year










Issuances during the year


288.5







Series I  end of year


288.5







Preferred stock


934.7



227.2



102.5Shareholders equity attributable to shareholders of
    Fairfax


8,696.6



7,619.0



4,968.8  Non-controlling interests  beginning of year


117.6



1,382.8



1,585.0Net earnings for the year


2.2



133.9



214.9Application of the equity method of accounting






4.7



Other comprehensive income (loss), net of income taxes:Change in net unrealized gains (losses) on available for sale
    securities






121.4



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






(6.5
)


Change in unrealized foreign currency translation gains (losses)


0.1



(8.7
)


(77.1
)Other comprehensive income (loss), net of income taxes


0.1



106.2



(77.1
)Common share dividends






(7.3
)


(25.6
)Net changes in capitalization


(4.8
)


(1,493.8
)


(311.2
)Other


(69.3
)


(8.9
)


(3.2
)Non-controlling interests  end of year


45.8



117.6



1,382.8Total equity


8,742.4



7,736.6



6,351.6   (1)
    
    Refer to note 2 for impact of new accounting
    policies.




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
   2010


2009


2008Number of shares outstandingCommon stock Subordinate voting shares  beginning of year


19,240,100



16,738,055



16,918,020Issuances during the year


563,381



2,881,844



Issuances on conversion of convertible senior debentures










886,888Purchases for cancellation


(43,900
)


(360,100
)


(1,066,601
)Net treasury shares acquired


(53,104
)


(19,699
)


(252
)Subordinate voting shares  end of year


19,706,477



19,240,100



16,738,055Multiple 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


20,455,247



19,988,870



17,486,825Preferred stock Series A  beginning of year






2,250,000



3,000,000Purchases for cancellation






(2,250,000
)


(750,000
)Series A  end of year










2,250,000Series B  beginning of year






3,750,000



5,000,000Purchases for cancellation






(3,750,000
)


(1,250,000
)Series B  end of year










3,750,000Series C  beginning of year


10,000,000







Issuances during the year






10,000,000



Series C  end of year


10,000,000



10,000,000



Series E  beginning of year










Issuances during the year


8,000,000







Series E  end of year


8,000,000







Series G  beginning of year










Issuances during the year


10,000,000







Series G  end of year


10,000,000







Series I  beginning of year










Issuances during the year


12,000,000







Series I  end of year


12,000,000












---



##### 



Consolidated
    Statements of Cash Flows
 for the years ended December 31, 2010, 2009 and 2008
  2010


2009


2008(US$ millions)Operating activitiesNet earnings


471.2



990.7



1,688.7Amortization of premises and equipment and intangible assets


46.3



35.8



22.4Net bond discount amortization


(36.9
)


(29.5
)


(3.9
)(Earnings) losses on investments, at equity


(50.9
)


(23.3
)


49.4Future income taxes


(114.7
)


12.8



(342.9
)Loss on significant commutations






3.6



84.2Net (gains) losses on available for sale securities


(780.9
)


(111.2
)


386.2Other net losses (gains) on investments


592.4



(833.3
)


(2,956.9
)Excess of fair value of net assets acquired over purchase price


(83.1
)






43.4



45.6



(1,072.8
)Changes in operating assets and liabilities (note 23)


(9.9
)


(764.8
)


1,192.7Cash provided by (used in) operating activities


33.5



(719.2
)


119.9Investing activitiesNet (purchases) sales of assets and liabilities classified as
    held for trading


(985.9
)


320.4



3,157.3Net sales (purchases) of securities designated as held for
    trading


779.0



(2,657.0
)


(3,814.6
)Available for sale securities  purchases


(5,722.0
)


(7,048.6
)


(15,306.1
) sales


6,957.3



10,363.0



16,443.9Net (increase) decrease in restricted cash and cash equivalents


(22.4
)


38.9



196.3Net purchases of investments, at equity


(214.8
)


(58.4
)


(54.2
)Net purchases of premises and equipment and intangible assets


(38.6
)


(49.1
)


(23.7
)Net purchases of subsidiaries, net of cash acquired


(454.9
)


(1,643.6
)


(11.0
)Cash provided by (used in) investing activities


297.7



(734.4
)


587.9Financing activitiesSubsidiary indebtednessIssuances


20.5



8.2



Repayment


(31.0
)


(21.0
)


(13.2
)Long term debt  holding companyIssuances


269.6



362.0



Issuance costs


(1.8
)


(3.4
)


Repayment






(13.8
)


(62.1
)Long term debt  subsidiary companiesIssuances










3.3Consent solicitation costs


(6.0
)






Repayment


(21.9
)


(1.4
)


(118.6
)Other long term obligations  holding company repayment


(5.8
)


(10.9
)


(4.9
)Net repurchases of subsidiary securities


(75.0
)


(96.6
)


(419.5
)




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
   2010


2009


2008(US$ millions)Subordinate voting sharesIssuances


200.0



1,000.0



Issuance costs


(0.3
)


(17.0
)


Repurchases


(16.8
)


(122.9
)


(282.0
)Preferred sharesIssuances


724.0



232.3



Issuance costs


(22.8
)


(7.3
)


Repurchases






(143.8
)


(48.0
)Purchase of subordinate voting shares for treasury


(26.8
)


(12.8
)


(0.2
)Common share dividends


(200.8
)


(140.8
)


(88.9
)Preferred share dividends


(31.4
)


(10.5
)


(10.1
)Dividends paid to non-controlling interests






(7.3
)


(25.6
)Cash provided by (used in) financing activities


773.7



993.0



(1,069.8
)Foreign currency translation


13.3



91.8



(224.8
)Increase (decrease) in cash and cash equivalents


1,118.2



(368.8
)


(586.8
)Cash and cash equivalents  beginning of year


2,156.9



2,525.7



3,112.5Cash and cash equivalents  end of year


3,275.1



2,156.9



2,525.7   December 31,2010


2009


2008(US$ millions)Cash and cash equivalents are included in the consolidated
    balance sheet as follows:Holding company cash and short term investments (including
    assets pledged for short sale and derivative obligations)


337.3



139.9



293.8Subsidiary cash and short term investments (including assets
    pledged for short sale and derivative obligations)


3,036.7



2,093.3



2,347.1Subsidiary restricted cash and short term investments


(98.9
)


(76.3
)


(115.2
)3,275.1



2,156.9



2,525.7Supplementary informationInterest paid


186.3



148.5



160.2Taxes paid


182.6



823.3



483.8




---



##### 



Notes
    to Consolidated Financial Statementsfor
    the years ended December 31, 2010, 2009 and 2008
    (in US$ and $millions except per share amounts and as otherwise
    indicated) 1.
    Business
    Operations    2.
    Summary
    of Significant Accounting Policies        Principles
    of consolidation
 Subsidiaries 
      Canadian Insurance
  
  U.S. Insurance
      Asian Insurance
  Fairfax Asia consists of:
      
  Reinsurance and Insurance
          which underwrites business in:




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
    Runoff
              Other
  
        Non-controlling interests
  Investments, at equity




---



##### 



2010


2009


2008Gulf Insurance Company (Gulf Insurance)


41.3
%






Cunningham Lindsey Group Limited (CLGL)


43.6
%


43.6
%


45.7
%ICICI Lombard


26.0
%


26.0
%


26.0
%Falcon Insurance PLC (Falcon Thailand)


40.5
%


40.5
%


24.9
%International Coal Group, Inc. (ICG)






27.7
%


19.7
%Singapore Reinsurance Corporation Limited (Singapore
    Re)


22.2
%


20.0
%


8.7
%The Brick Group Income Fund (The Brick)


17.3
%


12.8
%


13.0
%Polskie Towarzystwo Ubezpieczen S.A. (PTU)


22.7
%


22.7
%


MEGA Brands Inc. (MEGA)


16.5
%






Fibrek Inc. (Fibrek)


25.8
%


19.2
%


19.2
%     Business
    combinations
   Goodwill
    and intangible assets
 Goodwill
      Intangible assets




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
      Customer and broker relationships

8 to 20 yearsBrand names

Indefinite livesComputer software

3 to 15 years   Foreign
    currency translation
 Functional and presentation currency
  Transactions and items in the consolidated balance sheet in
    foreign currencies
  Translation of foreign subsidiaries
      Net investment hedge
  Comprehensive
    income (loss)




---



##### 



Consolidated
    statements of cash flows
   Cash and cash equivalents
  Investments
     Short-term investments
  Held for trading
  Available for sale
  Held to maturity
  Other than temporary impairments




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
      Recognition and measurement of non-derivative financial
    instruments
      Determination of fair value and/or




---



##### 



Real estate
  Loans
    and receivables and other financial liabilities
     Securities
    sold short and derivative financial instruments
 Securities sold short
  Derivative financial instruments over-the-counter




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
        Insurance
    contracts
 Revenue recognition
  Deferred premium acquisition costs
  Provision for claims




---



##### 



Estimation techniques
    
    the development of previously settled claims, where payments to
    date are extrapolated for each prior year;
    estimates based upon a projection of claims numbers and average
    cost;
    notified claims development, where notified claims to date for
    each year are extrapolated based upon observed development of
    earlier years; and,
    expected loss ratios.




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
      Uncertainties
  
    whether an event has occurred which would give rise to a
    policyholder suffering an insured loss;
    the extent of policy coverage and limits applicable;
    the amount of insured loss suffered by a policyholder as a
    result of the event occurring; and,
    the timing of a settlement to a policyholder for a loss suffered.              
    long delays in reporting claims from the date of exposure (for
    example, cases of mesothelioma can have a latent period of up to
    40 years) making estimation of the ultimate number of
    claims expected to be received particularly difficult;
    issues of allocation of responsibility among potentially
    responsible parties and insurers;
    emerging court decisions increasing or decreasing insurer
    liability;
    tendencies for social trends and factors to influence court
    awards;
    developments pertaining to the companys ability to recover
    reinsurance for claims of this nature; and,
    developments in the tactics of plaintiff lawyers and court
    decisions and awards.




---



##### 



Reinsurance
       Impairment
      Risk transfer
  Premiums
    Uncertainties




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
      Income
    taxes
     Premises
    and equipment
     Animal
    nutrition products
   first-in,
  Long
    term debt




---



##### 



Equity
       Net
    earnings per share attributable to shareholders of
    Fairfax
 Net earnings (loss) per share
  Net earnings (loss) per diluted share
  Pensions
    and post retirement benefits
   Defined contribution plan
  Defined benefit plan
    (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.(iii)
    Actuarial gains (losses) arise from the difference between the
    actual 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




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
    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 the 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.    Share-based
    compensation
   Operating
    leases
   Comparative
    figures
   Change
    to the application of the equity method of
    accounting
 Current year




---



##### 



Prior
    year
         December 31, 2010


December 31, 2009ICG


Fibrek


MEGA


Total


Singapore Re


The Brick


ICG


TotalDate equity method commenced:






July 15, 2010



March 31, 2010







December 24, 2009



November 28, 2009



February 20, 2009Date equity method discontinued:


December 17, 2010























Portfolio investments:Subsidiary cash and short term investments


163.9







(41.2
)


122.7















Bonds










7.8



7.8















Common stocks


159.9



(32.1
)






127.8



(22.8
)


(8.7
)


(55.5
)


(87.0
)Investments, at equity


(172.1
)


20.3



26.5



(125.3
)


19.6



4.2



119.3



143.1Derivatives and other invested assets










6.9



6.9















Future income taxes


(20.4
)


3.9







(16.5
)


1.0



1.4



(21.0
)


(18.6
)Non-controlling interests


















(1.2
)






5.9



4.7Accumulated other comprehensive income (loss)


53.4



(7.9
)






45.5



(1.0
)


(3.1
)


36.9



32.8Net gains (losses) on investments


77.9











77.9















   Changes
    in accounting policies
 Current
    year
 Business
    Combinations and Non-controlling Interests




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
            Prior
    year
 Financial
    Instruments




---



##### 



Goodwill
    and Intangible Assets
   Credit
    Risk
   Accounting
    pronouncements to be adopted in the future
 International
    Financial Reporting Standards (IFRS)
   3.
    Critical
    Accounting Estimates and Judgments    Provision
    for claims
   Provision
    for uncollectible reinsurance recoverables




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
      Provision
    for other than temporary impairment in the value of
    investments
   Valuation
    allowance for recovery of future income taxes
   Assessment
    of goodwill for potential impairment




---



##### 



4.
    Cash and
    Investments    December 31, 2010


December 31, 2009Classified


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


337.3



111.3











448.6



115.4



227.5



28.5







371.4Cash and short term investments pledged for short sale and
    derivative obligations






137.4











137.4



24.5



30.0



24.4







78.9Bonds






268.0



245.5







513.5







368.5



34.7







403.2Preferred stocks






43.4











43.4







64.8











64.8Common stocks






2.8



340.4







343.2







1.7



234.1







235.8Derivatives


54.6















54.6



97.5















97.5391.9



562.9



585.9







1,540.7



237.4



692.5



321.7







1,251.6Short sale and derivative obligations


(66.5
)














(66.5
)


(8.9
)














(8.9
)325.4



562.9



585.9







1,474.2



228.5



692.5



321.7







1,242.7Portfolio investments:Cash and short term investments


3,022.1



491.8











3,513.9



2,093.3



803.8



347.7







3,244.8Bonds






6,011.8



5,736.4







11,748.2







6,628.2



4,290.1







10,918.3Preferred stocks






541.9



42.0







583.9







261.1



31.7







292.8Common stocks






262.5



3,868.8







4,131.3







132.3



4,762.7







4,895.0Investments, at equity














715.5



715.5















433.5



433.5Derivatives


547.8















547.8



127.7















127.7Other invested assets














31.6



31.6















15.0



15.03,569.9



7,308.0



9,647.2



747.1



21,272.2



2,221.0



7,825.4



9,432.2



448.5



19,927.1Assets pledged for short sale and derivative obligations:Cash and short term investments


14.6















14.6







4.6











4.6Bonds






417.9



277.1







695.0







84.1



62.8







146.914.6



417.9



277.1







709.6







88.7



62.8







151.53,584.5



7,725.9



9,924.3



747.1



21,981.8



2,221.0



7,914.1



9,495.0



448.5



20,078.6Short sale and derivative obligations


(150.4
)














(150.4
)


(48.3
)














(48.3
)3,434.1



7,725.9



9,924.3



747.1



21,831.4



2,172.7



7,914.1



9,495.0



448.5



20,030.3         December 31,2010


2009Regulatory deposits


1,779.5



1,424.9Security for reinsurance and other


889.4



794.32,668.9



2,219.2




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
    Available
    For Sale Securities
   December 31, 2010


December 31, 2009Cost or


Gross


Gross


Total


Cost or


Gross


Gross


Totalamortized


unrealized


unrealized


carrying


amortized


unrealized


unrealized


carryingcost


gains


losses


value


cost


gains


losses


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


















24.4











24.4U.S. treasury


















28.5











28.5















52.9











52.9Bonds:U.S. treasury


246.5



1.7



(12.7
)


235.5















U.S. states and municipalities


















22.5



0.8







23.3Other government


10.9







(1.9
)


9.0















Corporate and other


1.0











1.0



10.9



0.5







11.4258.4



1.7



(14.6
)


245.5



33.4



1.3







34.7Common stocks:Canadian


15.5



18.8







34.3



39.5



18.9







58.4U.S.


201.9



71.3







273.2



80.7



44.2



(1.5
)


123.4Other


20.7



12.2







32.9



38.2



14.1







52.3238.1



102.3







340.4



158.4



77.2



(1.5
)


234.1Portfolio investments:Short term investments:Canadian government


















15.5



0.5







16.0U.S. treasury


















192.5











192.5Other government


















125.5



13.7







139.2















333.5



14.2







347.7Bonds:Canadian government


397.6



1.3



(10.9
)


388.0



179.2







(0.1
)


179.1Canadian provincials


246.6



29.0







275.6



417.4



39.6







457.0U.S. treasury


2,628.2



17.2



(188.7
)


2,456.7



490.1



12.3



(41.4
)


461.0U.S. states and municipalities


766.3



3.3



(17.4
)


752.2



938.6



38.0



(3.3
)


973.3Other government


948.3



16.7



(56.6
)


908.4



848.8



21.5



(27.6
)


842.7Corporate and other


867.0



110.2



(21.7
)


955.5



1,239.7



138.3



(1.0
)


1,377.05,854.0



177.7



(295.3
)


5,736.4



4,113.8



249.7



(73.4
)


4,290.1Preferred stocks:U.S.


0.3











0.3



0.1











0.1Other


39.1



2.6







41.7



31.2



0.4







31.639.4



2.6







42.0



31.3



0.4







31.7Common stocks:Canadian


431.2



346.5



(0.3
)


777.4



476.9



230.8







707.7U.S.


1,790.7



354.8



(11.0
)


2,134.5



2,716.2



398.5







3,114.7Other


718.4



242.3



(3.8
)


956.9



756.9



188.8



(5.4
)


940.32,940.3



943.6



(15.1
)


3,868.8



3,950.0



818.1



(5.4
)


4,762.7Assets pledged for short sale and derivative obligations:Bonds:Canadian provincials


















1.0



0.1







1.1U.S. treasury


143.2







(15.5
)


127.7



0.4











0.4U.S. states and municipalities


138.4











138.4















Other government


11.0











11.0



54.1



1.7







55.8Corporate and other


















5.0



0.5







5.5292.6







(15.5
)


277.1



60.5



2.3







62.8   (1)
    Includes nil ($24.4 at December 31, 2009) of short
    term investments included in assets pledged for short sale and
    derivative obligations.




---



##### 



December 31,
    2010
  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


319.9



(10.9
)


1















319.9



(10.9
)


1U.S. treasury


2,059.8



(183.0
)


8



90.9



(33.9
)


2



2,150.7



(216.9
)


10U.S. states and municipalities


416.6



(13.4
)


14



32.2



(4.0
)


1



448.8



(17.4
)


15Other government


486.4



(50.3
)


15



76.1



(8.2
)


3



562.5



(58.5
)


18Corporate and other


112.5



(21.6
)


5



1.1



(0.1
)


1



113.6



(21.7
)


63,395.2



(279.2
)


43



200.3



(46.2
)


7



3,595.5



(325.4
)


50Common stocks:Canadian


1.1



(0.3
)


1















1.1



(0.3
)


1U.S.


306.1



(11.0
)


2















306.1



(11.0
)


2Other


24.2



(3.8
)


5















24.2



(3.8
)


5331.4



(15.1
)


8















331.4



(15.1
)


83,726.6



(294.3
)


51



200.3



(46.2
)


7



3,926.9



(340.5
)


58   December 31,
    2009
  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


11.9



(0.1
)


1















11.9



(0.1
)


1U.S. treasury


196.1



(41.4
)


14















196.1



(41.4
)


14U.S. states and municipalities


115.9



(3.2
)


4



1.6



(0.1
)


1



117.5



(3.3
)


5Other government


61.4



(2.0
)


12



260.3



(25.6
)


5



321.7



(27.6
)


17Corporate and other


129.1



(1.0
)


4















129.1



(1.0
)


4514.4



(47.7
)


35



261.9



(25.7
)


6



776.3



(73.4
)


41Common stocks:U.S.


23.6



(1.5
)


1















23.6



(1.5
)


1Other


75.9



(5.4
)


12















75.9



(5.4
)


1299.5



(6.9
)


13















99.5



(6.9
)


13613.9



(54.6
)


48



261.9



(25.7
)


6



875.8



(80.3
)


54




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
      Securities
    Classified or Designated as Held for Trading
       Fixed
    Income Maturity Profile
   December 31, 2010


December 31, 2009Amortized

Fair


Amortized

Faircost

value


cost

valueDue in 1 year or less

555.4


525.1


779.5


726.3Due after 1 year through 5 years

1,618.0


1,809.3


2,445.5


2,199.3Due after 5 years through 10 years

4,870.1


5,223.6


5,412.7


6,039.4Due after 10 years

5,596.6


5,398.7


2,476.9


2,503.412,640.1


12,956.7


11,114.6


11,468.4Effective interest rate




5.7
%




5.8
%




---



##### 



Investments
    at Equity
   December 31, 2010


December 31, 2009Fair


Carrying


Fair


Carryingvalue


value


value


valuePortfolio investments:Investments, at equityGulf Insurance
    Company(1)


219.9



219.9







ICICI Lombard General Insurance Company Limited


266.5



94.2



204.4



75.9Cunningham Lindsey Group Limited


186.1



128.9



159.5



134.8International Coal Group,
    Inc.(2)










173.9



163.0Singapore Reinsurance Corporation Limited


30.3



28.7



22.9



20.9The Brick Group Income
    Fund(3)


26.8



15.7



8.9



4.2Partnerships, trusts and other


175.4



171.3



34.7



34.7MEGA Brands
    Inc.(4)


34.8



29.7







Fibrek
    Inc.(5)


37.1



27.1







976.9



715.5



604.3



433.5   (1)
    On September 28, 2010, the company completed the
    acquisition of a 41.3% interest in Gulf Insurance Company for
    cash consideration of $217.1 (61.9 million Kuwaiti dinar),
    as described in note 19.(2)
    On December 17, 2010, the company decreased its
    ownership of International Coal Group, Inc. from 22.2% to 11.1%
    and received cash consideration of $163.9 and recorded net gains
    on investments of $77.9, as described in note 2.(3)
    The company has investments of $43.2 ($33.8 at
    December 31, 2009) and $81.3 ($22.9 at
    December 31, 2009) in debt instruments and warrants
    issued by The Brick respectively. The debt instruments and the
    warrants are recorded in bonds and derivatives and other
    invested assets in the consolidated balance sheets
    respectively.(4)
    On March 31, 2010, the company participated in the
    recapitalization of MEGA and received newly issued common shares
    and commenced recording its investment in the common shares of
    MEGA using the equity method of accounting, as described in
    note 2. The company has investments of $27.9 ($19.7 at
    December 31, 2009) and $14.1 (nil at December 31,
    2009) in debt instruments and warrants issued by MEGA
    respectively. The debt instruments and the warrants are recorded
    in bonds and derivatives and other invested assets in the
    consolidated balance sheets.(5)
    On July 15, 2010, pursuant to the transaction described
    in note 2 the company purchased additional common shares of
    Fibrek for cash consideration of $15.7, that when aggregated
    with common shares already owned by the company and its
    affiliates represented 25.8% of the total common shares of
    Fibrek outstanding. Accordingly, the company commenced recording
    its investment in Fibrek using the equity method of
    accounting.    2010


2009


2008Cunningham Lindsey Group Limited


4.5



4.8



7.0ICICI Lombard General Insurance Company Limited


21.6



(4.7
)


(4.7
)International Coal Group, Inc.


4.6



11.2



Advent Capital (Holdings) PLC










1.6Partnerships, trusts and other


9.0



11.8



(53.3
)The Brick Group Income Fund


5.4







MEGA Brands Inc.


2.8







Singapore Re


2.0



0.2



Fibrek Inc.


1.0







50.9



23.3



(49.4
)




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
        Fair
    Value Disclosures
   December 31, 2010


December 31, 2009Significant











Significantother


Significant








other


SignificantTotal fair


Quoted


observable


unobservable


Total fair


Quoted


observable


unobservablevalue asset


prices


inputs


inputs


value asset


prices


inputs


inputs(liability)


(Level 1)


(Level 2)


(Level 3)


(liability)


(Level 1)


(Level 2)


(Level 3)Cash and cash equivalents


3,374.0



3,374.0











2,233.2



2,233.2







Short term investments:Canadian government


















71.8



71.8







Canadian provincials


88.6



88.6























U.S. treasury


368.5



368.5











1,196.5



1,196.5







Other government


254.2



250.6



3.6







177.2



135.0



42.2



Corporate and other


29.2







29.2







21.0







21.0



740.5



707.7



32.8







1,466.5



1,403.3



63.2



Bonds:Canadian government


393.5







393.5







191.7







191.7



Canadian provincials


1,251.3







1,251.3







1,346.8







1,346.8



U.S. treasury


2,824.7







2,824.7







541.4







541.4



U.S. states and municipalities


5,425.6







5,425.6







5,497.8







5,497.8



Other government


954.6







954.6







919.7







919.7



Corporate and other


2,107.0







2,045.1



61.9



2,689.3







2,672.2



17.1Mortgage backed securities  residential


















281.7







251.6



30.112,956.7







12,894.8



61.9



11,468.4







11,421.2



47.2Preferred stocks:Canadian


134.6







134.6







110.4







110.4



U.S.


451.0







450.7



0.3



215.6







215.6



Other


41.7







41.7







31.6







31.6



627.3







627.0



0.3



357.6







357.6



Common
    stocks:(1)Canadian


802.0



784.3



14.6



3.1



755.5



740.2



15.3



U.S.


2,485.0



2,345.0



47.4



92.6



3,228.6



3,187.6



38.6



2.4Other


1,053.6



665.9



324.7



63.0



1,020.7



710.3



292.6



17.84,340.6



3,795.2



386.7



158.7



5,004.8



4,638.1



346.5



20.2Derivatives and other invested
    assets(2)


609.4







280.8



328.6



232.2



41.6



190.6



Short sale and derivative obligations


(216.9
)






(216.9
)






(57.2
)






(57.2
)


Holding company cash, short term investments and marketable
    securities and portfolio investments measured at fair value


22,431.6



7,876.9



14,005.2



549.5



20,705.5



8,316.2



12,321.9



67.4100.0
%


35.1
%


62.4
%


2.5
%


100.0
%


40.2
%


59.5
%


0.3
%   (1)
    Excluded from these totals are available for sale investments
    of $70.2 ($66.4 at December 31, 2009) and $63.7 ($59.6
    at December 31, 2009) in common shares and partnership
    trusts respectively which are carried at cost as they do not
    have quoted market values in active markets.(2)
    Excluded from these totals are real estate investments of
    $24.6 (8.0 at December 31, 2009) which are carried at
    cost.




---



##### 



December 31, 2010


December 31, 2009Derivatives andCommon


Preferred


other invested








CommonBonds


stocks


stocks


assets


Total


Bonds


stocks


TotalBalance  beginning of year


47.2



20.2











67.4



166.6



3.8



170.4Total realized and unrealized gains (losses)Included in net gains (losses) on investments


29.7



6.8



4.6



(64.6
)


(23.5
)


(12.5
)






(12.5
)Included in other comprehensive income (loss)


2.6



2.4











5.0



1.1



(0.9
)


0.2Purchases


63.9



39.6



100.0



37.1



240.6



44.2



0.9



45.1Acquisition of Zenith National


1.0



78.2



0.3







79.5











Sales


(82.5
)


(3.5
)










(86.0
)


(56.7
)






(56.7
)Transfer in (out of) category






15.0



(104.6
)


356.1



266.5



(95.5
)


16.4



(79.1
)Balance  end of year


61.9



158.7



0.3



328.6



549.5



47.2



20.2



67.4Total gains (losses) for the period recognized in net gains
    (losses) on investments in the consolidated statements of
    earnings for Level 3 assets held at the end of the
    reporting period


















(57.6
)










(19.8
)   out-of-the 10-year




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
    Financial
    Performance
    Year ended December 31, 2010


Year ended December 31, 2009Classified


Designated


Classified








Classified


Designated


Classifiedas


as


as








as


as


asheld for


held for


available








held for


held for


availabletrading


trading


for sale


Other


Total


trading


trading


for sale


Other


TotalInterest income:Cash and short term investments


8.3



7.7



5.3







21.3



11.0



7.9



7.7







26.6Bonds






375.8



286.5







662.3







315.6



225.5







541.1Derivatives and other


(86.1
)










5.7



(80.4
)


(5.3
)










2.9



(2.4
)(77.8
)


383.5



291.8



5.7



603.2



5.7



323.5



233.2



2.9



565.3Dividends:Preferred stocks






13.1



11.7







24.8







3.1



2.8







5.9Common stocks










104.0







104.0











131.6







131.6



13.1



115.7







128.8







3.1



134.4







137.5Earnings from investments, at equity














50.9



50.9















23.3



23.3Investment expenses














(20.5
)


(20.5
)














(13.4
)


(13.4
)(77.8
)


396.6



407.5



36.1



762.4



5.7



326.6



367.6



12.8



712.7Net gains (losses) on investments:Bonds:Gains






195.9



383.7







579.6







691.7



248.1







939.8Losses










(10.2
)






(10.2
)










(5.0
)






(5.0
)



195.9



373.5







569.4







691.7



243.1







934.8Preferred stocks:Gains










1.5







1.5







24.3



2.6







26.9Losses






(15.4
)










(15.4
)










(0.3
)






(0.3
)



(15.4
)


1.5







(13.9
)






24.3



2.3







26.6Common stocks:Gains






32.4



455.4







487.8







35.3



285.9







321.2Losses










(11.2
)






(11.2
)










(82.1
)






(82.1
)



32.4



444.2







476.6







35.3



203.8







239.1Financial instruments classified as held for trading


(757.5
)














(757.5
)


37.5















37.5Foreign currency gains (losses) on investing activities


(25.7
)


(13.2
)


(85.5
)


5.1



(119.3
)


18.2



(1.1
)


(14.7
)


8.3



10.7Foreign currency gains (losses) on underwriting activities














(26.4
)


(26.4
)














14.3



14.3Gain on partial disposition of investee company














77.9



77.9



















Repurchase of debt


































9.0



9.0Other






0.6



(4.6
)


19.4



15.4







(4.2
)


2.0



14.7



12.5Other than temporary impairments of investments










(33.7
)






(33.7
)










(340.0
)






(340.0
)(783.2
)


200.3



695.4



76.0



188.5



55.7



746.0



96.5



46.3



944.5(861.0
)


596.9



1,102.9



112.1



950.9



61.4



1,072.6



464.1



59.1



1,657.2




---



##### 



Year ended December 31, 2008Classified


Designated


Classifiedas


as


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
)Investment expenses














(7.2
)


(7.2
)115.2



81.9



479.5



(50.2
)


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










602.9







602.9Losses






(350.0
)


(20.1
)






(370.1
)



(350.0
)


582.8







232.8Preferred stocks:Gains










3.0







3.0Losses


























3.0







3.0Common stocks:Gains










54.5







54.5Losses






(21.3
)


(15.0
)






(36.3
)



(21.3
)


39.5







18.2Financial instruments classified as held for trading


3,428.5















3,428.5Foreign currency gains (losses) on investing activities


(70.6
)


66.2



49.6



24.0



69.2Foreign currency gains (losses) on underwriting activities














(147.9
)


(147.9
)Foreign currency translation loss on disposition of investee
    company














(24.9
)


(24.9
)Other






1.2



0.3



2.1



3.6Other than temporary impairments of investments










(1,011.8
)






(1,011.8
)3,357.9



(303.9
)


(336.6
)


(146.7
)


2,570.73,473.1



(222.0
)


142.9



(196.9
)


3,197.1




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
      Designated asClassified as held for trading


held for tradingCommon




















Preferredstock and


Credit

















andequity index


default


Equity


CPI-linked











commonshort positions


swaps


warrants


derivatives


Other


Total


Bonds


stocks


TotalFor the year ended December 31, 2010Realized gains (losses) on positions closed in the
    year(1)


(700.1
)


10.4











(2.1
)


(691.8
)


251.2



(0.2
)


251.0Mark-to-market
    gains (losses) arising on positions remaining open at year end


(139.4
)


5.4



83.6



28.1



(43.4
)


(65.7
)


(55.3
)


17.2



(38.1
)Net gains (losses)


(839.5
)


15.8



83.6



28.1



(45.5
)


(757.5
)


195.9



17.0



212.9For the year ended December 31, 2009Realized gains (losses) on positions closed in the
    year(1)


(15.4
)


46.2



172.7







(44.9
)


158.6



87.6



9.2



96.8Mark-to-market
    gains (losses) arising on positions remaining open at year end


8.8



(160.8
)


58.2



(0.5
)


(26.8
)


(121.1
)


604.1



50.4



654.5Net gains (losses)


(6.6
)


(114.6
)


230.9



(0.5
)


(71.7
)


37.5



691.7



59.6



751.3For the year ended December 31, 2008Realized gains (losses) on positions closed in the
    year(1)


2,078.9



1,047.5











65.3



3,191.7



(1.9
)






(1.9
)Mark-to-market
    gains (losses) arising on positions remaining open at year end


(0.2
)


238.9











(1.9
)


236.8



(348.1
)


(21.3
)


(369.4
)Net gains (losses)


2,078.7



1,286.4











63.4



3,428.5



(350.0
)


(21.3
)


(371.3
)   (1)
    Amounts include net gains (losses) arising on certain
    derivatives which require the counterparties to cash-settle on a
    quarterly basis the market value movement since the previous
    quarterly reset date notwithstanding that the derivative
    contracts may remain open subsequent to the quarterly cash
    settlement.  5.
    Short
    Sale and Derivative Transactions    December 31, 2010


December 31, 2009Notional


Fair value





Notional


Fair valueCost


amount


Assets


Liabilities


Cost


amount


Assets


LiabilitiesEquity derivatives:Equity index total return swaps  short positions






5,463.3



10.3



133.7







1,582.7



9.2



Equity total return swaps  short positions






624.5



18.0



28.3







232.2







1.2Equity total return swaps  long positions






1,244.3



0.7



8.3







214.6



8.7



7.7Equity call options


















46.2



79.3



46.0



Warrants


21.6



158.8



171.1







10.1



127.5



71.6



Credit derivatives:Credit default swaps


70.8



3,499.3



67.2







114.8



5,926.2



71.6



Warrants


16.6



340.2



6.5







15.8



340.2



2.8



CPI-linked derivative contracts


302.3



34,182.3



328.6







8.8



1,490.7



8.2



Foreign exchange forward contracts














25.5











1.6



48.0Other derivative contracts














21.1











5.5



0.3Total










602.4



216.9











225.2



57.2




---



##### 



Equity
    contracts




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
        Credit
    contracts
       CPI-linked
    derivative contracts




---



##### 



December 31, 2010


December 31, 2009Notional Amount





Notional AmountOriginal





Weighted average


Original





Weighted averageUnderlying CPI Index

currency


U.S. dollars


strike price


currency


U.S. dollars


strike priceUnited States


16,250.0



16,250.0



216.58



800.0



800.0



215.85United Kingdom


550.0



861.1



216.01



250.0



403.8



215.30European Union


12,725.0



17,071.2



108.83



200.0



286.9



107.9134,182.3











1,490.7       Foreign
    exchange forward contracts
   Counterparty
    risk
   Hedge of
    net investment in Northbridge




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
    6.
    Goodwill
    and Intangible Assets    December 31, 2010Intangibleassets notIntangible assets subject to


subject toGoodwill


amortization


amortization


TotalCustomer andbroker


Computer





Brandrelationships


software


Other


names


OtherBalance  beginning of year


249.3



115.6



34.2



3.6



26.0



10.1



438.8Additions


317.6



147.5



33.4







20.2







518.7Disposals














(0.2
)










(0.2
)Amortization charge






(11.1
)


(8.4
)


(0.5
)










(20.0
)Foreign exchange effect


5.2



4.6



1.2







0.8







11.8Balance  end of year


572.1



256.6



60.4



2.9



47.0



10.1



949.1Gross carrying amount


575.7



274.1



117.4



7.8



47.0



10.1



1,032.1Accumulated amortization






(17.5
)


(48.4
)


(4.9
)










(70.8
)Accumulated impairment


(3.6
)






(8.6
)














(12.2
)572.1



256.6



60.4



2.9



47.0



10.1



949.1   December 31, 2009Intangible assets not subject to


Intangible assets subject toGoodwill


amortization


amortization


TotalCustomer andbroker


Computer





Brandrelationships


software


Other


names


OtherBalance  beginning of year


71.5







29.7



9.4



2.9



9.7



123.2Additions


167.3



107.5



7.5



0.4



21.2







303.9Disposals


(2.8
)










(5.0
)










(7.8
)Amortization charge






(5.4
)


(4.5
)


(1.2
)










(11.1
)Impairment charge


(3.6
)






















(3.6
)Foreign exchange effect


16.9



13.5



1.5







1.9



0.4



34.2Balance  end of year


249.3



115.6



34.2



3.6



26.0



10.1



438.8Gross carrying amount


252.9



121.5



70.6



11.7



26.0



10.1



492.8Accumulated amortization






(5.9
)


(27.8
)


(8.1
)










(41.8
)Accumulated impairment


(3.6
)






(8.6
)














(12.2
)249.3



115.6



34.2



3.6



26.0



10.1



438.8     Goodwill


Intangible assetsDecember 31,


December 31,2010


2009


2010


2009Zenith National


317.6







170.7



Northbridge


109.8



104.0



123.9



115.8OdysseyRe


104.2



104.2



51.8



48.2All other


40.5



41.1



30.6



25.5572.1



249.3



377.0



189.5




---



##### 



7.
    Provision
    for Claims    December 31,2010


2009


2008Provision for claims  beginning of year 
    net


11,437.5



11,008.5



10,624.8Foreign exchange effect of change in provision for claims


167.4



393.3



(580.3
)Provision for claims occurring:In the current year


3,161.4



3,091.8



3,405.4In the prior years


14.7



30.3



55.4Paid on claims during the year related to:The current year


(736.9
)


(729.9
)


(835.5
)The prior years


(2,612.9
)


(2,424.9
)


(2,034.2
)Provision for claims of companies acquired during the year at
    December 31


1,358.7



68.4



372.9Provision for claims at December 31 before the undernoted


12,789.9



11,437.5



11,008.5CTR Life


25.3



27.6



34.9Provision for claims  end of year  net


12,815.2



11,465.1



11,043.4Reinsurers share of provision for claims


3,455.1



3,301.6



3,685.0Provision for claims  end of year  gross


16,270.3



14,766.7



14,728.4     Fair value




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
        December 31, 2010

December 31, 2009Fair value

Carrying value

Fair value

Carrying valueInsurance and reinsurance contracts


17,941.8



18,391.2



16,127.1



16,680.5Ceded reinsurance contracts


3,488.5



3,734.8



3,250.3



3,534.3       December 31, 2010

December 31, 2009Fair value of

Fair value of

Fair value of

Fair value ofinsurance and

ceded

insurance and

cededreinsurance

reinsurance

reinsurance

reinsuranceChange in interest rates

contracts

contracts

contracts

contracts100 basis point increase


17,400.2



3,377.5



15,641.6



3,156.9100 basis point decrease


18,550.5



3,608.3



16,537.2



3,356.4   8.
    Significant
    Commutations      9.
    Reinsurance




---



##### 



2010


2009


2008Earned premiums ceded to reinsurers


(912.5
)


(814.5
)


(713.5
)Commissions earned on ceded reinsurance premiums


166.8



145.4



144.9Claims incurred ceded to
    reinsurers(1)


788.7



391.3



439.3Provision for uncollectible reinsurance


(32.0
)


(59.7
)


(15.0
)Net impact of ceded reinsurance transactions (pre-tax)


11.0



(337.5
)


(144.3
)   (1)
    In 2009 included a net $3.6 pre-tax loss on TIGs
    commuted reinsurance contracts. In 2008 included an $84.2
    pre-tax loss on Crum & Forsters commutation of
    an aggregate stop loss contract.        2010


2009Balance, beginning of year


381.1



370.2Write-off of recoverables against provision


(40.6
)


(49.4
)Provision for credit losses


40.8



74.9Release of provision for credit losses


(8.8
)


(15.2
)Foreign currency movements


0.5



0.6Balance, end of year


373.0



381.1




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
    10.
    Subsidiary
    Indebtedness, Long Term Debt and Credit Facilities  Subsidiary
    Indebtedness and Long Term Debt
  December 31, 2010


December 31, 2009Total





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


1.0



0.9



11.4



11.2U.S. $20.0 at floating rate due October 31, 2011


1.3



1.3



1.0



0.92.3



2.2



12.4



12.1Long term debt consists of the following balances:Fairfax unsecured notes:7.75% due April 15,
    2012(1)(2)


157.3



156.1



180.6



178.18.25% due October 1,
    2015(1)(3)


82.4



82.2



90.9



90.67.75% due June 15,
    2017(1)(4)


275.6



261.7



282.6



266.17.375% due April 15,
    2018(3)


144.2



143.8



144.2



143.77.50% due August 19, 2019
    (Cdn$400.0)(2)


402.6



398.5



381.6



377.07.25% due June 22, 2020
    (Cdn$275.0)(1)


276.8



274.4







8.30% due April 15,
    2026(3)


91.8



91.4



91.8



91.37.75% due July 15,
    2037(3)


91.3



90.0



91.3



90.1Long term debt  holding company borrowings


1,522.0



1,498.1



1,263.0



1,236.9OdysseyRe unsecured senior notes:7.65% due November 1,
    2013(1)(5)


218.8



216.4



225.0



224.06.875% due May 1,
    2015(1)(6)


125.0



123.3



125.0



123.8Series A, floating rate due March 15,
    2021(7)


50.0



49.8



50.0



49.7Series B, floating rate due March 15,
    2016(7)


50.0



49.7



50.0



49.7Series C, floating rate due December 15,
    2021(8)


40.0



39.8



40.0



39.8Crum & Forster unsecured senior notes:7.75% due May 1,
    2017(1)(9)


330.0



306.8



330.0



307.5Zenith National redeemable debentures:8.55% due August 1,
    2028(1)


38.4



38.0







Advent subordinated notes:floating rate due June 3, 2035


34.0



33.0



34.0



33.012.0 million, floating rate due June 3, 2035


16.0



15.5



17.2



16.8Advent unsecured senior notes:floating rate due January 15, 2026


26.0



25.1



26.0



25.0floating rate due December 15, 2026


20.0



19.4



20.0



19.4Ridley economic development loan at 1% due August 10, 2019


0.7



0.6



0.7



0.6MFXchange, equipment loans at 7.3% due April 1, 2011


0.3



0.3



2.0



2.0Long term debt  subsidiary company borrowings


949.2



917.7



919.9



891.32,471.2



2,415.8



2,182.9



2,128.2   (a)
    Principal net of unamortized issue costs and discounts.(1)
    During 2010, the company or one of its subsidiaries completed
    the following transactions with respect to its debt:  (a)
    During 2010, holders of OdysseyRes 7.65% senior
    notes due 2013 and 6.875% senior notes due 2015 and
    Crum & Forsters 7.75% senior notes due 2017
    provided their consent to amend the indentures governing those
    senior notes to




---



##### 



allow OdysseyRe and Crum & Forster to make
    available to senior note holders certain specified financial
    information and financial statements in lieu of the reports
    OdysseyRe and Crum & Forster previously filed with the
    Securities and Exchange Commission (SEC). In
    exchange for their consent to amend the indentures, OdysseyRe
    and Crum & Forster paid cash participation payments of
    $2.7 and $3.3 respectively to the senior note holders which were
    recorded as a reduction of the carrying value of the senior
    notes and will be amortized as an adjustment to the effective
    interest rate on the senior notes through interest expense in
    the consolidated statements of earnings. Transaction costs of
    $1.2, comprised of legal and agency fees incurred in connection
    with the consent solicitations, were recognized as an expense in
    the consolidated statements of earnings.  (b)
    On June 22, 2010, the company completed a public debt
    offering of Cdn$275.0 principal amount of 7.25% unsecured senior
    notes due June 22, 2020 issued at par for net proceeds
    after commissions and expenses of $267.1 (Cdn$272.5).
    Commissions and expenses of $2.5 (Cdn$2.5) were included as part
    of the carrying value of the debt. The notes are redeemable at
    the companys option, in whole or in part, at any time at
    the greater of a specified redemption price based on the then
    current yield of a Government of Canada bond with a term to
    maturity equal to the remaining term to June 22, 2020 and
    par. The company has designated these senior notes as a hedge of
    a portion of its net investment in Northbridge.  (c)
    Effective May 20, 2010, the company consolidated the
    assets and liabilities of Zenith National, pursuant to the
    transaction described in note 19. As a result, the carrying
    value of $38.0 of redeemable securities issued by a statutory
    business trust subsidiary of Zenith National, was included in
    long term debt  subsidiary company borrowings on the
    companys consolidated balance sheet as at
    December 31, 2010. These securities mature on
    August 1, 2028, pay semi-annual cumulative cash
    distributions at an annual rate of 8.55% of the $1,000
    liquidation amount per security and are redeemable at Zenith
    Nationals option at any time prior to their stated
    maturity date at a redemption price of 100% plus the excess of
    the then present value of the remaining scheduled payments of
    principal and interest over 100% of the principal amount
    together with the accrued and unpaid interest. Zenith National
    fully and unconditionally guarantees the distributions and
    redemptions of these redeemable securities. On May 26,
    2010, holders of the redeemable securities provided their
    consent to amend the indenture governing these securities to
    allow Zenith National to make available to the security holders
    certain specified financial information and financial statements
    in lieu of the reports Zenith National previously filed with the
    SEC.  The acquisition of Zenith National resulted in the
    consolidation of aggregate principal amount of $38.7 and $6.3 of
    debt securities issued by Fairfax and OdysseyRe respectively,
    which were recorded in Zenith Nationals investment
    portfolio as available for sale on the acquisition date.
    Accordingly, the $47.5 fair value of these debt securities was
    eliminated against long term debt  holding company
    borrowings and long term debt  subsidiary company
    borrowings on the consolidated balance sheet. As a result, the
    carrying value of long term debt  holding company
    borrowings and long term debt  subsidiary company
    borrowings decreased by $38.0 and $6.3 respectively and the
    company recorded a pre-tax loss of $3.2 in net gains (losses) on
    investments in the consolidated statement of earnings.On September 17, 2010, Zenith National purchased $7.0
    principal amount of its redeemable debentures due 2028 for cash
    consideration of $7.0. On June 9, 2010, Zenith National
    purchased $13.0 principal amount of its redeemable debentures
    due 2028 for cash consideration of $13.0.  (2)
    During 2009, the company or one of its subsidiaries completed
    the following transactions with respect to its debt:  (a)
    On September 25, 2009, the company purchased $1.0
    principal amount of its senior notes due 2012 for cash
    consideration of $1.0.(b)
    On August 18, 2009, the company completed a public debt
    offering of Cdn$400.0 principal amount of 7.50% unsecured senior
    notes due August 19, 2019 at an issue price of $99.639 for
    net proceeds after discount, commissions and expenses of $358.6
    (Cdn$394.8). Commissions and expenses of $3.4 (Cdn$3.7) were
    included as part of the carrying value of the debt. The notes
    are redeemable at the companys option, in whole or in
    part, at any time at the greater of a specified redemption price
    based upon the then current yield of a Government of Canada bond
    with a term to maturity equal to the remaining term to
    August 19, 2019 and par. The company has designated these
    senior notes as a hedge of a portion of its net investment in
    Northbridge.  (c)
    On the maturity date, January 28, 2009, the company
    repaid the outstanding $12.8 of its 6.15% secured loan.  (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, 2010 is $28.5 ($31.3 at December 31,
    2009).




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
     (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 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)
    Redeemable at Crum & Forsters option at any
    time beginning May 1, 2012 at specified redemption
    prices.      December 31,


December 31,2010


2009Carrying


Fair


Carrying


Fairvalue


value


value


valueLong term debt  holding company borrowings


1,498.1



1,614.1



1,236.9



1,317.4Long term debt  subsidiary company borrowings


917.7



987.9



891.3



917.4Other long term obligations  holding company


311.5



309.4



173.5



171.32,727.3



2,911.4



2,301.7



2,406.1     2011


0.42012


157.42013


218.82014


0.12015


207.5Thereafter


1,887.0   Credit facilities




---



##### 



11.
    Other
    Long Term Obligations  Holding Company    December 31,


December 31,2010


2009Carrying


Fair


Carrying


Fairvalue


value


value


valueTIG Note


143.8



143.8







Purchase consideration payable


158.6



158.6



164.4



164.4Trust preferred securities of subsidiaries


9.1



7.0



9.1



6.9311.5



309.4



173.5



171.3           12.
    Total
    Equity  Capital Stock
  Authorized
    capital




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
    Issued
    capital
    Liquidation

Fixed dividendNumber of shares



preference

rateRedemption date

issued

Stated capital

per share

per annumSeries C(1)

December 31, 2014


10,000,000


Cdn $250.0

Cdn $25.00


5.75
%Series E(2)

March 31, 2015


8,000,000


Cdn $200.0

Cdn $25.00


4.75
%Series G(2)

September 30, 2015


10,000,000


Cdn $250.0

Cdn $25.00


5.00
%Series I(2)

December 31, 2015


12,000,000


Cdn $300.0

Cdn $25.00


5.00
%   (1)
    Series C preferred shares are redeemable by the company
    on the date specified in the table above and on each subsequent
    five-year anniversary date at Cdn$25.00 per share. Holders of
    unredeemed Series C preferred shares will have the right,
    at their option, to convert their shares into floating rate
    cumulative preferred shares Series D on December 31,
    2014 and on each subsequent five-year anniversary date. The
    Series D preferred shares (of which none are currently
    issued) will have a dividend rate equal to the three-month
    Government of Canada Treasury Bill yield current on
    December 31, 2014 or any subsequent five-year anniversary
    plus 3.15%.(2)
    Series E, Series G and Series I preferred
    shares are redeemable by the company on the dates specified in
    the table above and on each subsequent five-year anniversary
    date at Cdn$25.00 per share. Holders of unredeemed
    Series E, Series G and Series I preferred shares
    will have the right, at their option, to convert their shares
    into floating rate cumulative preferred shares Series F (on
    March 31, 2015), Series H (on September 30,
    2015) and Series J (on December 31,
    2015) respectively and on each subsequent five-year
    anniversary date. The Series F, Series H and
    Series J preferred shares (of which none are currently
    issued) will have a dividend rate equal to the three-month
    Government of Canada Treasury Bill yield current on
    March 31, 2015, September 30, 2015 and
    December 31, 2015 or any subsequent five-year anniversary
    plus 2.16%, 2.56% and 2.85% respectively.  Treasury
    shares
    Capital
    transactions
  Year
    ended December 31, 2010




---



##### 



Year
    ended December 31, 2009
        Dividends
        Accumulated
    Other Comprehensive Income (Loss)
    December 31, 2010


December 31, 2009Income tax








Income taxPre-tax


(expense)


After-tax


Pre-tax


(expense)


After-taxamount


recovery


amount


amount


recovery


amountNet unrealized gains (losses) on available for sale securities:Bonds


(148.2
)


47.0



(101.2
)


181.2



(60.5
)


120.7Common stocks and other


998.7



(291.3
)


707.4



874.3



(251.1
)


623.2850.5



(244.3
)


606.2



1,055.5



(311.6
)


743.9Share of accumulated other comprehensive income (loss) of
    investments, at equity


6.9



(4.4
)


2.5



(10.8
)


(1.2
)


(12.0
)Currency translation account


273.1



(17.9
)


255.2



167.9



(6.7
)


161.21,130.5



(266.6
)


863.9



1,212.6



(319.5
)


893.1   Non-controlling
    interest




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
    13.
    Income
    Taxes    2010


2009


2008Current


(4.8
)


202.1



1,098.5Future


(114.7
)


12.8



(342.9
)(119.5
)


214.9



755.6     2010


2009


2008Provision for income taxes at the statutory income tax rate 
    (2010  31.0%; 2009  33.0%; 2008
     33.5%)


109.0



397.9



818.9Tax rate differential on income earned outside Canada


(91.5
)


(48.5
)


(3.7
)Non-taxable investment income


(89.0
)


(78.0
)


(1.3
)Change in unrecorded tax benefit of losses


(43.7
)


(47.7
)


(12.6
)Non-taxable gain arising from U.S. acquisitions


(39.1
)






Withholding tax on U.S. dividend


35.6







Change in tax rate for future income taxes


(12.7
)


2.1



3.5Recovery related to prior years


(1.7
)


(48.2
)


(15.8
)Foreign exchange


2.5



25.5



(33.5
)Other including permanent differences


11.1



11.8



0.1Provision for (recovery of) income taxes


(119.5
)


214.9



755.6




---



##### 



December 31,2010


2009Operating and capital losses


179.3



207.8Claims discount


328.6



298.6Unearned premium reserve


63.0



58.2Deferred premium acquisition cost


(52.6
)


(50.3
)Allowance for doubtful accounts


16.4



16.0Foreign tax credits


149.6



56.1Intangible assets


(93.2
)


(41.7
)Investments and other


50.3



(44.0
)641.1



500.7Valuation allowance


(127.0
)


(182.0
)Future income taxes


514.4



318.7
     December 31, 2010U.S.


Canada


Ireland


U.K.


TotalLess than 1 year


















From 1 to 5 years






23.0











23.0From 6 to 10 years


















From 11 to 20 years


65.2



86.8











152.0No expiration date










193.5



400.6



594.165.2



109.8



193.5



400.6



769.1




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
    14.
    Statutory
    Requirements    December 31, 2010Northbridge(1)


229.0Crum & Forster


133.1Zenith National


69.0OdysseyRe


315.4746.5    (1)
    
    Subject to prior regulatory approval.  15.
    Contingencies
    and Commitments  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. In March 2010, the Court granted the
    defendants motions to dismiss the Amended Consolidated
    Complaint, on the grounds that the Court had no jurisdiction in
    that Complaint as constituted, and denied as futile any request
    by plaintiffs for leave to file a further amended complaint.
    Previously, in November 2009, the Court had granted a motion by
    the lead plaintiffs to withdraw as lead plaintiffs, and allowed
    other prospective lead plaintiffs 60 days to file motions
    seeking appointment as replacement lead plaintiff. Two entities
    filed such motions and subsequently asked the Court to appoint
    them as co-lead plaintiffs. These motions had not been ruled
    upon prior to the Courts issuance of its judgment
    dismissing the Amended Consolidated Complaint. The original lead
    plaintiffs and the proposed replacement co-lead plaintiffs filed
    a motion asking the Court to alter or amend its March 2010
    judgment so as to reinstate the claims of U.S. residents
    and to appoint the proposed replacement co-lead plaintiffs as
    co-lead plaintiffs. That motion was denied. One of the proposed
    replacement co-lead plaintiffs filed a motion asking the Court
    to grant it leave to intervene for the purpose of pursuing an
    appeal of the March 2010 judgment and renewing its application
    for appointment as replacement lead plaintiff. That motion was
    denied in late July 2010. The same proposed replacement co-lead
    plaintiff has filed notices of appeal of the March 2010 judgment
    and of the July 2010 denial of its motion referred to in the
    second preceding sentence above. Fairfax, OdysseyRe and the
    named officers and directors are opposing these purported
    appeals. The ultimate outcome of any




---



##### 



litigation is uncertain, and should the consolidated lawsuit be
    allowed to continue (or a new comparable lawsuit be commenced)
    and 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, if it is allowed to
    continue, or a subsequently commenced comparable 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 either such 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. If the
    consolidated lawsuit is allowed to continue or a new comparable
    lawsuit is commenced, Fairfax, OdysseyRe and the named officers
    and directors intend to vigorously defend against them and the
    companys financial statements include no provision for
    loss in this matter.  (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. Those
    defendants have not to date served all parties named in the
    third-party complaint and have not pursued any counterclaims. 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 motion for summary judgment brought by
    two defendants, and dismissed Fairfaxs claims against
    those defendants without prejudice. Discovery in this action is
    ongoing. The ultimate outcome of any litigation is uncertain and
    the companys financial statements include no provision for
    loss on the counterclaim.  Financial guarantee
    Other




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
      16.
    Pensions
    and Post Retirement Benefits        Defined benefit


Post  retirementpension plans


benefit  plansDecember 31,


December 31,2010


2009


2010


2009Fixed income securities


138.4



97.7







Equity securities


230.6



213.8







Other


39.5



29.7







408.5



341.2







     December 31, 2010


December 31, 2009Significant











Significantother


Significant








other


SignificantTotal


Quoted


observable


unobservable


Total


Quoted


observable


unobservablefair value


prices


inputs


inputs


fair value


prices


inputs


inputsasset


(Level 1)


(Level 2)


(Level 3)


asset


(Level 1)


(Level 2)


(Level 3)Fixed income securities


138.4



47.2



91.2







97.7



36.2



61.5



Equity securities


230.6



220.9



9.7







213.8



209.6



4.2



Other


39.5



17.1



10.5



11.9



29.7



19.9



3.2



6.6408.5



285.2



111.4



11.9



341.2



265.7



68.9



6.6




---



##### 



Defined benefit


Post retirementpension plans


benefit plansDecember 31,


December 31,2010


2009


2010


2009Change in benefit obligation:Balance  beginning of year


385.8



305.2



65.3



56.1Cost of benefits earned in the year


14.2



12.4



3.9



2.6Interest cost on benefit obligation


22.6



19.8



3.7



3.5Actuarial (gains) losses


21.9



32.0



1.3



6.8Benefits paid


(12.9
)


(15.7
)


(2.5
)


(2.3
)Settlements and other














(4.6
)Change in foreign currency exchange rate


8.3



32.1



1.2



3.2Balance  end of year


439.9



385.8



72.9



65.3Change in fair value of plan assets:Balance  beginning of year


341.2



241.2







Actual return on plan assets


48.7



61.5







Company contributions


22.2



24.7



2.4



2.3Plan participant contributions










0.1



Benefits paid


(12.9
)


(15.7
)


(2.5
)


(2.3
)Settlements and other














Change in foreign currency exchange rate


9.3



29.5







Balance  end of year


408.5



341.2







Funded status of plans  surplus (deficit)


(31.4
)


(44.6
)


(72.9
)


(65.3
)Unrecognized net actuarial loss


21.9



28.8



4.2



2.6Unrecognized prior service costs


1.5



1.7



(4.2
)


(5.3
)Unrecognized transitional (asset) obligation


(2.5
)


(3.6
)






Net accrued liability  end of year


(10.5
)


(17.7
)


(72.9
)


(68.0
)Amounts recognized in the consolidated balance sheet consists
    of:Other assets


47.1



14.5







Accounts payable and accrued liabilities


(57.6
)


(32.2
)


(72.9
)


(68.0
)Net accrued liability  end of year


(10.5
)


(17.7
)


(72.9
)


(68.0
)Weighted average assumptions used to determine benefit
    obligations:Discount rate


5.5
%


6.0
%


5.4
%


5.9
%Rate of compensation increase


4.4
%


4.4
%


4.0
%


4.0
%Assumed overall health care cost trend










8.1
%


9.1
%




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
      Defined benefit


Post retirementpension plans


benefit plansDecember 31,


December 31,2010


2009


2008


2010


2009


2008Cost of benefits earned in the year, net of employee
    contributions


14.2



12.4



14.9



3.8



2.6



2.9Interest cost on benefit obligation


22.6



19.8



19.4



3.7



3.5



3.7Actual return on plan assets


(48.7
)


(61.5
)


10.8











Actuarial (gains) losses on benefit obligation


21.9



32.0



(43.5
)


1.3



6.8



(8.2
)Settlements and other










1.6







(0.2
)


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


10.0



2.7



3.2



8.8



12.7



(1.6
)Adjustments to recognize the long term nature of employee future
    benefits costs:(Excess) shortfall of:Actual returns over expected returns on plan assets


27.1



45.3



(25.9
)










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


(20.5
)


(32.0
)


46.0



(1.5
)


(7.5
)


8.4Prior service costs amortized over plan amendment cost arising


0.3



0.1



0.3



(1.0
)


(0.5
)


(0.3
)Amortization of the transitional (asset) obligation


(1.3
)


(0.9
)


(1.0
)






0.2



1.05.6



12.5



19.4



(2.5
)


(7.8
)


9.1Annual defined benefit pension and post retirement benefit
    expense recognized in the consolidated statement of earnings


15.6



15.2



22.6



6.3



4.9



7.5Defined contribution benefit expense recognized


16.3



17.4



21.1











Total benefit expense recognized


31.9



32.6



43.7



6.3



4.9



7.5Weighted average assumptions used to determine benefit
    expenseDiscount rate


6.0
%


6.3
%


5.5
%


5.8
%


6.7
%


5.9
%Expected long term rate of return on plan assets


6.3
%


5.8
%


5.9
%










Rate of compensation increase


4.4
%


4.4
%


4.4
%


4.0
%


4.0
%


4.0
%




---



##### 



Defined benefit

Post retirementpension plans

benefit plans2011


14.3



3.02012


15.5



3.22013


16.5



3.52014


18.7



3.72015


20.1



4.02016-2020


128.5



25.1   17.
    Operating
    Leases    2011


59.22012


42.02013


34.22014


26.92015


22.2Thereafter


79.5   18.
    Earnings
    per Share    2010


2009


2008Net earnings attributable to shareholders of Fairfax


469.0



856.8



1,473.8Preferred share dividends


(31.4
)


(10.5
)


(10.1
)Excess over stated value of preferred shares purchased for
    cancellation






(41.3
)


(13.9
)Net earnings attributable to common shareholders 
    basic


437.6



805.0



1,449.8Interest expense on convertible debt, net of tax










0.3Net earnings available to common shareholders  diluted


437.6



805.0



1,450.1Weighted average common shares outstanding  basic


20,436,346



18,301,133



18,036,670Effect of dilutive shares:Convertible debt










104,197Restricted share awards


98,226



96,765



91,890Total effect of dilutive shares


98,226



96,765



196,087Weighted average common shares outstanding  diluted


20,534,572



18,397,898



18,232,757Net earnings per common share  basic

$
21.41


$
43.99


$
80.38Net earnings per common share  diluted

$
21.31


$
43.75


$
79.53




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
    19.
    Acquisitions
    and Divestitures  Subsequent
    to December 31, 2010
  Acquisition
    of First Mercury Financial Corporation
    First MercuryAcquisition date


February 9, 2011Percentage of common shares acquired


100
%Assets:Holding company cash, short term investments and marketable
    securities


0.6Accounts receivable and other


48.8Recoverable from reinsurers


379.7Portfolio investments


835.4Future income taxes


9.3Intangible assets


59.8Goodwill


63.6Other assets


43.21,440.4Liabilities:Subsidiary indebtedness


29.7Accounts payable and accrued liabilities


60.8Funds withheld payable to reinsurers


83.3Provision for claims


731.1Unearned premiums


174.2Long term debt  subsidiary company borrowings


67.01,146.1Net assets acquired


294.31,440.4     Cunningham
    Lindsey
    Year
    ended December 31, 2010
  Agreement
    to Purchase The Pacific Insurance Berhad




---



##### 



Acquisition
    of General Fidelity Insurance Company
    Acquisition
    of Zenith National




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
    Syndicate 2112


GFIC


Zenith NationalAcquisition date


October 1, 2010



August 17, 2010



May 20, 2010Percentage of common shares acquired


100
%


100
%


100
%Assets:Holding company cash, short term investments and marketable
    securities(1)










50.6Accounts receivable and other


1.5



47.8



570.4Recoverable from reinsurers


0.7



10.5



235.1Portfolio
    investments(2)


29.1



661.1



1,746.6Future income taxes






42.2



Intangible
    assets(3)










175.5Goodwill










317.6Other assets










76.131.3



761.6



3,171.9Liabilities:Accounts payable and accrued liabilities


0.7



10.4



206.2Future income
    taxes(4)










44.2Provision for claims


30.6



394.7



1,175.8Unearned premiums






32.8



246.6Long term debt  subsidiary company borrowings










57.731.3



437.9



1,730.5Net assets acquired






323.7



1,441.431.3



761.6



3,171.9Excess of fair value of net assets acquired over purchase price






83.1



   (1)
    Included in the carrying value of Zenith Nationals
    holding company cash, short term investments and marketable
    securities acquired was $40.6 of holding company cash and cash
    equivalents.(2)
    Included in the carrying value of the acquired portfolio
    investments of Syndicate 2112 and GFIC were $29.1 and $650.0
    respectively of subsidiary cash and cash equivalents. Included
    in the carrying value of Zenith Nationals portfolio
    investments acquired was $231.5 of subsidiary cash and cash
    equivalents and $47.5 of debt securities issued by Fairfax and
    OdysseyRe. The $47.5 of debt securities acquired was eliminated
    against long term debt  holding company borrowings
    ($40.6) and long term debt  subsidiary company
    borrowings ($6.9) on the consolidated balance sheet.(3)
    Zenith Nationals intangible assets were comprised of
    broker relationships of $147.5, brand names of $20.2 and
    computer software of $7.8.(4)
    Included in Zenith Nationals future income taxes was a
    future income tax liability of $58.7 associated with the
    recognition of broker relationships and brand names as described
    in footnote 3.




---



##### 



Year endedDecember 31, 2010Revenue  as reported


6,163.7Revenue  Zenith National (from the beginning of the
    period to May 20)


194.6Pro-forma revenue


6,358.3Net earnings attributable to shareholders of Fairfax 
    as reported


469.0Net loss attributable to shareholders of Fairfax 
    Zenith National (from the beginning of the period to May 20)


(26.3
)Pro-forma net earnings attributable to shareholders of Fairfax


442.7Pro-forma net earnings per share

$
20.13Pro-forma net earnings per diluted share

$
20.03   Sale of
    TIG Indemnity
    Other
  Investment
    in Gulf Insurance
    Year
    ended December 31, 2009
  Establishment
    of New Brazilian Insurer
    Privatization
    of OdysseyRe




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
      Privatization
    of Advent
    Privatization
    of Northbridge
    Acquisition
    of Polish Re
    OdysseyRe


Advent


Northbridge


Polish ReStep 1 acquisition


Step 2 acquisition


TotalAcquisition date


October 21, 2009



September 2, 2009



January 13, 2009



February 20, 2009







January 7, 2009Percentage of common shares acquired


27.4
%


36.5
%


24.8
%


11.6
%


36.4
%


100
%Cash purchase consideration


1,017.0



59.5



374.0



172.4



546.4



57.0Fair value of assets acquired:Tangible
    assets(1)


3,028.7



368.3



1,070.2



496.0



1,566.2



141.0Intangible assets:Customer and broker relationships


27.9







53.5



26.1



79.6



Brand names


10.0







7.5



3.7



11.2



Goodwill


64.6







51.5



29.1



80.6



13.8Total fair value of assets acquired


3,131.2



368.3



1,182.7



554.9



1,737.6



154.8Total fair value of liabilities assumed


(2,114.2
)


(308.8
)


(808.7
)


(382.5
)


(1,191.2
)


(97.8
)Net assets acquired


1,017.0



59.5



374.0



172.4



546.4



57.0   (1)
    Of the $141.0 of tangible assets acquired in the Polish Re
    transaction, $31.9 comprised cash and cash equivalents.




---



##### 



Other
  Investment
    in Alltrust
    Investment
    in Cunningham Lindsey
    Year
    ended December 31, 2008
  Acquisition
    of Ridley
    Acquisition
    of Advent
    Acquisition
    of CropUSA Insurance Agency, Inc.
    (CropUSA)
    Cunningham
    Lindsey




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
      Other
  Investment
    in Arab Orient
    Repurchases
    of shares
      20.
    Financial
    Risk Management  Overview
    year-over-year




---



##### 



Underwriting
    Risk




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
        
    Property, which insures against losses from (among other things)
    fire, explosion, natural perils (for example earthquake,
    windstorm and flood) and engineering problems (for example,
    boiler explosion, machinery breakdown and construction defects);
    Automobile, which insures against losses from, principally,
    physical damage to the insured vehicle, loss of the insured
    vehicle and third party liability;
    Workers compensation and employers liability;
    Other casualty, such as accident and health, medical
    malpractice, other liability and umbrella coverage;
    Marine and aerospace, such as inland marine, aircraft, and
    marine hull;
    Other includes all other miscellaneous risks insured by the
    company and not identified above; and
    Reinsurance includes, but is not limited to, property, casualty
    and liability exposures.      U.S.Insurance (Crum &Insurance 


Forster and


Insurance 


Reinsurance 


Reinsurance and InsuranceNorthbridge


Zenith National)


Asia


OdysseyRe


OtherFor the years ended December 31,

2010


2009


2010


2009


2010


2009


2010


2009


2010


2009Impact of +1% increase in loss ratio on:Earnings from operations before tax


10.0



9.7



10.0



7.8



1.6



1.2



18.9



19.3



5.4



6.3Total equity


7.0



6.6



6.5



5.1



1.4



1.0



12.3



12.5



4.1



4.8   Credit
    Risk
  year-over-year




---



##### 



December 31,2010


2009Bonds:U.S., Canadian and other government


4,172.8



1,652.8Canadian provincials


1,251.3



1,346.8U.S. states and municipalities


5,425.6



5,497.8Corporate and other and mortgage backed securities 
    residential


2,107.0



2,971.0Derivatives and other invested assets:Receivable from counterparties to derivatives


602.4



225.2Accounts receivable and other


1,802.3



1,805.0Recoverable from reinsurers


3,993.8



3,818.6Cash and short term investments


4,114.5



3,699.7Total gross credit risk exposure


23,469.7



21,016.9     Investments
    in Debt Instruments
    year-over-year
    December 31, 2010


December 31, 2009Carrying





CarryingIssuer Credit Rating

value


%


value


%AAA/Aaa


4,220.2



32.5



5,748.9



50.1AA/Aa


5,291.0



40.8



1,695.4



14.8A/A


1,432.7



11.1



1,468.5



12.8BBB/Baa


558.4



4.3



970.8



8.5BB/Ba


324.4



2.5



253.5



2.2B/B


215.1



1.7



291.9



2.5Lower than B/B and unrated


914.9



7.1



1,039.4



9.1Total


12,956.7



100.0



11,468.4



100.0




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
      mark-to-market
    Balances
    due from Counterparties to Derivative Contracts
    December 31,2010


2009Total derivative assets (excluding exchange traded instruments
    comprised principally of equity call options and warrants and
    credit warrants which are not subject to counterparty risk)


424.8



104.8Impact of net settlement arrangements


(119.0
)


(11.1
)Fair value of collateral deposited for the benefit of the company


(120.5
)


(23.2
)Net derivative counterparty exposure after net settlement and
    collateral arrangements


185.3



70.5




---



##### 



Recoverable
    from Reinsurers
        December 31, 2010


December 31, 2009Outstanding








OutstandingGross


balances for


Net unsecured


Gross


balances for


Net unsecuredrecoverable


which security is


recoverable


recoverable


which security is


recoverableA.M. Best Rating

from reinsurers


held


from reinsurers


from reinsurers


held


from reinsurersA++


176.4



8.5



167.9



124.0



8.4



115.6A+


841.0



72.0



769.0



871.4



76.1



795.3A


2,077.5



473.2



1,604.3



1,837.4



470.3



1,367.1A−


262.3



123.7



138.6



352.8



143.5



209.3B++


38.0



13.0



25.0



39.6



9.9



29.7B+


78.0



55.8



22.2



60.7



41.3



19.4B or lower


5.5







5.5



17.6



0.3



17.3Not rated


806.6



244.3



562.3



815.5



235.7



579.8Pools and associations


81.5



46.6



34.9



80.7



45.7



35.04,366.8



1,037.1



3,329.7



4,199.7



1,031.2



3,168.5Provision for uncollectible reinsurance


373.0







373.0



381.1







381.1Recoverable from reinsurers


3,993.8







2,956.7



3,818.6







2,787.4




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
    Economic
    hedging of credit risk
    December 31, 2010


For the Year Ended December 31, 2010OthercomprehensiveExposure/


Carrying


income


Net earnings


Net equitynotional amount


value


(pre-tax)


(pre-tax)


(pre-tax)Credit risk exposures:Bonds:U.S., Canadian and other government


4,172.8



4,172.8











Canadian provincials


1,251.3



1,251.3











U.S. states and municipalities


5,425.6



5,425.6



(49.7
)


(148.1
)


(197.8
)Corporate and other


2,107.0



2,107.0



(89.3
)


479.6



390.3Derivatives and other invested assets:Receivable from counterparties to derivatives


602.4



602.4







4.5



4.5Accounts receivable and other


1,802.3



1,802.3







2.0



2.0Recoverable from reinsurers


3,993.8



3,993.8







(32.0
)


(32.0
)Cash and short term investments


4,114.5



4,114.5











23,469.7



23,469.7



(139.0
)


306.0



167.0Hedging instruments:Derivatives and other invested assets:Credit default swaps


(3,499.3
)


67.2







15.8



15.8Net exposure and financial effects


19,970.4







(139.0
)


321.8



182.8   December 31, 2009


For the Year Ended December 31, 2009OthercomprehensiveExposure/


Carrying


income


Net earnings


Net equitynotional amount


value


(pre-tax)


(pre-tax)


(pre-tax)Credit risk exposures:Bonds:U.S., Canadian and other government


1,652.8



1,652.8











Canadian provincials


1,346.8



1,346.8











U.S. states and municipalities


5,497.8



5,497.8



65.3



308.6



373.9Corporate and other and mortgage backed securities-residential


2,971.0



2,971.0



185.4



599.1



784.5Derivatives and other invested assets:Receivable from counterparties to derivatives


225.2



225.2







3.1



3.1Accounts receivable and other


1,805.0



1,805.0







(1.9
)


(1.9
)Recoverable from reinsurers


3,818.6



3,818.6







(59.7
)


(59.7
)Cash and short term investments


3,699.7



3,699.7











21,016.9



21,016.9



250.7



849.2



1,099.9Hedging instruments:Derivatives and other invested assets:Credit default swaps


(5,926.2
)


71.6







(114.6
)


(114.6
)Net exposure and financial effects


15,090.7







250.7



734.6



985.3




---



##### 



Liquidity
    Risk




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
      December 31,
    2010
  Less than


1 to 3


3 months








More than1 month


months


to 1 year


1 - 3 years


3 - 5 years


5 years


TotalSubsidiary indebtedness  principal and interest


1.3







1.0















2.3Accounts payable and accrued
    liabilities(1)


242.9



218.9



191.3



277.8



57.6



196.9



1,185.4Income taxes payable






25.4



















25.4Funds withheld payable to reinsurers






2.4



37.3



28.0



268.0



27.5



363.2Gross claims liability


338.4



701.2



2,717.3



4,172.4



2,721.0



5,620.0



16,270.3Long term debt obligations  principal


0.1



0.2



0.1



376.2



207.6



1,887.0



2,471.2Long term debt obligations  interest


3.9



18.4



155.8



338.0



294.1



666.0



1,476.2Other long term liabilities  principal






1.6



5.1



8.7



10.3



343.4



369.1Other long term liabilities  interest


0.4



3.5



10.5



27.5



25.8



31.7



99.4Operating leases  obligations


4.7



10.3



44.2



76.2



49.1



79.5



264.0591.7



981.9



3,162.6



5,304.8



3,633.5



8,852.0



22,526.5   December 31,
    2009
  Less than


1 to 3


3 months








More than1 month


months


to 1 year


1 - 3 years


3 - 5 years


5 years


TotalSubsidiary indebtedness  principal and interest










0.1



12.6











12.7Accounts payable and accrued
    liabilities(1)


179.9



134.6



440.6



163.3



58.6



160.9



1,137.9Income taxes payable






70.9



















70.9Funds withheld payable to reinsurers


0.8



6.1



33.3



25.1



25.1



264.5



354.9Gross claims liability


300.8



576.4



2,540.0



4,245.7



2,346.1



4,757.7



14,766.7Long term debt obligations  principal










1.8



181.0



225.2



1,774.9



2,182.9Long term debt obligations  interest


3.9



16.3



136.6



306.3



268.0



647.8



1,378.9Other long term liabilities  principal






1.5



4.6



10.8



9.5



147.1



173.5Other long term liabilities  interest


0.4



3.6



11.0



28.3



26.7



44.0



114.0Operating leases  obligations


2.4



6.0



43.3



66.9



36.3



79.4



234.3488.2



815.4



3,211.3



5,040.0



2,995.5



7,876.3



20,426.7   (1)
    Excludes accrued interest, deferred revenue, deferred costs
    and unrecognized balances relating to defined benefit pension
    and other post retirement benefit plans.




---



##### 



December 31,
    2010
  Less than


1 to


3 months








More than1 month


3 months


to 1 year


1 - 3 years


3 - 5 years


5 years


TotalShort sale and derivative obligations:Equity index total return swaps  short positions


7.3



126.4



















133.7Equity total return swaps  short positions


1.5



26.3















0.5



28.3Equity total return swaps  long positions


6.0



2.3



















8.3Foreign exchange forward contracts


1.9



13.5



10.1















25.5Other derivative contracts


15.6











5.5











21.132.3



168.5



10.1



5.5







0.5



216.9   December 31,
    2009
  Less than


1 to


3 months








More than1 month


3 months


to 1 year


1 - 3 years


3 - 5 years


5 years


TotalShort sale and derivative obligations:Equity total return swaps  short positions






1.2



















1.2Equity total return swaps  long positions


7.7























7.7Foreign exchange forward contracts


0.7



7.2



40.1















48.0Other derivative contracts














0.3











0.38.4



8.4



40.1



0.3











57.2   Market
    Risk
    Interest
    Rate Risk




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
        December 31, 2010Hypothetical $ changeeffect on:Fair value of


Otherfixed income


comprehensive


Net


HypotheticalChange in Interest Rates

portfolio


income


earnings


% change200 basis point increase


10,285.5



(1,001.2
)


(800.2
)


(20.6
)100 basis point increase


11,473.9



(563.5
)


(445.5
)


(11.4
)No change


12,956.7











100 basis point decrease


14,593.3



670.7



446.4



12.6200 basis point decrease


16,461.7



1,498.9



898.5



27.1   December 31, 2009Hypothetical $ changeeffect on:Fair value of


Otherfixed income


comprehensive


Net


HypotheticalChange in Interest Rates

portfolio


income


earnings


% change200 basis point increase


9,689.3



(448.6
)


(752.3
)


(15.5
)100 basis point increase


10,535.9



(241.5
)


(389.4
)


(8.1
)No change


11,468.4











100 basis point decrease


12,434.0



268.9



384.1



8.4200 basis point decrease


13,521.5



585.7



806.0



17.9     Market
    Price Fluctuations




---



##### 



December 31, 2010


For the Year Ended December 31, 2010OthercomprehensiveExposure /


Carrying


income


Net earnings


Net equitynotional value


value


(pre-tax)


(pre-tax)


(pre-tax)Equity exposures:Common stocks


4,474.5



4,474.5



125.2



442.4



567.6Investments, at equity


976.9



715.5



1.8



135.1



136.9Derivatives and other invested assets:Equity total return swaps  long positions


1,244.3



(7.6
)






83.2



83.2Equity warrants


158.8



171.1







83.6



83.6Equity call options














13.9



13.9Total equity and equity-related holdings


6,854.5



5,353.5



127.0



758.2



885.2Hedging instruments:Derivatives and other invested assets:Equity total return swaps  short positions


(624.5
)


(10.3
)






(93.0
)


(93.0
)Equity index total return swaps  short positions


(5,463.3
)


(123.4
)






(843.6
)


(843.6
)(6,087.8
)


(133.7
)






(936.6
)


(936.6
)Net exposure and financial effects


766.7







127.0



(178.4
)


(51.4
)




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
    December 31, 2009


For the Year Ended December 31, 2009OthercomprehensiveExposure /


Carrying


income


Net earnings


Net equitynotional value


value


(pre-tax)


(pre-tax)


(pre-tax)Equity exposures:Common stocks


5,130.8



5,130.8



1,207.5



(91.5
)


1,116.0Investments, at equity


604.3



433.5



3.3



23.3



26.6Derivatives and other invested assets:Equity total return swaps  long positions


214.6



1.0







84.4



84.4Equity and equity index call options


79.3



46.0







8.6



8.6Equity warrants


127.5



71.6







230.9



230.9Total equity and equity-related holdings


6,156.5



5,682.9



1,210.8



255.7



1,466.5Hedging instruments:Derivatives and other invested assets:S&P 500 index call options














2.6



2.6Equity total return swaps  short positions


(232.2
)


(1.2
)






(26.8
)


(26.8
)Equity index total return swaps  short positions


(1,582.7
)


9.2







(75.4
)


(75.4
)(1,814.9
)


8.0







(99.6
)


(99.6
)Net exposure and financial effects


4,341.6







1,210.8



156.1



1,366.9       15-year one-to-one
  December 31, 2010


December 31, 2009Effect on other


Effect on


Effect on other


Effect oncomprehensive income


net earnings


comprehensive income


net earningsChange in global
    equity markets10% increase


286.2



(294.6
)


333.1



(89.5
)10% decrease


(286.2
)


296.4



(333.1
)


93.5




---



##### 



Risk of
    Decreasing Price Levels
  and/or
    mark-to-market mark-to-market
    Foreign
    Currency Risk




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
      Non-U.S. dollar
          Year ended December 31,2010


2009


2008Net gains (losses) on investmentsUnderwriting activities


(26.4
)


14.3



(147.9
)Investing activities


(151.8
)


(31.9
)


102.5Foreign currency gains (losses) included in pre-tax net earnings


(178.2
)


(17.6
)


(45.4
)Other comprehensive income  investing activities
    foreign currency gains (losses)


100.7



(39.3
)


41.6(77.5
)


(56.9
)


(3.8
)




---



##### 



2010

2009Canadian dollarImpact on pre-tax earnings (loss)


(10.2
)


(2.6
)Impact on net earnings (loss)


(8.1
)


(2.1
)Impact on pre-tax other comprehensive income (loss)


(54.9
)


(66.2
)Impact on other comprehensive income (loss)


(52.6
)


(70.1
)EuroImpact on pre-tax earnings (loss)


(6.1
)


2.4Impact on net earnings (loss)


(3.8
)


1.9Impact on pre-tax other comprehensive income (loss)


7.8



8.1Impact on other comprehensive income (loss)


2.3



3.4British pound sterlingImpact on pre-tax earnings (loss)


0.1



1.3Impact on net earnings (loss)


(0.7
)


1.1Impact on pre-tax other comprehensive income (loss)


20.7



22.3Impact on other comprehensive income (loss)


13.5



14.5All other currenciesImpact on pre-tax earnings (loss)


10.8



8.4Impact on net earnings (loss)


8.4



6.0Impact on pre-tax other comprehensive income (loss)


(10.5
)


(5.8
)Impact on other comprehensive income (loss)


(10.0
)


(6.9
)TotalImpact on pre-tax earnings (loss)


(5.4
)


9.5Impact on net earnings (loss)


(4.2
)


6.9Impact on pre-tax other comprehensive income (loss)


(36.9
)


(41.6
)Impact on other comprehensive income (loss)


(46.8
)


(59.1
)     Capital
    Management




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
      December 31,2010


2009Holding company cash, short term investments and marketable
    securities, net of short sale and derivative obligations


1,474.2



1,242.7Holding company debt


1,498.1



1,236.9Subsidiary debt


919.9



903.4Other long term obligations  holding company


311.5



173.5Total debt


2,729.5



2,313.8Net debt


1,255.3



1,071.1Common shareholders equity


7,761.9



7,391.8Preferred equity


934.7



227.2Non-controlling interests


45.8



117.6Total equity


8,742.4



7,736.6Net debt/total equity


14.4
%


13.8
%Net debt/net total
    capital(1)


12.6
%


12.2
%Total debt/total
    capital(2)


23.8
%


23.0
%Interest
    coverage(3)


2.8
x


8.2
xInterest and preferred share dividend distribution
    coverage(4)


2.3
x


7.5
x   (1)
    Net total capital is calculated by the company as the sum of
    total equity and net debt.(2)
    Total capital is calculated by the company as the sum of
    total equity 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.(4)
    Interest and preferred share dividend distribution coverage
    is calculated by the company as the sum of earnings (loss) from
    operations before income taxes and interest expense divided by
    interest expense and preferred share dividend distribution
    obligations adjusted to a before tax equivalent at the
    companys Canadian statutory tax rate.




---



##### 



21.
    Segmented
    Information    Insurance
        Reinsurance
    Reinsurance and Insurance  Other
    Runoff
    Other




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
    Corporate
    and Other
    Pre-tax
    income (loss) by Reporting Segment
    2010
  ReinsuranceInsurance





and








Other





EliminationsFairfax


Reinsurance


Insurance


Ongoing





(animal


Corporate


andNorthbridge


U.S.


Asia


OdysseyRe


Other


Operations


Runoff


nutrition)


and other


Adjustments


ConsolidatedNet premiums earned


996.6



1,000.1



155.0



1,885.7



536.0



4,573.4



















4,573.4Underwriting expenses


(1,069.0
)


(1,168.3
)


(138.4
)


(1,859.9
)


(574.4
)


(4,810.0
)


















(4,810.0
)Underwriting profit (loss)


(72.4
)


(168.2
)


16.6



25.8



(38.4
)


(236.6
)


















(236.6
)Interest income


106.9



91.1



13.2



271.0



52.0



534.2



63.4







5.6







603.2Dividends


24.9



27.1



5.0



40.3



0.7



98.0



24.4







6.4







128.8Earnings (losses) on investments, at equity


5.0



3.3



23.2



10.9



(1.4
)


41.0



3.9







6.0







50.9Investment expenses


(11.0
)


(17.6
)


(1.6
)


(33.3
)


(6.3
)


(69.8
)


(13.2
)






(3.2
)


65.7



(20.5
)Interest and dividends


125.8



103.9



39.8



288.9



45.0



603.4



78.5







14.8



65.7



762.4OtherRevenue(1)


























90.3



549.1



65.7



(65.7
)


639.4Expenses


























(124.0
)


(538.8
)










(662.8
)























(33.7
)


10.3



65.7



(65.7
)


(23.4
)Operating income (loss) before:


53.4



(64.3
)


56.4



314.7



6.6



366.8



44.8



10.3



80.5







502.4Net gains (losses) on investments


55.7



122.5



(3.5
)


(28.8
)


72.9



218.8



98.7







(125.6
)


(3.4
)


188.5Interest expense






(30.7
)






(30.5
)


(4.5
)


(65.7
)


(3.2
)


(0.6
)


(125.9
)






(195.4
)Corporate overhead and other


(15.4
)


(7.7
)


(2.4
)


(31.3
)


(3.1
)


(59.9
)










(83.9
)






(143.8
)Pre-tax income (loss)


93.7



19.8



50.5



224.1



71.9



460.0



140.3



9.7



(254.9
)


(3.4
)


351.7Income taxes










































119.5Net earnings










































471.2Attributable to:Shareholders of Fairfax










































469.0Non-controlling interests










































2.2471.2   (1)
    The Runoff segment revenue includes $83.1 of the excess of
    the fair value of net assets acquired over the purchase price
    related to the acquisition of GFIC, as described in
    note 19.




---



##### 



2009
  ReinsuranceInsurance





and








Other





EliminationsFairfax


Reinsurance


Insurance


Ongoing





(animal


Corporate


andNorthbridge


U.S.


Asia


OdysseyRe


Other


Operations


Runoff


nutrition)


and other


Adjustments


ConsolidatedNet premiums earned


969.2



781.3



116.0



1,927.4



628.1



4,422.0



















4,422.0Underwriting expenses


(1,026.3
)


(813.3
)


(95.8
)


(1,863.1
)


(616.2
)


(4,414.7
)


















(4,414.7
)Underwriting profit (loss)


(57.1
)


(32.0
)


20.2



64.3



11.9



7.3



















7.3Interest income


96.8



90.6



10.2



258.9



38.9



495.4



55.0







14.9







565.3Dividends


24.9



34.4



5.6



52.0



2.5



119.4



11.4







6.7







137.5Earnings (losses) on investments, at equity


0.1



4.7



(4.6
)


6.5



0.4



7.1











16.2







23.3Investment expenses


(8.8
)


(15.8
)


(2.2
)


(33.8
)


(4.3
)


(64.9
)


(12.0
)






(1.4
)


64.9



(13.4
)Interest and dividends


113.0



113.9



9.0



283.6



37.5



557.0



54.4







36.4



64.9



712.7OtherRevenue






























556.4



64.9



(64.9
)


556.4Expenses


























(152.4
)


(544.0
)










(696.4
)























(152.4
)


12.4



64.9



(64.9
)


(140.0
)Operating income (loss) before:


55.9



81.9



29.2



347.9



49.4



564.3



(98.0
)


12.4



101.3







580.0Net gains (losses) on investments


94.4



229.1



17.8



353.6



(25.8
)


669.1



129.2







147.3



(1.1
)


944.5Interest expense






(27.8
)






(31.0
)


(5.1
)


(63.9
)






(1.0
)


(101.4
)






(166.3
)Corporate overhead and other


(19.8
)


(3.3
)


(2.3
)


(25.8
)


(13.1
)


(64.3
)










(88.3
)






(152.6
)Pre-tax income (loss)


130.5



279.9



44.7



644.7



5.4



1,105.2



31.2



11.4



58.9



(1.1
)


1,205.6Income taxes










































(214.9
)Net earnings










































990.7Attributable to:Shareholders of Fairfax










































856.8Non-controlling interests










































133.9990.7   2008
  ReinsuranceInsurance





and








Other





EliminationsFairfax


Reinsurance


Insurance


Ongoing





(animal


Corporate


andNorthbridge


U.S.


Asia


OdysseyRe


Other


operations


Runoff


nutrition)


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


(1,114.0
)


(1,182.2
)


(77.7
)


(2,104.1
)


(314.6
)


(4,792.6
)


















(4,792.6
)Underwriting profit (loss)


(37.9
)


(177.2
)


6.9



(27.7
)


(45.0
)


(280.9
)


















(280.9
)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 (losses) on investments, at equity


0.6



(32.2
)


(4.9
)


(13.2
)


1.4



(48.3
)


(4.2
)






3.1







(49.4
)Investment 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


























(192.8
)


(98.0
)










(290.8
)























(175.4
)


1.4



53.3



(53.3
)


(174.0
)Operating income (loss) before:


70.0



(91.0
)


8.5



222.6



(14.9
)


195.2



(107.2
)


1.4



82.1







171.5Net gains (losses) on investments


25.7



605.7



3.0



740.1



28.1



1,402.6



499.8







689.1



(20.8
)


2,570.7Interest 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
)Net earnings










































1,688.7Attributable to:Shareholders of Fairfax










































1,473.8Non-controlling interests










































214.91,688.7




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
      2010


2009


2008Revenues for reporting segmentsNet premiums earned


4,573.4



4,422.0



4,511.7Interest and dividends


762.4



712.7



626.4Net gains on investments


188.5



944.5



2,570.7Other revenue per reportable segment


639.4



556.4



116.8Total consolidated revenues


6,163.7



6,635.6



7,825.6   Significant
    Non-cash Items
    Depreciation and impairment lossof premises &Earnings (losses)


equipment &


Impairment offrom investments,


amortization of


available for saleat equity


intangible assets


securities2010


2009


2008


2010


2009


2008


2010


2009


2008Insurance

 Canada (Northbridge)


5.0



0.1



0.6



10.5



8.8



3.5



6.9



54.1



279.0 U.S. (Crum & Forster and Zenith National)


3.3



4.7



(32.2
)


12.4



4.3



10.1



8.1



106.1



198.0 Asia (Fairfax Asia)


23.2



(4.6
)


(4.9
)


0.5



0.5



0.7







1.1



1.9Reinsurance

 OdysseyRe


10.9



6.5



(13.2
)


6.9



6.2



6.6



17.9



119.1



370.1Reinsurance and Insurance  Other


(1.4
)


0.4



1.4



0.8



0.6











19.0



8.9Ongoing operations


41.0



7.1



(48.3
)


31.1



20.4



20.9



32.9



299.4



857.9Runoff




3.9







(4.2
)


0.9



1.2



1.7



0.8



29.8



76.5Other (animal nutrition)














11.2



12.1



2.5











Corporate and other


6.0



16.2



3.1



5.7



5.7



5.6







10.8



77.4Consolidated


50.9



23.3



(49.4
)


48.9



39.4



30.7



33.7



340.0



1,011.8




---



##### 



Investments,
    at Equity, Additions to Goodwill, Segment Assets and Segment
    Liabilities
    Investments,


Additionsat equity


to goodwill


Segment assets


Segment liabilities2010


2009


2010


2009


2010


2009


2010


2009Insurance

 Canada (Northbridge)


35.4



5.8







80.6



5,643.9



5,235.2



3,941.1



3,724.5 U.S. (Crum & Forster and Zenith National)


52.9



34.6



317.6







6,912.4



5,044.1



4,967.6



3,690.7 Asia (Fairfax Asia)


118.6



93.5











1,089.8



807.6



692.6



475.8Reinsurance

 OdysseyRe


140.3



92.7







72.9



11,216.8



10,866.5



7,467.5



7,249.5Reinsurance and Insurance  Other


3.9



5.2







13.8



2,208.2



2,004.0



1,508.9



1,430.6Ongoing operations


351.1



231.8



317.6



167.3



27,071.1



23,957.4



18,577.7



16,571.1Runoff




15.4



39.4











5,101.6



4,914.6



3,486.9



3,472.6Other (animal nutrition)


















199.0



205.1



73.8



81.4Corporate and other and eliminations and adjustments


349.0



162.3











(633.5
)


(625.1
)


857.4



590.3Consolidated




715.5



433.5



317.6



167.3



31,738.2



28,452.0



22,995.8



20,715.4   Product
    Line
    GeneralProperty


Casualty


Automobile


liability2010


2009


2008


2010


2009


2008


2010


2009


2008


2010


2009


2008Net premiums earned:Insurance

 Canada (Northbridge)


247.7



249.6



256.1















458.7



439.6



498.3



196.6



197.0



234.6 U.S. (Crum & Forster and Zenith National)


97.6



115.9



242.8



141.9



130.2



117.7



86.7



126.3



187.2



184.9



184.8



196.5 Asia (Fairfax Asia)


13.7



9.5



10.7



10.2



11.3



11.0



47.5



26.7



9.4



8.0



11.8



6.4Reinsurance

 OdysseyRe


368.5



375.4



368.1



0.3







0.4



132.9



182.5



186.0



400.5



413.3



583.0Reinsurance and Insurance  Other


145.1



133.3



35.8



9.9



3.7



0.8



120.3



130.3



73.8



74.4



70.9



78.9Ongoing operations


872.6



883.7



913.5



162.3



145.2



129.9



846.1



905.4



954.7



864.4



877.8



1,099.4Runoff




0.2



(0.1
)


(0.8
)






(0.4
)


(0.5
)


(1.0
)


(1.2
)


0.2



3.5



0.1



4.8Total net premiums earned


872.8



883.6



912.7



162.3



144.8



129.4



845.1



904.2



954.9



867.9



877.9



1,104.2   Workers


Marine and


Insurance


Reinsurancecompensation


aerospace


Other


non-proportional


Total2010


2009


2008


2010


2009


2008


2010


2009


2008


2010


2009


2008


2010


2009


2008Net premiums earned:Insurance

 Canada (Northbridge)














83.4



74.2



77.9



10.2



8.9



9.1







(0.1
)


0.1



996.6



969.2



1,076.1 U.S. (Crum & Forster and Zenith National)


457.9



188.3



219.8



18.1



17.2



20.0



12.9



18.6



21.0



0.1











1,000.1



781.3



1,005.0 Asia (Fairfax Asia)


21.5



12.6



18.0



45.1



37.2



23.8



9.0



6.9



5.3















155.0



116.0



84.6Reinsurance

 OdysseyRe






0.5



3.7



105.3



105.6



113.9



64.5



65.8



69.8



813.7



784.3



751.5



1,885.7



1,927.4



2,076.4Reinsurance and Insurance  Other


3.6



0.1



(1.7
)


25.9



35.7



8.8



7.9



14.9



8.3



148.9



239.2



64.9



536.0



628.1



269.6Ongoing operations


483.0



201.5



239.8



277.8



269.9



244.4



104.5



115.1



113.5



962.7



1,023.4



816.5



4,573.4



4,422.0



4,511.7Runoff




1.4



1.5



12.4



0.8







0.8



1.4







0.4



0.9



0.1



0.1



7.2







17.4Total net premiums earned


484.4



203.0



252.2



278.6



269.9



245.2



105.9



115.1



113.9



963.6



1,023.5



816.6



4,580.6



4,422.0



4,529.1Interest and dividends


















































762.4



712.7



626.4Net gains on investments


















































188.5



944.5



2,570.7Excess of fair value of net assets acquired over purchase price










































83.1







Other revenue




















































549.1



556.4



99.4Total consolidated revenues


















































6,163.7



6,635.6



7,825.6




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
    Geographic
    Region
    Canada


United States


International


Total2010


2009


2008


2010


2009


2008


2010


2009


2008


2010


2009


2008Net premiums earned:Insurance

 Canada (Northbridge)


957.9



910.9



1,024.5



38.2



58.3



51.3



0.5







0.3



996.6



969.2



1,076.1 U.S. (Crum & Forster and Zenith National)














1,000.1



781.3



1,005.0















1,000.1



781.3



1,005.0 Asia (Fairfax Asia)


























155.0



116.0



84.6



155.0



116.0



84.6Reinsurance

 OdysseyRe


54.9



38.6



41.2



1,017.6



1,094.4



1,154.1



813.2



794.4



881.1



1,885.7



1,927.4



2,076.4Reinsurance and Insurance  Other


159.3



178.7



161.5



158.1



241.8



88.3



218.6



207.6



19.8



536.0



628.1



269.6Ongoing operations


1,172.1



1,128.2



1,227.2



2,214.0



2,175.8



2,298.7



1,187.3



1,118.0



985.8



4,573.4



4,422.0



4,511.7Runoff




0.4



0.2



(0.2
)


6.8



(0.2
)


17.6















7.2







17.4Total net premiums earned


1,172.5



1,128.4



1,227.0



2,220.8



2,175.6



2,316.3



1,187.3



1,118.0



985.8



4,580.6



4,422.0



4,529.1Interest and dividends






































762.4



712.7



626.4Net gains on investments






































188.5



944.5



2,570.7Excess of fair value of net assets acquired over purchase price






























83.1







Other revenue








































549.1



556.4



99.4Total consolidated revenues






































6,163.7



6,635.6



7,825.6Allocation of revenue


25.6
%


25.5
%


27.1
%


48.5
%


49.2
%


51.1
%


25.9
%


25.3
%


21.8
%




---



##### 



22.
    US
    GAAP Reconciliation    Consolidated
    Statements of Earnings and Comprehensive Income
    2010


2009(a)


2008(a)Net earnings, Canadian GAAP


471.2



990.7



1,688.7Recoveries on retroactive
    reinsurance(b)


15.9



14.9



30.8Equity
    accounting(c)


9.2



3.6



(7.2
)Northbridge step
    acquisitions(d)


12.2



(1.9
)


OdysseyRe step
    acquisition(e)


86.1



17.0



Repurchase of subsidiary
    securities(f)






(16.9
)


Other
    differences(g)










8.8Tax
    effects(h)


(48.4
)


(11.0
)


(9.6
)Net earnings, US GAAP


546.2



996.4



1,711.5Attributable to:Shareholders of Fairfax, US GAAP


544.0



860.3



1,495.3Non-controlling interests, US GAAP


2.2



136.1



216.2546.2



996.4



1,711.5Net earnings per share, US GAAP

$
25.08


$
44.18


$
81.57Net earnings per diluted share, US GAAP

$
24.96


$
43.95


$
80.71Other comprehensive income (loss), Canadian GAAP


(21.2
)


1,074.3



(545.4
)Equity
    accounting(c)


0.5



(3.7
)


Northbridge step
    acquisitions(d)


(15.2
)


(7.1
)


OdysseyRe step
    acquisition(e)


(85.9
)


(18.3
)


Pension liability
    adjustment(i)


2.8



(8.3
)


32.1Tax effects


34.6



(3.8
)


(6.8
)Other comprehensive income (loss), US GAAP


(84.4
)


1,033.1



(520.1
)Attributable to:Shareholders of Fairfax, US GAAP


(84.0
)


928.6



(443.0
)Non-controlling interests, US GAAP


(0.4
)


104.5



(77.1
)(84.4
)


1,033.1



(520.1
)Net earnings, US GAAP


546.2



996.4



1,711.5Other comprehensive income (loss), US GAAP


(84.4
)


1,033.1



(520.1
)Comprehensive income, US GAAP


461.8



2,029.5



1,191.4Attributable to:Shareholders of Fairfax, US GAAP


460.0



1,788.9



1,052.3Non-controlling interests, US GAAP


1.8



240.6



139.1461.8



2,029.5



1,191.4




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
      (a)
    The presentation under Canadian and US GAAP of non-controlling
    interests on the consolidated balance sheets and in the
    consolidated statements of net earnings was substantially
    harmonized following the adoption by the company of new Canadian
    GAAP accounting pronouncements related to business combinations
    and non-controlling interests on January 1, 2010 as
    described in note 2. Accordingly, certain comparative
    figures have been reclassified to conform to the presentation of
    non-controlling interests adopted under Canadian GAAP in the
    current year.(b)
    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.Included in recoveries on retroactive reinsurance for the year
    ended December 31, 2008 is pre-tax income of $8.8 related
    to the release of the unamortized deferred gain in connection
    with the commutation by Crum & Forster in the second
    quarter as described in note 8. The non-cash pre-tax charge
    under US GAAP related to this commutation was therefore $75.4.The 2008 pre-tax income reflects $11.8 related to the release of
    a portion of an unamortized deferred gain caused by a decrease
    in the losses ceded to the underlying retroactive reinsurance
    contract.  (c)
    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 income of $9.2 was recognized in 2010 (2009 
    pre-tax income of $3.6; 2008  pre-tax loss of $7.2)
    under US GAAP for companys investments in certain
    partnership trusts, whereas under Canadian GAAP, these
    investments were recorded at cost.  (d)
    Under Canadian GAAP, the privatization of Northbridge was
    accounted for as two separate step acquisitions of the
    outstanding common shares of Northbridge. Under US GAAP,
    pursuant to the adoption by the company on January 1, 2009
    of
    ASC 810-10,
    changes in ownership interests of a subsidiary that do not
    result in a loss or acquisition of control are accounted for as
    equity transactions. Under Canadian GAAP, the step acquisition
    accounting for the privatization of Northbridge recognized fair
    value adjustments to the assets and liabilities acquired, as
    described in note 19, which are generally released or
    amortized into comprehensive income in the future. These fair
    value adjustments to assets and liabilities are not recognized
    under US GAAP. Fair value adjustments relating to investments of
    $6.2 which decreased pre-tax net earnings and increased other
    comprehensive income under Canadian GAAP for the year ended
    December 31, 2010 are not recognized in comprehensive
    income under US GAAP. Fair value adjustments relating to
    investments of $7.4 which increased pre-tax net earnings and
    decreased other comprehensive income under Canadian GAAP for the
    year ended December 31, 2009 are not recognized in
    comprehensive income under US GAAP.  (e)
    Under Canadian GAAP, the privatization of OdysseyRe was
    accounted for as a step acquisition of the outstanding common
    shares of OdysseyRe. Under US GAAP, pursuant to the adoption by
    the company on January 1, 2009 of
    ASC 810-10,
    changes in ownership interests of a subsidiary that do not
    result in a loss or acquisition of control are accounted for as
    equity transactions. Under Canadian GAAP, the step acquisition
    for the privatization of OdysseyRe recognized fair value
    adjustments to the assets and liabilities acquired, as described
    in note 19, which are generally released or amortized into
    comprehensive income in the future. These fair value adjustments
    to assets and liabilities are not recognized under US GAAP. Fair
    value adjustments relating to investments of $84.7
    (2009  $17.0) which decreased pre-tax net earnings
    and increased pre-tax other comprehensive income under Canadian
    GAAP for the year ended December 31, 2010 are not
    recognized in comprehensive income under US GAAP.




---



##### 



(f)
    Under Canadian GAAP, the repurchase by OdysseyRe of its common
    shares during 2009, as described in note 19, was accounted
    for as a step acquisition. Under US GAAP, pursuant to the
    adoption by the company on January 1, 2009 of
    ASC 810-10,
    changes in ownership interests of a subsidiary that do not
    result in a loss or acquisition of control are accounted for as
    equity transactions. Under Canadian GAAP, the excess of the fair
    value of net assets acquired over the cost of the acquisition is
    recognized in consolidated net earnings. As a result, the gain
    of $16.9 recognized in 2009 in connection with the repurchase of
    common shares by OdysseyRe under Canadian GAAP was charged to
    cumulative reduction in retained earnings under US GAAP.  (g)
    Included in other differences for the year ended
    December 31, 2008 is income of $5.2 related to the release
    of a reserve for an uncertain tax provision established on
    January 1, 2007 which was resolved at December 31,
    2008.(h)
    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:  2010


2009


2008Recoveries on retroactive
    reinsurance(b)


(5.6
)


(5.2
)


(10.7
)Equity
    accounting(c)


(3.2
)


(0.1
)


1.1Northbridge step
    acquisitions(d)


(8.8
)


0.2



OdysseyRe step
    acquisitions(e)


(30.8
)


(5.9
)


(48.4
)


(11.0
)


(9.6
)
   (i)
    US GAAP 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, 2010, 2009 and 2008.




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
     Consolidated
    Balance Sheets
    December 31, 2010


December 31,
    2009(i)Canadian








CanadianGAAP


Differences


US GAAP


GAAP


Differences


US GAAPAssetsHolding company cash, short term investments and marketable
    securities


1,540.7







1,540.7



1,251.6







1,251.6Portfolio investments:Common
    stocks(ii)


4,131.3



(326.0
)


3,805.3



4,895.0



(186.8
)


4,708.2Investments, at
    equity(ii)


715.5



312.3



1,027.8



433.5



165.0



598.5All other portfolio investments


17,135.0







17,135.0



14,750.1







14,750.1Future income
    taxes(iii)


514.4



76.9



591.3



318.7



89.3



408.0Goodwill and intangible
    assets(iv)(v)(vi)


949.1



(268.4
)


680.7



438.8



(265.4
)


173.4All other assets


6,752.2







6,752.2



6,364.3







6,364.331,738.2



(205.2
)


31,533.0



28,452.0



(197.9
)


28,254.1LiabilitiesAccounts payable and accrued
    liabilities(vii)


1,269.6



111.7



1,381.3



1,238.1



130.8



1,368.9All other liabilities


21,567.6







21,567.6



19,312.9







19,312.922,837.2



111.7



22,948.9



20,551.0



130.8



20,681.8Mandatorily redeemable shares of TRG


158.6







158.6



164.4







164.4Equity(i)(ii)(iii)(iv)(v)(vi)(vii)


8,742.4



(316.9
)


8,425.5



7,736.6



(328.7
)


7,407.931,738.2



(205.2
)


31,533.0



28,452.0



(197.9
)


28,254.1     December 31, 2010


December 31,
    2009(i)Non -








Non -Parent


controlling





Parent


controllingTotal


company


interests


Total


company


interestsTotal equity based on Canadian GAAP


8,742.4



8,696.6



45.8



7,736.6



7,619.0



117.6Accumulated other comprehensive loss


(123.8
)


(121.6
)


(2.2
)


(60.6
)


(58.9
)


(1.7
)Cumulative reduction in retained earnings under US GAAP


(193.1
)


(193.1
)






(268.1
)


(268.1
)


Total equity based on US GAAP


8,425.5



8,381.9



43.6



7,407.9



7,292.0



115.9     December 31, 2010


December 31, 2009Non -








Non -Parent


controlling





Parent


controllingTotal


company


interests


Total


company


interestsEquity
    accounting(ii)


(3.2
)


(3.2
)






(3.7
)


(3.7
)


Northbridge step
    acquisitions(iv)


(22.3
)


(22.3
)






(7.1
)


(7.1
)


OdysseyRe step
    acquisition(v)


(104.2
)


(104.2
)






(18.3
)


(18.3
)


Pension liability
    adjustment(vii)


(34.8
)


(31.8
)


(3.0
)


(37.6
)


(35.1
)


(2.5
)Related future income taxes


40.7



39.9



0.8



6.1



5.3



0.8(123.8
)


(121.6
)


(2.2
)


(60.6
)


(58.9
)


(1.7
)




---



##### 



December 31, 2010


December 31, 2009Non -








Non -Parent


controlling





Parent


controllingTotal


company


interests


Total


company


interestsNet actuarial loss


(40.1
)


(36.7
)


(3.4
)


(44.7
)


(41.6
)


(3.1
)Prior service costs


2.8



2.4



0.4



3.5



2.9



0.6Transitional amounts


2.5



2.5







3.6



3.6



Total


(34.8
)


(31.8
)


(3.0
)


(37.6
)


(35.1
)


(2.5
)     December 31, 2010


December 31, 2009Non -








Non -Parent


controlling





Parent


controllingTotal


company


interests


Total


company


interestsRecoveries on retroactive
    reinsurance(vii)


(58.9
)


(58.9
)






(69.2
)


(69.2
)


Equity
    accounting(ii)


3.4



3.4







(2.6
)


(2.6
)


Northbridge step
    acquisitions(iv)


(147.0
)


(147.0
)






(150.4
)


(150.4
)


OdysseyRe step
    acquisition(v)


(22.8
)


(22.8
)






(78.1
)


(78.1
)


Purchase price allocation on the acquisition of TIG Re (now part
    of OdysseyRe) in
    1999(vi)


32.2



32.2







32.2



32.2



(193.1
)


(193.1
)






(268.1
)


(268.1
)


   (i)
    The presentation under Canadian and US GAAP of non-controlling
    interests on the consolidated balance sheets and in the
    consolidated statements of net earnings was substantially
    harmonized following the adoption by the company of new Canadian
    GAAP accounting pronouncements related to business combinations
    and non-controlling interests on January 1, 2010 as
    described in note 2. Accordingly, certain comparative figures
    have been reclassified to conform to the presentation of
    non-controlling interests adopted under Canadian GAAP in the
    current year.(ii)
    Under Canadian GAAP, certain of the companys investments
    of $63.6 ($54.5 at December 31, 2009) in partnership
    trusts that do not have a quoted price in an active market are
    accounted for on the cost basis. Under Canadian GAAP, the
    companys investment of $262.4 ($132.3 at December 31,
    2009) 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. For the
    investments in partnership trusts and limited partnerships
    described above, US GAAP requires the use of the equity method
    to account for such investments since the companys equity
    interest in these investments is more than minor.(iii)
    The difference is comprised principally of deferred tax
    adjustments related to:  December 31, 2010


December 31, 2009Recoveries on retroactive reinsurance


31.6



37.2Northbridge step acquisitions


23.8



29.3OdysseyRe step acquisitions


12.8



13.3Pension liability adjustment


8.3



5.9Other


0.4



3.676.9



89.3   (iv)
    Under Canadian GAAP, the privatization of Northbridge was
    accounted for as two separate step acquisitions of the
    outstanding common shares of Northbridge. Under US GAAP,
    pursuant to the adoption by the company on January 1, 2009
    of
    ASC 810-10,
    changes in ownership interests of a subsidiary that do not
    result in a loss or acquisition of control are accounted for as
    equity transactions. Under Canadian GAAP, the step acquisition
    accounting for the privatization of Northbridge recognized fair
    value adjustments to the




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
    assets and liabilities acquired and goodwill, as described in
    note 19. These fair value adjustments to assets and
    liabilities and goodwill are not recognized under US GAAP. As a
    result, an amount of $147.9 was charged to the cumulative
    reduction in retained earnings under US GAAP representing the
    excess of the cost of the acquisition of $546.4 over the
    carrying value of the non-controlling interest of $398.5.  (v)
    Under Canadian GAAP, the privatization of OdysseyRe was
    accounted for as a step acquisition of the outstanding common
    shares of OdysseyRe. Under US GAAP, pursuant to the adoption by
    the company on January 1, 2009 of
    ASC 810-10,
    changes in ownership interests of a subsidiary that do not
    result in a loss or acquisition of control are accounted for as
    equity transactions. Under Canadian GAAP, the step acquisition
    accounting for the privatization of OdysseyRe recognized fair
    value adjustments to the assets and liabilities acquired and
    goodwill, as described in note 19. These fair value
    adjustments to assets and liabilities and goodwill are not
    recognized under US GAAP. As a result, an amount of $89.2 was
    charged to the cumulative reduction in retained earnings under
    US GAAP representing the excess of the cost of the acquisition
    of $1,017.0 and liabilities assumed related to the amendment of
    OdysseyRes employee compensation plans of $22.4 over the
    carrying value of the non-controlling interest of $950.2.(vi)
    Under Canadian GAAP, foreign exchange losses realized on foreign
    exchange contracts that hedged the acquisition funding for TIG
    Re in 1999 (now part of OdysseyRe) were included in the purchase
    price equation and recorded as goodwill. Under U.S. GAAP these
    foreign exchange contracts were not considered a hedge and as a
    result, the goodwill recognized under Canadian GAAP has been
    reclassified as a cumulative reduction in retained earnings
    under US GAAP.(vii)
    The difference is comprised of the unamortized deferred gain on
    retroactive reinsurance contracts of $90.5 ($106.4 at
    December 31, 2009) and the pension liability
    adjustment of $21.2 ($24.4 at December 31, 2009).      Statements
    of Cash Flows
  ASC 810-10,
  Accounting
    pronouncements adopted in 2010
  No. 2009-17, 2009-17), 2009-17




---



##### 



2009-17
  No. 2010-06, 2010-06). 2010-06 2010-06
  Accounting
    pronouncements to be adopted in 2011
    23.
    Changes
    in Operating Assets and Liabilities    2010


2009


2008Provision for claims


(282.9
)


(661.3
)


24.8Unearned premiums


(125.3
)


(135.4
)


(200.0
)Accounts receivable and other


616.1



75.1



302.5Income taxes receivable


(176.5
)


(25.1
)


(10.4
)Recoverable from reinsurers


152.8



514.7



582.5Funds withheld payable to reinsurers


8.3



(0.2
)


(25.6
)Accounts payable and accrued liabilities


(202.7
)


12.5



(146.0
)Income taxes payable


(46.2
)


(579.4
)


614.0Other


46.5



34.3



50.9Change in operating assets and liabilities


(9.9
)


(764.8
)


1,192.7