FAIRFAX FINANCIAL HOLDINGS
    LIMITED


Corporate
    Profile  Fairfax Financial Holdings Limited
  Canadian
    insurance
  Northbridge Financial
  U.S.
    insurance
  Crum & Forster (C&F)
  Zenith National
  Asian
    insurance
  First Capital
  Falcon Insurance
  Other
    Insurance
  Fairfax Brasil
  Reinsurance
  OdysseyRe
  Advent




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##### 



Polish Re
  Group Re
  Runoff
    The Resolution Group (TRG) the RiverStone Group
  Other
  Hamblin Watsa Investment Counsel
  Notes:
  (1)
    
    All of the above companies are
    wholly owned (except for 98%-owned First Capital).(2)
    
    The foregoing lists all of
    Fairfaxs operating subsidiaries. The Fairfax corporate
    structure also includes a 41.3% interest in Gulf Insurance (a
    Kuwait insurance company), a 26% interest in ICICI Lombard (an
    Indian property and casualty insurance company), a 40.5%
    interest in Falcon Thailand, a 22.7% interest in PTU S.A. (a
    Polish property and casualty insurance company), a 22.2%
    interest in Singapore Re, an approximate 20.0% interest in
    Alliance Insurance (a Dubai, U. A. E. company), a 15.0% interest
    in Alltrust (a Chinese property and casualty insurance company),
    and investments in The Brick (17.3%), Cunningham Lindsey
    (43.6%), MEGA Brands (16.5%), Fibrek (25.8%) and Ridley (73.5%).
    The other companies in the Fairfax corporate structure,
    principally investment or intermediate holding companies
    (including companies located in various jurisdictions outside
    North America), are not part of these operating groups; these
    other companies have no insurance, reinsurance, runoff or other
    operations.




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##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
   To Our
    Shareholders:
  1
  1 2
  25-year all
  As of December 31, 20105 years


10 years


15 years


20 years


25 yearsCompound growth in book value


22.5%



9.9%



16.4%



17.6%



24.7%          
 1 Amounts

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




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##### 



six-year




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
         Return onAverageCombined


Net


ShareholdersRatio


Earnings


EquityNorthbridge


107.3%



80.7



5.0%Crum & Forster


109.1%



64.2



5.8%Zenith National*


137.8%



(24.0
)


(1.9)%OdysseyRe


98.6%



225.3



6.1%Fairfax Asia


89.3%



46.0



12.6%   *
    
    since it was acquired in May 2010      2001  2010Annual CompoundGrowth
    Rate(1)Northbridge


17.2%Crum & Forster


17.0%OdysseyRe


20.4%Fairfax
    Asia(2)


23.6%   (1)
    
    Based on Canadian or U.S. GAAP, except Crum &
    Forster, which is based on statutory surplus.(2)
    
    2002  2010 as Fairfax Asia began in 2002 with the
    purchase of First Capital.




---



##### 



mark-to-market
    Earnings (loss) per Share


Book Value per ShareFirst quarter

$
14.02


$
384


($370 as of December 31, 2009)Second quarter


15.49



383Third quarter


10.24



401Fourth quarter


(18.43
)


379         As of December 31, 2010Shares Owned


Cost per


Amount


Market(millions)


Share


Invested


ValueWells Fargo


20.0


$
19.36



388



620Johnson & Johnson


7.6



61.00



464



469US Bancorp


15.9



16.27



259



428Kraft Foods


10.9



26.59



290



344




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##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
     Fairfax
    International Operations as at and for the year ended
    December 31, 2010
  Gross








Fairfax ShareShareholders


Premiums


Investment


Fairfax


Shareholders


Gross PremiumsCompany

Equity


Written


Portfolio


Ownership


Equity


WrittenFairfax AsiaFalcon Insurance (Hong Kong)


58.9



63.9



123.0



100%



58.9



63.9First Capital (Singapore)


224.5



303.9



465.6



98%



220.0



297.8Falcon
    Thailand(1)


10.2



19.9



18.2



41%



4.2



8.2ICICI Lombard (India)
    (1)(2)


371.3



913.5



953.0



26%



96.5



237.5Insurance  OtherFairfax Brasil


36.5



35.0



52.8



100%



36.5



35.0Alliance Insurance (Dubai)
    (1)(2)


80.3



82.9



227.4



20%



16.1



16.6Gulf Insurance (Kuwait)
    (1)


293.6



417.6



552.0



41%



120.4



171.2Alltrust Insurance (China)
    (2)(3)


261.3



741.5



796.1



15%



39.2



111.2Reinsurance-OtherAdvent Capital (United Kingdom)


149.7



318.9



582.5



100%



149.7



318.9Polish Re (Poland)


62.5



81.7



134.0



100%



62.5



81.7Total International Operations


1,548.8



2,978.8



3,904.6







804.0



1,342.0   (1)
    
    These associated companies are carried on an equity accounted
    basis.(2)
    
    All dollar amounts are as at or for the 12 months ended
    September 30, 2010.(3)
    
    Alltrust is carried at cost.




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##### 



INTRINSIC VALUE% Change in US$


STOCK PRICEBook Value per


% Change inShare


Cdn$ Stock Price1986


+ 180



+ 2921987


+ 48



-31988


+ 31



+ 211989


+ 27



+ 251990


+ 41



-411991


+ 24



+ 931992


+ 1



+ 181993


+ 42



+1451994


+ 18



+ 91995


+ 25



+ 461996


+ 63



+ 1961997


+ 36



+ 101998


+ 30



+ 691999


+ 38



-552000


-5



-72001


-21



-282002


+ 7



-262003


+ 31



+ 872004


-1



-112005


-16



-172006


+ 9



+ 382007


+ 53



+ 242008


+ 21



+ 362009


+ 33



+ 52010


+ 3



01985-2010


+ 24.7
%


+ 21.3
%   1 4
  mark-to-market




---



##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
   Insurance
    and Reinsurance Operations
  Net PremiumsCombined Ratio


WrittenYear Ended December 31,


% Change in2010


2009


2008


2010Northbridge


107.3%



105.9%



103.5%



6.1%Crum & Forster


109.1%



104.1%



117.6%



2.4%Zenith National


137.8%











OdysseyRe


98.6%



96.7%



101.3%



(2.1)%Fairfax Asia


89.3%



82.6%



91.8%



23.1%Other reinsurance and insurance


107.2%



98.1%



116.6%



(14.4)%Consolidated


105.2%



99.8%



106.2%



3.7%           NetPremiumsWritten/Net Premiums


Statutory


StatutoryWritten


Surplus


SurplusNorthbridge


985.0



1,271.5



0.8Crum & Forster


733.4



1,313.5



0.6Zenith National


427.3
(1)


690.2



0.6OdysseyRe


1,853.8



3,749.3
(2)


0.5Fairfax Asia


157.4



397.2
(2)


0.4   (1)
    
    Zenith National was acquired on May 20, 2010; as a
    result, net premiums written for the period May 21 to
    December 31, 2010 have been annualized.(2)
    
    Canadian GAAP total equity.  2002-2005




---



##### 



2002  2010Cumulative NetPremiums


AverageWritten


Combined Ratio($ billions)Northbridge


Cdn 9.9



95.6%Crum & Forster


7.9



99.8%OdysseyRe


18.5



91.2%Fairfax Asia


0.7



88.0%       2002  2009Average AnnualReserveRedundanciesNorthbridge


7.6%Crum & Forster


8.9%OdysseyRe


9.6%Fairfax Asia


2.6%




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##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
     Average longBenefit

term CanadaUnderwriting





(cost)

treasury bondYear

profit (loss)


Average float


of float

yield1986


2.5



21.6



11.6%


9.6%(Up and Down Arrow)2006


212.6



8,212.9



2.6%


4.3%2007


238.9



8,617.7



2.8%


4.3%2008


(280.9
)


8,917.8



(3.1)%


4.1%2009


7.3



9,429.3



0.1%


3.9%2010


(236.6
)


10,430.5



(2.3)%


3.8%Weighted average since inception










(2.3)%


4.9%Fairfax weighted average financing differential since inception:
    2.6%       TotalReinsurance


InsuranceCanadian


U.S.


Asian


Reinsurance 


and Insurance 


andInsurance


Insurance


Insurance


OdysseyRe


Other


Reinsurance


Runoff


Total2006


1,586.0



1,853.8



85.4



4,360.2



572.4



8,457.8



2,061.0



10,518.82007


1,887.4



1,812.8



86.9



4,412.6



577.8



8,777.5



1,770.5



10,548.02008


1,739.1



2,125.1



68.9



4,398.6



726.4



9,058.1



1,783.8



10,841.92009


2,052.8



2,084.5



125.7



4,540.4



997.0



9,800.4



1,737.0



11,537.42010


2,191.9



2,949.7



144.1



4,797.6



977.3



11,060.6



2,048.9



13,109.5




---



##### 



2010


2009UnderwritingInsurance      Canada
    (Northbridge)


(72.4
)


(57.1
) U.S.
    (Crum & Forster and Zenith National)


(168.2
)


(32.0
) Asia
    (Fairfax Asia)


16.6



20.2Reinsurance  OdysseyRe


25.8



64.3Reinsurance and insurance  Other


(38.4
)


11.9Underwriting profit (loss)


(236.6
)


7.3Interest and dividends  insurance and reinsurance


603.4



557.0Operating income


366.8



564.3Net gains on investments  insurance and reinsurance


215.4



668.0Runoff


143.5



31.2Other (animal nutrition)


10.3



12.4Interest expense


(195.4
)


(166.3
)Corporate overhead and other


(188.9
)


96.0Pre-tax income


351.7



1,205.6Income taxes


119.5



(214.9
)Net earnings


471.2



990.7Attributable to:Shareholders of Fairfax


469.0



856.8Non-controlling interest


2.2



133.9471.2



990.7




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##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
   Financial
    Position
  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


12.6%


12.2%Total debt/total capital


23.8%


23.0%Interest coverage


2.8x


8.2xInterest and preferred share dividend coverage


2.3x


7.5x   ten-year
  Investments
    5 Years

10 Years

15 YearsCommon stocks (with equity hedging)


14.2
%


17.9
%


17.2
%S&P 500


2.3
%


1.4
%


6.8
%Taxable bonds


12.6
%


11.9
%


10.0
%Merrill Lynch U.S. corporate (1-10 year) bond index


5.9
%


6.3
%


6.2
%




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##### 



may
    2000


2008


2010Oil  $/barrel


27



45



91Copper  $/lb.


0.83



1.39



4.35Nickel  $/lb.


3.09



5.31



11.23Wheat  $/bushel


2.80



6.11



7.94Corn  $/bushel


2.25



4.07



6.29Cotton  $/lb.


0.62



0.49



1.45Gold  $/oz.


274



870



1,405     mark-to-market




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##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
   1 2
      Notional Amount


Weighted Average


December 31, 2010Underlying CPI Index

($ billions)


Strike Price (CPI)


CPIU.S.


16.2



216.58



219.18European Union


17.1



108.83



110.93U.K.


0.9



216.01



228.4034.2     other-than-temporary
  mark-to-market
    2010


2009Bonds


(146.0
)


179.9Preferred stocks


2.6



0.4Common stocks


1,030.8



888.4Investments, at equity


261.4



170.81,148.8



1,239.5




---



##### 



2010United States


2,537.4Canada


814.7Other


1,122.44,474.5     Miscellaneous




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##### 



FAIRFAX FINANCIAL HOLDINGS
    LIMITED
   th
      
   Chairman and Chief Executive Officer