Exhibit 99.2

---



Management's Responsibility for the Financial Statements

The preparation and presentation of the accompanying consolidated financial statements, Management's Discussion and Analysis ("MD&A") and all financial information are the
responsibility of management and have been approved by the Board of Directors.

The
consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. Financial statements,
by nature, are not precise since they include certain amounts based upon estimates and judgments. When alternative methods exist, management has chosen those it deems to be the most appropriate in the
circumstances.

We,
as Fairfax's Chief Executive Officer and Chief Financial Officer, have certified Fairfax's annual disclosure documents filed with the Canadian Securities Administrators and the Securities and
Exchange Commission (Form 40-F) in accordance with Canadian securities legislation and the United States Sarbanes-Oxley Act of 2002 respectively.

The
Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and is ultimately responsible for reviewing and approving the consolidated
financial statements and MD&A. The Board carries out this responsibility principally through its Audit Committee which is independent from management.

The
Audit Committee is appointed by the Board of Directors and reviews the consolidated financial statements and MD&A; considers the report of the external auditors; assesses the adequacy of the
internal controls of the company, including management's assessment described below; examines the fees and expenses for audit services; and recommends to the Board the independent auditors for
appointment by the shareholders. The independent auditors have full and free access to the Audit Committee and meet with it to discuss their audit work, Fairfax's internal control over financial
reporting and financial reporting matters. The Audit Committee reports its findings to the Board for consideration when approving the consolidated financial statements for issuance to the shareholders
and management's assessment of the internal control over financial reporting.

Management's Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting.

Management
has assessed the effectiveness of the company's internal control over financial reporting as of December 31, 2015 using criteria established inInternal
Control  Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). The scope of
this assessment did not include an evaluation of the internal control over financial reporting of Brit PLC, which was acquired on June 5, 2015 and subsequently renamed Brit Limited. The
operations of Brit Limited represented 8.8% of the company's consolidated revenue for the year ended December 31, 2015 and represented 15.3% and 15.9% of the company's consolidated assets and
liabilities respectively as at December 31, 2015. Based on this assessment, management concluded that the company's internal control over financial reporting was effective as of
December 31, 2015.

The
effectiveness of the company's internal control over financial reporting as of December 31, 2015 has been audited by PricewaterhouseCoopers LLP, an independent auditor, as stated in
its report which appears herein.

March 11,
2016

|GRAPHIC                                            |  | GRAPHIC                                                
|-------------------------------------------------- |  | -------------------------------------------------------
|V. Prem Watsa Chairman and Chief Executive Officer |  | David Bonham Vice President and Chief Financial Officer

28

---



Independent Auditor's Report

To
the Shareholders of Fairfax Financial Holdings Limited

We
have completed integrated audits of Fairfax Financial Holdings Limited (the Company) and its subsidiaries' 2015 and 2014 consolidated financial statements and their internal control over
financial reporting as at December 31, 2015. Our opinions, based on our audits are presented below.

Report on the consolidated financial statements

We have audited the accompanying consolidated financial statements of the Company and its subsidiaries, which comprise the consolidated balance sheets as at December 31,
2015 and December 31, 2014 and the consolidated statements of earnings, comprehensive income, changes in equity and cash flows for each of the two years in the period ended December 31,
2015, and the related notes, which comprise a summary of significant accounting policies and other explanatory information.

Management's responsibility for the consolidated financial statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards Board (IASB) and for such internal control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.

Auditor's responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally
accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free
from material misstatement. Canadian generally accepted auditing standards also require that we comply with ethical requirements.

An
audit involves performing procedures to obtain audit evidence, on a test basis, about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the
auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the company's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the
circumstances. An audit also includes evaluating the appropriateness of accounting principles and policies used and the reasonableness of accounting estimates made by management, as well as evaluating
the overall presentation of the consolidated financial statements.

We
believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion on the consolidated financial statements.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company and its subsidiaries as at
December 31, 2015 and 2014 and their financial performance and their cash flows for each of the two years in the period ended December 31, 2015 in accordance with IFRS as issued by
the IASB.

Report on internal control over financial reporting

We have also audited the Company's internal control over financial reporting as at December 31, 2015, based on criteria established in Internal
Control  Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Management's responsibility for internal control over financial reporting

Management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial
reporting included in Management's Report on Internal Control over Financial Reporting on page 28.

29

---



Auditor's responsibility

Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We conducted our audit of internal control over
financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

An
audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control, based on the assessed risk, and performing such other procedures as we consider necessary in the circumstances.

We
believe that our audit provides a reasonable basis for our audit opinion on the company's internal control over financial reporting.

Definition of internal control over financial reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Inherent limitations

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

As
described in Management's Report on Internal Control over Financial Reporting, management has excluded Brit PLC, which was subsequently renamed Brit Limited, from its assessment of internal
control over financial reporting as at December 31, 2015 because it was acquired by the Company in a purchase business combination during 2015. We have also excluded Brit Limited from our audit
of internal control over financial reporting. Brit Limited is a 70.1% owned subsidiary whose total assets, total liabilities and total revenues represent 15.3%, 15.9% and 8.8%, respectively, of the
related consolidated financial statement amounts as at and for the year ended December 31, 2015.

Opinion

In our opinion, Fairfax Financial Holdings Limited and its subsidiaries maintained, in all material respects, effective internal control over financial reporting as at
December 31, 2015, based on criteria established in Internal Control  Integrated Framework (2013) issued by COSO.

GRAPHIC

Chartered
Professional Accountants, Licensed Public Accountants
Toronto, Ontario

March 11,
2016

30

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31

---





Consolidated Financial Statements

Consolidated Balance Sheetsas at December 31, 2015 and December 31, 2014

|                                                                                                                                              |  | Notes |  | December 31,
2015 |  | December 31,
2014
|--------------------------------------------------------------------------------------------------------------------------------------------- |  | ----- |  | ----------------- |  | -----------------
|
|Assets                                                                                                                                        |  |       |  |                   |  |                  
|Holding company cash and investments (including assets pledged for short sale and derivative obligations  $62.8; December 31, 2014  $109.7) |  | 5, 27 |  | 1,276.5           |  | 1,244.3          
|Insurance contract receivables                                                                                                                |  | 10    |  | 2,546.5           |  | 1,931.7          
|Portfolio investments                                                                                                                         |  |       |  |                   |  |                  
|Subsidiary cash and short term investments                                                                                                    |  | 5, 27 |  | 6,641.6           |  | 5,534.3          
|Bonds (cost $11,258.9; December 31, 2014  $9,900.1)                                                                                          |  | 5     |  | 12,286.6          |  | 11,445.5         
|Preferred stocks (cost $220.5; December 31, 2014  $386.8)                                                                                    |  | 5     |  | 116.6             |  | 376.4            
|Common stocks (cost $6,004.2; December 31, 2014  $4,531.7)                                                                                   |  | 5     |  | 5,358.3           |  | 4,848.5          
|Investments in associates (fair value $2,185.9; December 31, 2014  $2,070.5)                                                                 |  | 5, 6  |  | 1,730.2           |  | 1,617.7          
|Derivatives and other invested assets (cost $628.5; December 31, 2014  $634.0)                                                               |  | 5, 7  |  | 500.7             |  | 426.8            
|Assets pledged for short sale and derivative obligations (cost $322.9; December 31, 2014  $757.8)                                            |  | 5, 7  |  | 351.1             |  | 860.0            
|Fairfax India cash and portfolio investments (cost $848.7; December 31, 2014  nil)                                                           |  | 5, 27 |  | 847.4             |  |                 
|                                                                                                                                              |  |       |  |                   |  |                  
|                                                                                                                                              |  |       |  | 27,832.5          |  | 25,109.2         
|                                                                                                                                              |  |       |  |                   |  |                  
|Deferred premium acquisition costs                                                                                                            |  | 11    |  | 532.7             |  | 497.6            
|Recoverable from reinsurers (including recoverables on paid losses  $286.3; December 31, 2014  $230.7)                                      |  | 9     |  | 3,890.9           |  | 3,982.1          
|Deferred income taxes                                                                                                                         |  | 18    |  | 463.9             |  | 460.4            
|Goodwill and intangible assets                                                                                                                |  | 12    |  | 3,214.9           |  | 1,558.3          
|Other assets                                                                                                                                  |  | 13    |  | 1,771.1           |  | 1,347.6          
|                                                                                                                                              |  |       |  |                   |  |                  
|Total assets                                                                                                                                  |  |       |  | 41,529.0          |  | 36,131.2         
|                                                                                                                                              |  |       |  |                   |  |                  

See accompanying notes.

Signed on behalf of the Board

GRAPHIC

GRAPHICDirector

Director


32

---






|                                                                                                           |  | Notes |  | December 31,
2015 |  | December 31,
2014
|---------------------------------------------------------------------------------------------------------- |  | ----- |  | ----------------- |  | -----------------
|
|Liabilities                                                                                                |  |       |  |                   |  |                  
|Accounts payable and accrued liabilities                                                                   |  | 14    |  | 2,555.9           |  | 2,029.1          
|Income taxes payable                                                                                       |  | 18    |  | 85.8              |  | 118.3            
|Short sale and derivative obligations (including at the holding company  $0.6; December 31, 2014  $31.6) |  | 5, 7  |  | 92.9              |  | 160.8            
|Funds withheld payable to reinsurers                                                                       |  |       |  | 322.8             |  | 461.5            
|Insurance contract liabilities                                                                             |  | 8     |  | 23,101.2          |  | 20,438.7         
|Long term debt  holding company and insurance and reinsurance companies                                   |  | 15    |  | 3,067.5           |  | 3,042.4          
|Long term debt  non-insurance companies                                                                   |  | 15    |  | 284.0             |  | 136.6            
|                                                                                                           |  |       |  |                   |  |                  
|Total liabilities                                                                                          |  |       |  | 29,510.1          |  | 26,387.4         
|                                                                                                           |  |       |  |                   |  |                  
|Equity                                                                                                     |  | 16    |  |                   |  |                  
|Common shareholders' equity                                                                                |  |       |  | 8,952.5           |  | 8,361.0          
|Preferred stock                                                                                            |  |       |  | 1,334.9           |  | 1,164.7          
|                                                                                                           |  |       |  |                   |  |                  
|Shareholders' equity attributable to shareholders of Fairfax                                               |  |       |  | 10,287.4          |  | 9,525.7          
|Non-controlling interests                                                                                  |  |       |  | 1,731.5           |  | 218.1            
|                                                                                                           |  |       |  |                   |  |                  
|Total equity                                                                                               |  |       |  | 12,018.9          |  | 9,743.8          
|                                                                                                           |  |       |  |                   |  |                  
|                                                                                                           |  |       |  | 41,529.0          |  | 36,131.2         
|                                                                                                           |  |       |  |                   |  |                  

See accompanying notes.

33

---



Consolidated Statements of Earningsfor the years ended December 31, 2015 and 2014

|                                            |                                      | Notes |        | 2015 |         | 2014     |  
|------------------------------------------- | ------------------------------------ | ----- | ------ | ---- | ------- | -------- | -
|
|Revenue                                     |                                      |       |        |      |         |          |  
|                                            | Gross premiums written               |       | 10, 25 |      |         | 8,655.8  |  
|                                            |                                      |       |        |      |         |          |  
|                                            | Net premiums written                 |       | 25     |      |         | 7,520.5  |  
|                                            |                                      |       |        |      |         |          |  
|                                            | Gross premiums earned                |       |        |      |         | 8,581.7  |  
|                                            | Premiums ceded to reinsurers         |       |        |      |         | (1,210.7 | )
|                                            |                                      |       |        |      |         |          |  
|                                            | Net premiums earned                  |       | 25     |      |         | 7,371.0  |  
|                                            | Interest and dividends               |       | 5      |      |         | 512.2    |  
|                                            | Share of profit of associates        |       | 6      |      |         | 172.9    |  
|                                            | Net gains (losses) on investments    |       | 5      |      |         | (259.2   | )
|                                            | Other revenue                        |       | 25     |      |         | 1,783.5  |  
|                                            |                                      |       |        |      |         |          |  
|                                            |                                      |       |        |      | 9,580.4 |          |  
|                                            |                                      |       |        |      |         |          |  
|Expenses                                    |                                      |       |        |      |         |          |  
|                                            | Losses on claims, gross              |       | 8      |      |         | 5,098.4  |  
|                                            | Losses on claims ceded to reinsurers |       | 9      |      |         | (712.0   | )
|                                            |                                      |       |        |      |         |          |  
|                                            | Losses on claims, net                |       | 26     |      |         | 4,386.4  |  
|                                            | Operating expenses                   |       | 26     |      |         | 1,470.1  |  
|                                            | Commissions, net                     |       | 9      |      |         | 1,177.3  |  
|                                            | Interest expense                     |       | 15     |      |         | 219.0    |  
|                                            | Other expenses                       |       | 26     |      |         | 1,703.1  |  
|                                            |                                      |       |        |      |         |          |  
|                                            |                                      |       |        |      | 8,955.9 |          |  
|                                            |                                      |       |        |      |         |          |  
|Earnings before income taxes                |                                      |       |        |      | 624.5   |          |  
|Provision for (recovery of) income taxes    |                                      | 18    |        |      | (17.5   | )        |  
|                                            |                                      |       |        |      |         |          |  
|Net earnings                                |                                      |       |        |      | 642.0   |          |  
|                                            |                                      |       |        |      |         |          |  
|Attributable to:                            |                                      |       |        |      |         |          |  
|Shareholders of Fairfax                     |                                      |       |        |      | 567.7   |          |  
|Non-controlling interests                   |                                      |       |        |      | 74.3    |          |  
|                                            |                                      |       |        |      |         |          |  
|                                            |                                      |       |        |      | 642.0   |          |  
|                                            |                                      |       |        |      |         |          |  
|Net earnings per share                      |                                      | 17    |        | $    | 23.67   |          | $
|Net earnings per diluted share              |                                      | 17    |        | $    | 23.15   |          | $
|Cash dividends paid per share               |                                      | 16    |        | $    | 10.00   |          | $
|Shares outstanding (000) (weighted average) |                                      | 17    |        |      | 22,070  |          |  

See accompanying notes.

34

---



Consolidated Statements of Comprehensive Incomefor the years ended December 31, 2015 and 2014

|                                             |                                                                  | Notes                                                                                                  |  | 2015   |   | 2014    |  
|-------------------------------------------- | ---------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ |  | ------ | - | ------- | -
|
|                                             |                                                                  |                                                                                                        |  |        |   |         |  
|Net earnings                                 |                                                                  |                                                                                                        |  | 642.0  |   | 1,664.6 |  
|                                             |                                                                  |                                                                                                        |  |        |   |         |  
|Other comprehensive loss,net of income taxes |                                                                  | 16                                                                                                     |  |        |   |         |  
|                                             | Items that may be subsequently reclassified to net earnings      |                                                                                                        |  |        |   |         |  
|                                             |                                                                  | Net unrealized foreign currency translation losses on foreign operations                               |  |        |   | (557.9  | )
|                                             |                                                                  | Gains on hedge of net investment in Canadian subsidiaries                                              |  | 7      |   | 218.8   |  
|                                             |                                                                  | Share of other comprehensive loss of associates, excluding net gains (losses) on defined benefit plans |  | 6      |   | (25.0   | )
|                                             |                                                                  |                                                                                                        |  |        |   |         |  
|                                             |                                                                  |                                                                                                        |  | (364.1 | ) | (134.7  | )
|                                             |                                                                  |                                                                                                        |  |        |   |         |  
|                                             | Items that will not be subsequently reclassified to net earnings |                                                                                                        |  |        |   |         |  
|                                             |                                                                  | Share of net gains (losses) on defined benefit plans of associates                                     |  | 6      |   | 28.8    |  
|                                             |                                                                  | Net losses on defined benefit plans                                                                    |  | 21     |   | (6.1    | )
|                                             |                                                                  |                                                                                                        |  |        |   |         |  
|                                             |                                                                  |                                                                                                        |  | 22.7   |   | (69.6   | )
|                                             |                                                                  |                                                                                                        |  |        |   |         |  
|Other comprehensive loss,net of income taxes |                                                                  |                                                                                                        |  | (341.4 | ) | (204.3  | )
|                                             |                                                                  |                                                                                                        |  |        |   |         |  
|Comprehensive income                         |                                                                  |                                                                                                        |  | 300.6  |   | 1,460.3 |  
|                                             |                                                                  |                                                                                                        |  |        |   |         |  
|Attributable to:                             |                                                                  |                                                                                                        |  |        |   |         |  
|Shareholders of Fairfax                      |                                                                  |                                                                                                        |  | 316.0  |   | 1,436.7 |  
|Non-controlling interests                    |                                                                  |                                                                                                        |  | (15.4  | ) | 23.6    |  
|                                             |                                                                  |                                                                                                        |  |        |   |         |  
|                                             |                                                                  |                                                                                                        |  | 300.6  |   | 1,460.3 |  
|                                             |                                                                  |                                                                                                        |  |        |   |         |  

See accompanying notes.

35

---



Consolidated Statements of Changes in Equityfor the years ended December 31, 2015 and 2014
(US$ millions)

|                                                                                       |                                                                                                | Subordinate
voting
shares |   | Multiple
voting
shares |   | Treasury
shares
(at cost) |   | Share-
based
payments
and other
reserves |   | Retained
earnings |   | Accumulated
other
comprehensive
income (loss) |        | Common
shareholders'
equity |        | Preferred
shares |   | Equity
attributable
to
shareholders
of Fairfax |        | Non-
controlling
interests |       | Total
equity |       
|-------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------- | ------------------------- | - | ---------------------- | - | ------------------------- | - | ---------------------------------------- | - | ----------------- | - | --------------------------------------------- | ------ | --------------------------- | ------ | ---------------- | - | ---------------------------------------------- | ------ | -------------------------- | ----- | ------------ | ------
|Balance as of January 1, 2015                                                          |                                                                                                | 3,642.8                   |   | 3.8                    |   | (155.8                    | ) | 78.4                                     |   | 4,909.9           |   | (118.1                                        | )      | 8,361.0                     |        | 1,164.7          |   | 9,525.7                                        |        | 218.1                      |       | 9,743.8      |       
|Net earnings for the year                                                              |                                                                                                |                          |   |                       |   |                          |   |                                         |   | 567.7             |   |                                              |        | 567.7                       |        |                 |   | 567.7                                          |        | 74.3                       |       | 642.0        |       
|Other comprehensive loss, net of income taxes:                                         |                                                                                                |                           |   |                        |   |                           |   |                                          |   |                   |   |                                               |        |                             |        |                  |   |                                                |        |                            |       |              |       
|                                                                                       | Net unrealized foreign currency translation losses on foreign operations                       |                           |  |                        |  |                           |  |                                          |  |                   |  |                                               | (468.3 | )                           | (468.3 | )                |  |                                                | (468.3 | )                          | (89.6 | )            | (557.9
|                                                                                       | Gains on hedge of net investment in Canadian subsidiaries                                      |                           |  |                        |  |                           |  |                                          |  |                   |  |                                               | 218.8  |                             | 218.8  |                  |  |                                                | 218.8  |                            |      |              | 218.8 
|                                                                                       | Share of other comprehensive loss of associates, excluding net gains on defined benefit plans  |                           |  |                        |  |                           |  |                                          |  |                   |  |                                               | (25.0  | )                           | (25.0  | )                |  |                                                | (25.0  | )                          |      |              | (25.0 
|                                                                                       | Share of net gains on defined benefit plans of associates                                      |                           |  |                        |  |                           |  |                                          |  |                   |  |                                               | 28.0   |                             | 28.0   |                  |  |                                                | 28.0   |                            | 0.8   |              | 28.8  
|                                                                                       | Net losses on defined benefit plans                                                            |                           |  |                        |  |                           |  |                                          |  |                   |  |                                               | (5.2   | )                           | (5.2   | )                |  |                                                | (5.2   | )                          | (0.9  | )            | (6.1  
|Issuance of shares                                                                     |                                                                                                | 587.0                     |   |                       |   | 15.3                      |   | (16.1                                    | ) |                  |   |                                              |        | 586.2                       |        | 179.0            |   | 765.2                                          |        |                           |       | 765.2        |       
|Purchases and amortization                                                             |                                                                                                |                          |   |                       |   | (95.5                     | ) | 34.8                                     |   |                  |   |                                              |        | (60.7                       | )      | (8.8             | ) | (69.5                                          | )      | 0.2                        |       | (69.3        | )     
|Excess of book value over consideration of preferred shares purchased for cancellation |                                                                                                |                          |   |                       |   |                          |   |                                         |   | 4.0               |   |                                              |        | 4.0                         |        |                 |   | 4.0                                            |        |                           |       | 4.0          |       
|Common share dividends                                                                 |                                                                                                |                          |   |                       |   |                          |   |                                         |   | (216.1            | ) |                                              |        | (216.1                      | )      |                 |   | (216.1                                         | )      | (5.0                       | )     | (221.1       | )     
|Preferred share dividends                                                              |                                                                                                |                          |   |                       |   |                          |   |                                         |   | (49.3             | ) |                                              |        | (49.3                       | )      |                 |   | (49.3                                          | )      |                           |       | (49.3        | )     
|Acquisitions of subsidiaries (notes 16 and 23)                                         |                                                                                                |                          |   |                       |   |                          |   |                                         |   |                  |   |                                              |        |                            |        |                 |   |                                               |        | 1,175.4                    |       | 1,175.4      |       
|Other net changes in capitalization                                                    |                                                                                                |                          |   |                       |   |                          |   | (8.9                                     | ) | 14.5              |   | 5.8                                           |        | 11.4                        |        |                 |   | 11.4                                           |        | 358.2                      |       | 369.6        |       
|                                                                                       |                                                                                                |                           |   |                        |   |                           |   |                                          |   |                   |   |                                               |        |                             |        |                  |   |                                                |        |                            |       |              |       
|Balance as of December 31, 2015                                                        |                                                                                                | 4,229.8                   |   | 3.8                    |   | (236.0                    | ) | 88.2                                     |   | 5,230.7           |   | (364.0                                        | )      | 8,952.5                     |        | 1,334.9          |   | 10,287.4                                       |        | 1,731.5                    |       | 12,018.9     |       
|                                                                                       |                                                                                                |                           |   |                        |   |                           |   |                                          |   |                   |   |                                               |        |                             |        |                  |   |                                                |        |                            |       |              |       
|Balance as of January 1, 2014                                                          |                                                                                                | 3,642.8                   |   | 3.8                    |   | (140.0                    | ) | 50.5                                     |   | 3,551.2           |   | 78.4                                          |        | 7,186.7                     |        | 1,166.4          |   | 8,353.1                                        |        | 107.4                      |       | 8,460.5      |       
|Net earnings for the year                                                              |                                                                                                |                          |   |                       |   |                          |   |                                         |   | 1,633.2           |   |                                              |        | 1,633.2                     |        |                 |   | 1,633.2                                        |        | 31.4                       |       | 1,664.6      |       
|Other comprehensive loss, net of income taxes:                                         |                                                                                                |                           |   |                        |   |                           |   |                                          |   |                   |   |                                               |        |                             |        |                  |   |                                                |        |                            |       |              |       
|                                                                                       | Net unrealized foreign currency translation losses on foreign operations                       |                           |  |                        |  |                           |  |                                          |  |                   |  |                                               | (193.3 | )                           | (193.3 | )                |  |                                                | (193.3 | )                          | (7.4  | )            | (200.7
|                                                                                       | Gains on hedge of net investment in Canadian subsidiaries                                      |                           |  |                        |  |                           |  |                                          |  |                   |  |                                               | 118.7  |                             | 118.7  |                  |  |                                                | 118.7  |                            |      |              | 118.7 
|                                                                                       | Share of other comprehensive loss of associates, excluding net losses on defined benefit plans |                           |  |                        |  |                           |  |                                          |  |                   |  |                                               | (52.7  | )                           | (52.7  | )                |  |                                                | (52.7  | )                          |      |              | (52.7 
|                                                                                       | Share of net losses on defined benefit plans of associates                                     |                           |  |                        |  |                           |  |                                          |  |                   |  |                                               | (36.7  | )                           | (36.7  | )                |  |                                                | (36.7  | )                          |      |              | (36.7 
|                                                                                       | Net losses on defined benefit plans                                                            |                           |  |                        |  |                           |  |                                          |  |                   |  |                                               | (32.5  | )                           | (32.5  | )                |  |                                                | (32.5  | )                          | (0.4  | )            | (32.9 
|Issuance of shares                                                                     |                                                                                                |                          |   |                       |   | 8.8                       |   | (12.2                                    | ) |                  |   |                                              |        | (3.4                        | )      |                 |   | (3.4                                           | )      |                           |       | (3.4         | )     
|Purchases and amortization                                                             |                                                                                                |                          |   |                       |   | (24.6                     | ) | 36.8                                     |   |                  |   |                                              |        | 12.2                        |        | (1.7             | ) | 10.5                                           |        |                           |       | 10.5         |       
|Excess of book value over consideration of preferred shares purchased for cancellation |                                                                                                |                          |   |                       |   |                          |   |                                         |   | 0.5               |   |                                              |        | 0.5                         |        |                 |   | 0.5                                            |        |                           |       | 0.5          |       
|Common share dividends                                                                 |                                                                                                |                          |   |                       |   |                          |   |                                         |   | (215.7            | ) |                                              |        | (215.7                      | )      |                 |   | (215.7                                         | )      | (6.6                       | )     | (222.3       | )     
|Preferred share dividends                                                              |                                                                                                |                          |   |                       |   |                          |   |                                         |   | (56.9             | ) |                                              |        | (56.9                       | )      |                 |   | (56.9                                          | )      |                           |       | (56.9        | )     
|Acquisitions of subsidiaries (note 23)                                                 |                                                                                                |                          |   |                       |   |                          |   |                                         |   |                  |   |                                              |        |                            |        |                 |   |                                               |        | 86.7                       |       | 86.7         |       
|Other net changes in capitalization                                                    |                                                                                                |                          |   |                       |   |                          |   | 3.3                                      |   | (2.4              | ) |                                              |        | 0.9                         |        |                 |   | 0.9                                            |        | 7.0                        |       | 7.9          |       
|                                                                                       |                                                                                                |                           |   |                        |   |                           |   |                                          |   |                   |   |                                               |        |                             |        |                  |   |                                                |        |                            |       |              |       
|Balance as of December 31, 2014                                                        |                                                                                                | 3,642.8                   |   | 3.8                    |   | (155.8                    | ) | 78.4                                     |   | 4,909.9           |   | (118.1                                        | )      | 8,361.0                     |        | 1,164.7          |   | 9,525.7                                        |        | 218.1                      |       | 9,743.8      |       
|                                                                                       |                                                                                                |                           |   |                        |   |                           |   |                                          |   |                   |   |                                               |        |                             |        |                  |   |                                                |        |                            |       |              |       

See accompanying notes.

36

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Consolidated Statements of Cash Flowsfor the years ended December 31, 2015 and 2014

|                                                 |                                                                           | Notes                                                         |       | 2015     |          | 2014    |         
|------------------------------------------------ | ------------------------------------------------------------------------- | ------------------------------------------------------------- | ----- | -------- | -------- | ------- | --------
|
|Operating activities                             |                                                                           |                                                               |       |          |          |         |         
|                                                 | Net earnings                                                              |                                                               |       |          | 642.0    |         | 1,664.6 
|                                                 | Depreciation, amortization and impairment charges                         |                                                               | 25    |          | 133.3    |         | 94.2    
|                                                 | Net bond discount amortization                                            |                                                               |       |          | (0.2     | )       | (30.0   
|                                                 | Amortization of share-based payment awards                                |                                                               |       |          | 34.8     |         | 36.8    
|                                                 | Share of profit of associates                                             |                                                               | 6     |          | (172.9   | )       | (105.7  
|                                                 | Deferred income taxes                                                     |                                                               | 18    |          | (210.4   | )       | 521.7   
|                                                 | Net (gains) losses on investments                                         |                                                               | 5     |          | 259.2    |         | (1,736.2
|                                                 | Loss on repurchase of long term debt                                      |                                                               | 15    |          |         |         | 3.6     
|                                                 | Net purchases of securities classified as FVTPL                           |                                                               | 27    |          | (484.3   | )       | (590.0  
|                                                 | Changes in operating assets and liabilities                               |                                                               | 27    |          | (56.8    | )       | 70.8    
|                                                 |                                                                           |                                                               |       |          |          |         |         
|Cash provided by (used in) operating activities  |                                                                           |                                                               |       | 144.7    |          | (70.2   | )       
|                                                 |                                                                           |                                                               |       |          |          |         |         
|Investing activities                             |                                                                           |                                                               |       |          |          |         |         
|                                                 | Sales of investments in associates                                        |                                                               | 6, 23 |          | 201.3    |         | 252.1   
|                                                 | Purchases of investments in associates                                    |                                                               | 6, 23 |          | (313.3   | )       | (390.2  
|                                                 | Net purchases of premises and equipment and intangible assets             |                                                               |       |          | (201.3   | )       | (67.1   
|                                                 | Purchases of subsidiaries, net of cash acquired                           |                                                               | 23    |          | (1,455.6 | )       | (189.9  
|                                                 | Sales of subsidiaries, net of cash divested                               |                                                               | 23    |          | 304.4    |         |        
|                                                 | Increase in restricted cash for purchase of subsidiary                    |                                                               |       |          | (6.5     | )       |        
|                                                 |                                                                           |                                                               |       |          |          |         |         
|Cash used in investing activities                |                                                                           |                                                               |       | (1,471.0 | )        | (395.1  | )       
|                                                 |                                                                           |                                                               |       |          |          |         |         
|Financing activities                             |                                                                           |                                                               |       |          |          |         |         
|                                                 | Long term debt  holding company and insurance and reinsurance companies: |                                                               | 15    |          |          |         |         
|                                                 |                                                                           | Issuances, net of issuance costs                              |       |          |          | 275.7   |         
|                                                 |                                                                           | Repayments                                                    |       |          |          | (212.4  | )       
|                                                 | Long term debt  non-insurance companies:                                 |                                                               | 15    |          |          |         |         
|                                                 |                                                                           | Issuances, net of issuance costs                              |       |          |          | 54.2    |         
|                                                 |                                                                           | Repayments                                                    |       |          |          | (5.8    | )       
|                                                 |                                                                           | Net borrowings from revolving credit facilities               |       |          |          | 18.4    |         
|                                                 | Subordinate voting shares:                                                |                                                               | 16    |          |          |         |         
|                                                 |                                                                           | Issuances, net of issuance costs                              |       |          |          | 575.9   |         
|                                                 |                                                                           | Purchases for treasury                                        |       |          |          | (95.5   | )       
|                                                 |                                                                           | Common share dividends                                        |       |          |          | (216.1  | )       
|                                                 | Preferred shares:                                                         |                                                               | 16    |          |          |         |         
|                                                 |                                                                           | Issuance, net of issuance costs                               |       |          |          | 179.0   |         
|                                                 |                                                                           | Repurchases                                                   |       |          |          | (4.8    | )       
|                                                 |                                                                           | Preferred share dividends                                     |       |          |          | (49.3   | )       
|                                                 | Subsidiary common shares:                                                 |                                                               |       |          |          |         |         
|                                                 |                                                                           | Issuances to non-controlling interests, net of issuance costs |       | 23       |          | 725.8   |         
|                                                 |                                                                           | Net sales to non-controlling interests                        |       | 23       |          | 430.0   |         
|                                                 |                                                                           | Dividends paid to non-controlling interests                   |       |          |          | (5.0    | )       
|                                                 |                                                                           |                                                               |       |          |          |         |         
|Cash provided by (used in) financing activities  |                                                                           |                                                               |       | 1,670.1  |          | (83.5   | )       
|                                                 |                                                                           |                                                               |       |          |          |         |         
|Increase (decrease) in cash and cash equivalents |                                                                           |                                                               |       | 343.8    |          | (548.8  | )       
|                                                 | Cash and cash equivalents  beginning of year                             |                                                               |       |          | 3,018.7  |         | 3,758.2 
|                                                 | Foreign currency translation                                              |                                                               |       |          | (236.9   | )       | (190.7  
|                                                 |                                                                           |                                                               |       |          |          |         |         
|Cash and cash equivalents  end of year          |                                                                           | 27                                                            |       | 3,125.6  |          | 3,018.7 |         
|                                                 |                                                                           |                                                               |       |          |          |         |         

See accompanying notes.

37

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Index to Notes to Consolidated Financial Statements

|    |  |                                             |  |    
|--- |  | ------------------------------------------- |  | ---
|1.  |  | Business Operations                         |  | 39 
|2.  |  | Basis of Presentation                       |  | 39 
|3.  |  | Summary of Significant Accounting Policies  |  | 39 
|4.  |  | Critical Accounting Estimates and Judgments |  | 50 
|5.  |  | Cash and Investments                        |  | 51 
|6.  |  | Investments in Associates                   |  | 57 
|7.  |  | Short Sales and Derivatives                 |  | 58 
|8.  |  | Insurance Contract Liabilities              |  | 61 
|9.  |  | Reinsurance                                 |  | 64 
|10. |  | Insurance Contract Receivables              |  | 65 
|11. |  | Deferred Premium Acquisition Costs          |  | 65 
|12. |  | Goodwill and Intangible Assets              |  | 66 
|13. |  | Other Assets                                |  | 67 
|14. |  | Accounts Payable and Accrued Liabilities    |  | 68 
|15. |  | Long Term Debt and Credit Facilities        |  | 69 
|16. |  | Total Equity                                |  | 71 
|17. |  | Earnings per Share                          |  | 75 
|18. |  | Income Taxes                                |  | 75 
|19. |  | Statutory Requirements                      |  | 78 
|20. |  | Contingencies and Commitments               |  | 78 
|21. |  | Pensions and Post Retirement Benefits       |  | 79 
|22. |  | Operating Leases                            |  | 80 
|23. |  | Acquisitions and Divestitures               |  | 80 
|24. |  | Financial Risk Management                   |  | 85 
|25. |  | Segmented Information                       |  | 101
|26. |  | Expenses                                    |  | 106
|27. |  | Supplementary Cash Flow Information         |  | 107
|28. |  | Related Party Transactions                  |  | 108
|29. |  | Subsidiaries                                |  | 109

38

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Notes to Consolidated Financial Statementsfor the years ended December 31, 2015 and 2014
(in US$ and $ millions except per share amounts and as otherwise indicated)

1.    Business Operations

Fairfax Financial Holdings Limited ("the company" or "Fairfax") is a holding company which, through its subsidiaries, is principally engaged in property and casualty
insurance and reinsurance and the associated investment management. The holding company is federally incorporated and domiciled in Ontario, Canada.

2.    Basis of Presentation

The company's consolidated financial statements for the year ended December 31, 2015 are prepared in accordance with International Financial Reporting Standards ("IFRS")
as issued by the International Accounting Standards Board ("IASB") effective as at December 31, 2015 (except IFRS 9 (2010)Financial
Instrumentswhich was adopted early). The consolidated financial statements have been prepared on a historical cost basis, except for derivative financial instruments and fair
value through profit and loss ("FVTPL") financial assets and liabilities that have been measured at fair value.

The
consolidated balance sheets of the company are presented on a non-classified basis. Assets expected to be realized and liabilities expected to be settled within the company's normal operating
cycle of one year would typically be considered as current, including the following balances: cash, short term investments, insurance contract receivables, deferred premium acquisition costs, income
taxes payable, and short sale and derivative obligations. The following balances are generally considered as non-current: deferred income taxes and goodwill and intangible assets. All other balances
are comprised of current and non-current amounts.

The
holding company has significant liquid resources that are generally not restricted by insurance regulators. The operating subsidiaries are primarily insurers and reinsurers that are often subject
to a wide variety of insurance and other laws and regulations that vary by jurisdiction and are intended to protect policyholders rather than investors. These laws and regulations may limit the
ability of operating subsidiaries to pay dividends or make distributions to parent companies. The company's consolidated balance sheet and consolidated statement of cash flows therefore make a
distinction in classification between the holding company and the operating subsidiaries for cash and short term investments to provide additional insight into the company's liquidity, financial
leverage and capital structure.

These
consolidated financial statements were approved for issue by the company's Board of Directors on March 11, 2016.

3.    Summary of Significant Accounting Policies

The principal accounting policies applied to the presentation of these consolidated financial statements and the methods of computation have been consistently applied to all
periods presented unless otherwise stated, and are as set out below.

Consolidation

Subsidiaries The company's consolidated financial statements include the assets,
liabilities, equity, revenue, expenses and cash flows of the holding company and its subsidiaries. A subsidiary is an entity over which the company has control. The company controls an entity when the
company has power over the entity, is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
Assessment of control is based on the substance of the relationship between the company and the entity and includes consideration of both existing voting rights and, if applicable, potential voting
rights that are currently exercisable and convertible. The operating results of subsidiaries acquired are included in the consolidated financial statements from the date control is acquired (typically
the acquisition date). The operating results of subsidiaries that have been divested during the year are included up to the date control ceased and any difference between the fair value of the
consideration received and the carrying value of the subsidiary are recognized in the consolidated statement of earnings.

The
consolidated financial statements are prepared as of December 31, 2015 and 2014 based on individual holding companies' and subsidiary companies' financial statements at the same dates.
Accounting policies of subsidiaries

39

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have
been aligned where necessary to ensure consistency with those of Fairfax. The company's significant subsidiaries are identified in note 29.

Non-controlling interests A non-controlling interest is initially recognized as the proportionate share of the
identifiable net assets of the subsidiary on the date of its acquisition and is subsequently adjusted
for the non-controlling interest's share in changes of the acquired subsidiary's earnings and capital. Effects of transactions with non-controlling interests are recorded in equity if there is no
change in control.

Business combinations

Business combinations are accounted for using the acquisition method of accounting whereby the consideration transferred is measured at fair value at the date of acquisition.
This consideration may include cash paid and the fair value at the date of exchange of assets given, liabilities incurred and equity instruments issued by the company or its subsidiaries. The
consideration transferred also includes contingent consideration arrangements recorded at fair value. Directly attributable acquisition-related costs are expensed in the current period and reported
within operating expenses. At the date of acquisition, the company recognizes the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquired business. The
identifiable assets acquired and liabilities assumed are initially recognized at fair value. If the consideration transferred is less than the fair value of identifiable net assets acquired, the
excess is recognized in the consolidated statement of earnings.

A
pre-existing equity interest in an acquiree is re-measured to fair value at the date of the business combination with any gain or loss recognized in net gains (losses) on investments in the
consolidated statement of earnings.

Goodwill and intangible assets

Goodwill Goodwill is recorded as the excess of consideration transferred over the fair
value of the identifiable net assets acquired in a business combination, less accumulated impairment charges, and is allocated to the cash-generating units expected to benefit from the acquisition for
the purpose of impairment testing. On an annual basis or more frequently if there are potential indicators of impairment, the carrying value of a cash-generating unit inclusive of its allocated
goodwill is compared to its recoverable amount, with any goodwill impairment measured as the excess of the carrying amount over the recoverable amount. Goodwill is derecognized on disposal of a
cash-generating unit to which goodwill was previously allocated.

Intangible assets Intangible assets are comprised primarily of customer and broker relationships, brand names,
Lloyd's participation rights, computer software (including enterprise systems) and other acquired identifiable non-monetary assets without physical form.

Intangible
assets are initially recognized at cost (fair value when acquired through a business combination) and subsequently measured at cost less accumulated amortization and impairment, where
amortization is calculated using the straight-line method based on the estimated useful life of those intangible assets with a finite life. The carrying value of intangible assets with a finite life
are re-evaluated by the company when there are potential indicators of impairment. Indefinite-lived intangible assets are not subject to amortization but are assessed for impairment annually or more
frequently if there are potential indicators of impairment.

The
estimated useful lives of the company's intangible assets are as follows:

Customer and broker relationships

8 to 20 yearsBrand names and Lloyd's participation rights

IndefiniteComputer software

3 to 15 years


Brand names are considered to be indefinite-lived based on their strength, history and expected future use.

Investments in associates

Investments in associates are accounted for using the equity method and are comprised of investments in corporations, limited partnerships and trusts where the company has the
ability to exercise significant influence but not control. Under the equity method of accounting, an investment in associate is initially recognized at cost and adjusted thereafter for the
post-acquisition change in the company's share of net assets of the associate. The company's share of profit (loss) and other comprehensive income (loss) of associates are reported in the
corresponding lines in the consolidated statement of earnings and consolidated statement of comprehensive income, respectively. A pre-existing interest in an associate is re-measured to fair value at
the date significant influence is obtained and included in the carrying value of the associate.

40

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The
fair value of associates is estimated at each reporting date (or more frequently when conditions warrant) using valuation techniques consistent with those applied to the company's other
investments in equity instruments. See 'Determination of fair value' under the heading of 'Investments' for further details. If there is objective evidence of impairment, the associate is written down
to its recoverable amount. Gains and losses realized on dispositions of associates and unrealized impairment losses are recognized in net gains (losses) on investments in the consolidated statement
of earnings.

Foreign currency translation

Functional and presentation currency The consolidated financial statements are presented in
U.S. dollars which is the holding company's functional currency and the presentation currency of the consolidated group.

Foreign currency transactions Foreign currency transactions are translated into the functional currencies of the
holding company and its subsidiaries using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from
the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the consolidated statement of earnings. Non-monetary items carried at
cost are translated using the exchange rate at the date of the transaction. Non-monetary items carried at fair value are translated at the date the fair value is determined.

Translation of foreign subsidiaries The functional currencies of some of the company's subsidiaries (principally
in Canada, the United Kingdom and Asia) differ from the consolidated group U.S. dollar presentation currency. As a result, the assets and liabilities of these foreign subsidiaries
(including goodwill and fair value adjustments arising on their acquisition, where applicable) are translated on consolidation at the rates of exchange prevailing at the balance sheet date. Revenue
and expenses are translated at the average rate of exchange for the period. The net unrealized gain or loss resulting from this translation is recognized in accumulated other comprehensive income, and
only recycled to the consolidated statement of earnings upon reduction of an investment in a foreign subsidiary.

Net investment hedge The net unrealized gain or loss relating to the effective portion of the hedge is recognized
in accumulated other comprehensive income, and only recycled to the consolidated statement of earnings upon reduction of the investment in the hedged foreign subsidiary. Gains and losses relating to
the ineffective portion of the hedge are recorded in net gains (losses) on investments in the consolidated statement of earnings.

Comprehensive income (loss)

Comprehensive income (loss) consists of net earnings (loss) and other comprehensive income (loss) and includes all changes in total equity during a period, except for those
resulting from investments by owners and distributions to owners. Unrealized foreign currency translation amounts arising from foreign subsidiaries and associates that do not have U.S. dollar
functional currencies and changes in the fair value of the effective portion of cash flow hedging instruments on hedges of net investments in foreign subsidiaries are recognized in other comprehensive
income (loss) and included in accumulated other comprehensive income (loss) until recycled to the consolidated statement of earnings in the future. Actuarial gains and losses and changes in asset
limitation amounts on defined benefit pension and post retirement plans are recorded in other comprehensive income (loss) and subsequently included in accumulated other comprehensive income (loss)
without recycling. Upon settlement of the defined benefit plan or disposal of the related associate or subsidiary those amounts are reclassified directly to retained earnings. Accumulated other
comprehensive income (loss) (net of income taxes) is included on the consolidated balance sheet as a component of common shareholders' equity.

Consolidated statement of cash flows

The company's consolidated statements of cash flows are prepared in accordance with the indirect method, classifying cash flows by operating, investing and financing activities.

Cash and cash equivalents Cash and cash equivalents consist of holding company and subsidiary cash on hand, demand
deposits with banks and other short term highly liquid investments with
maturities of three months or less when purchased, and exclude cash and short term highly liquid investments that are restricted.

Investments

Investments include cash and cash equivalents, short term investments, equity instruments, debt instruments, securities sold short, derivatives, real estate held for investment
and investments in associates. Management

41

---



determines
the appropriate classifications of investments at their acquisition date. The company has not designated any financial assets or liabilities (including derivatives) as accounting hedges
except for the hedge of its net investment in Canadian subsidiaries as described in note 7.

Classification Short term investments, equity instruments, debt instruments, securities sold short and derivatives
are classified as fair value through profit or loss ("FVTPL"). Investments classified as FVTPL are carried at fair value on the consolidated balance sheet with realized and unrealized
gains and losses recorded in net gains (losses) on investments in the consolidated statement of earnings and as an operating activity in the consolidated statement of cash flows. Dividends and
interest earned, net of interest incurred on investments are included in the consolidated statement of earnings in interest and dividends and as an operating activity in the consolidated statement of
cash flows.

An
investment in a debt instrument is measured at amortized cost if (i) the objective of the company's business model is to hold the instrument in order to collect contractual cash flows and
(ii) the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The company's
business model currently does not permit any of its investments in debt instruments to be measured at amortized cost.

Recognition and measurement The company recognizes purchases and sales of investments on the trade date, which is
the date on which the company commits to purchase or sell the asset. Transactions pending settlement are reflected on the consolidated balance sheet in other assets or in accounts payable and accrued
liabilities.

Transaction
costs related to investments classified or designated as FVTPL are expensed as incurred.

An
investment is derecognized when the rights to receive cash flows from the investment have expired or have been transferred and when the company has transferred substantially the risks and rewards
of ownership.

Short term investments Short term investments are investments with maturity dates between three months and twelve
months when purchased.

Securities sold short Securities sold short ("short sales") represent obligations to deliver securities which were
not owned at the time of the sale.

Derivatives Derivatives may include interest rate, credit default, currency and total return swaps, consumer price
index linked ("CPI-linked"), futures, forwards, warrants and option contracts, all of which derive their value mainly from changes in underlying interest rates, foreign exchange rates, credit ratings,
commodity values, inflation indexes or equity instruments. A derivative contract may be traded on an exchange or over-the-counter ("OTC"). Exchange-traded derivatives are standardized and include
futures and certain warrants and option contracts. OTC derivative contracts are individually negotiated between contracting parties and may include the company's forwards, CPI-linked derivatives and
total return swaps.

The
company uses derivatives principally to mitigate financial risks arising from its investment holdings and reinsurance recoverables, and monitors the derivatives for effectiveness in achieving
their risk management objectives.

The
fair value of derivatives in a gain position is presented on the consolidated balance sheet in derivatives and other invested assets in portfolio investments and in cash and investments of the
holding company. The fair value of derivatives in a loss position and obligations to purchase securities sold short, if any, are presented on the consolidated balance sheet in short sale and
derivative obligations. The initial premium paid for a derivative contract, if any, would be recorded as a derivative asset and subsequently adjusted for changes in the market value of the contract at
each balance sheet date. Changes in the market value of a derivative are recorded as net gains (losses) on investments in the consolidated statement of earnings at each balance sheet date, with a
corresponding adjustment to the carrying value of the derivative asset or liability.

Cash
received from counterparties as collateral for derivative contracts is recognized within subsidiary cash and short term investments and a corresponding liability is recognized within accounts
payable and accrued liabilities. Securities received from counterparties as collateral are not recorded as assets.

Cash
and securities delivered to counterparties as collateral for derivative contracts continue to be reflected as assets on the consolidated balance sheet within holding company cash and investments
or within portfolio investments assets as assets pledged for short sale and derivative obligations.

42

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Equity contracts The company's long equity total return swaps allow the company to receive the total return on a
notional amount of an equity index or individual equity security (including dividends and capital gains or losses) in exchange for the payment of a floating rate of interest on the notional amount.
Conversely, short equity total return swaps allow the company to pay the total return on a notional amount of an equity index or individual equity security in exchange for the receipt of a floating
rate of interest on the notional amount. The company classifies dividends and interest paid or received related to its long and short equity and equity index total return swaps on a net basis as
interest and dividends in the consolidated statement of earnings. The company's equity and equity index total return swaps contain contractual reset provisions requiring counterparties to cash-settle
on a monthly or quarterly basis any market value movements arising subsequent to the prior settlement. Any cash amounts paid to settle unfavourable market value changes
and, conversely, any cash amounts received in settlement of favourable market value changes, are recorded as net gains (losses) on investments in the consolidated statement of earnings. To the extent
that a contractual reset date of a contract does not correspond to the balance sheet date, the company records net gains (losses) on investments in the consolidated statement of earnings to adjust the
carrying value of the derivative asset or liability associated with each total return swap contract to reflect its fair value at the balance sheet date. Final cash settlements of total return swaps
are recognized as net gains (losses) on investments net of any previously recorded unrealized market value changes since the last quarterly reset date. Total return swaps require no initial net
investment, and at inception, their fair value is zero.

CPI-linked derivative contracts The company's derivative contracts referenced to consumer price indexes ("CPI") in
the geographic regions in which it operates serve as an economic hedge against the potential adverse financial impact on the company of decreasing price levels. These contracts may be structured to
provide a payout at maturity if there is cumulative deflation over the life of the contract or if cumulative average inflation is below a specified floor rate over the life of the contract. As the
average remaining life of a CPI-linked derivative declines, the fair value of the contract (excluding the impact of changes in the underlying CPI) will generally decline.

Determination of fair value Fair values for substantially all of the company's financial instruments are measured
using market or income approaches. Considerable judgment may be required in interpreting market data used to develop estimates of fair value. Accordingly, actual values realized in future market
transactions may differ from the estimates presented in these consolidated financial statements. The use of different market assumptions and/or valuation methodologies may have a material effect on
the estimated fair values. The fair values of financial instruments are based on bid prices for financial assets and ask prices for financial liabilities. The company categorizes its fair value
measurements using a three level hierarchy in accordance with IFRS as described below:



43

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Transfers
between fair value hierarchy categories are considered effective from the beginning of the reporting period in which the transfer is identified.

Valuation
techniques used by the company's independent pricing service providers and third party broker-dealers include comparisons with similar instruments where observable market prices exist,
discounted cash flow analysis, option pricing models, and other valuation techniques commonly used by market participants. The company assesses the reasonableness of pricing received from these third
party sources by comparing the fair values received to recent transaction prices for similar assets where available, to industry accepted discounted cash flow models (that incorporate estimates of the
amount and timing of future cash flows and market observable inputs such as credit spreads and discount rates) and to option pricing models (that incorporate market observable inputs including the
quoted price, volatility and dividend yield of the underlying security and the risk free rate).

The
reasonableness of the fair values of CPI-linked derivative contracts are assessed by comparing the fair values received from third party broker-dealers to recent market transactions where
available and values determined using third party pricing software based on the Black-Scholes option pricing model for European-style options that incorporates market observable and unobservable
inputs such as the current value of the relevant CPI underlying the derivative, the inflation swap rate, nominal swap rate and inflation volatility. The fair values of CPI-linked derivative contracts
are sensitive to assumptions such as market expectations of future rates of inflation and related inflation volatilities.

The
company employs dedicated personnel responsible for the valuation of its investment portfolio. Detailed valuations are performed for those financial instruments that are priced internally, while
external pricing received from independent pricing service providers and third party broker-dealers are evaluated by the company for reasonableness. The company's Chief Financial Officer oversees the
valuation function and regularly reviews valuation processes and results, including at each quarterly reporting period. Significant valuation matters, particularly those requiring extensive judgment,
are communicated to the company's Audit Committee.

Accounts receivable and accounts payable

Accounts receivable and accounts payable are recognized initially at fair value. Due to their short-term nature, carrying value is considered to approximate fair value.

Insurance contracts

Insurance contracts are those contracts that have significant insurance risk at the inception of the contract. Insurance risk arises when the company agrees to compensate a
policyholder if a specified uncertain future event adversely affects the policyholder, with the possibility of paying (including variability in timing of payments) significantly more in a scenario
where the insured event occurs than when it does not occur. Contracts not meeting the definition of an insurance contract under IFRS are classified as investment contracts, derivative contracts or
service contracts, as appropriate.

Revenue recognition Premiums written are deferred as unearned premiums and recognized as revenue, net of premiums
ceded, on a pro rata basis over the terms of the underlying policies. Net premiums earned are reported gross of premium taxes which are included in operating expenses as the related premiums
are earned. Certain reinsurance premiums are estimated at the individual contract level, based on historical patterns and experience from the ceding companies for contracts where reports from ceding
companies for the period are not contractually due until after the balance sheet date. The cost of reinsurance purchased by the company (premiums ceded) is included in recoverable from reinsurers and
is amortized over the contract period in proportion to the amount of insurance protection provided. Unearned premium represents the portion of the premiums written relating to periods of insurance and
reinsurance coverage subsequent to the balance sheet date. Impairment losses on insurance premiums receivable are included in operating expenses in the consolidated statement of earnings.

Deferred premium acquisition costs Certain costs of acquiring insurance contracts, consisting of brokers'
commissions and premium taxes are deferred and charged to earnings as the related premiums are earned. Deferred premium acquisition costs are limited to their estimated realizable value based on the
related unearned premium, which considers anticipated losses and loss adjustment expenses and estimated remaining costs of servicing the business based on historical experience. The ultimate
recoverability of deferred premium acquisition costs is determined without regard to investment income. Impairment losses on deferred premium acquisition costs are included in operating expenses in
the consolidated statement of earnings.

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Provision for losses and loss adjustment expenses The company is required by applicable insurance laws,
regulations and Canadian accepted actuarial practice to establish reserves for payment of losses and loss adjustment expenses that arise from the company's general insurance and reinsurance products
and its runoff operations. These reserves are based on assumptions that represent the best estimates of possible outcomes aimed at evaluating the expected ultimate cost to settle claims occurring
prior to, but still outstanding as of, the balance sheet date. The company establishes its reserves by product line, type and extent of coverage and year of occurrence. Loss reserves fall into two
categories: reserves for reported losses (case reserves) and reserves for incurred but not reported ("IBNR") losses. Additionally, reserves are held for loss adjustment expenses, which include the
estimated legal and other expenses expected to be incurred to finalize the settlement of the losses. Losses and loss adjustment expenses are charged to losses on claims, gross, in the consolidated
statement of earnings.

The
company's reserves for reported losses and loss adjustment expenses are based on estimates of future payments to settle reported general insurance and reinsurance claims and claims from its
run-off operations. The company bases case reserve estimates on the facts available at the time the reserves are established and for reinsurance, based on reports and individual case reserve estimates
received from ceding companies. The company establishes these reserves on an undiscounted basis to recognize the estimated costs of bringing pending claims to final settlement, taking into account
inflation, as well as other factors that can influence the amount of reserves required, some of which are subjective and some of which are dependent on future events. In determining the level of
reserves, the company considers historical trends and patterns of loss payments, pending levels of unpaid claims and types of coverage. In addition, court decisions, economic conditions and public
attitudes may affect the ultimate cost of settlement and, as a result, the company's estimation of reserves. Between the reporting and final settlement of a claim, circumstances may change, which
would result in changes to established reserves. Items such as changes in law and interpretations of relevant case law, results of litigation, changes in medical costs, as well as costs of vehicle and
building repair materials and labour rates can substantially impact ultimate settlement costs. Accordingly, the company reviews and re-evaluates case reserves on a regular basis. Any resulting
adjustments are included in the consolidated statement of earnings in the period the adjustment is made. Amounts ultimately paid for losses and loss adjustment expenses can vary significantly from the
level of reserves originally set or currently recorded.

The
company also establishes reserves for IBNR claims on an undiscounted basis to recognize the estimated final settlement cost for loss events which have already occurred but which have not yet been
reported. Historical information and statistical models, based on product line, type and extent of coverage, as well as reported claim trends, claim severities, exposure growth, and other factors, are
relied upon to estimate IBNR reserves. These estimates are revised as additional information becomes available and as claims are actually paid and reported.

Estimation techniques Provisions for losses and loss adjustment expense and provisions for unearned premiums are
determined based upon previous claims experience, knowledge of events, the terms and conditions of the relevant policies and on interpretation of circumstances. Particularly relevant is experience
with similar cases and historical claims payment trends. The approach also includes consideration of the development of loss payment trends, the potential longer term significance of large events, the
levels of unpaid claims, legislative changes, judicial decisions and economic and political conditions.

Where
possible the company applies several commonly accepted actuarial projection methodologies in estimating required provisions to give greater insight into the trends inherent in the data being
projected. These include methods based upon the following: the development of previously settled claims, where payments to date are extrapolated for each prior year; estimates based upon a projection
of numbers of claims 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. In addition, the company uses other techniques such as aggregate benchmarking methods for specialist classes of business. In selecting its best estimate, the company considers the
appropriateness of the methods to the individual circumstances of the line of business and accident or underwriting year.

Large
claims impacting each relevant line of business are generally assessed separately, being measured either at the face value of the loss adjusters' estimates or projected separately in order to
allow for the future development of large claims.

Provisions
for losses and loss adjustment expenses are calculated gross of any reinsurance recoveries. A separate estimate is made of the amounts that will be recoverable from reinsurers based upon
the gross provisions and having due regard to collectability.

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The
provisions for losses and loss adjustment expenses are subject to review at the subsidiary level by subsidiary actuaries, at the corporate level by the company's Chief Risk Officer and by
independent third party actuaries. In addition, for major classes of business where the risks and uncertainties inherent in the provisions are greatest, ad hoc detailed reviews are undertaken by
internal and external advisers who are able to draw upon their specialist expertise and a broader knowledge of current industry trends in claims development. The results of these reviews are
considered when establishing the appropriate levels of provisions for losses and loss adjustment expenses and unexpired risks.

Reinsurance

Reinsurance does not relieve the originating insurer of its liability and is reflected on the consolidated balance sheet on a gross basis to indicate the extent of credit risk
related to reinsurance and the obligations of the insurer to its policyholders. Reinsurance assets include balances due from reinsurance companies for paid and unpaid losses and loss adjustment
expenses and ceded unearned premiums. Amounts recoverable from reinsurers are estimated in a manner consistent with the claim liability associated with the reinsured policy. Reinsurance is recorded
gross on the consolidated balance sheet unless a legal right to offset against a liability owing to the same reinsurer exists.

Ceded
premiums and losses are recorded in the consolidated statement of earnings in premiums ceded to reinsurers and losses on claims ceded to reinsurers respectively and in recoverable from
reinsurers on the consolidated balance sheet. Unearned premiums are reported before reduction for premiums ceded to reinsurers and the reinsurers' portion is classified with recoverable from
reinsurers on the consolidated balance sheet along with the estimates of the reinsurers' shares of provision for claims determined on a basis consistent with the related claims liabilities.

Impairment Reinsurance assets are assessed regularly for any events that may trigger impairment, including legal
disputes with third parties, changes in capital, surplus levels and in credit ratings of a counterparty, and historic experience regarding collectability from specific reinsurers. If there is
objective evidence that a reinsurance asset is impaired, the carrying amount of the asset is reduced to its recoverable amount by recording a provision for uncollectible reinsurance in the
consolidated statement of earnings.

Risk transfer Reinsurance contracts are assessed to ensure that insurance risk is transferred by the ceding or
assuming company to the reinsurer. Those contracts that do not transfer insurance risk are accounted for using the deposit method whereby a deposit asset or liability is recognized based on the
consideration paid or received less any explicitly identified premiums or fees to be retained by the ceding company.

Premiums Premiums payable in respect of reinsurance ceded are recognized on the consolidated balance sheet in the
period in which the reinsurance contract is entered into and include estimates for contracts in force which have not yet been finalized. Premiums ceded are recognized in the consolidated statement of
earnings over the period of the reinsurance contract.

Income taxes

The provision for income taxes for the period comprises current and deferred income tax. Income taxes are recognized in the consolidated statement of earnings, except to the
extent that they relate to items recognized in other comprehensive income or directly in equity. In those cases, the related taxes are also recognized in other comprehensive income or directly in
equity, respectively.

Current
income tax is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the company's subsidiaries and associates
operate and generate taxable income.

Deferred
income tax is calculated under the liability method whereby deferred income tax assets and liabilities are recognized for temporary differences between the financial statement carrying
amounts of assets and liabilities and their respective income tax bases at the current substantively enacted tax rates. With the exception of initial recognition of deferred income tax arising from
business combinations, changes in deferred income tax associated with components of other comprehensive income are recognized directly in other comprehensive income while all other changes in deferred
income tax are included in the provision for income taxes in the consolidated statement of earnings.

Deferred
income tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. Carry forwards of
unused losses or unused tax credits are tax

46

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effected
and recognized as deferred tax assets when it is probable that future taxable profits will be available against which these losses or tax credits can be utilized.

Deferred
income tax is not recognized on unremitted subsidiary earnings where the company has determined it is not probable those earnings will be repatriated in the foreseeable future.

Current
and deferred income tax assets and liabilities are offset when the income taxes are levied by the same taxation authority and there is a legally enforceable right of offset.

Other assets

Other assets consist of premises and equipment, inventories and receivables of subsidiaries included in the Other reporting segment, accrued interest and dividends, income taxes
refundable, receivables for securities sold, pension assets, deferred compensation assets, prepaid expenses and other miscellaneous receivables.

Premises and equipment Premises and equipment is recorded at historical cost less accumulated amortization and any
accumulated impairment losses. The company reviews premises and equipment for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. The cost of
premises and equipment is depreciated on a straight-line basis over the asset's estimated useful life and charged to operating expenses in the consolidated statement of earnings.

Other revenue and expenses

Revenue from the sale of hospitality, travel and other non-insurance products and services are recognized when the price is fixed or determinable, collection is reasonably
assured and the product or service has been delivered to the customer. The revenue and related cost of inventories sold or services provided are recorded in other revenue and other expenses
respectively, in the consolidated statement of earnings.

Long term debt

Borrowings (debt issued) are recognized initially at fair value, net of transaction costs incurred, and subsequently carried at amortized cost. Interest expense on borrowings is
recognized in the consolidated statement of earnings using the effective interest rate method.

Equity

Common stock issued by the company is classified as equity when there is no contractual obligation to transfer cash or other financial assets to the holder of the shares.
Incremental costs directly attributable to the issue or repurchase for cancellation of equity instruments are recognized in equity, net of tax.

Treasury
shares are equity instruments reacquired by the company which have not been cancelled and are deducted from equity on the consolidated balance sheet, regardless of the objective of the
transaction. The company acquires its own subordinate voting shares on the open market for its share-based payment awards. No gain or loss is recognized in the consolidated statement of earnings on
the purchase, sale, issue or cancellation of treasury shares. Consideration paid or received is recognized directly in equity.

Dividends
and other distributions to holders of the company's equity instruments are recognized directly in equity.

Share-based payments

The company has restricted share plans or equivalent for management of the holding company and its subsidiaries with vesting periods of up to ten years from the date of grant.
The fair value of restricted share awards on the grant date is amortized to compensation expense over the vesting period, with a corresponding
increase in the share-based payments equity reserve. At each balance sheet date, the company reviews its estimates of the number of restricted share awards expected to vest.

Net earnings per share attributable to shareholders of Fairfax

Net earnings (loss) per share Basic net earnings (loss) per share is calculated by dividing
the net earnings (loss) attributable to shareholders of Fairfax, after the deduction of preferred share dividends declared and the excess over stated value of preferred shares purchased for
cancellation, by the weighted average number of subordinate and multiple voting shares issued and outstanding during the period, excluding subordinate voting shares purchased by the company and held
as treasury shares.

47

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Net earnings (loss) per diluted share Diluted earnings (loss) per share is calculated by adjusting the weighted
average number of subordinate and multiple voting shares outstanding during the period for the dilutive effect of share-based payments.

Pensions and post retirement benefits

The company's subsidiaries have a number of arrangements in Canada, the United States, and the United Kingdom that provide pension and post retirement benefits to
retired and current employees. The holding company has no such arrangements or plans. Pension arrangements of the subsidiaries include defined benefit statutory pension plans, as well as supplemental
arrangements that provide pension benefits in excess of statutory limits. These plans are a combination of defined benefit plans and defined contribution plans. The assets of these plans are held
separately from the company's general assets in separate pension funds and invested principally in high quality fixed income securities and cash and short term investments. Certain of the company's
post retirement benefit plans covering medical care and life insurance are internally funded.

Defined contribution plan A defined contribution plan is a pension plan under which the company pays fixed
contributions. Contributions to defined contribution pension plans are charged to operating expenses in the period in which the employment services qualifying for the benefit are provided. The company
has no further payment obligations once the contributions have been paid.

Defined benefit plan A defined benefit plan is a plan that defines an amount of pension or other post retirement
benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and salary. Actuarial valuations of benefit liabilities for the majority of
pension and post retirement benefit plans are performed each year using the projected benefit method prorated on service, based on management's assumptions.

Defined
benefit obligations, net of the fair value of plan assets, and adjusted for pension asset limitations, if any, are accrued on the consolidated balance sheet in accounts payable and accrued
liabilities (note 14). Plans in a net asset position, subject to any minimum funding requirements, are recognized in other assets (note 13).

Defined
benefit expense recognized in the consolidated statement of earnings includes the net interest on the net defined benefit liability (asset) calculated using a discount rate based on market
yields on high quality bonds, past service costs arising from plan amendments or curtailments and gains or losses on plan settlements.

Remeasurements,
consisting of actuarial gains and losses, the actual return on plan assets (excluding the net interest component) and any change in asset limitation amounts, are recognized in other
comprehensive income and subsequently included in accumulated other comprehensive income. These remeasurements will not be recycled to the consolidated statement of earnings in the future, but are
reclassified to retained earnings upon settlement of the plan or disposal of the related subsidiary.

Operating leases

The company and its subsidiaries are lessees under various operating leases relating to premises, automobiles and equipment. Payments made under operating leases (net of
any incentives received from the lessor) are recorded in operating expenses on a straight-line basis over the period of the lease.

New accounting pronouncements adopted in 2015

The company adopted the following new and revised standards, along with any consequential amendments, effective January 1, 2015. These changes were retrospectively
adopted in accordance with the applicable transitional provisions of each new or revised standard, and did not have a significant impact on the consolidated financial statements.

Amendment to IAS 19 Employee Benefits ("IAS 19")

The IASB amended IAS 19 to permit employee contributions that are independent of the number of years of service to be recognized as a reduction of service cost in the
period in which the service is rendered, instead of allocating the contributions to periods of service. Retrospective adoption of the amendment on January 1, 2015 did not have a significant
impact on the consolidated financial statements.

48

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IFRS Annual Improvements

The IASB periodically issues improvements to clarify the requirements of IFRS and eliminate inconsistencies within and between standards. Adoption of the 2010-2012 and 2011-2013
improvements on January 1, 2015 in accordance with their respective transition provisions did not have a significant impact on the consolidated financial statements.

New accounting pronouncements issued but not yet effective

The following new standards have been issued by the IASB and were not yet effective for the fiscal year beginning January 1, 2015. The company is currently evaluating
their impact on its consolidated financial statements.

IFRS Annual Improvements 2012-2014

In September 2014 the IASB issued a limited number of amendments to clarify the requirements of four IFRS standards. The amendments are effective for annual periods
beginning on or after January 1, 2016, with retrospective application.

IFRS 9 Financial Instruments ("IFRS 9")

In July 2014 the IASB published the complete version of IFRS 9 which supersedes the 2010 version of IFRS 9 currently applied by the company. This complete
version is effective for annual periods beginning on or after January 1, 2018, with retrospective application, and includes: requirements for the classification and measurement of financial
assets and liabilities; an expected credit loss model that replaces the existing incurred loss impairment model; and new hedge accounting guidance. The company is also evaluating the implementation
options for insurers proposed in the December 2015 Exposure DraftApplying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (Proposed amendments
to IFRS 4).

IFRS 15 Revenue from Contracts with Customers ("IFRS 15")

In May 2014 the IASB published IFRS 15 which introduces a single model for recognizing revenue from contracts with customers. IFRS 15 excludes insurance
contracts from its scope and is primarily applicable to the company's non-insurance entities. The standard is effective for annual periods beginning on or after January 1, 2018, with
retrospective application.

IFRS 16 Leases ("IFRS 16")

In January 2016 the IASB published IFRS 16 which largely eliminates the distinction between finance and operating leases for lessees. With limited exceptions,
lessees will be required to recognize a right-of-use asset and a liability for its obligation to make lease payments. The standard is effective for annual periods beginning on or after
January 1, 2019, with modified retrospective application.

Clarification of Acceptable Methods of Depreciation and Amortization (Amendments to IAS 16 and IAS 38)

In
May 2014 the IASB issued amendments to IAS 16Property, Plant and Equipmentand IAS 38Intangible
Assetsto clarify that revenue-based amortization methods cannot be used to amortize property, plant and equipment, and may be used to amortize intangible assets only in limited
circumstances. The amendments are effective for annual periods beginning on or after January 1, 2016, with prospective application.

Disclosure Initiative (Amendments to IAS 1)

In December 2014 the IASB issued certain narrow-focus amendments to IAS 1Presentation of Financial Statementsto
clarify existing presentation and disclosure requirements. The amendments are effective for annual periods beginning on or after January 1, 2016, with retrospective application.

49

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4.    Critical Accounting Estimates and Judgments

In the preparation of the company's consolidated financial statements, management has made a number of estimates and judgments, the more critical of which are discussed below,
with the exception of the determination of fair value for financial instruments (notes 3 and 5), carrying value of associates (notes 3 and 6), and contingencies
(note 20). Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable
under the circumstances.

Provision for losses and loss adjustment expenses

Provisions for losses and loss adjustment expenses are valued based on Canadian accepted actuarial practices, which are designed to ensure the company establishes an appropriate
reserve on the consolidated balance sheet to cover insured losses with respect to reported and unreported claims incurred as of the end of each accounting period and related claims expenses. The
assumptions underlying the valuation of provisions for losses and loss adjustment expenses are reviewed and updated by the company on an ongoing basis to reflect recent and emerging trends in
experience and changes in risk profile of the business. The estimation techniques employed by the company in determining provisions for losses and loss adjustment expenses and the inherent
uncertainties associated with insurance contracts are described in the "Underwriting Risk" section of note 24 while the historic development of the company's insurance liabilities are presented
in note 8.

Recoverability of deferred income tax assets

In determining the recoverability of deferred income tax assets, the company primarily considers current and expected profitability of applicable operating companies and their
ability to utilize any recorded tax assets. The company reviews its deferred income tax assets quarterly, taking into consideration the availability of sufficient current and projected taxable
profits, reversals of taxable temporary differences and tax planning strategies.

Business combinations

Accounting for business combinations requires judgments and estimates to be made in order to determine the fair values of the consideration transferred, assets acquired and the
liabilities assumed. The company uses all available information, including external valuations and appraisals where appropriate, to determine these fair values. Changes in estimates of fair value due
to additional information related to facts and circumstances that existed at the acquisition date would impact the amount of goodwill (or gain on bargain purchase) recognized. If necessary, the
company has up to one year from the acquisition date to finalize the determinations of fair value for business combinations.

Assessment of goodwill for potential impairment

Goodwill is assessed annually for impairment or more frequently if there are potential indicators of impairment. Management estimates the recoverable amount of each of the
company's cash-generating units using one or more generally accepted valuation techniques, which requires the making of a number of assumptions, including assumptions about future revenue, net
earnings, corporate overhead costs, capital expenditures, cost of capital, and the growth rate of the various operations. The recoverable amount of each cash-generating unit to which goodwill has been
assigned is compared to its carrying value (inclusive of assigned goodwill). If the recoverable amount of a cash-generating unit is determined to be less than its carrying value, the excess is
recognized as a goodwill impairment loss. Given the variability of future-oriented financial information, goodwill impairment tests are subjected to sensitivity analysis.

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5.    Cash and Investments

Holding company cash and investments, portfolio investments and short sale and derivative obligations are classified as FVTPL, except for investments in associates and other
invested assets which are classified as other, and are shown in the table below:

|                                                                         |  | December 31,
2015 |   | December 31,
2014 |  
|------------------------------------------------------------------------ |  | ----------------- | - | ----------------- | -
|Holding company:                                                         |  |                   |   |                   |  
|Cash and cash equivalents (note 27)                                      |  | 222.4             |   | 317.7             |  
|Short term investments                                                   |  | 241.7             |   | 121.6             |  
|Short term investments pledged for short sale and derivative obligations |  | 49.9              |   | 92.0              |  
|Bonds                                                                    |  | 511.7             |   | 323.8             |  
|Bonds pledged for short sale and derivative obligations                  |  | 12.9              |   | 17.7              |  
|Preferred stocks                                                         |  | 0.3               |   | 144.2             |  
|Common stocks(1)                                                         |  | 159.6             |   | 89.8              |  
|Derivatives (note 7)                                                     |  | 78.0              |   | 137.5             |  
|                                                                         |  |                   |   |                   |  
|                                                                         |  | 1,276.5           |   | 1,244.3           |  
|Short sale and derivative obligations (note 7)                           |  | (0.6              | ) | (31.6             | )
|                                                                         |  |                   |   |                   |  
|                                                                         |  | 1,275.9           |   | 1,212.7           |  
|                                                                         |  |                   |   |                   |  
|Portfolio investments:                                                   |  |                   |   |                   |  
|Cash and cash equivalents (note 27)                                      |  | 3,227.7           |   | 3,034.5           |  
|Short term investments                                                   |  | 3,413.9           |   | 2,499.8           |  
|Bonds                                                                    |  | 12,286.6          |   | 11,445.5          |  
|Preferred stocks                                                         |  | 116.6             |   | 376.4             |  
|Common stocks(1)                                                         |  | 5,358.3           |   | 4,848.5           |  
|Investments in associates (note 6)                                       |  | 1,730.2           |   | 1,617.7           |  
|Derivatives (note 7)                                                     |  | 484.4             |   | 412.6             |  
|Other invested assets                                                    |  | 16.3              |   | 14.2              |  
|                                                                         |  |                   |   |                   |  
|                                                                         |  | 26,634.0          |   | 24,249.2          |  
|                                                                         |  |                   |   |                   |  
|Assets pledged for short sale and derivative obligations:                |  |                   |   |                   |  
|Cash and cash equivalents (note 27)                                      |  | 7.7               |   |                  |  
|Short term investments                                                   |  | 129.1             |   | 227.7             |  
|Bonds                                                                    |  | 214.3             |   | 632.3             |  
|                                                                         |  |                   |   |                   |  
|                                                                         |  | 351.1             |   | 860.0             |  
|                                                                         |  |                   |   |                   |  
|Fairfax India cash and portfolio investments:                            |  |                   |   |                   |  
|Cash and cash equivalents (note 27)                                      |  | 22.0              |   |                  |  
|Short term investments                                                   |  | 61.5              |   |                  |  
|Bonds                                                                    |  | 512.8             |   |                  |  
|Common stocks(1)                                                         |  | 48.4              |   |                  |  
|Investments in associates (note 6)                                       |  | 202.7             |   |                  |  
|                                                                         |  |                   |   |                   |  
|                                                                         |  | 847.4             |   |                  |  
|                                                                         |  |                   |   |                   |  
|                                                                         |  | 27,832.5          |   | 25,109.2          |  
|Short sale and derivative obligations (note 7)                           |  | (92.3             | ) | (129.2            | )
|                                                                         |  |                   |   |                   |  
|                                                                         |  | 27,740.2          |   | 24,980.0          |  
|                                                                         |  |                   |   |                   |  

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Restricted
cash and cash equivalents at December 31, 2015 of $354.2 (December 31, 2014  $333.5) was comprised primarily of amounts required to be
maintained on deposit with various regulatory authorities to support the subsidiaries' insurance and reinsurance operations. Restricted cash and cash equivalents are included on the consolidated
balance sheet in holding company cash and investments, or in portfolio investments in subsidiary cash and short term investments, assets pledged for short sale and derivative obligations and Fairfax
India portfolio investments.

The
company's subsidiaries have pledged cash and investments, inclusive of trust funds and regulatory deposits, as security for their own obligations to pay claims or make premium payments (these
pledges are either direct or to support letters of credit). In order to write insurance business in certain jurisdictions (primarily U.S. states) the company's subsidiaries must deposit funds
with local insurance regulatory authorities to provide security for future claims payments as ultimate protection for the policyholder. Additionally, some of the company's subsidiaries provide
reinsurance to primary insurers, for which funds must be posted as security for losses that have been incurred but not yet paid. These pledges are in the normal course of business and are generally
released when the payment obligation is fulfilled.

The
table that follows summarizes pledged assets by the nature of the pledge requirement (excluding assets pledged in favour of Lloyd's (note 20) and assets pledged for short sale and
derivative obligations). Pledged assets primarily consist of bonds within portfolio investments on the consolidated balance sheet.

December 31,
2015

December 31,
2014Regulatory deposits

4,786.8

2,717.0Security for reinsurance and other

699.5

903.85,486.3

3,620.8


Fixed Income Maturity Profile

Bonds are summarized by the earliest contractual maturity date in the table below. Actual maturities may differ from maturities shown below due to the existence of call and put
features. At December 31, 2015 bonds containing call and put features represented approximately $6,339.1 and $179.4 respectively (December 31,
2014  $6,880.2 and $56.4) of the total fair value of bonds.

|                                   |  | December 31, 2015 |  | December 31, 2014 |  
|---------------------------------- |  | ----------------- |  | ----------------- | -
|
|Due in 1 year or less              |  | 1,173.9           |  | 1,313.1           |  
|Due after 1 year through 5 years   |  | 4,649.9           |  | 5,160.3           |  
|Due after 5 years through 10 years |  | 952.8             |  | 931.5             |  
|Due after 10 years                 |  | 5,635.7           |  | 6,133.4           |  
|                                   |  |                   |  |                   |  
|                                   |  | 12,412.3          |  | 13,538.3          |  
|                                   |  |                   |  |                   |  
|Effective interest rate            |  |                   |  | 5.1               | %
|                                   |  |                   |  |                   |  

The calculation of the effective interest rate of 5.1% (December 31, 2014  5.0%) is on a pre-tax basis and does not give effect to
the favourable tax treatment which the company expects to receive with respect to its tax advantaged U.S. state and municipal bond investments of approximately $4.9 billion
(December 31, 2014  $5.2 billion).

52

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Fair Value Disclosures

The company's use of quoted market prices (Level 1), valuation models using observable market information as inputs (Level 2) and valuation models without
observable market information as inputs (Level 3) in the valuation of securities and derivative contracts by type of issuer was as follows:

|                                                                                      |                                | December 31, 2015 |         | December 31, 2014
|------------------------------------------------------------------------------------- | ------------------------------ | ----------------- | ------- | -----------------
|
|Cash and cash equivalents                                                             |                                | 3,479.8           |         | 3,479.8          
|                                                                                      |                                |                   |         |                  
|Short term investments:                                                               |                                |                   |         |                  
|                                                                                      | Canadian government            |                   | 66.7    |                  
|                                                                                      | Canadian provincials           |                   | 114.0   |                  
|                                                                                      | U.S. treasury                  |                   | 3,433.9 |                  
|                                                                                      | Other government               |                   | 199.0   |                  
|                                                                                      | Corporate and other            |                   | 82.5    |                  
|                                                                                      |                                |                   |         |                  
|                                                                                      |                                | 3,896.1           |         | 3,783.5          
|                                                                                      |                                |                   |         |                  
|Bonds:                                                                                |                                |                   |         |                  
|                                                                                      | Canadian government            |                   | 297.1   |                  
|                                                                                      | Canadian provincials           |                   | 198.8   |                  
|                                                                                      | U.S. treasury                  |                   | 2,699.7 |                  
|                                                                                      | U.S. states and municipalities |                   | 6,646.2 |                  
|                                                                                      | Other government               |                   | 1,625.2 |                  
|                                                                                      | Corporate and other            |                   | 2,071.3 |                  
|                                                                                      |                                |                   |         |                  
|                                                                                      |                                | 13,538.3          |         |                 
|                                                                                      |                                |                   |         |                  
|Preferred stocks:                                                                     |                                |                   |         |                  
|                                                                                      | Canadian                       |                   | 16.3    |                  
|                                                                                      | U.S.                           |                   | 78.8    |                  
|                                                                                      | Other                          |                   | 21.8    |                  
|                                                                                      |                                |                   |         |                  
|                                                                                      |                                | 116.9             |         |                 
|                                                                                      |                                |                   |         |                  
|Common stocks:                                                                        |                                |                   |         |                  
|                                                                                      | Canadian                       |                   | 704.3   |                  
|                                                                                      | U.S.                           |                   | 1,059.7 |                  
|                                                                                      | Other funds(1)                 |                   | 1,094.0 |                  
|                                                                                      | Other                          |                   | 2,708.3 |                  
|                                                                                      |                                |                   |         |                  
|                                                                                      |                                | 5,566.3           |         | 2,617.3          
|                                                                                      |                                |                   |         |                  
|Derivatives and other invested assets                                                 |                                | 578.7             |         |                 
|                                                                                      |                                |                   |         |                  
|Short sale and derivative obligations                                                 |                                | (92.9             | )       |                 
|                                                                                      |                                |                   |         |                  
|Holding company cash and investments and portfolio investments measured at fair value |                                | 27,083.2          |         | 9,880.6          
|                                                                                      |                                |                   |         |                  
|                                                                                      |                                | 100.0%            |         | 36.5%            
|                                                                                      |                                |                   |         |                  
|Investments in associates (note 6)(2)                                                 |                                | 2,406.6           |         | 1,034.9          
|                                                                                      |                                |                   |         |                  

53

---



Transfers
between fair value hierarchy levels are considered effective from the beginning of the reporting period in which the transfer is identified. During 2015 and 2014 there were no significant
transfers of financial instruments between Level 1 and Level 2 and there were no significant transfers of financial instruments in or out of Level 3 as a result of changes
in the observability of valuation inputs.

Included
in Level 3 are investments in CPI-linked derivatives, certain private placement debt securities and equity warrants, and common and preferred shares of private companies. CPI-linked
derivatives are classified within holding company cash and investments, or in derivatives and other invested assets in portfolio investments on the consolidated balance sheet and are valued based on
broker-dealer quotes which management has determined utilize market observable inputs except for the inflation volatility input which is not market observable. Private placement debt securities are
classified within holding company cash and investments and bonds on the consolidated balance sheet and are valued using industry accepted discounted cash flow models that incorporate the credit
spreads of the issuers, an input which is not market observable. Limited partnerships, private equity funds and private company common shares are classified within holding company cash and investments
and common stocks on the consolidated balance sheet. These investments are primarily valued based on net asset value statements provided by the respective third party fund managers and general
partners. The fair values in those statements are determined using quoted prices of the underlying assets, and to a lesser extent, observable inputs where available and unobservable inputs, in
conjunction with industry accepted valuation models, where required. In some instances, private equity funds and limited partnerships are classified as Level 3 because they may require at least
three months' notice to liquidate. Reasonably possible changes in the value of unobservable inputs for any of these individual investments would not significantly change the fair value of investments
classified as Level 3 in the fair value hierarchy.

A
summary of changes in Level 3 financial assets measured at fair value on a recurring basis for the years ended December 31 follows:

|                                                                                                            |  | 2015   |  
|----------------------------------------------------------------------------------------------------------- |  | ------ | -
|
|Balance  January 1                                                                                         |  | 833.0  |  
|Net realized and unrealized gains (losses) included in the consolidated statement of earnings               |  | (75.9  | )
|Purchases                                                                                                   |  | 123.7  |  
|Sales                                                                                                       |  | (162.4 | )
|Acquisition of Brit                                                                                         |  | 23.5   |  
|Unrealized foreign currency translation losses on foreign operations included in other comprehensive income |  | (45.5  | )
|                                                                                                            |  |        |  
|Balance  December 31                                                                                       |  | 696.4  |  
|                                                                                                            |  |        |  

|
|

54

---



|                                                                                                            |  | 2014  |  
|----------------------------------------------------------------------------------------------------------- |  | ----- | -
|
|Balance  January 1                                                                                         |  | 437.6 |  
|Net realized and unrealized gains (losses) included in the consolidated statement of earnings               |  | 175.1 |  
|Purchases                                                                                                   |  | 249.2 |  
|Sales                                                                                                       |  | (5.5  | )
|Transfer into category due to change in accounting treatment                                                |  |      |  
|Unrealized foreign currency translation losses on foreign operations included in other comprehensive income |  | (23.4 | )
|                                                                                                            |  |       |  
|Balance  December 31                                                                                       |  | 833.0 |  
|                                                                                                            |  |       |  

Investment Income

An analysis of investment income for the years ended December 31 follows:

Interest and dividends and share of profit of associates

|                                       |                                 | 2015  |        | 2014  |       
|-------------------------------------- | ------------------------------- | ----- | ------ | ----- | ------
|Interest income:                       |                                 |       |        |       |       
|                                       | Cash and short term investments |       | 28.5   |       | 27.8  
|                                       | Bonds                           |       | 584.7  |       | 474.1 
|                                       | Derivatives and other           |       | (156.1 | )     | (151.6
|                                       |                                 |       |        |       |       
|                                       |                                 | 457.1 |        | 350.3 |       
|                                       |                                 |       |        |       |       
|Dividends:                             |                                 |       |        |       |       
|                                       | Preferred stocks                |       | 15.1   |       | 38.1  
|                                       | Common stocks                   |       | 65.0   |       | 42.1  
|                                       |                                 |       |        |       |       
|                                       |                                 | 80.1  |        | 80.2  |       
|                                       |                                 |       |        |       |       
|Investment expenses                    |                                 | (25.0 | )      | (26.7 | )     
|                                       |                                 |       |        |       |       
|Interest and dividends                 |                                 | 512.2 |        | 403.8 |       
|                                       |                                 |       |        |       |       
|Share of profit of associates (note 6) |                                 | 172.9 |        | 105.7 |       
|                                       |                                 |       |        |       |       

55

---



Net gains (losses) on investments

|                                                 |                                               | 2015    |        | 2014     |        
|------------------------------------------------ | --------------------------------------------- | ------- | ------ | -------- | -------
|
|                                                 | Bonds                                         |         | 27.4   |          | (615.3 
|                                                 | Preferred stocks                              |         | 130.6  | (1)      | (141.8)
|                                                 | Common stocks                                 |         | 255.7  |          | (948.7 
|                                                 |                                               |         |        |          |        
|                                                 |                                               | 413.7   |        | (1,705.8 | )      
|                                                 |                                               |         |        |          |        
|Derivatives:                                     |                                               |         |        |          |        
|                                                 | Common stock and equity index short positions |         | 303.3  | (2)      | 205.7  
|                                                 | Common stock and equity index long positions  |         | (43.0) | (2)      | 7.0    
|                                                 | Equity index put options                      |         |       |          | (7.2   
|                                                 | Equity warrants and call options              |         | 208.5  | (3)      | (20.8) 
|                                                 | CPI-linked derivatives                        |         |       |          | 35.7   
|                                                 | Other                                         |         | 6.1    |          | (8.7   
|                                                 |                                               |         |        |          |        
|                                                 |                                               | 474.9   |        | 211.7    |        
|                                                 |                                               |         |        |          |        
|Foreign currency net gains (losses) on:          |                                               |         |        |          |        
|                                                 | Investing activities                          |         | (99.6  | )        | 72.0   
|                                                 | Underwriting activities                       |         | 82.1   |          |       
|                                                 | Foreign currency contracts                    |         | 210.4  |          | (152.4 
|                                                 |                                               |         |        |          |        
|                                                 |                                               | 192.9   |        | (80.4    | )      
|                                                 |                                               |         |        |          |        
|Gain on disposition of subsidiary and associates |                                               | 235.5   | (4)    |         |        
|                                                 |                                               |         |        |          |        
|Other                                            |                                               | (0.3    | )      | (1.4     | )      
|                                                 |                                               |         |        |          |        
|Net gains (losses) on investments                |                                               | 1,316.7 |        | (1,575.9 | )      
|                                                 |                                               |         |        |          |        

56

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6.    Investments in Associates

The following summarizes the company's investments in associates:

|                                                |                                                                                                       | December 31, 2015 |       | Year ended
December 31,
2015 |       | December 31, 2014 |         | Year ended
December 31,
2014 |     
|----------------------------------------------- | ----------------------------------------------------------------------------------------------------- | ----------------- | ----- | ---------------------------- | ----- | ----------------- | ------- | ---------------------------- | ----
|
|Insurance and reinsurance associates:           |                                                                                                       |                   |       |                              |       |                   |         |                              |     
|                                                | ICICI Lombard General Insurance Company Limited ("ICICI Lombard")(1)                                  |                   | 25.6% |                              | 666.3 |                   | 109.8   |                              | 10.7
|                                                | Gulf Insurance Company ("Gulf Insurance")                                                             |                   | 41.4% |                              | 247.0 |                   | 198.3   |                              | 6.5 
|                                                | Thai Re Public Company Limited ("Thai Re")                                                            |                   | 32.1% |                              | 103.7 |                   | 98.9    |                              | 14.9
|                                                | Bank for Investment and Development of Vietnam Insurance Joint Stock Corporation ("BIC Insurance")(2) |                   | 35.0% |                              | 33.8  |                   | 48.1    |                              |    
|                                                | Singapore Reinsurance Corporation Limited ("Singapore Re")                                            |                   | 27.8% |                              | 38.5  |                   | 34.6    |                              | 1.0 
|                                                | Ambridge Partners LLC ("Ambridge Partners")(3)                                                        |                   | 50.0% |                              | 28.6  |                   | 28.6    |                              |    
|                                                | Falcon Insurance PLC ("Falcon Thailand")                                                              |                   | 40.5% |                              | 8.1   |                   | 8.1     |                              | (0.1
|                                                |                                                                                                       |                   |       |                              |       |                   |         |                              |     
|                                                |                                                                                                       |                   |       | 1,126.0                      |       | 526.4             |         | 33.0                         |     
|                                                |                                                                                                       |                   |       |                              |       |                   |         |                              |     
|Non-insurance associates:                       |                                                                                                       |                   |       |                              |       |                   |         |                              |     
|Real estate                                     |                                                                                                       |                   |       |                              |       |                   |         |                              |     
|                                                | KWF Real Estate Ventures Limited Partnerships ("KWF LPs")(4)                                          |                   |      |                              | 191.5 |                   | 191.5   |                              | 77.5
|                                                | Grivalia Properties REIC ("Grivalia Properties")                                                      |                   | 40.6% |                              | 329.3 |                   | 301.7   |                              | 16.2
|                                                |                                                                                                       |                   |       |                              |       |                   |         |                              |     
|                                                |                                                                                                       |                   |       | 520.8                        |       | 493.2             |         | 93.7                         |     
|                                                |                                                                                                       |                   |       |                              |       |                   |         |                              |     
|Other                                           |                                                                                                       |                   |       |                              |       |                   |         |                              |     
|                                                | Resolute Forest Products Inc. ("Resolute")(5)                                                         |                   | 32.3% |                              | 218.0 |                   | 416.2   |                              | 30.3
|                                                | IIFL Holdings Limited ("IIFL Holdings")(6)                                                            |                   | 30.7% |                              | 310.3 |                   | 290.8   |                              |    
|                                                | Arbor Memorial Services Inc. ("Arbor Memorial")                                                       |                   | 43.4% |                              | 73.8  |                   | 47.3    |                              | 7.0 
|                                                | Partnerships, trusts and other                                                                        |                   |      |                              | 157.7 |                   | 159.0   |                              | 8.9 
|                                                |                                                                                                       |                   |       |                              |       |                   |         |                              |     
|                                                |                                                                                                       |                   |       | 759.8                        |       | 913.3             |         | 46.2                         |     
|                                                |                                                                                                       |                   |       |                              |       |                   |         |                              |     
|Investments in associates                       |                                                                                                       |                   |       | 2,406.6                      |       | 1,932.9           |         | 172.9                        |     
|                                                |                                                                                                       |                   |       |                              |       |                   |         |                              |     
|As presented on the consolidated balance sheet: |                                                                                                       |                   |       |                              |       |                   |         |                              |     
|                                                | Investments in associates                                                                             |                   |       |                              |       |                   | 1,730.2 |                              |     
|                                                | Fairfax India cash and portfolio investments(6)                                                       |                   |       |                              |       |                   | 202.7   |                              |     
|                                                |                                                                                                       |                   |       |                              |       |                   |         |                              |     
|                                                |                                                                                                       |                   |       |                              |       | 1,932.9           |         |                              |     
|                                                |                                                                                                       |                   |       |                              |       |                   |         |                              |     

57

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During
2015 the company received distributions (inclusive of the distribution from the KWF LP described above) and dividends of $202.5 (2014  $260.7) from
its non-insurance associates. The distributions received in 2014 are inclusive of the proceeds on the sales of MEGA Brands Inc. and certain KWF LPs.

The
company's strategic investment in 15.0% of Alltrust Insurance Company of China Ltd. ("Alltrust Insurance") had a carrying value of $93.2 at December 31, 2015 (December 31,
2014  $97.5) and is classified as FVTPL within common stocks on the consolidated balance sheet.

7.    Short Sales and Derivatives

The following table summarizes the company's derivative financial instruments:

|                                   |                                                    | December 31, 2015 |         | December 31, 2014
|---------------------------------- | -------------------------------------------------- | ----------------- | ------- | -----------------
|
|
|
|Equity derivatives:                |                                                    |                   |         |                  
|                                   | Equity index total return swaps  short positions |                   | 4,403.1 |                  
|                                   | Equity total return swaps  short positions        |                   |        |                  
|                                   | Equity index put options                           |                   | 20.3    |                  
|                                   | Equity total return swaps  long positions         |                   |        |                  
|                                   | Equity call options                                |                   | 0.4     |                  
|                                   | Warrants                                           |                   |        |                  
|CPI-linked derivative contracts    |                                                    | 655.8             |         | 109,449.1        
|Foreign exchange forward contracts |                                                    |                  |         |                 
|Other derivative contracts         |                                                    |                  |         |                 
|                                   |                                                    |                   |         |                  
|Total                              |                                                    |                   |         |                  
|                                   |                                                    |                   |         |                  

The company is exposed to significant market risk (comprised of foreign currency risk, interest rate risk and other price risk) through its investing activities. Derivative
contracts entered into by the company, with limited exceptions, are considered economic hedges and are not designated as hedges for financial reporting.

58

---



Equity contracts

The company has economically hedged its equity and equity-related holdings (comprised of common stocks, convertible preferred stocks, convertible bonds, non-insurance
investments in associates and equity-related derivatives) against a potential significant decline in equity markets by way of short positions effected through equity and equity index total return
swaps (including short positions in certain equity indexes and individual equities) and equity index put options as set out in the table below. The company's equity hedges are structured to provide a
return which is inverse to changes in the fair values of the equity indexes and certain individual equities.

During
2015 the company closed out a portion of its short individual equities and other equity index total return swaps with an original notional amount of $434.1. During 2015 the company received net
cash of $303.3 (2014  paid net cash of $377.9) in connection with the reset provisions of its short equity and equity index total return swaps (excluding the
impact of collateral requirements). Subsequent to December 31, 2015 the company added approximately $952.6 notional amount to its short positions in equity and equity index total return swaps,
increasing its equity hedge ratio to approximately 100% based on the fair value of its equity and equity-related holdings at December 31, 2015. Refer to note 24 for a tabular analysis
followed by a discussion of the company's hedges of equity price risk and the related basis risk.

|                           |  | December 31, 2015 |  | December 31, 2014
|-------------------------- |  | ----------------- |  | -----------------
|
|Russell 2000  TRS         |  | 37,424,319        |  | 2,477.2          
|S&P/TSX 60  TRS           |  | 13,044,000        |  | 206.1            
|Other equity indices  TRS |  |                  |  | 40.0             
|Individual equities -TRS   |  |                  |  | 1,379.3          
|S&P 500  put options(2)   |  | 225,643           |  | 382.5            

As
at December 31, 2015 the company had entered into long equity total return swaps on individual equities for investment purposes with an original notional amount of $243.9
(December 31, 2014  $243.5). During 2015 the company paid net cash of $43.0 (2014  received net cash of $70.3) in
connection with the reset provisions of its long equity total return swaps (excluding the impact of collateral requirements).

During
2015 the company paid a premium of $20.3 to purchase American style put options on the S&P 500 index with a notional amount of $382.5, a weighted average strike price of 1,695.15 and an
expiry date of December 30, 2016.

At
December 31, 2015 the fair value of the collateral deposited for the benefit of derivative counterparties included in holding company cash and investments, or in assets pledged for short
sale and derivative obligations, was $413.9 (December 31, 2014  $969.7), comprised of collateral of $380.4 (December 31,
2014  $788.6) required to be deposited to enter into such derivative contracts (principally related to total return swaps) and $33.5 (December 31,
2014  $181.1) securing amounts owed to counterparties in respect of fair value changes since the most recent reset date.

CPI-linked derivative contracts

The company has purchased derivative contracts referenced to consumer price indexes ("CPI") in the geographic regions in which it operates to serve as an economic hedge against
the potential adverse financial impact on the company of decreasing price levels. At December 31, 2015 these contracts have a remaining weighted average life of 6.6 years
(December 31, 2014  7.4 years) and a notional amount and fair value as shown in the table below. In the event of a sale, expiration or early
settlement of any of these contracts, the company would receive the fair value of that contract on the date of the transaction. The company's maximum potential loss on any contract is limited to the

59

---



original
cost of that contract. The following table summarizes the notional amounts and weighted average strike prices of CPI indexes underlying the company's CPI-linked derivative contracts:

|               |  |      |  | December 31, 2015 |  | December 31, 2014
|-------------- |  | ---- |  | ----------------- |  | -----------------
|
|
|United States  |  | 0.0% |  | 46,225.0          |  | 46,225.0         
|United States  |  | 0.5% |  | 12,600.0          |  | 12,600.0         
|European Union |  | 0.0% |  | 38,975.0          |  | 42,338.4         
|United Kingdom |  | 0.0% |  | 3,300.0           |  | 4,863.9          
|France         |  | 0.0% |  | 3,150.0           |  | 3,421.8          
|               |  |      |  |                   |  |                  
|               |  |      |  |                   |  | 109,449.1        
|               |  |      |  |                   |  |                  

During
2015 the company purchased $2,907.3 (2014  $35,954.2) notional amount of CPI-linked derivative contracts at a cost of $14.6
(2014  $120.6) and paid additional premiums of $4.8 (2014  nil) to increase the strike prices of certain CPI-linked
derivative contracts (primarily the European CPI-linked derivatives). The company's CPI-linked derivative contracts produced net unrealized gains of $35.7 in 2015
(2014  $17.7).

Foreign exchange forward contracts

Long and short foreign exchange forward contracts primarily denominated in the euro, the British pound sterling and the Canadian dollar are used to manage certain foreign
currency exposures arising from foreign currency denominated transactions. These contracts have an average term to maturity of less than one year and may be renewed at market rates.

Counterparty collateral

The company endeavours to limit counterparty risk through diligent selection of counterparties to its derivative contracts and through the terms of negotiated agreements. The
fair value of the collateral deposited for the benefit of the company at December 31, 2015 consisted of cash of $28.7 and government securities of $264.6 (December 31,
2014  $27.8 and $164.5). The company had not exercised its right to sell or repledge collateral at December 31, 2015. The company's exposure to
counterparty risk and the management thereof are discussed in note 24.

Hedge of net investment in Canadian subsidiaries

The company has designated the carrying value of Cdn$1,525.0 principal amount of its Canadian dollar denominated unsecured senior notes with a fair value of $1,240.9
(December 31, 2014  principal amount of Cdn$1,525.0 with a fair value of $1,488.7) as a hedge of its net investment in its Canadian subsidiaries for
financial reporting. In 2015 the company recognized pre-tax gains of $218.8 (2014  $118.7) related to foreign currency movements on the unsecured senior notes in
gains on hedge of net investment in Canadian subsidiaries in the consolidated statement of comprehensive income.

60

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8.    Insurance Contract Liabilities

|                                                  |  | December 31, 2015 |  | December 31, 2014
|------------------------------------------------- |  | ----------------- |  | -----------------
|
|Provision for unearned premiums                   |  | 3,284.8           |  | 398.7            
|Provision for losses and loss adjustment expenses |  | 19,816.4          |  | 3,205.9          
|                                                  |  |                   |  |                  
|Total insurance contract liabilities              |  | 23,101.2          |  | 3,604.6          
|                                                  |  |                   |  |                  
|Current                                           |  | 8,552.5           |  | 2,380.7          
|Non-current                                       |  | 14,548.7          |  | 1,223.9          
|                                                  |  |                   |  |                  
|                                                  |  | 23,101.2          |  | 3,604.6          
|                                                  |  |                   |  |                  

At December 31, 2015 the company's net loss reserves of $16,610.5 (December 31, 2014  $14,393.4) were comprised of case
reserves of $7,790.9 and IBNR of $8,819.6 (December 31, 2014  $7,285.0 and $7,108.4).

Provision for unearned premiums

Changes in the provision for unearned premiums for the years ended December 31 were as follows:

2015

2014Provision for unearned premiums  January 1

2,689.6

2,680.9Gross premiums written

8,655.8

7,459.9Less: gross premiums earned

(8,581.7
)
(7,358.2
)Acquisitions of subsidiaries

691.9

2.6Foreign exchange effect and other

(170.8
)
(95.6
)Provision for unearned premiums  December 31

3,284.8

2,689.6


Provision for losses and loss adjustment expenses

Changes in the provision for losses and loss adjustment expenses for the years ended December 31 were as follows:

2015

2014Provision for losses and loss adjustment expenses  January 1

17,749.1

19,212.8Decrease in estimated losses and expenses for claims occurring in the prior years

(506.2
)
(473.9
)Losses and expenses for claims occurring in the current year

5,606.5

4,901.3Paid on claims occurring during:the current year

(1,342.4
)
(1,201.4
)the prior years

(4,172.3
)
(4,081.0
)Acquisitions of subsidiaries

3,299.0

0.4Foreign exchange effect and other

(817.3
)
(609.1
)Provision for losses and loss adjustment expenses  December 31

19,816.4

17,749.1


61

---



Development of insurance losses, gross

The development of insurance liabilities provides a measure of the company's ability to estimate the ultimate value of claims. The loss development table which follows shows the
provision for losses and loss adjustment expenses at the end of each calendar year, the cumulative payments made in respect of those reserves in subsequent years and the re-estimated amount of each
calendar year's provision for losses and loss adjustment expenses as at December 31, 2015.

|                                                  |                                        | Calendar year
|------------------------------------------------- | -------------------------------------- | -------------
|
|Provision for losses and loss adjustment expenses |                                        | 14,843.2     
|Less: CTR Life(1)                                 |                                        | 21.5         
|                                                  |                                        |              
|                                                  |                                        | 14,821.7     
|Cumulative payments as of:                        |                                        |              
|One year later                                    |                                        | 3,167.8      
|Two years later                                   |                                        | 5,130.8      
|Three years later                                 |                                        | 6,784.9      
|Four years later                                  |                                        | 8,124.6      
|Five years later                                  |                                        | 9,079.0      
|Six years later                                   |                                        | 9,730.6      
|Seven years later                                 |                                        | 10,458.1     
|Eight years later                                 |                                        | 11,025.6     
|Reserves re-estimated as of:                      |                                        |              
|One year later                                    |                                        | 14,420.4     
|Two years later                                   |                                        | 14,493.8     
|Three years later                                 |                                        | 14,579.9     
|Four years later                                  |                                        | 14,679.5     
|Five years later                                  |                                        | 14,908.6     
|Six years later                                   |                                        | 14,947.2     
|Seven years later                                 |                                        | 14,964.2     
|Eight years later                                 |                                        | 14,887.8     
|Favourable (unfavourable) development             |                                        | (66.1        
|Comprised of  favourable (unfavourable):         |                                        |              
|                                                  | Effect of foreign currency translation |              
|                                                  | Loss reserve development               |              
|                                                  |                                        |              
|                                                  |                                        | (66.1        
|                                                  |                                        |              

The
effect of foreign currency translation in the table above primarily arose on translation to U.S. dollars of the loss reserves of subsidiaries with functional currencies other than the
U.S. dollar. The company's exposure to foreign currency risk and the management thereof are discussed in note 24.

Loss
reserve development in the table above excludes the loss reserve development of a subsidiary in the year it is acquired whereas the consolidated statement of earnings includes the loss reserve
development of a subsidiary from its acquisition date.

Favourable
loss reserve development in calendar year 2015 of $491.7 in the table above was principally comprised of favourable loss emergence on the more recent accident years, partially offset by
adverse development primarily relating to asbestos and other latent reserves.

62

---



Development of losses and loss adjustment expenses for asbestos

A number of the company's subsidiaries wrote general insurance policies and reinsurance prior to their acquisition by the company under which policyholders continue to present
asbestos-related injury claims. The vast majority of these claims are presented under policies written many years ago and reside primarily within the runoff group.

There
is a great deal of uncertainty surrounding these types of claims, which impacts the ability of insurers and reinsurers to estimate the ultimate amount of unpaid claims and related settlement
expenses. The majority of these claims differ from most other types of claims because there is inconsistent precedent, if any at all, to determine what, if any, coverage exists or which, if any,
policy years and insurers/reinsurers may be liable. These uncertainties are exacerbated by judicial and legislative interpretations of coverage that in some cases have eroded the clear and express
intent of the parties to the insurance contracts, and in others have expanded theories of liability.

The
following is an analysis of the changes which have occurred in the company's provision for losses and loss adjustment expenses related to asbestos exposure on a gross and net basis for the years
ended December 31:

|                                                                         |                                                                          | 2015    |        | 2014    |       
|------------------------------------------------------------------------ | ------------------------------------------------------------------------ | ------- | ------ | ------- | ------
|
|Provision for asbestos claims and loss adjustment expenses  January 1   |                                                                          | 1,224.3 |        | 896.7   |       
|                                                                         | Losses and loss adjustment expenses incurred                             |         | 159.2  |         | 87.2  
|                                                                         | Losses and loss adjustment expenses paid                                 |         | (200.5 | )       | (130.6
|                                                                         | Provisions for asbestos claims assumed during the year at December 31(1) |         | 198.0  |         | 190.5 
|                                                                         |                                                                          |         |        |         |       
|Provision for asbestos claims and loss adjustment expenses  December 31 |                                                                          | 1,381.0 |        | 1,043.8 |       
|                                                                         |                                                                          |         |        |         |       

Fair Value

The fair value of insurance and reinsurance contracts is estimated as follows:

|                            |  | December 31, 2015 |  | December 31, 2014
|--------------------------- |  | ----------------- |  | -----------------
|
|Insurance contracts         |  | 22,997.8          |  | 23,101.2         
|Ceded reinsurance contracts |  | 3,481.5           |  | 3,604.6          

The fair value of insurance contracts is comprised of the fair value of unpaid claim liabilities and the fair value of the unearned premiums. The fair value of ceded reinsurance
contracts is comprised of the fair value of reinsurers' share of unpaid claim liabilities and the unearned premium. Both reflect the time value of money through discounting, whereas the carrying
values (including the reinsurers' share thereof) do not. The calculation of the fair value of the unearned premium includes acquisition expenses to reflect the deferral of these expenses at the
inception of the insurance contract. The estimated value of insurance and ceded reinsurance contracts is determined by projecting the expected future cash flows of the contracts, selecting the
appropriate interest rates, and applying the resulting discount factors to expected future cash flows. The difference between the sum of the undiscounted expected future cash flows and discounted
future cash flows represent the time value of money. A margin for risk and uncertainty is added to the discounted cash flows to reflect the volatility of the lines of business written, quantity of
reinsurance purchased, credit quality of reinsurers and a risk margin for future changes in interest rates.

The
table that follows shows the potential impact of interest rate fluctuations on the fair value of insurance and reinsurance contracts:

|                        |  | December 31, 2015 |  | December 31, 2014
|----------------------- |  | ----------------- |  | -----------------
|
|100 basis point rise    |  | 22,364.4          |  | 3,408.5          
|100 basis point decline |  | 23,681.4          |  | 3,559.7          

63

---



9.    Reinsurance

Reinsurers' share of insurance contract liabilities was comprised as follows:

|                                                  |  | December 31, 2015 |  | December 31, 2014
|------------------------------------------------- |  | ----------------- |  | -----------------
|
|Provision for losses and loss adjustment expenses |  | 3,259.8           |  | (53.9            
|Reinsurers' share of paid losses                  |  | 419.4             |  | (133.1           
|Provision for unearned premiums                   |  | 398.7             |  |                 
|                                                  |  |                   |  |                  
|                                                  |  | 4,077.9           |  | (187.0           
|                                                  |  |                   |  |                  
|Current                                           |  |                   |  |                  
|Non-current                                       |  |                   |  |                  
|                                                  |  |                   |  |                  
|                                                  |  |                   |  |                  
|                                                  |  |                   |  |                  

Changes in reinsurers' share of paid losses, unpaid losses, unearned premiums and the provision for uncollectible balances for the years ended December 31 were
as follows:

|                            |                                                                 | 2015  |         
|--------------------------- | --------------------------------------------------------------- | ----- | --------
|
|Balance  January 1, 2015   |                                                                 | 380.7 |         
|                            | Reinsurers' share of losses paid to insureds                    |       | 1,338.2 
|                            | Reinsurance recoveries received                                 |       | (1,326.6
|                            | Reinsurers' share of losses or premiums earned                  |       |        
|                            | Premiums ceded to reinsurers                                    |       |        
|                            | Change in provision, recovery or write-off of impaired balances |       | (20.3   
|                            | Acquisitions of subsidiaries                                    |       | 59.3    
|                            | Foreign exchange effect and other                               |       | (11.9   
|                            |                                                                 |       |         
|Balance  December 31, 2015 |                                                                 | 419.4 |         
|                            |                                                                 |       |         

|
|

|                            |                                                                 | 2014  |         
|--------------------------- | --------------------------------------------------------------- | ----- | --------
|
|Balance  January 1, 2014   |                                                                 | 518.6 |         
|                            | Reinsurers' share of losses paid to insureds                    |       | 1,380.2 
|                            | Reinsurance recoveries received                                 |       | (1,507.6
|                            | Reinsurers' share of losses or premiums earned                  |       |        
|                            | Premiums ceded to reinsurers                                    |       |        
|                            | Change in provision, recovery or write-off of impaired balances |       | (3.0    
|                            | Foreign exchange effect and other                               |       | (7.5    
|                            |                                                                 |       |         
|Balance  December 31, 2014 |                                                                 | 380.7 |         
|                            |                                                                 |       |         

Commission income earned on premiums ceded to reinsurers in 2015 of $266.7 (2014  $261.0) is included in commissions, net in the
consolidated statement of earnings.

64

---



On
October 15, 2015 Crum & Forster commuted a significant aggregate stop loss reinsurance treaty which reduced each of recoverable from reinsurers and funds withheld payable to
reinsurers by $334.0, with no impact on net earnings or cash flows.

On
August 18, 2014 Runoff commuted a $312.7 reinsurance recoverable from Brit Group for proceeds of $310.2, comprised of cash and investments.

10.  Insurance Contract Receivables

Insurance contract receivables were comprised as follows:

|                                     |  | December 31,
2015 |   | December 31,
2014 |  
|------------------------------------ |  | ----------------- | - | ----------------- | -
|Insurance premiums receivable        |  | 1,677.1           |   | 1,262.7           |  
|Reinsurance premiums receivable      |  | 659.5             |   | 427.0             |  
|Funds withheld receivable            |  | 191.9             |   | 223.3             |  
|Other                                |  | 49.2              |   | 50.6              |  
|Provision for uncollectible balances |  | (31.2             | ) | (31.9             | )
|                                     |  |                   |   |                   |  
|                                     |  | 2,546.5           |   | 1,931.7           |  
|                                     |  |                   |   |                   |  

The following changes have occurred in the insurance premiums receivable and reinsurance premiums receivable balances for the years ended December 31:

|                      |                                   | Insurance
premiums receivable |          | Reinsurance
premiums receivable |         
|--------------------- | --------------------------------- | ----------------------------- | -------- | ------------------------------- | --------
|
|Balance  January 1   |                                   | 1,262.7                       |          | 1,192.1                         |         
|                      | Gross premiums written            |                               | 6,185.3  |                                 | 5,322.9 
|                      | Premiums collected                |                               | (5,421.0 | )                               | (4,825.5
|                      | Impairments                       |                               | (3.9     | )                               | (1.0    
|                      | Amounts due to brokers and agents |                               | (639.0   | )                               | (387.2  
|                      | Acquisitions of subsidiaries      |                               | 380.8    |                                 | 0.2     
|                      | Foreign exchange effect and other |                               | (87.8    | )                               | (38.8   
|                      |                                   |                               |          |                                 |         
|Balance  December 31 |                                   | 1,677.1                       |          | 1,262.7                         |         
|                      |                                   |                               |          |                                 |         

11.  Deferred Premium Acquisition Costs

Changes in deferred premium acquisition costs for the years ended December 31 were as follows:

|                      |                                   | 2015  |          | 2014  |         
|--------------------- | --------------------------------- | ----- | -------- | ----- | --------
|Balance  January 1   |                                   | 497.6 |          | 462.4 |         
|                      | Acquisition costs deferred        |       | 1,591.3  |       | 1,360.0 
|                      | Amortization of deferred costs    |       | (1,532.2 | )     | (1,312.6
|                      | Foreign exchange effect and other |       | (24.0    | )     | (12.2   
|                      |                                   |       |          |       |         
|Balance  December 31 |                                   | 532.7 |          | 497.6 |         
|                      |                                   |       |          |       |         

65

---



12.  Goodwill and Intangible Assets

Goodwill and intangible assets were comprised as follows:

|                            |                                   | Goodwill |       | Intangibles |       | Total  |      
|--------------------------- | --------------------------------- | -------- | ----- | ----------- | ----- | ------ | -----
|
|Balance  January 1, 2015   |                                   | 1,048.7  |       | 4.3         |       | 273.7  |      
|                            | Additions                         |          | 465.6 |             | 416.2 |        | 158.6
|                            | Disposals                         |          | (15.0 | )           |      |        |     
|                            | Amortization and impairment       |          |      |             |      |        | (28.3
|                            | Foreign exchange effect and other |          | (71.1 | )           |      |        | (18.4
|                            |                                   |          |       |             |       |        |      
|Balance  December 31, 2015 |                                   | 1,428.2  |       | 420.5       |       | 385.6  |      
|                            |                                   |          |       |             |       |        |      
|Gross carrying amount       |                                   | 1,428.2  |       | 420.5       |       | 496.3  |      
|Accumulated amortization    |                                   |         |       |            |       | (110.7 | )    
|Accumulated impairment      |                                   |         |       |            |       |       |      
|                            |                                   |          |       |             |       |        |      
|                            |                                   | 1,428.2  |       | 420.5       |       | 385.6  |      
|                            |                                   |          |       |             |       |        |      

|
|

|                            |                                   | Goodwill |       | Intangibles |   | Total |      
|--------------------------- | --------------------------------- | -------- | ----- | ----------- | - | ----- | -----
|
|Balance  January 1, 2014   |                                   | 851.3    |       | 4.3         |   | 243.0 |      
|                            | Additions                         |          | 220.9 |             |  |       | 55.3 
|                            | Disposals                         |          |      |             |  |       |     
|                            | Amortization and impairment       |          |      |             |  |       | (19.3
|                            | Foreign exchange effect and other |          | (23.5 | )           |  |       | (5.3 
|                            |                                   |          |       |             |   |       |      
|Balance  December 31, 2014 |                                   | 1,048.7  |       | 4.3         |   | 273.7 |      
|                            |                                   |          |       |             |   |       |      
|Gross carrying amount       |                                   | 1,048.7  |       | 4.3         |   | 362.1 |      
|Accumulated amortization    |                                   |         |       |            |   | (88.4 | )    
|Accumulated impairment      |                                   |         |       |            |   |      |      
|                            |                                   |          |       |             |   |       |      
|                            |                                   | 1,048.7  |       | 4.3         |   | 273.7 |      
|                            |                                   |          |       |             |   |       |      

Goodwill and intangible assets are allocated to the company's cash-generating units ("CGUs") as follows:

|                  |  | December 31, 2015 |  | December 31, 2014
|----------------- |  | ----------------- |  | -----------------
|
|Cara              |  | 119.7             |  | 674.9            
|Brit              |  | 154.3             |  | 584.9            
|Zenith National   |  | 317.6             |  | 129.1            
|Crum & Forster    |  | 177.5             |  | 153.9            
|OdysseyRe         |  | 126.5             |  | 61.9             
|Northbridge       |  | 85.3              |  | 58.7             
|Thomas Cook India |  | 186.0             |  | 61.6             
|All other(1)      |  | 261.3             |  | 61.7             
|                  |  |                   |  |                  
|                  |  | 1,428.2           |  | 1,786.7          
|                  |  |                   |  |                  

66

---



At December 31, 2015 goodwill and intangible assets were comprised primarily of amounts arising on the acquisitions of Cara, Brit and NCML during 2015, The Keg, Sterling
Resorts and Pethealth during 2014, American Safety, Hartville and Quess during 2013, Thomas Cook India during 2012, First Mercury, Pacific Insurance and Sporting Life during 2011, Zenith National
during 2010 and the privatizations of Northbridge and OdysseyRe during 2009. Impairment tests for goodwill and intangible assets not subject to amortization were completed in 2015 and it was concluded
that no impairment had occurred.

When
testing for impairment, the recoverable amount of each CGU was based on fair value less costs of disposal, determined on the basis of market prices, where available, or discounted cash flow
models. Cash flow projections covering a five year period were derived from financial budgets approved by management. Cash flows beyond the five year period were extrapolated using estimated growth
rates which do not exceed the long term average past growth rate for the business in which each CGU operates.

A
number of other assumptions and estimates including forecasts of operating cash flows, premium volumes, expenses and working capital requirements were required to be incorporated into the discounted
cash flow models. The forecasts were based on the best estimates of future premiums or revenue and operating expenses using historical trends, general geographical market conditions, industry trends
and forecasts and other available information. These assumptions and estimates were reviewed by the applicable CGU's management and by head office management. The cash flow forecasts are adjusted by
applying appropriate after-tax discount rates within a range of 7.7% to 13.1% for insurance business and 10.1% to 20.4% for non-insurance business. The weighted average annual growth rate used to
extrapolate cash flows beyond five years was 3.0%.

13.  Other Assets

Other assets were comprised as follows:

|                                                    |  | December 31, 2015 |  | December 31, 2014
|--------------------------------------------------- |  | ----------------- |  | -----------------
|
|Premises and equipment                              |  | 164.2             |  | 397.8            
|Other reporting segment sales receivables           |  |                  |  | 240.9            
|Accrued interest and dividends                      |  | 134.4             |  | 28.9             
|Other reporting segment inventories                 |  |                  |  | 103.6            
|Income taxes refundable                             |  | 72.8              |  | 25.1             
|Pension surplus (note 21)                           |  | 77.8              |  |                 
|Prepaid expenses                                    |  | 49.3              |  | 16.0             
|Deferred compensation plans                         |  | 47.6              |  |                 
|Receivables for securities sold but not yet settled |  | 20.0              |  |                 
|Other                                               |  | 203.4             |  | 189.3            
|                                                    |  |                   |  |                  
|                                                    |  | 769.5             |  | 1,001.6          
|                                                    |  |                   |  |                  
|Current                                             |  | 394.9             |  | 519.9            
|Non-current                                         |  | 374.6             |  | 481.7            
|                                                    |  |                   |  |                  
|                                                    |  | 769.5             |  | 1,001.6          
|                                                    |  |                   |  |                  

67

---



14.  Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities were comprised as follows:

|                                                             |  | December 31, 2015 |  | December 31, 2014
|------------------------------------------------------------ |  | ----------------- |  | -----------------
|
|Payable to reinsurers                                        |  | 428.7             |  |                 
|Salaries and employee benefit liabilities                    |  | 206.6             |  | 28.6             
|Deferred gift card, hospitality and other revenue            |  | 19.3              |  | 187.2            
|Other reporting segment payables related to cost of sales    |  |                  |  | 204.8            
|Pension and post retirement liabilities (note 21)            |  | 179.6             |  | 19.1             
|Amounts withheld and accrued taxes                           |  | 117.3             |  | 42.1             
|Amounts payable for securities purchased but not yet settled |  | 114.7             |  |                 
|Ceded deferred premium acquisition costs                     |  | 72.9              |  |                 
|Accrued commissions                                          |  | 72.0              |  |                 
|Accrued premium taxes                                        |  | 51.7              |  |                 
|Accrued rent, storage and facilities costs                   |  | 18.3              |  | 23.9             
|Accrued interest expense                                     |  | 36.7              |  | 2.9              
|Accrued legal and professional fees                          |  | 21.1              |  | 4.2              
|Amounts payable to agents and brokers                        |  | 17.7              |  | 0.2              
|Administrative and other                                     |  | 442.0             |  | 244.3            
|                                                             |  |                   |  |                  
|                                                             |  | 1,798.6           |  | 757.3            
|                                                             |  |                   |  |                  
|Current                                                      |  | 1,142.3           |  | 560.5            
|Non-current                                                  |  | 656.3             |  | 196.8            
|                                                             |  |                   |  |                  
|                                                             |  | 1,798.6           |  | 757.3            
|                                                             |  |                   |  |                  

68

---



15.  Long Term Debt and Credit Facilities

|                                                                                                                    |                                                  | December 31, 2015 |       | December 31, 2014
|------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------ | ----------------- | ----- | -----------------
|
|Long term debt  holding company borrowings                                                                         |                                                  |                   |       |                  
|Fairfax unsecured notes:                                                                                            |                                                  |                   |       |                  
|                                                                                                                    | 8.25% due October 1, 2015(1)                     |                   |      |                  
|                                                                                                                    | 7.375% due April 15, 2018(e)                     |                   | 144.2 |                  
|                                                                                                                    | 7.50% due August 19, 2019 (Cdn$400.0)(d)         |                   | 288.0 |                  
|                                                                                                                    | 7.25% due June 22, 2020 (Cdn$275.0)(d)           |                   | 198.0 |                  
|                                                                                                                    | 5.80% due May 15, 2021(d)                        |                   | 500.0 |                  
|                                                                                                                    | 6.40% due May 25, 2021 (Cdn$400.0)(d)            |                   | 288.0 |                  
|                                                                                                                    | 5.84% due October 14, 2022 (Cdn$450.0)(d)        |                   | 324.0 |                  
|                                                                                                                    | 4.875% due August 13, 2024(d)                    |                   | 300.0 |                  
|                                                                                                                    | 4.95% due March 3, 2025 (Cdn$350.0)(4)           |                   | 252.0 |                  
|                                                                                                                    | 8.30% due April 15, 2026(e)                      |                   | 91.8  |                  
|                                                                                                                    | 7.75% due July 15, 2037(e)                       |                   | 91.3  |                  
|Trust preferred securities                                                                                          |                                                  | 2.1               |       | 2.1              
|Purchase consideration payable due 2017                                                                             |                                                  | 134.7             |       | 134.7            
|                                                                                                                    |                                                  |                   |       |                  
|                                                                                                                    |                                                  | 2,614.1           |       | 2,599.0          
|                                                                                                                    |                                                  |                   |       |                  
|Long term debt  insurance and reinsurance companies                                                                |                                                  |                   |       |                  
|OdysseyRe unsecured senior notes:                                                                                   |                                                  |                   |       |                  
|                                                                                                                    | 6.875% due May 1, 2015(5)(d)                     |                   |      |                  
|                                                                                                                    | Series A, floating rate due March 15, 2021(d)    |                   | 50.0  |                  
|                                                                                                                    | Series C, floating rate due December 15, 2021(d) |                   | 40.0  |                  
|Brit 6.625% subordinated notes due December 9, 2030 (£135.0)(4)                                                     |                                                  | 199.0             |       | 208.6            
|First Mercury floating rate trust preferred securities due 2036 and 2037                                            |                                                  | 41.4              |       | 41.4             
|Zenith National 8.55% debentures due August 1, 2028(d)                                                              |                                                  | 38.4              |       | 38.1             
|Advent floating rate subordinated notes due June 3, 2035(d)                                                         |                                                  | 47.0              |       | 45.8             
|Advent floating rate unsecured senior notes due 2026(d)                                                             |                                                  | 46.0              |       | 44.8             
|                                                                                                                    |                                                  |                   |       |                  
|                                                                                                                    |                                                  | 461.8             |       | 468.5            
|                                                                                                                    |                                                  |                   |       |                  
|Long term debt  non-insurance companies(c)                                                                         |                                                  |                   |       |                  
|The Keg 7.5% note due May 31, 2042 (Cdn$57.0)                                                                       |                                                  | 41.0              |       | 41.0             
|The Keg floating rate term loan due July 1, 2016                                                                    |                                                  | 23.0              |       | 22.8             
|Thomas Cook India 10.52% debentures redeemable in equal instalments from 2016 to 2018 (1.0 billion Indian rupees)   |                                                  | 15.1              |       | 15.1             
|Thomas Cook India 9.37% debentures redeemable in equal instalments from 2018 to 2020 (1.0 billion Indian rupees)(2) |                                                  | 15.1              |       | 15.0             
|Loans and revolving credit facilities primarily at floating rates(3)(6)                                             |                                                  | 190.9             |       | 190.1            
|                                                                                                                    |                                                  |                   |       |                  
|                                                                                                                    |                                                  | 285.1             |       | 284.0            
|                                                                                                                    |                                                  |                   |       |                  
|Long term debt                                                                                                      |                                                  | 3,361.0           |       | 3,351.5          
|                                                                                                                    |                                                  |                   |       |                  
|Current                                                                                                             |                                                  | 128.9             |       |                  
|Non-current                                                                                                         |                                                  | 3,232.1           |       |                  
|                                                                                                                    |                                                  |                   |       |                  
|                                                                                                                    |                                                  | 3,361.0           |       |                  
|                                                                                                                    |                                                  |                   |       |                  

69

---



During 2015 the company and its subsidiaries completed the following debt transactions:

Principal
repayments on long term debt are due as follows:

Holding company
and insurance and
reinsurance
companies

Non-insurance
companies

Total2016

5.4

123.5

128.92017

129.3

44.1

173.42018

144.2

36.3

180.52019

288.0

12.7

300.72020

198.0

12.7

210.7Thereafter

2,311.0

55.8

2,366.8


Credit Facility

On May 11, 2015 the company increased the size of its unsecured revolving credit facility (the "credit facility") with a syndicate of lenders to $600.0 from $300.0
and extended the term from December 31, 2016 to May 11, 2019. On December 23, 2015 the company increased the size of the credit facility to $1.0 billion. There were no
amounts drawn on the credit facility at December 31, 2015.

70

---



16.  Total Equity

Equity attributable to shareholders of Fairfax

Authorized capital

The authorized share capital of the company consists of an unlimited number of preferred shares issuable in series, an unlimited number of multiple voting shares (cumulatively
carrying 41.8% voting power) and an unlimited number of subordinate voting shares carrying one vote per share.

Issued capital

Issued capital at December 31, 2015 included 1,548,000 (December 31, 2014  1,548,000) multiple voting shares and 22,034,939
(December 31, 2014  20,865,645) subordinate voting shares without par value prior to deducting 569,850 (December 31,
2014  438,247) subordinate voting shares reserved in treasury for share-based payment awards. The multiple voting shares are not traded.

Subsequent to December 31, 2015

On March 2, 2016 the company completed an underwritten public offering of 1.0 million subordinate voting shares at a price of Cdn$735.00 per share, resulting in
net proceeds of $523.5 (Cdn$705.1), after commissions and expenses of $22.2 (Cdn$29.9), to provide the financing for the acquisition of Eurolife and the additional investment in ICICI Lombard as
described in note 23.

Common stock

The number of shares outstanding was as follows:

|                                                                                                                 |                            | 2015       |           | 2014       |        
|---------------------------------------------------------------------------------------------------------------- | -------------------------- | ---------- | --------- | ---------- | -------
|Subordinate voting shares  January 1                                                                            |                            | 20,427,398 |           | 20,451,232 |        
|                                                                                                                 | Issuances during the year  |            | 1,169,294 |            |       
|                                                                                                                 | Purchases for cancellation |            |          |            | (8     
|                                                                                                                 | Treasury shares acquired   |            | (185,156  | )          | (53,421
|                                                                                                                 | Treasury shares reissued   |            | 53,553    |            | 29,595 
|                                                                                                                 |                            |            |           |            |        
|Subordinate voting shares  December 31                                                                          |                            | 21,465,089 |           | 20,427,398 |        
|Multiple voting shares  beginning and end of year                                                               |                            | 1,548,000  |           | 1,548,000  |        
|Interest in subordinate voting shares held through ownership interest in shareholder  beginning and end of year |                            | (799,230   | )         | (799,230   | )      
|                                                                                                                 |                            |            |           |            |        
|Common stock effectively outstanding  December 31                                                               |                            | 22,213,859 |           | 21,176,168 |        
|                                                                                                                 |                            |            |           |            |        

On April 10, 2015 the company issued 19,294 subordinate voting shares to a shareholder of Cara in exchange for Cara common shares pursuant to the Cara acquisition
described in note 23.

On
March 3, 2015 the company completed an underwritten public offering of 1.15 million subordinate voting shares at a price of Cdn$650.00 per share, resulting in net proceeds of $575.9
(Cdn$717.1), after commissions and expenses of $24.4 (Cdn$30.4), that formed part of the financing for the Brit acquisition as described in note 23.

During
2015 the company repurchased for treasury 185,156 subordinate voting shares at a cost of $95.5 (2014  53,421 subordinate voting shares at a
cost of $24.6) on the open market for use in its share-based payment awards. During 2014 the company repurchased 8 shares for cancellation from former employees.

Dividends
paid by the company on its outstanding multiple voting and subordinate voting shares were as follows:

Date of declaration

Date of record

Date of payment

Dividend
per share

Total cash
paymentJanuary 5, 2016

January 20, 2016

January 27, 2016

$
10.00

$
227.8January 5, 2015

January 20, 2015

January 27, 2015

$
10.00

$
216.1January 3, 2014

January 21, 2014

January 28, 2014

$
10.00

$
215.7


71

---



Amendment to Terms of Multiple Voting Shares

Following shareholder approval, on August 31, 2015 the company amended its articles to preserve the then current 41.8% voting power of its multiple voting shares, which
are controlled by V. Prem Watsa, the company's Chairman and Chief Executive Officer, and to make certain additional changes, including memorializing that the holder of the multiple voting shares will
never be able to profit, or receive any premium or benefit, from the special voting rights attached to the multiple voting shares, and continuing through 2025 the freeze since 2000 on
Mr. Watsa's compensation as Chief Executive Officer. The continuing preservation of the 41.8% voting power of the multiple voting shares is subject to a majority of the minority shareholder
ratification vote in various circumstances. Some of those circumstances involve a calculation which factors in the aggregate number of all issued and outstanding multiple voting shares and subordinate
voting shares on August 31, 2015: that number is 23,583,605.

Preferred Stock

The number of preferred shares outstanding was as follows:

|                  |                | Series C   |            | Series D  |           | Series E  |            | Series F  |           | Series G   |            | Series H  |           | Series I   |            | Series J  |           | Series K  |   | Series M  |           | Total      |          
|----------------- | -------------- | ---------- | ---------- | --------- | --------- | --------- | ---------- | --------- | --------- | ---------- | ---------- | --------- | --------- | ---------- | ---------- | --------- | --------- | --------- | - | --------- | --------- | ---------- | ---------
|December 31, 2013 |                | 10,000,000 |            |          |           | 8,000,000 |            |          |           | 10,000,000 |            |          |           | 12,000,000 |            |          |           | 9,500,000 |   |          |           | 49,500,000 |          
|2014 Activity:    |                |            |            |           |           |           |            |           |           |            |            |           |           |            |            |           |           |           |   |           |           |            |          
|                  | Repurchases    |            |           |           |          |           | (75,326    | )         |          |            |           |           |          |            |           |           |          |           |  |           |          |            | (75,326  
|                  | Conversions    |            | (3,983,616 | )         | 3,983,616 |           |           |           |          |            |           |           |          |            |           |           |          |           |  |           |          |            |         
|                  |                |            |            |           |           |           |            |           |           |            |            |           |           |            |            |           |           |           |   |           |           |            |          
|December 31, 2014 |                | 6,016,384  |            | 3,983,616 |           | 7,924,674 |            |          |           | 10,000,000 |            |          |           | 12,000,000 |            |          |           | 9,500,000 |   |          |           | 49,424,674 |          
|2015 Activity:    |                |            |            |           |           |           |            |           |           |            |            |           |           |            |            |           |           |           |   |           |           |            |          
|                  | Issuances(1)   |            |           |           |          |           |           |           |          |            |           |           |          |            |           |           |          |           |  |           | 9,200,000 |            | 9,200,000
|                  | Repurchases(2) |            |           |           |          |           | (385,496   | )         |          |            |           |           |          |            |           |           |          |           |  |           |          |            | (385,496 
|                  | Conversions(3) |            |           |           |          |           | (3,572,044 | )         | 3,572,044 |            | (2,567,048 | )         | 2,567,048 |            | (1,534,447 | )         | 1,534,447 |           |  |           |          |            |         
|                  |                |            |            |           |           |           |            |           |           |            |            |           |           |            |            |           |           |           |   |           |           |            |          
|December 31, 2015 |                | 6,016,384  |            | 3,983,616 |           | 3,967,134 |            | 3,572,044 |           | 7,432,952  |            | 2,567,048 |           | 10,465,553 |            | 1,534,447 |           | 9,500,000 |   | 9,200,000 |           | 58,239,178 |          
|                  |                |            |            |           |           |           |            |           |           |            |            |           |           |            |            |           |           |           |   |           |           |            |          

Changes in the carrying value of preferred shares outstanding were as follows:

|                  |             | Series C |       | Series D |      | Series E |       | Series F |      | Series G |       | Series H |      | Series I |       | Series J |      | Series K |   | Series M |       | Total   |      
|----------------- | ----------- | -------- | ----- | -------- | ---- | -------- | ----- | -------- | ---- | -------- | ----- | -------- | ---- | -------- | ----- | -------- | ---- | -------- | - | -------- | ----- | ------- | -----
|December 31, 2013 |             | 227.2    |       |         |      | 183.1    |       |         |      | 235.9    |       |         |      | 288.5    |       |         |      | 231.7    |   |         |       | 1,166.4 |      
|2014 Activity:    |             |          |       |          |      |          |       |          |      |          |       |          |      |          |       |          |      |          |   |          |       |         |      
|                  | Repurchases |          |      |          |     |          | (1.7  | )        |     |          |      |          |     |          |      |          |     |          |  |          |      |         | (1.7 
|                  | Conversions |          | (90.5 | )        | 90.5 |          |      |          |     |          |      |          |     |          |      |          |     |          |  |          |      |         |     
|                  |             |          |       |          |      |          |       |          |      |          |       |          |      |          |       |          |      |          |   |          |       |         |      
|December 31, 2014 |             | 136.7    |       | 90.5     |      | 181.4    |       |         |      | 235.9    |       |         |      | 288.5    |       |         |      | 231.7    |   |         |       | 1,164.7 |      
|2015 Activity:    |             |          |       |          |      |          |       |          |      |          |       |          |      |          |       |          |      |          |   |          |       |         |      
|                  | Issuances   |          |      |          |     |          |      |          |     |          |      |          |     |          |      |          |     |          |  |          | 179.0 |         | 179.0
|                  | Repurchases |          |      |          |     |          | (8.8  | )        |     |          |      |          |     |          |      |          |     |          |  |          |      |         | (8.8 
|                  | Conversions |          |      |          |     |          | (81.8 | )        | 81.8 |          | (60.6 | )        | 60.6 |          | (36.9 | )        | 36.9 |          |  |          |      |         |     
|                  |             |          |       |          |      |          |       |          |      |          |       |          |      |          |       |          |      |          |   |          |       |         |      
|December 31, 2015 |             | 136.7    |       | 90.5     |      | 90.8     |       | 81.8     |      | 175.3    |       | 60.6     |      | 251.6    |       | 36.9     |      | 231.7    |   | 179.0    |       | 1,334.9 |      
|                  |             |          |       |          |      |          |       |          |      |          |       |          |      |          |       |          |      |          |   |          |       |         |      

72

---



The terms of the company's cumulative five-year rate reset preferred shares at December 31, 2015 were as follows:

|         |  | Next possible
redemption and
conversion date(1)(2) |  | Number of
shares
outstanding |  | Stated capital |  | Liquidation
preference
per share |  | Fixed
dividend rate
per annum |  | Floating
dividend rate per
annum(3)
|-------- |  | -------------------------------------------------- |  | ---------------------------- |  | -------------- |  | -------------------------------- |  | ----------------------------- |  | -----------------------------------
|Series C |  | December 31, 2019                                  |  | 6,016,384                    |  | Cdn $150.4     |  | Cdn $25.00                       |  | 4.58%                         |  |                                   
|Series D |  | December 31, 2019                                  |  | 3,983,616                    |  | Cdn $99.6      |  | Cdn $25.00                       |  |                              |  | 3.59%                              
|Series E |  | March 31, 2020                                     |  | 3,967,134                    |  | Cdn $99.2      |  | Cdn $25.00                       |  | 2.91%                         |  |                                   
|Series F |  | March 31, 2020                                     |  | 3,572,044                    |  | Cdn $89.3      |  | Cdn $25.00                       |  |                              |  | 2.60%                              
|Series G |  | September 30, 2020                                 |  | 7,432,952                    |  | Cdn $185.8     |  | Cdn $25.00                       |  | 3.32%                         |  |                                   
|Series H |  | September 30, 2020                                 |  | 2,567,048                    |  | Cdn $64.2      |  | Cdn $25.00                       |  |                              |  | 3.00%                              
|Series I |  | December 31, 2020                                  |  | 10,465,553                   |  | Cdn $261.6     |  | Cdn $25.00                       |  | 3.71%                         |  |                                   
|Series J |  | December 31, 2020                                  |  | 1,534,447                    |  | Cdn $38.4      |  | Cdn $25.00                       |  |                              |  | 3.35%                              
|Series K |  | March 31, 2017                                     |  | 9,500,000                    |  | Cdn $237.5     |  | Cdn $25.00                       |  | 5.00%                         |  |                                   
|Series M |  | March 31, 2020                                     |  | 9,200,000                    |  | Cdn $230.0     |  | Cdn $25.00                       |  | 4.75%                         |  |                                   

Accumulated other comprehensive income (loss)

The amounts related to each component of accumulated other comprehensive income (loss) attributable to shareholders of Fairfax were as follows:

|                                                                             |                                                                                                                    | December 31, 2015 |        | December 31, 2014 |      
|---------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------ | ----------------- | ------ | ----------------- | -----
|
|Items that may be subsequently reclassified to net earnings                  |                                                                                                                    |                   |        |                   |      
|                                                                             | Currency translation account                                                                                       |                   | (243.7 | )                 | (21.6
|                                                                             | Share of accumulated other comprehensive loss of associates, excluding net gains (losses) on defined benefit plans |                   | (118.0 | )                 | 22.6 
|                                                                             |                                                                                                                    |                   |        |                   |      
|                                                                             |                                                                                                                    | (361.7            | )      | 1.0               |      
|                                                                             |                                                                                                                    |                   |        |                   |      
|Items that will not be subsequently reclassified to net earnings             |                                                                                                                    |                   |        |                   |      
|                                                                             | Share of net gains (losses) on defined benefit plans of associates                                                 |                   | (0.3   | )                 | 0.5  
|                                                                             | Net losses on defined benefit plans                                                                                |                   | (5.4   | )                 | 1.9  
|                                                                             |                                                                                                                    |                   |        |                   |      
|                                                                             |                                                                                                                    | (5.7              | )      | 2.4               |      
|                                                                             |                                                                                                                    |                   |        |                   |      
|Accumulated other comprehensive loss attributable to shareholders of Fairfax |                                                                                                                    | (367.4            | )      | 3.4               |      
|                                                                             |                                                                                                                    |                   |        |                   |      

73

---



Other comprehensive income (loss)

Consolidated other comprehensive income (loss) for the years ended December 31 were comprised as follows:

|                                                                 |                                                                                                        | 2015   |        | 2014 |      
|---------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ | ------ | ------ | ---- | -----
|
|Items that may be subsequently reclassified to net earnings      |                                                                                                        |        |        |      |      
|                                                                 | Net unrealized foreign currency translation losses on foreign operations                               |        | (557.6 | )    | (0.3 
|                                                                 | Gains on hedge of net investment in Canadian subsidiaries                                              |        | 218.8  |      |     
|                                                                 | Share of other comprehensive loss of associates, excluding net gains (losses) on defined benefit plans |        | (34.7  | )    | 9.7  
|                                                                 |                                                                                                        |        |        |      |      
|                                                                 |                                                                                                        | (373.5 | )      | 9.4  |      
|                                                                 |                                                                                                        |        |        |      |      
|Items that will not be subsequently reclassified to net earnings |                                                                                                        |        |        |      |      
|                                                                 | Share of net gains (losses) on defined benefit plans of associates                                     |        | 38.9   |      | (10.1
|                                                                 | Net losses on defined benefit plans                                                                    |        | (9.4   | )    | 3.3  
|                                                                 |                                                                                                        |        |        |      |      
|                                                                 |                                                                                                        | 29.5   |        | (6.8 | )    
|                                                                 |                                                                                                        |        |        |      |      
|Other comprehensive loss                                         |                                                                                                        | (344.0 | )      | 2.6  |      
|                                                                 |                                                                                                        |        |        |      |      

Non-controlling interests

|                     |  |        |  |       |  |         |  |       |  |       |  | Net earnings attributable to non-controlling interests
|-------------------- |  | ------ |  | ----- |  | ------- |  | ----- |  | ----- |  | ------------------------------------------------------
|
|
|
|
|Fairfax India(1)     |  | Canada |  | 4.9%  |  | 716.4   |  |      |  |      |  | 18.1                                                  
|Brit(2)              |  | U.K.   |  | 29.9% |  | 505.1   |  |      |  |      |  | 3.6                                                   
|Cara(3)              |  | Canada |  | 43.1% |  | 351.2   |  |      |  |      |  | 43.8                                                  
|Thomas Cook India(4) |  | India  |  | 32.2% |  | 106.3   |  | 27.0% |  | 145.1 |  | 2.2                                                   
|The Keg              |  | Canada |  | 49.0% |  | 17.2    |  | 49.0% |  | 17.4  |  | 2.2                                                   
|Ridley(5)            |  | Canada |  |      |  |        |  | 26.4% |  | 34.2  |  | 3.5                                                   
|All other            |  |       |  |      |  | 35.3    |  |      |  | 21.4  |  | 0.9                                                   
|                     |  |        |  |       |  |         |  |       |  |       |  |                                                       
|                     |  |        |  |       |  | 1,731.5 |  |       |  | 218.1 |  | 74.3                                                  
|                     |  |        |  |       |  |         |  |       |  |       |  |                                                       

Pursuant to the transactions described in note 23:

Non-controlling
interest voting percentage was consistent with economic ownership for each subsidiary at December 31, 2015 except for Fairfax India and Cara whose non-controlling interest
economic ownership percentages were 71.9% and 59.5% respectively.

74

---



17.  Earnings per Share

Net earnings per share is calculated based upon the weighted average common shares outstanding as follows:

2015

2014Net earnings attributable to shareholders of Fairfax


567.7


1,633.2Preferred share dividends


(49.3
)

(56.9
)Excess of book value over consideration of preferred shares purchased for cancellation


4.0


0.5Net earnings attributable to common shareholders  basic and diluted


522.4


1,576.8Weighted average common shares outstanding  basic


22,069,942


21,186,325Share-based payment awards


494,874


411,814Weighted average common shares outstanding  diluted


22,564,816


21,598,139Net earnings per common share  basic

$
23.67

$
74.43Net earnings per common share  diluted

$
23.15

$
73.01


18.  Income Taxes

The company's provision for (recovery of) income taxes for the years ended December 31 were as follows:

2015

2014Current income taxCurrent year expense

198.8

184.8Adjustments to prior years' income taxes

(5.9
)
(33.2
)192.9

151.6Deferred income taxOrigination and reversal of temporary differences

(194.4
)
514.2Adjustments to prior years' deferred income taxes

(9.9
)
8.8Other

(6.1
)
(1.3
)(210.4
)
521.7Provision for (recovery of) income taxes

(17.5
)
673.3


A significant portion of the company's earnings before income taxes may be earned or incurred outside of Canada. The statutory income tax rates for jurisdictions outside of
Canada generally differs from the Canadian statutory income tax rate (and may be significantly higher or lower). The company's earnings before income taxes by jurisdiction and the associated
provision for (recovery of) income taxes for the years ended December 31, 2015 and 2014 are summarized in the following table:

|                                         |  | 2015  |  | 2014 
|---------------------------------------- |  | ----- |  | -----
|
|Earnings before income taxes             |  | 478.1 |  | 137.1
|Provision for (recovery of) income taxes |  | 59.7  |  | (83.0
|                                         |  |       |  |      
|Net earnings                             |  | 418.4 |  | 220.1
|                                         |  |       |  |      

The
increase in pre-tax profitability in Canada in 2015 compared to 2014 was due to improved operating income and higher net realized gains on investments (including gains arising on the Ridley sale
and Cara acquisition during 2015). The decrease in pre-tax profitability in the U.S. and Other in 2015 compared to 2014 primarily reflected increased net unrealized losses on investments, partially
offset by an improvement in underwriting results.

75

---



Reconciliations
of the provision for income taxes calculated at the Canadian statutory income tax rate to the provision for (recovery of) income taxes at the effective tax rate in the consolidated
financial statements for the years ended December 31, 2015 and 2014 are summarized in the following table:

2015

2014Canadian statutory income tax rate

26.5
%
26.5
%Provision for income taxes at the Canadian statutory income tax rate

165.5

619.5Non-taxable investment income

(204.1
)
(109.2
)Change in unrecorded tax benefit of losses and temporary differences

(28.9
)
24.4Change in tax rate for deferred income taxes

(2.4
)
(10.9
)Recovery relating to prior years

(0.6
)
(17.4
)Tax rate differential on income and losses incurred outside Canada

29.8

121.8Other including permanent differences

17.5

22.4Foreign exchange effect

5.7

22.7Provision for (recovery of) income taxes

(17.5
)
673.3


Non-taxable investment income is principally comprised of dividend income, non-taxable interest income and the 50% of net capital gains which are not taxable in Canada. During
2015 non-taxable investment income of $204.1 included gains on the sale of Ridley and the Cara acquisition. The Ridley gain and a portion of the Cara gains were incurred in Canada and therefore only
50% taxable, while the remaining Cara gain was largely non-taxable as the Cara acquisition resulted in a rollover of tax basis for the instruments exchanged. In 2014 non-taxable investment income also
included a provision for income taxes of $38.0 following an internal reorganization of the U.S. shareholders of OdysseyRe that triggered the release of taxable gains on intercompany
transactions within the U.S. consolidated tax group that had been deferred in prior years.

The
change in unrecorded tax benefit of losses and temporary differences of $28.9 in 2015 principally reflected the recognition of a deferred tax asset at Cara ($40.8) after determining that it was
probable that certain tax attributes and temporary differences at Cara could be utilized prior to expiration, partially offset by deferred tax assets in Canada of $10.9
(2014  $28.1) that were not recorded because the related pre-tax losses did not meet the applicable recognition criteria under IFRS. In 2014 the change in
unrecorded tax benefit of losses and temporary differences of $24.4 also included the de-recognition of $9.0 of U.S. foreign tax credits which had been recorded as deferred tax assets in prior
years after determining that it was no longer probable that those tax credits could be utilized prior to expiration.

The
recovery relating to prior years of $0.6 in 2015 and $17.4 in 2014 was primarily due to the release of provisions following the completion of prior year income tax audits.

The
tax rate differential on income and losses incurred outside Canada of $29.8 in 2015 principally reflected improved underwriting results and net realized gains on investments on
U.S. securities, partially offset by pre-tax net unrealized losses on investments on bonds (primarily U.S. state and municipal bonds and U.S treasury bonds) and the benefit of the
recognition of foreign tax credits in the U.S. consolidated tax group after determining that it was probable that foreign tax credits arising in 2015 could be utilized prior to expiration. The
tax rate differential on income and losses incurred outside Canada of $121.8 in 2014 principally reflected significant pre-tax net unrealized gains on investments, combined with improved underwriting
results in the U.S. The statutory income tax rate in the U.S. is significantly higher than the Canadian statutory income tax rate.

Income
taxes refundable and payable were as follows:

December 31,
2015

December 31,
2014Income taxes refundable

97.9

51.1Income taxes payable

(85.8
)
(118.3
)Net income taxes (payable) refundable

12.1

(67.2
)


76

---



Changes in net income taxes (payable) refundable during the years ended December 31 were as follows:

2015

2014Balance  January 1

(67.2
)
34.0Amounts recorded in the consolidated statements of earnings

(192.9
)
(151.6
)Payments made during the year

259.0

52.3Acquisitions of subsidiaries

12.0

(5.1
)Foreign exchange effect and other

1.2

3.2Balance  December 31

12.1

(67.2
)


Changes in the net deferred income tax asset during the years ended December 31 were as follows:

|                            |                                                            | 2015  |       
|--------------------------- | ---------------------------------------------------------- | ----- | ------
|
|Balance  January 1, 2015   |                                                            | 479.7 |       
|                            | Amounts recorded in the consolidated statement of earnings |       | (238.3
|                            | Amounts recorded in total equity                           |       | (1.6  
|                            | Acquisitions of subsidiaries (note 23)                     |       | 10.7  
|                            | Foreign exchange effect and other                          |       | (15.1 
|                            |                                                            |       |       
|Balance  December 31, 2015 |                                                            | 235.4 |       
|                            |                                                            |       |       

|
|

|                            |                                                            | 2014  |       
|--------------------------- | ---------------------------------------------------------- | ----- | ------
|
|Balance  January 1, 2014   |                                                            | 690.9 |       
|                            | Amounts recorded in the consolidated statement of earnings |       | (213.3
|                            | Amounts recorded in total equity                           |       |      
|                            | Acquisitions of subsidiaries (note 23)                     |       | 9.8   
|                            | Foreign exchange effect and other                          |       | (7.7  
|                            |                                                            |       |       
|Balance  December 31, 2014 |                                                            | 479.7 |       
|                            |                                                            |       |       

Management expects that the recorded deferred income tax asset will be realized in the normal course of operations. The most significant temporary differences included in the
deferred income tax asset at December 31, 2015 related to provision for losses and loss adjustment expenses and operating and capital losses, partially offset by a deferred income tax liability
related to intangible assets. The provision for losses and loss
adjustment expenses is recorded on an undiscounted basis in these consolidated financial statements but is recorded on a discounted basis in certain jurisdictions for tax purposes.

Management
conducts ongoing reviews of the recoverability of the deferred income tax asset and adjusts, as necessary, to reflect its anticipated realization. As at December 31, 2015 management
has not recorded deferred income tax assets of $412.2 (December 31, 2014  $464.8) related primarily to operating and capital losses and
U.S. foreign tax credits. The losses for which deferred income tax assets have not been recorded are comprised of $591.1 of losses in Canada (December 31,
2014  $947.7), $463.0 of losses in Europe (December 31, 2014  $412.6), $44.5 of losses in the
U.S. (December 31, 2014  $58.2), and $59.0 of foreign tax credits in the U.S. (December 31,
2014  $59.0). The losses in Canada expire between 2026 and 2034. The losses and foreign tax credits in the U.S. expire between 2020 and 2034. The losses
in Europe do not have an expiry date.

77

---



Deferred
income tax has not been recognized for the withholding tax and other taxes that could be payable on the unremitted earnings of certain subsidiaries. Unremitted earnings amounted to
approximately $3.2 billion at December 31, 2015 (December 31, 2014  $3.0 billion) and are not likely to be repatriated in the
foreseeable future.

19.  Statutory Requirements

The retained earnings of the company are largely represented by retained earnings at the insurance and reinsurance subsidiaries. The insurance and reinsurance subsidiaries are
subject to certain requirements and restrictions under their respective insurance company Acts including minimum capital requirements and dividend restrictions. The company's capital requirements and
management thereof are discussed in note 24. The company's share of dividends paid in 2015 by the insurance and reinsurance subsidiaries, comprised of cash and marketable securities, which are
eliminated on consolidation was $757.9 (2014  $605.8 (inclusive of $250.0 of dividends received in connection with the 2014 OdysseyRe reorganization described in
note 25). Based on the surplus and net income of the insurance and reinsurance subsidiaries at December 31, 2015 the dividend capacity available in 2016 at each of the primary operating
companies is as follows:

December 31, 2015OdysseyRe

449.6Brit

144.5Crum & Forster

121.2Zenith National

121.0Northbridge(1)

85.2921.5


20.  Contingencies and Commitments

Lawsuits

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. On September 12, 2012, before trial, and consequently
without having heard or made any determination on the facts, the Court dismissed the lawsuit on legal grounds. In October 2012 Fairfax filed an appeal of this dismissal, as it believes that the
legal basis for the dismissal is incorrect. By the end of 2013, the briefs of all parties in connection with this appeal had been filed. The ultimate outcome of any litigation is uncertain. The
financial effects, if any, of this lawsuit cannot be practicably determined at this time, and the company's consolidated financial statements include no anticipated recovery from the lawsuit.

Other

The Autorité des marchés financiers (the "AMF"), the securities regulatory authority in the Province of Quebec, is conducting an
investigation of Fairfax, its CEO, Prem Watsa, and its President, Paul Rivett. The investigation concerns the possibility of illegal insider trading and/or tipping (not involving any personal
trading by the individuals) in connection with the December 15, 2011 takeover offer by Resolute Forest Products Inc. for shares of Fibrek Inc. Except as set out below, further
details concerning the investigation are, by law, not permitted to be disclosed.

The
AMF has authorized Fairfax to make the above-mentioned disclosure. Fairfax and its management are solely responsible for the content of the disclosure set out in the three following paragraphs;
the AMF has not in any way endorsed that content.

Resolute's
above-mentioned takeover offer was made to all Fibrek shareholders, including Fairfax. Fairfax agreed in that transaction to a hard lock-up agreement with Resolute whereby Fairfax agreed to
tender its shares of Fibrek, representing approximately 26% of Fibrek's outstanding shares, to the Resolute takeover offer at the same price as all

78

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other
Fibrek shareholders. At the time of the Resolute takeover offer for Fibrek, Fairfax's position in Fibrek was valued at approximately Cdn$32, representing less than 1/6 of 1% of
Fairfax's total invested assets at that time.

Fibrek
actively opposed the Resolute takeover offer. ln 2012, the Fibrek transaction was the subject of numerous regulatory hearings in Quebec and court proceedings relating to Fibrek's anti-takeover
tactics and the hard lock-ups given by various selling shareholders, including Fairfax. Allegations were made in those hearings concerning the possibility of non-compliance with the takeover bid
rules. Resolute's takeover offer was allowed to proceed and resulted in Resolute acquiring Fibrek.

Fairfax
believes it has an unblemished record for honesty and integrity and is fully cooperating with the AMF's investigation. Fairfax continues to be confident that in connection with the Resolute
takeover offer, it had no material non-public information, that it did not engage in illegal insider trading or tipping, and that there is no reasonable basis for any proceedings in this connection.
To the best of Fairfax's knowledge, the AMF investigation is still ongoing. If the AMF commences legal proceedings, which could be administrative or penal, no assurance can be given at this time by
Fairfax as to the outcome.

Subsidiaries
of the company are defendants in several damage suits and have been named as third party in other suits. The uninsured exposure to the company is not considered to be material to the
company's financial position, financial performance or cash flows.

OdysseyRe,
Brit, Advent and RiverStone (UK) ("the Lloyd's participants") underwrite in the Lloyd's of London insurance market through their participation on certain Lloyd's syndicates. The
Lloyd's participants have pledged securities and cash, with a fair value of $1,295.0 and $75.5 respectively at December 31, 2015. These
assets represent a combination of assets pledged as capital to support those underwriting activities as well as assets pledged in respect of the specific reinsurance contracts that the entities have
entered into. Pledged securities and restricted cash consist of cash, fixed income and equity investments which are included within portfolio investments on the consolidated balance sheet. The Lloyd's
participants have the ability to substitute other securities for these pledged securities subject to certain admissibility criteria. The Lloyd's participants' liability in respect of assets pledged as
capital is limited to the aggregate amount of the pledged assets and their obligation to support these liabilities will continue until such liabilities are settled or are reinsured by a third party
approved by Lloyd's. The company believes that the syndicates for which the Lloyd's participants are capital providers maintain sufficient liquidity and financial resources to support their ultimate
liabilities and does not anticipate that the pledged assets will be utilized.

The
company's maximum capital commitments for potential investments in common stocks, limited partnerships and associates at December 31, 2015 was $339.2, with a further amount of approximately
$811 committed for investments in Eurolife, APR Energy and ICICI Lombard (described in note 23).

21.  Pensions and Post Retirement Benefits

The funded status of the company's defined benefit pension and post retirement plans were as follows:

|                                                                    |  | Defined benefit
pension plans
December 31 |   | Post retirement
benefit plans
December 31 |  
|------------------------------------------------------------------- |  | ----------------------------------------- | - | ----------------------------------------- | -
|
|Benefit obligation                                                  |  | 736.6                                     |   | 640.0                                     |  
|Fair value of plan assets                                           |  | 715.4                                     |   | 566.8                                     |  
|                                                                    |  |                                           |   |                                           |  
|Funded status of plans  deficit                                    |  | (21.2                                     | ) | (73.2                                     | )
|Impact of asset ceiling                                             |  | (1.4                                      | ) | (1.4                                      | )
|                                                                    |  |                                           |   |                                           |  
|Net accrued liability (notes 13 and 14)(1)                          |  | (22.6                                     | ) | (74.6                                     | )
|                                                                    |  |                                           |   |                                           |  
|Weighted average assumptions used to determine benefit obligations: |  |                                           |   |                                           |  
|Discount rate                                                       |  | 4.0                                       | % | 4.1                                       | %
|Rate of compensation increase                                       |  | 3.5                                       | % | 3.5                                       | %
|Health care cost trend                                              |  |                                          |   |                                          |  

79

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Pension
and post retirement expenses recognized in the consolidated statements of earnings for the years ended December 31 were as follows:

2015

2014Defined benefit pension plan expense

21.6

20.7Defined contribution pension plan expense

32.5

24.1Defined benefit post retirement expense

9.4

8.863.5

53.6


Pre-tax actuarial net gains (losses) recognized in the consolidated statements of comprehensive income for the years ended December 31 were as follows:

2015

2014Defined benefit pension plansActuarial net gains (losses) on plan assets and change in asset ceiling

(40.2
)
32.9Actuarial net gains (losses) on benefit obligations

25.7

(69.8
)(14.5
)
(36.9
)Post retirement benefit plans  actuarial net gains (losses) on benefit obligations

5.1

(7.7
)(9.4
)
(44.6
)


During 2015 the company contributed $29.8 (2014  $34.1) to its defined benefit pension and post retirement benefit plans, and expects to
make contributions of $23.5 in 2016.

22.  Operating Leases

Aggregate future minimum operating lease commitments at December 31, 2015 relating to premises, automobiles and equipment for various terms up to ten years were
as follows:

2016

110.82017

102.72018

93.82019

86.22020

76.8Thereafter

290.2


23.  Acquisitions and Divestitures

Subsequent to December 31, 2015

Acquisition of Eurolife ERB Insurance Group Holdings S.A.

On December 22, 2015 the company entered into an agreement with Eurobank Ergasias S.A. ("Eurobank") to acquire an 80% interest in Eurolife ERB Insurance Group
Holdings S.A. ("Eurolife") for a purchase price of approximately $347 (€316). Closing of the transaction is subject to regulatory approvals and customary closing conditions, and
is expected to occur by the end of the second quarter of 2016. Eurolife, which distributes its life and non-life insurance products and services through Eurobank's network, is the third largest
insurer in Greece, with gross written premiums of approximately €306 during 2015.

Investment in APR Energy plc

On January 5, 2016, the company through its subsidiaries, participated, along with certain other investors, in a transaction to privatize APR Energy plc
("APR Energy") and to provide APR Energy with $200.0 of additional equity financing for it to retire outstanding debt and augment working capital. The company invested $230.2 in APR Energy as
part of these transactions, comprised of $80.6 and $149.6 in preferred shares and common shares respectively, that in addition to its pre-existing ownership of 18.3%, resulted in the company having a
49.0% indirect equity interest. APR

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Energy,
serving developed and developing markets globally, provides mobile power generation solutions to utilities, countries, and industries.

Additional Investment in ICICI Lombard General Insurance Company Limited

On October 30, 2015 the company reached an agreement with ICICI Bank Limited to acquire an additional 9.0% of the outstanding shares of ICICI Lombard, which will increase
the company's ownership interest in ICICI Lombard to 34.6%. The proposed transaction values ICICI Lombard at approximately $2.6 billion (172.3 billion Indian rupees),
is subject to governmental and regulatory approvals and is expected to close in the first quarter of 2016. ICICI Lombard is the largest private sector general insurance company in India with
gross written premiums of approximately $1 billion for its fiscal year ended March 31, 2015.

Acquisition of Eastern European Insurers

On December 16, 2014 the company entered into an agreement with QBE Insurance (Europe) Limited ("QBE") to acquire QBE's insurance operations in the Czech Republic,
Hungary and Slovakia (the "QBE insurance operations"). A new Luxembourg insurer, Colonnade Insurance S.A. ("Colonnade"), was licensed in July 2015 and branches of Colonnade were
established in the Czech Republic, Hungary and Slovakia during the fourth quarter of 2015. The business and renewal rights of QBE's Hungarian insurance operations were transferred to Colonnade during
the first quarter of 2016, with the Czech Republic and Slovakia equivalents expected to be transferred later in the second quarter of 2016. In 2015 the QBE insurance operations generated approximately
$78 in gross premiums written across a range of general insurance classes, including property, travel, general liability and product protection. The previously announced transaction to acquire QBE 's
operations in Ukraine closed during the fourth quarter of 2015. Those operations, now known as Colonnade Ukraine and included in the Insurance and
Reinsurance  Other reporting segment, recorded gross written premiums of approximately $5 in 2015 across a variety of non-life classes of business.

Year ended December 31, 2015

National Collateral Management Services Limited

On August 19, 2015 Fairfax India acquired a 73.6% interest in National Collateral Management Services Limited ("NCML") for purchase consideration of $124.2
(8.1 billion Indian rupees) and subsequently acquired a further 14.5% interest by September 28, 2015 for $24.5 (1.6 billion Indian rupees). Commencing August 19, 2015 the
assets and liabilities and results of operations of NCML were consolidated by Fairfax India and included in the Other reporting segment. NCML is a leading private-sector agricultural commodities
storage company in India. Fairfax's economic interest in NCML at August 19, 2015 was 20.7%, (increased to 24.8% by September 28, 2015) as that interest is held through a 28.1% equity
interest in Fairfax India.

Sale of Ridley Inc.

On June 18, 2015 the company completed the sale of its 73.6% interest in Ridley Inc. ("Ridley") for Cdn$40.75 per common share. The company received cash proceeds
of $313.2 (Cdn$383.5) and recognized a pre-tax gain of $236.4 (including amounts previously recorded in accumulated other comprehensive income) and de-consolidated Ridley from the Other reporting
segment.

Acquisition of Brit PLC

On June 5, 2015 the company completed the acquisition of 97.0% of the outstanding ordinary shares of Brit PLC ("Brit") for 305 pence per share (comprised of
$4.30 (280 pence) per share in cash paid by the company and the final and special dividends of $0.38 (25 pence) per share paid by Brit on April 30, 2015), representing aggregate
cash consideration of $1,656.6 (£1,089.1). The remaining 3.0% of the outstanding ordinary shares of Brit were acquired by July 8, 2015 on the same terms as described in the
preceding sentence. The assets and liabilities and results of operations of Brit were consolidated in the Brit reporting segment. Brit is a market-leading global Lloyd's of London specialty insurer
and reinsurer. On June 29, 2015 the company completed the sale of 29.9% of the outstanding ordinary shares of Brit to Ontario Municipal Employees Retirement System ("OMERS"), the pension plan
manager for government employees in the province of Ontario, for cash proceeds of $516.0 ($4.30 per share). The company will have the ability to repurchase the shares owned by OMERS over time. These
transactions resulted in an increase of $501.1 to the company's non-controlling interests.

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The net proceeds from underwritten public offerings (described in more detail in notes 15 and 16) of 1.15 million subordinate voting shares ($575.9), 9.2 million
Series M preferred shares ($179.0) and Cdn$350.0 of 4.95% Fairfax senior notes due 2025 ($275.7), all of which closed on March 3, 2015, were used to finance the acquisition
of Brit.

Acquisition of Cara Operations Limited

On April 10, 2015 the company acquired, directly and through its subsidiaries, a 52.6% and a 40.7% voting and economic interest respectively in Cara Operations Limited
("Cara") through an exchange of its existing holdings (comprised of warrants, class A and class B preferred shares and subordinated debentures) for common shares of Cara pursuant to
their respective terms and also through the acquisition of additional common shares of Cara from existing Cara shareholders in a private transaction. The common shares were exchanged for multiple
voting shares immediately prior to Cara's initial public offering of subordinate voting shares at Cdn$23.00 per share, which closed on April 10, 2015. The assets and liabilities and results of
operations of Cara were consolidated in the Other reporting segment. These transactions resulted in an increase of $353.8 to the company's non-controlling interests. Cara is Canada's largest
full-service restaurant company and franchises, owns and operates numerous restaurant brands across Canada.

Investment in Fairfax India Holdings Corporation

On January 30, 2015 the company, through its subsidiaries, acquired 30,000,000 multiple voting shares of newly incorporated Fairfax India for $300.0 in a private
placement. Through that private placement and offerings of subordinate voting shares, Fairfax India raised net proceeds of $1,025.8 after issuance costs and expenses. The company's multiple voting
shares represented 95.1% of the voting rights and 28.1% of the equity interest in Fairfax India at the close of the offerings. Fairfax India was established, with the support of Fairfax, to invest in
public and private equities and debt instruments in India and Indian businesses or other businesses primarily conducted in or dependent on India. Hamblin Watsa is the portfolio advisor to Fairfax
India and its subsidiaries. The assets and liabilities and results of operations of Fairfax India were consolidated in the Other reporting segment. These transactions resulted in an increase of $737.3
to the company's non-controlling interests.

Acquisition of MCIS Insurance Berhad

On March 1, 2015 Pacific Insurance, a wholly-owned subsidiary of the company, completed the acquisition of the general insurance business of MCIS Insurance Berhad
(formerly known as MCIS Zurich Insurance Berhad) ("MCIS") for cash consideration of $13.4 (48.6 million Malaysian ringgits). MCIS is an established general insurer in Malaysia with
approximately $55 of gross premiums written in 2014 in its general insurance business. The assets and liabilities and results of operations of MCIS were consolidated in the Fairfax Asia reporting
segment.

Acquisition of Union Assurance General Limited

On January 1, 2015 the company completed the acquisition of 78.0% of Union Assurance General Limited ("Union Assurance") for cash consideration of $27.9
(3.7 billion Sri Lankan rupees). Union Assurance, with approximately $43 of gross premiums written in 2015, is headquartered in Colombo, Sri Lanka and underwrites general insurance in Sri
Lanka, specializing in automobile and personal accident lines of business. The assets and liabilities and results of operations of Union Assurance were consolidated in the Fairfax Asia reporting
segment.

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The
preliminary determination of the fair value of assets acquired and liabilities assumed in connection with the Brit, Cara and NCML acquisitions is summarized in the table that follows and may be
revised when estimates, assumptions and valuations are finalized within twelve months of the respective acquisition dates:

|                                     |                                          | Brit         |         | Cara           |       | NCML            |     
|------------------------------------ | ---------------------------------------- | ------------ | ------- | -------------- | ----- | --------------- | ----
|Acquisition date                     |                                          | June 5, 2015 |         | April 10, 2015 |       | August 19, 2015 |     
|Percentage of common shares acquired |                                          | 97.0%        |         | 40.7%          |       | 73.6%           | (4) 
|Assets:                              |                                          |              |         |                |       |                 |     
|                                     | Insurance contract receivables           |              | 727.8   |                |      |                 |    
|                                     | Portfolio investments                    |              | 3,938.6 | (1)            | 0.5   |                 | 33.3
|                                     | Recoverable from reinsurers              |              | 882.1   |                |      |                 |    
|                                     | Deferred income taxes                    |              |        |                |      |                 | 2.0 
|                                     | Goodwill and intangible assets           |              | 746.4   | (2)            | 846.2 | (3)             | 65.3
|                                     | Other assets                             |              | 116.2   |                | 128.4 |                 | 91.7
|                                     |                                          |              |         |                |       |                 |     
|                                     |                                          | 6,411.1      |         | 975.1          |       | 192.3           |     
|                                     |                                          |              |         |                |       |                 |     
|Liabilities:                         |                                          |              |         |                |       |                 |     
|                                     | Accounts payable and accrued liabilities |              | 76.8    |                | 147.9 |                 | 10.8
|                                     | Short sale and derivative obligations    |              | 8.6     |                |      |                 |    
|                                     | Deferred income taxes                    |              | 130.4   |                | 77.6  |                 |    
|                                     | Funds withheld payable to reinsurers     |              | 354.0   |                |      |                 |    
|                                     | Insurance contract liabilities           |              | 3,921.4 |                |      |                 |    
|                                     | Long term debt                           |              | 216.7   |                | 31.9  |                 | 36.1
|                                     |                                          |              |         |                |       |                 |     
|                                     |                                          | 4,707.9      |         | 257.4          |       | 46.9            |     
|Non-controlling interests            |                                          | 46.6         |         | 353.8          |       | 21.2            |     
|Purchase consideration               |                                          | 1,656.6      |         | 363.9          |       | 124.2           |     
|                                     |                                          |              |         |                |       |                 |     
|                                     |                                          | 6,411.1      |         | 975.1          |       | 192.3           |     
|                                     |                                          |              |         |                |       |                 |     

Brit
contributed revenue of $846.7 and a net loss of $14.9 to the company's consolidated financial results for the year ended December 31, 2015. Had Brit been acquired on January 1,
2015, the company's pro-forma consolidated revenue and net earnings would have been $10,273.1 and $678.4 respectively for the year ended December 31, 2015.

Year ended December 31, 2014

Acquisition of Pethealth Inc.

On November 14, 2014 the company acquired all of the outstanding common shares, preferred shares and employee share options of Pethealth Inc. ("Pethealth") for
cash consideration of $88.7 (Cdn$100.4). The goodwill and intangible assets associated with Pethealth's marketing of pet medical insurance were allocated to the Crum & Forster ($90.9, comprised
of $39.4 of goodwill, $47.3 of customer relationships and $4.2 of computer software) and Northbridge ($17.3, comprised of $8.3 of goodwill, $8.0 of customer relationships and $1.0 of computer
software) reporting segments since Crum & Forster and Northbridge were to become Pethealth's ongoing insurance carriers. Pethealth's residual assets and liabilities and results of operations
were consolidated in the Other reporting segment. Pethealth is headquartered in Canada and provides pet medical insurance, related management software and pet-related database management services in
North America and the United Kingdom.

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Acquisition of Sterling Holiday Resorts (India) Limited

During the first half of 2014 Thomas Cook India acquired a 41.9% ownership interest in Sterling Holiday Resorts (India) Limited ("Sterling Resorts") for cash purchase
consideration of $57.4 (3.5 billion Indian rupees), and classified its investment as an associate. On September 3, 2014 Thomas Cook India increased its ownership interest to 55.1% by
acquiring additional common shares of Sterling Resorts for cash consideration of $19.2 (1.2 billion Indian rupees). Having obtained control, Thomas Cook India was required to re-measure its
existing ownership interest in Sterling Resorts to fair value as at September 3, 2014, resulting in the recognition of a non-cash gain of $41.2 in net gains on investments in the consolidated
statement of earnings, representing the difference between the fair value of the previously held interest in Sterling Resorts and its carrying value under the equity method of accounting. The
acquisition of Sterling Resorts was financed internally by subsidiaries of Fairfax. The assets and liabilities and results of operations of Sterling Resorts were consolidated within the Other
reporting segment. Goodwill and intangible assets was comprised of $69.2 of goodwill and $0.4 of computer software. Sterling Resorts is engaged in vacation ownership and leisure hospitality and
operates a network of resorts in India.

Acquisition of Praktiker Hellas Commercial Societe Anonyme

On June 5, 2014 Fairfax completed the acquisition of a 100% interest in Praktiker Hellas Commercial Societe Anonyme ("Praktiker") for cash purchase consideration of $28.6
(€21.0). The assets and liabilities and results of operations of Praktiker were consolidated in the Other reporting segment. Praktiker is one of the largest home improvement and
do-it-yourself goods retailers in Greece, operating 14 stores.

Acquisition of PT Batavia Mitratama Insurance

On May 21, 2014 Fairfax Asia completed the acquisition of an 80.0% interest in PT Batavia Mitratama Insurance (subsequently renamed PT Fairfax Insurance Indonesia
("Fairfax Indonesia")) for cash purchase consideration of $8.5 (98.2 billion Indonesian rupees). Subsequent to the acquisition, Fairfax Asia contributed an additional $12.9 to Fairfax Indonesia
(maintaining its 80.0% interest) to support business expansion. The assets and liabilities and results of operations of Fairfax Indonesia were consolidated in the Fairfax Asia reporting segment.
Fairfax Indonesia is headquartered in Jakarta, Indonesia and underwrites general insurance, specializing in automobile coverage in Indonesia.

Acquisition of Keg Restaurants Ltd.

On February 4, 2014 the company completed the acquisition of 51.0% of the outstanding common shares of Keg Restaurants Ltd. ("The Keg") for cash purchase
consideration of $76.7 (Cdn$85.0). The assets and liabilities and results of operations of The Keg were consolidated in the Other reporting segment. Goodwill and intangible assets was comprised of
$65.4 of goodwill and $0.1 of computer software. The Keg franchises, owns and operates a network of premium dining restaurants across Canada and in select locations in the United States.

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The
identifiable assets acquired and liabilities assumed in connection with the Pethealth, Sterling Resorts and The Keg acquisitions are summarized in the table below.

|                                     |                                          | Pethealth         |       | Sterling Resorts  |       | The Keg         
|------------------------------------ | ---------------------------------------- | ----------------- | ----- | ----------------- | ----- | ----------------
|Acquisition date                     |                                          | November 14, 2014 |       | September 3, 2014 |       | February 4, 2014
|Percentage of common shares acquired |                                          | 100.0%            |       | 55.1%             | (3)   | 51.0%           
|Assets:                              |                                          |                   |       |                   |       |                 
|                                     | Portfolio investments(1)                 |                   | 10.7  |                   | 19.1  |                 
|                                     | Goodwill and intangible assets           |                   | 108.2 | (2)               | 69.6  | (4)             
|                                     | Other assets                             |                   | 7.7   |                   | 176.3 |                 
|                                     |                                          |                   |       |                   |       |                 
|                                     |                                          | 126.6             |       | 265.0             |       | 270.4           
|                                     |                                          |                   |       |                   |       |                 
|Liabilities:                         |                                          |                   |       |                   |       |                 
|                                     | Accounts payable and accrued liabilities |                   | 19.9  |                   | 52.8  |                 
|                                     | Deferred income taxes                    |                   | 18.0  | (2)               | 17.0  |                 
|                                     | Long term debt                           |                   |      |                   | 2.1   |                 
|                                     |                                          |                   |       |                   |       |                 
|                                     |                                          | 37.9              |       | 71.9              |       | 182.9           
|Non-controlling interests            |                                          |                  |       | 74.1              |       | 10.8            
|Purchase consideration               |                                          | 88.7              |       | 119.0             |       | 76.7            
|                                     |                                          |                   |       |                   |       |                 
|                                     |                                          | 126.6             |       | 265.0             |       | 270.4           
|                                     |                                          |                   |       |                   |       |                 

24.  Financial Risk Management

Overview

The primary goals of the company's financial risk management are to ensure that the outcomes of activities involving elements of risk are consistent with the company's
objectives and risk tolerance, while maintaining an appropriate balance between risk and reward and protecting the company's consolidated balance sheet from events that have the potential to
materially impair its financial strength. The company's exposure to potential loss from its insurance and reinsurance operations and investment activities primarily relates to underwriting risk,
credit risk, liquidity risk and various market risks. Balancing risk and reward is achieved through identifying risk appropriately, aligning risk tolerances with business strategy, diversifying risk,
pricing appropriately for risk, mitigating risk through preventive controls and transferring risk to third parties. There were no significant changes in the types of the company's risk exposures or
the processes used by the company for managing those risk exposures at December 31, 2015 compared to those identified at December 31, 2014, except as discussed below.

Financial
risk management objectives are achieved through a two tiered system, with detailed risk management processes and procedures at the company's primary operating subsidiaries and its investment
management subsidiary combined with the analysis of the company-wide aggregation and accumulation of risks at the holding company level. In addition, although the company and its operating
subsidiaries have designated Chief Risk Officers, the company regards each Chief Executive Officer as the chief risk officer of his or her company: each Chief Executive Officer is the individual
ultimately responsible for risk management for his or her company and its subsidiaries.

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The
company's designated Chief Risk Officer reports on risk considerations to Fairfax's Executive Committee and provides a quarterly report to the Board of Directors on the key risk exposures. The
company's management, in consultation with the designated Chief Risk Officer, approves certain policies for overall risk management, as well as policies addressing specific areas such as investments,
underwriting, catastrophe risk and reinsurance. The company's Investment Committee approves policies for the management of market risk (including currency risk, interest rate risk and other price
risk) and the use of derivative and non-derivative financial instruments, and monitors to ensure compliance with relevant regulatory guidelines and requirements. A discussion of the risks of the
business (the risk factors and the management of those risks) is an agenda item for every regularly scheduled meeting of the Board of Directors.

Underwriting Risk

Underwriting risk is the risk that the total cost of claims, claims adjustment expenses and premium acquisition expenses will exceed premiums received and can arise as a result
of numerous factors, including pricing risk, reserving risk and catastrophe risk. There were no significant changes to the company's exposure to underwriting risk or the framework used to monitor,
evaluate and manage underwriting risk at December 31, 2015 compared to December 31, 2014. The foregoing statement recognizes the acquisition of Brit during the second quarter of 2015,
whose underwriting risk profile is largely consistent with that of the company.

Principal lines of business

The company's principal lines of business and the significant insurance risks inherent therein are as follows:



An
analysis of revenue by line of business is included in note 25.

The
table below shows the company's concentration of risk by region and line of business based on gross premiums written prior to giving effect to ceded reinsurance premiums. The company's exposure to
general insurance risk varies by geographic region and may change over time. Premiums ceded to reinsurers (including retrocessions) in 2015 by line of business amounted to $379.3 for property
(2014  $400.1), $512.2 for casualty (2014  $539.1) and $243.8 for specialty
(2014  $218.9).

|            |  | Canada  |  | United States |  | Asia(1) |  | International(2) |  | Total
|----------- |  | ------- |  | ------------- |  | ------- |  | ---------------- |  | -----
|
|Property    |  | 579.4   |  | 560.9         |  | 1,250.4 |  | 1,173.5          |  | 413.2
|Casualty    |  | 489.5   |  | 516.0         |  | 3,547.5 |  | 2,805.9          |  | 288.6
|Specialty   |  | 112.6   |  | 113.1         |  | 371.8   |  | 211.0            |  | 284.3
|            |  |         |  |               |  |         |  |                  |  |      
|Total       |  | 1,181.5 |  | 1,190.0       |  | 5,169.7 |  | 4,190.4          |  | 986.1
|            |  |         |  |               |  |         |  |                  |  |      
|Insurance   |  | 1,095.3 |  | 1,120.7       |  | 4,060.4 |  | 3,426.0          |  | 494.6
|Reinsurance |  | 86.2    |  | 69.3          |  | 1,109.3 |  | 764.4            |  | 491.5
|            |  |         |  |               |  |         |  |                  |  |      
|            |  | 1,181.5 |  | 1,190.0       |  | 5,169.7 |  | 4,190.4          |  | 986.1
|            |  |         |  |               |  |         |  |                  |  |      

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Pricing Risk

Pricing risk arises because actual claims experience can differ adversely from the assumptions included in pricing calculations. Historically the underwriting results of the
property and casualty industry have fluctuated significantly due to the cyclicality of the insurance market. The market cycle is affected by the frequency and severity of losses, levels of capacity
and demand, general economic conditions and competition on rates and terms of coverage. The operating companies focus on profitable underwriting using a combination of experienced underwriting and
actuarial staff, pricing models and price adequacy monitoring tools.

Reserving Risk

Reserving risk arises because actual claims experience can differ adversely from the assumptions included in setting reserves, in large part due to the length of time between
the occurrence of a loss, the reporting of the loss to the insurer and the ultimate resolution of the claim. The degree of uncertainty will vary by line of business according to the characteristics of
the insured risks and the cost of a claim will be determined by the actual loss suffered by the policyholder. Claims provisions reflect expectations of the ultimate cost of resolution and
administration of claims based on an assessment of facts and circumstances then known, a review of historical settlement patterns, estimates of trends in claims severity and frequency, legal theories
of liability and other factors.

The
time required to learn of and settle claims is often referred to as the "tail" and is an important consideration in establishing the company's reserves. Short-tail claims are those for which
losses are normally reported soon after the incident and are generally settled within months following the reported incident. This would include, for example, most property, automobile and marine and
aerospace damage. Long-tail claims are
considered by the company to be those that often take three years or more to develop and settle, such as asbestos, environmental pollution, workers' compensation and product liability. Information
concerning the loss event and ultimate cost of a long-tail claim may not be readily available, making the reserving analysis of long-tail lines of business more difficult and subject to greater
uncertainties than for short-tail lines of business. In the extreme cases of long-tail claims like those involving asbestos and environmental pollution, it may take upwards of 40 years to
settle. The company employs specialized techniques to determine such provisions using the extensive knowledge of both internal and external asbestos and environmental pollution experts and
legal advisors.

The
establishment of provisions for losses and loss adjustment expenses is an inherently uncertain process that can be affected by internal factors such as the inherent risk in estimating loss
development patterns based on historical data that may not be representative of future loss payment patterns; assumptions built on industry loss ratios or industry benchmark development patterns that
may not reflect actual experience; and the intrinsic risk as to the homogeneity of the underlying data used in carrying out the reserve analyses; and external factors such as trends relating to jury
awards; economic inflation; medical inflation; worldwide economic conditions; tort reforms; court interpretations of coverage; the regulatory environment; underlying policy pricing; claims handling
procedures; inclusion of exposures not contemplated at the time of policy inception; and significant changes in severity or frequency of losses relative to historical trends. Due to the amount of time
between the occurrence of a loss, the actual reporting of the loss and the ultimate payment for the loss, provisions may ultimately develop differently from the actuarial assumptions made when
initially estimating the provision for claims.

The
company has exposures to risks in each line of business that may develop adversely and that could have a material impact upon the company's financial position. The insurance risk diversity within
the company's portfolio of issued policies makes it difficult to predict whether material prior year reserve development will occur and, if it does occur, the location and the timing of such
an occurrence.

Catastrophe Risk

Catastrophe risk arises because property and casualty insurance companies may be exposed to large losses arising from man-made or natural catastrophes that could result in
significant underwriting losses. As the company does not establish reserves for catastrophes in advance of the occurrence of such events, these events may cause volatility in the levels of incurred
losses and reserves, subject to the effects of reinsurance recoveries. This volatility may also be contingent upon political and legal developments after the occurrence of the event. The company
evaluates potential catastrophic events and assesses the probability of occurrence and magnitude of these events predominantly through probable maximum loss ("PML") modeling techniques
and through the aggregation of limits exposed. A wide range of events are simulated using the company's proprietary and commercial models, including single large events and multiple events spanning
the numerous geographic regions in which the company operates.

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Each
of the operating companies has developed and applies strict underwriting guidelines for the amount of catastrophe exposure it may assume as a standalone entity for any one risk and location.
Those guidelines are regularly monitored and updated by the operating companies. Each of the operating companies also manages catastrophe exposure by diversifying risk across geographic regions,
catastrophe types and other lines of business, factoring in levels of reinsurance protection, adjusting the amount of business written based on capital levels and adhering to risk tolerances. The
company's head office aggregates catastrophe exposure company-wide and continually monitors the group exposure. The independent exposure limits for each entity in the group are aggregated to produce
an exposure limit for the group as there is currently no model capable of simultaneously projecting the magnitude and probability of loss in all geographic regions in which the company operates.
Currently the company's objective is to limit its company-wide catastrophe loss exposure such that one year's aggregate pre-tax net catastrophe losses would not exceed one year's normalized net
earnings before income taxes. The company takes a long term view and generally considers a 15% return on common shareholders' equity, adjusted to a pre-tax basis, to be representative of one year's
normalized net earnings. The modeled probability of aggregate catastrophe losses in any one year exceeding this amount is generally more than once in every 250 years.

Management of Underwriting Risk

To manage its exposure to underwriting risk, and the pricing, reserving and catastrophe risks contained therein, the company's operating companies have established limits for
underwriting authority and the requirement for specific approvals for transactions involving new products or for transactions involving existing products which exceed certain limits of size or
complexity. The company's objective of operating with a prudent and stable underwriting philosophy with sound reserving is also achieved through establishment of goals, delegation of authorities,
financial monitoring, underwriting reviews and remedial actions to facilitate continuous improvement. The company's provision for claims is reviewed separately by, and must be acceptable to, internal
actuaries at each operating company, the Chief Risk Officer at Fairfax and one or more independent actuaries. The company also purchases reinsurance protection for risks assumed when it is considered
prudent and cost effective to do so, at the operating company level for specific exposures and, if needed, at the holding company level for aggregate exposures. Steps are taken to actively reduce the
volume of insurance and reinsurance underwritten on particular types of risks when the company desires to reduce its direct exposure due to inadequate pricing.

As
part of its overall risk management strategy, the company cedes insurance risk through proportional, non-proportional and facultative reinsurance treaties. With proportional reinsurance, the
reinsurer shares a pro rata portion of the company's losses and premium, whereas with non-proportional reinsurance, the reinsurer assumes payment of the company's loss above a specified
retention, subject to a limit. Facultative reinsurance is the reinsurance of individual risks as agreed by the company and the reinsurer. The company follows the policy of underwriting and reinsuring
contracts of insurance and reinsurance which, depending on the type of contract, generally limits the liability of the individual insurance and reinsurance subsidiaries on any policy to a maximum
amount on any one loss. Reinsurance decisions are made by the subsidiaries to reduce and spread the risk of loss on insurance and reinsurance written, to limit multiple claims arising from a single
occurrence and to protect capital resources. The amount of reinsurance purchased can vary among subsidiaries depending on the lines of business written, their respective capital resources and
prevailing or expected market conditions. Reinsurance is generally placed on an excess of loss basis and written in several layers, the purpose of which is to limit the amount of one risk to a maximum
amount acceptable to the company and to protect from losses on multiple risks arising from a single occurrence. This type of reinsurance includes what is generally referred to as catastrophe
reinsurance. The company's reinsurance does not, however, relieve the company of its primary obligation to the policyholder.

The
majority of reinsurance contracts purchased by the company provide coverage for a one year term and are negotiated annually. The ability of the company to obtain reinsurance on terms and prices
consistent with
historical results reflects, among other factors, recent loss experience of the company and of the industry in general. Currently there exists excess capital within the reinsurance market due to
favourable operating results of reinsurers and alternative forms of reinsurance capacity entering the market. As a result, the market has become very competitive with pricing remaining flat and in
some cases decreasing. Further compounding these effects has been the relatively benign level of catastrophe losses for reinsurers in the United States over the last number of years. The
company will remain opportunistic in its use of reinsurance, balancing capital requirements and the cost of reinsurance.

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Credit Risk

Credit risk is the risk of loss resulting from the failure of a counterparty to honour its financial obligations to the company. Credit risk arises predominantly with respect to
cash and short term investments, investments in debt instruments, insurance contract receivables, recoverable from reinsurers and receivable from counterparties to derivative contracts (primarily
total return swaps and CPI-linked derivatives). There were no significant changes to the company's exposure to credit risk (except as set out in the discussion which follows) or the framework used to
monitor, evaluate and manage credit risk at December 31, 2015 compared to December 31, 2014.

The
company's aggregate gross credit risk exposure at December 31, 2015 (without taking into account amounts held by the company as collateral) was comprised as follows:

December 31,
2015

December 31,
2014Cash and short term investments

7,375.9

6,293.3Bonds:U.S., U.K., German, and Canadian sovereign government

3,242.9

2,408.2Other sovereign government

1,379.1

1,261.0Canadian provincials

198.8

217.1U.S. states and municipalities

6,646.2

6,998.2Corporate and other

2,071.3

1,534.8Receivable from counterparties to derivative contracts

561.6

514.9Insurance contract receivables

2,546.5

1,931.7Recoverable from reinsurers

3,890.9

3,982.1Other assets

930.8

664.9Total gross credit risk exposure

28,844.0

25,806.2


The company had income taxes refundable of $97.9 at December 31, 2015 (December 31, 2014  $51.1).

Cash and Short Term Investments

The company's cash and short term investments (including at the holding company) are held at major financial institutions in the jurisdictions in which the company operates. At
December 31, 2015, 86.3% of these balances were held in Canadian and U.S. financial institutions, 5.5% in European financial institutions and 8.2% in other foreign financial institutions
(December 31, 2014  89.0%, 3.4% and 7.6% respectively). The company monitors risks associated with cash and short term investments by regularly reviewing
the financial strength and creditworthiness of these financial institutions and more frequently during periods of economic volatility. As a result of these reviews, the company may transfer balances
from financial institutions where it perceives heightened credit risk to other institutions considered to be more stable.

Investments in Debt Instruments

The company's risk management strategy for debt instruments is to invest primarily in high credit quality issuers and to limit the amount of credit exposure with respect to any
one corporate issuer. While the company reviews third party credit ratings, it also carries out its own analysis and does not delegate the credit decision to rating agencies. The company endeavours to
limit credit exposure by monitoring fixed income portfolio limits on individual corporate issuers and limits based on credit quality and may, from time to time, initiate positions in certain types of
derivatives to further mitigate credit risk exposure.

At
December 31, 2015 the company's bond investments subject to credit risk had a fair value of $10,220.3 (December 31, 2014  $9,978.9),
representing 35.2% (December 31, 2014  38.1%) of the total investment portfolio (comprising bonds included in other sovereign government rated A/A or
lower and all bonds included in Canadian provincials, U.S. states and municipalities and corporate and other). Other sovereign government bonds included Greek bonds purchased at deep discounts
to par of $151.4 (December 31, 2014  $178.6) that were rated below investment grade. At December 31, 2015 and 2014, the company did not own any
bonds issued by Ireland, Italy, Portugal or Spain. The company considers its investment of $3,318.0 in sovereign bonds rated AA/Aa or higher (primarily sovereign bonds issued by the U.S., U.K., German
and Canadian governments (including $2,699.7

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(December 31,
2014  $2,094.2) of U.S. treasury bonds), representing 11.4% (December 31, 2014  9.3%)
of the total investment portfolio, to present only a nominal risk of default. The company's exposure to credit risk from its investment in debt instruments remained substantially unchanged at
December 31, 2015 compared to December 31, 2014 notwithstanding the consolidation of Brit's bond portfolio and Fairfax India's purchases of permitted investments in India from the net
proceeds of its share offerings during 2015. There were no other significant changes to the company's framework used to monitor, evaluate and manage credit risk of investments in debt instruments at
December 31, 2015 compared to December 31, 2014.

The
composition of the company's fixed income portfolio classified according to the higher of each security's respective S&P and Moody's issuer credit rating is presented in the table
that follows:

December 31, 2015

December 31, 2014Issuer Credit Rating

Amortized
cost

Carrying
value

%

Amortized
cost

Carrying
value

%AAA/Aaa

3,562.5

3,587.9

26.5

2,402.4

2,636.2

21.2AA/Aa

5,100.6

6,125.8

45.3

5,266.0

6,419.2

51.8A/A

566.4

647.6

4.8

839.8

956.4

7.7BBB/Baa

1,288.6

1,368.9

10.1

994.5

1,097.4

8.8BB/Ba

318.0

272.5

2.0

35.1

51.8

0.4B/B

26.9

26.3

0.2

359.7

178.6

1.4Lower than B/B and unrated

1,549.3

1,509.3

11.1

879.5

1,079.7

8.7Total

12,412.3

13,538.3

100.0

10,777.0

12,419.3

100.0


There were no significant changes to the composition of the company's fixed income portfolio classified according to the higher of each security's respective S&P and Moody's
issuer credit rating at December 31, 2015 compared to December 31, 2014, notwithstanding the modest increase in the categories rated BBB/Baa and lower. At December 31, 2015, 86.7%
(December 31, 2014  89.5%) of the fixed income portfolio carrying value was rated investment grade or better, with 71.8% (December 31,
2014  73.0%) being rated AA or better (primarily consisting of government obligations). The increase in bonds rated BBB/Baa reflected Fairfax India's purchase of
investments in India from the net proceeds of its share offerings. The increase in bonds rated BB/Ba reflected a credit rating downgrade on certain of the company's tax exempt and taxable
U.S. municipal bonds (in the A/A category at December 31, 2014). The increase in bonds rated lower than B/B and unrated reflected the credit rating downgrade of the company's
Greek bonds (in the B/B category at December 31, 2014) and Fairfax India's purchase of investments in India from the net proceeds of its share offerings.

At
December 31, 2015 holdings of fixed income securities in the ten issuers (excluding U.S., Canadian, U.K. and German sovereign government bonds) to which the company had the greatest exposure
totaled $4,701.6 (December 31, 2014  $4,829.7), which represented approximately 16.2% (December 31,
2014  18.4%) of the total investment portfolio. Exposure to the largest single issuer of corporate bonds at December 31, 2015 was $547.6
(December 31, 2014  $653.3), which represented approximately 1.9% (December 31, 2014  2.5%) of the total
investment portfolio.

The
consolidated investment portfolio included $6.6 billion at December 31, 2015 (December 31, 2014  $7.0 billion) of
U.S. state and municipal bonds (approximately $4.9 billion tax-exempt, $1.7 billion taxable), a large portion of which were purchased during 2008 within subsidiary investment
portfolios. At December 31, 2015 approximately $3.7 billion (December 31, 2014  $3.9 billion) of those U.S. state and
municipal bonds are insured by Berkshire Hathaway Assurance Corp. for the payment of interest and principal in the event of issuer default, and are therefore all rated AA or better.

Counterparties to Derivative Contracts

Counterparty risk arises from the company's derivative contracts primarily in three ways: first, a counterparty may be unable to honour its obligation under a derivative
contract and there may be insufficient collateral pledged in favour of the company to support that obligation; second, collateral deposited by the company to a counterparty as a prerequisite for
entering into certain derivative contracts (also known as initial margin) may be at risk should the counterparty face financial difficulty; and third, excess collateral pledged in favour of a
counterparty may be at risk should the counterparty face financial difficulty (counterparties may hold excess collateral as a result of the timing of the settlement of the amount of collateral
required to be pledged based on the fair value of a derivative contract).

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The
company endeavours to limit counterparty risk through diligent selection of counterparties to its derivative contracts and through the terms of negotiated agreements. Pursuant to these agreements,
counterparties are contractually required to deposit eligible collateral in collateral accounts (subject to certain minimum thresholds) for the benefit of the company based on the then daily fair
value of the derivative contracts. The company's exposure to risk associated with providing initial margin is mitigated where possible through the use of segregated third party custodian accounts
whereby counterparties are permitted to take control of the collateral only in the event of default by the company.

Agreements
negotiated with counterparties provide for a single net settlement of all financial instruments covered by the agreement in the event of default by the counterparty, thereby permitting
obligations owed by the company to a counterparty to be offset to the extent of the aggregate amount receivable by the company from that counterparty (the "net settlement arrangements"). The
following table sets out the company's credit risk related to derivative contract counterparties, assuming all such counterparties are simultaneously in default:

December 31,
2015

December 31,
2014Total derivative assets(1)

561.6

514.9Impact of net settlement arrangements

(61.1
)
(110.0
)Fair value of collateral deposited for the benefit of the company(2)

(285.2
)
(171.1
)Excess collateral pledged by the company in favour of counterparties

39.3

137.1Initial margin not held in segregated third party custodian accounts

59.8

61.8Net derivative counterparty exposure after net settlement and collateral arrangements

314.4

432.7


Collateral
deposited for the benefit of the company at December 31, 2015 consisted of cash and government securities of $28.7 and $264.6 respectively (December 31,
2014  $27.8 and $164.5 respectively). The company had not exercised its right to sell or repledge collateral at December 31, 2015.

Recoverable from Reinsurers

Credit risk on the company's recoverable from reinsurers balance existed at December 31, 2015 to the extent that any reinsurer may be unable or unwilling to reimburse the
company under the terms of the relevant reinsurance arrangements. The company is also exposed to the credit risk assumed in fronting arrangements and to potential reinsurance capacity constraints. The
company regularly assesses the creditworthiness of reinsurers with whom it transacts business. Internal guidelines generally require reinsurers to have strong A.M. Best ratings and to maintain
capital and surplus in excess of $500.0. Where contractually provided for, the company has collateral for outstanding balances in the form of cash, letters of credit, guarantees or assets held in
trust accounts. This collateral may be drawn on when amounts remain unpaid beyond contractually specified time periods for each individual reinsurer.

The
company's reinsurance security department conducts ongoing detailed assessments of current and potential reinsurers and annual reviews on impaired reinsurers, and provides recommendations for
uncollectible reinsurance provisions for the group. The reinsurance security department also collects and maintains individual and group reinsurance exposures aggregated across the group. Most of the
reinsurance balances for reinsurers rated B++ and lower or which are not rated were inherited by the company on acquisition of a subsidiary. The company's largest single recoverable from reinsurer
(Munich Reinsurance Company) represented 3.2% of shareholders' equity attributable to shareholders of Fairfax at December 31, 2015 (December 31,
2014  Swiss Re America Corp., 4.4%) and is rated A+ by A.M. Best.

The
company's gross exposure to credit risk from counterparties to its reinsurance contracts remained substantially unchanged at December 31, 2015 compared to December 31, 2014. Changes
that occurred in the provision for uncollectible reinsurance during the period are disclosed in note 9.

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The
following table presents the gross recoverable from reinsurers classified according to the financial strength rating of the reinsurers. Pools and associations, shown separately, are generally
government or similar insurance funds carrying limited credit risk.

|                                        |  | December 31, 2015 |   | December 31, 2014 | 
|--------------------------------------- |  | ----------------- | - | ----------------- | 
|
|A++                                     |  | 422.2             |   | 99.7              | 
|A+                                      |  | 1,325.5           |   | 163.3             | 
|A                                       |  | 1,294.8           |   | 105.3             | 
|A-                                      |  | 347.7             |   | 162.4             | 
|B++                                     |  | 16.9              |   | 3.7               | 
|B+                                      |  | 5.9               |   | 5.2               | 
|B or lower                              |  | 17.8              |   | 13.6              | 
|Not rated                               |  | 556.8             |   | 163.6             | 
|Pools and associations                  |  | 90.3              |   | 68.4              | 
|                                        |  |                   |   |                   | 
|                                        |  | 4,077.9           |   | 785.2             | 
|Provision for uncollectible reinsurance |  | (187.0            | ) |                   | 
|                                        |  |                   |   |                   | 
|Recoverable from reinsurers             |  | 3,890.9           |   |                   | 
|                                        |  |                   |   |                   | 

Liquidity Risk

Liquidity risk is the potential for loss if the company is unable to meet financial commitments in a timely manner at reasonable costs as they fall due. The company's policy is
to ensure that sufficient liquid assets are available to meet financial commitments, including liabilities to policyholders and debt holders, dividends on preferred shares and investment commitments.
Cash flow analysis is performed regularly at both the holding company and subsidiary company levels to ensure that future cash needs are met or exceeded by cash flows generated from operating
companies.

The
holding company's known significant commitments for 2016 consist of payment of the $227.8 ($10.00 per share) dividend on common shares (paid January 2016), interest and corporate overhead
expenses, preferred share dividends, income tax payments, potential cash outflows related to derivative contracts (described below) and the anticipated acquisition of Eurolife and the additional
investment in ICICI Lombard. The net proceeds from an underwritten public offering of 1.0 million subordinate voting shares ($523.5 (Cdn$705.1)), which closed on March 2, 2016, will be
used to finance the acquisition of Eurolife and the additional investment in ICICI Lombard (see notes 16 and 23).

The
net proceeds from underwritten public offerings (described in more detail in notes 15 and 16) of 1.15 million subordinate voting shares ($575.9), 9.2 million
Series M preferred shares ($179.0) and Cdn$350.0 of 4.95% Fairfax senior notes due 2025 ($275.7), all of which closed on March 3, 2015, were used to finance the acquisition of Brit. The
company used the residual proceeds from the private debt offering completed on August 13, 2014 of $300.0 principal amount of 4.875% senior notes due August 13, 2024 to fund the
repayment, upon maturity, of the Fairfax ($82.4) and OdysseyRe ($125.0) unsecured senior notes on October 1, 2015 and May 1, 2015 respectively.

The
company believes that holding company cash and investments, net of holding company short sale and derivative obligations at December 31, 2015 of $1,275.9 provides adequate liquidity to meet
the holding company's known obligations in 2016. The holding company expects to continue to receive investment management and administration fees from its insurance and reinsurance subsidiaries,
investment income on its holdings of cash and investments, and dividends from its insurance and reinsurance subsidiaries. To further augment its liquidity, the holding company can draw upon its
$1.0 billion unsecured revolving credit facility (described in note 15).

The
liquidity requirements of the insurance and reinsurance subsidiaries principally relate to the liabilities associated with underwriting, operating costs and expenses, the payment of dividends to
the holding company, contributions to their subsidiaries, payment of principal and interest on their outstanding debt obligations, income tax payments

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and
certain derivative obligations (described below). Liabilities associated with underwriting include the payment of claims and direct commissions. Historically, the insurance and reinsurance
subsidiaries have used cash inflows from operating activities (primarily the collection of premiums and reinsurance commissions) and investment activities (primarily repayments of principal on debt
investments, sales of investment securities and investment income) to fund their liquidity requirements. The insurance and reinsurance subsidiaries may also receive cash inflows from financing
activities (primarily distributions received from their subsidiaries).

The
company's insurance and reinsurance subsidiaries (and the holding company on a consolidated basis) focus on the stress that could be placed on liquidity requirements as a result of severe
disruption or volatility in the capital markets or extreme catastrophe activity or the combination of both. The insurance and reinsurance subsidiaries maintain investment strategies intended to
provide adequate funds to pay claims or withstand disruption or volatility in the capital markets without forced sales of investments. The insurance and reinsurance subsidiaries hold highly liquid,
high quality short-term investment securities and other liquid investment grade fixed maturity securities to fund anticipated claim payments, operating expenses and commitments related to investments.
At December 31, 2015 portfolio investments net of short sale and derivative obligations totaled $27.7 billion. These portfolio investments may include investments in inactively traded
corporate debentures, preferred stocks, common stocks and limited partnership interests that are relatively illiquid. At December 31, 2015 these asset classes represented approximately 7.4%
(December 31, 2014  7.6%) of the carrying value of the insurance and reinsurance subsidiaries' portfolio investments.

The
insurance and reinsurance subsidiaries and the holding company may experience cash inflows or outflows (which at times could be significant) related to their derivative contracts, including
collateral requirements and cash settlements of market value movements of total return swaps which have occurred since the most recent reset date. During 2015 the insurance and reinsurance
subsidiaries and the holding company received net cash of $225.4 (2014  paid net cash of $194.2) and $34.9 (2014  paid net
cash of $113.4) respectively, in connection with long and short equity and equity index total return swap derivative contracts (excluding the impact of collateral requirements). The insurance and
reinsurance subsidiaries typically fund such obligations from cash provided by operating activities (and may fund such obligations from sales of equity-related investments, the market value of
which will generally vary inversely with the market value of short equity and equity index total return swaps). The holding company typically funds any such obligations from holding company cash and
investments and its additional sources of liquidity as discussed above.

The
following tables set out the maturity profile of the company's financial liabilities based on the expected undiscounted cash flows from the end of the year to the contractual maturity date or the
settlement date:

|                                                  |  | December 31, 2015
|------------------------------------------------- |  | -----------------
|
|Accounts payable and accrued liabilities(1)       |  | 1,129.2          
|Funds withheld payable to reinsurers              |  | 101.0            
|Provision for losses and loss adjustment expenses |  | 1,397.5          
|Long term debt  principal                        |  | 11.6             
|Long term debt  interest                         |  | 38.9             
|                                                  |  |                  
|                                                  |  | 2,678.2          
|                                                  |  |                  

|
|

|                                                  |  | December 31, 2014
|------------------------------------------------- |  | -----------------
|
|Accounts payable and accrued liabilities(1)       |  | 844.6            
|Funds withheld payable to reinsurers(2)           |  | 1.3              
|Provision for losses and loss adjustment expenses |  | 1,064.3          
|Long term debt  principal                        |  | 9.9              
|Long term debt  interest                         |  | 36.5             
|                                                  |  |                  
|                                                  |  | 1,956.6          
|                                                  |  |                  

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The timing of loss payments is not fixed and represents the company's best estimate. The payment obligations which are due beyond one year in accounts payable and accrued liabilities primarily relate
to certain payables to brokers and reinsurers not expected to be settled in the short term. At December 31, 2015 the company had income taxes payable of $85.8 (December 31,
2014  $118.3).

The
following table provides a maturity profile of the company's short sale and derivative obligations based on the expected undiscounted cash flows from the end of the year to the contractual
maturity date or the settlement date:

|                                                  |  | December 31, 2015 |  | December 31, 2014
|------------------------------------------------- |  | ----------------- |  | -----------------
|
|Equity index total return swaps  short positions |  |                  |  |                 
|Equity total return swaps  short positions       |  | 9.3               |  |                 
|Equity total return swaps  long positions        |  | 9.5               |  |                 
|Foreign exchange forward contracts                |  | 53.9              |  | 20.2             
|Other derivative contracts                        |  |                  |  |                 
|                                                  |  |                   |  |                  
|                                                  |  | 72.7              |  | 20.2             
|                                                  |  |                   |  |                  

Market Risk

Market risk (comprised of foreign currency risk, interest rate risk and other price risk) is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market prices. The company is exposed to market risk principally in its investing activities but also in its underwriting activities to the extent that those activities
expose the company to foreign currency risk. The company's investment portfolios are managed with a long term, value-oriented investment philosophy emphasizing downside protection. The company has
policies to limit and monitor its individual issuer exposures and aggregate equity exposure at the subsidiary level and in total at the holding company level. The following is a discussion of the
company's primary market risk exposures and how those exposures are managed.

Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Typically, as
interest rates rise, the fair value of fixed income investments decline and, conversely, as interest rates decline, the fair value of fixed income investments rise. In each case, the longer the
maturity of the financial instrument, the greater the consequence of a change in interest rates. The company's interest rate risk management strategy is to position its fixed income portfolio based on
its view of future interest rates and the yield curve, balanced with liquidity requirements. The company may reposition the portfolio in response to changes in the interest rate environment. At
December 31, 2015 the company's investment portfolio included fixed income securities with a fair value of $13.5 billion which are subject to interest rate risk.

Notwithstanding
the consolidation of Brit's bond portfolio and Fairfax India's purchase of investments in India from the net proceeds of its share offerings during 2015, the company's exposure to
interest rate risk did not change significantly during 2015 compared to 2014. There were no significant changes to the company's framework used to monitor, evaluate and manage interest rate risk at
December 31, 2015 compared to December 31, 2014.

Movements
in the term structure of interest rates affect the level and timing of recognition in earnings of gains and losses on fixed income securities held. Generally, the company's investment income
may be reduced during sustained periods of lower interest rates as higher yielding fixed income securities are called, mature, or are sold and the proceeds are reinvested at lower rates. During
periods of rising interest rates, the market value of the company's existing fixed income securities will generally decrease and gains on fixed income securities will likely be reduced. Losses are
likely to be incurred following significant increases in interest rates. General economic conditions, political conditions and many other factors can also adversely affect the bond markets and,
consequently, the value of fixed income securities held. These risks are monitored by the company's senior portfolio managers and CEO, and taken into consideration when managing the consolidated
bond portfolio.

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The
table below displays the potential impact of changes in interest rates on the company's fixed income portfolio based on parallel 200 basis point shifts up and down, in 100 basis
point increments. This analysis was performed on each individual security to determine the hypothetical effect on net earnings.

|                         |  | December 31, 2015 |  | December 31, 2014 |  
|------------------------ |  | ----------------- |  | ----------------- | -
|
|Change in interest rates |  |                   |  |                   |  
|200 basis point increase |  | 11,560.9          |  | (1,380.2          | )
|100 basis point increase |  | 12,467.2          |  | (747.8            | )
|No change                |  | 13,538.3          |  |                  |  
|100 basis point decrease |  | 14,867.4          |  | 927.7             |  
|200 basis point decrease |  | 16,480.6          |  | 2,053.3           |  

Certain shortcomings are inherent in the method of analysis presented above. Computations of the prospective effects of hypothetical interest rate changes are based on numerous
assumptions, including the maintenance of the level and composition of fixed income securities at the indicated date, and should not be relied on as indicative of future results. Actual values may
differ from the projections presented should market conditions vary from assumptions used in the calculation of the fair value of individual securities; such variations may include non-parallel shifts
in the term structure of interest rates and changes in individual issuer credit spreads.

Market Price Fluctuations

Market price fluctuation is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those
arising from interest rate risk or foreign currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or other factors affecting all
similar financial instruments in the market. Changes to the company's exposure to equity price risk through its equity and equity-related holdings at December 31, 2015 compared to
December 31, 2014 are described below.

The
company holds significant investments in equity and equity-related instruments. The market value and the liquidity of these investments are volatile and may vary dramatically either up or down in
short periods, and their ultimate value will therefore only be known over the long term or on disposition. The company has economically hedged its equity and equity-related holdings (comprised of
common stocks, convertible preferred stocks, convertible bonds, non-insurance investments in associates and equity-related derivatives) against a potential significant decline in equity markets by way
of short positions effected through equity and equity index total return swaps (including short positions in certain equity indexes (Russell 2000 index, S&P/TSX 60 index and other equity
indexes, collectively the "indexes") and individual equities) and equity index put options (S&P 500). The company's equity hedges are structured to provide a return which is inverse to changes
in the fair values of the indexes and certain individual equities.

At
December 31, 2015 equity hedges with a notional amount of $5,894.8 (December 31, 2014  $6,856.9) represented 88.1% (December 31,
2014  89.6%) of the fair value of the company's equity and equity-related holdings of $6,687.4 (December 31,
2014  $7,651.7). The modest decrease in the hedge ratio principally resulted from closing out short positions in certain individual equities and equity index
total return swaps, partially offset by unrealized depreciation of equity and equity-related holdings due to significant market declines and the impact of the strengthening of the U.S. dollar
on holdings denominated in the euro and Canadian dollar during 2015. Subsequent to December 31, 2015 the company added approximately $952.6 notional amount to its short positions in equity and
equity index total return swaps, increasing its equity hedge ratio to approximately 100% based on the fair value of its equity and equity-related holdings at December 31, 2015. During 2015 the
company's equity and equity-related holdings after equity hedges produced net gains of $76.8 (2014  $347.4).

One
risk of a hedging strategy (sometimes referred to as basis risk) is the risk that the fair value or cash flows of derivative instruments applied as economic hedges will not experience changes in
exactly the opposite directions from those of the underlying hedged exposure. This imperfect correlation between the derivative instrument and underlying hedged exposure creates the potential for
excess gains or losses in a hedging strategy. In the context of the

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company's
equity hedges, the company expects that there may be periods when the notional amount of the equity hedges may exceed or be deficient relative to the company's equity price risk exposure as
a result of the timing of opportunities to exit and enter hedges at attractive prices, decisions by the company to hedge an amount less than the company's full equity exposure or, as a result of any
non-correlated performance of the equity hedges relative to the equity and equity-related holdings (basis risk).

The
company's risk management objective when selecting a hedging instrument (including its equity index total return swaps) is to economically protect capital over potentially long periods of time and
especially during periods of market turbulence. The company regularly monitors the prospective and retrospective effectiveness of its equity hedging program. Based on its historical observation, the
company believes that its hedges of its equity and equity-related holdings will be effective in the medium to long term and especially in the event of a significant market correction. However, due to
the lack of a perfect correlation between the hedging instruments and the hedged exposures, combined with other market uncertainties, it is not possible to predict the future impact of the company's
hedging program related to equity risk. In the future, the company may manage the net exposure to its equity and equity-related holdings by adjusting the notional amounts of its equity hedges upwards
or downwards.

The
following table summarizes the effect of the equity hedges and the equity and equity-related holdings on the company's financial position as at December 31, 2015 and 2014 and results of
operations for the years then ended:

|                                   |                                                | December 31, 2015                                 |         | December 31, 2014 |         | Year ended
December 31, 2015 |         | Year ended
December 31,
2014 |        
|---------------------------------- | ---------------------------------------------- | ------------------------------------------------- | ------- | ----------------- | ------- | ---------------------------- | ------- | ---------------------------- | -------
|
|Equity exposures:                  |                                                |                                                   |         |                   |         |                              |         |                              |        
|                                   | Common stocks(1)                               |                                                   | 4,472.3 |                   | 4,472.3 |                              | 4,938.3 |                              | 4,938.3
|                                   | Preferred stocks  convertible                 |                                                   | 82.8    |                   | 82.8    |                              | 329.8   |                              | 329.8  
|                                   | Bonds  convertible                            |                                                   | 701.5   |                   | 701.5   |                              | 773.3   |                              | 773.3  
|                                   | Investments in associates and subsidiary(2)(3) |                                                   | 1,280.6 |                   | 1,406.5 |                              | 1,397.2 |                              | 1,178.1
|                                   | Derivatives and other invested assets:         |                                                   |         |                   |         |                              |         |                              |        
|                                   |                                                | Equity total return swaps  long positions        |         | 149.4             |         | (8.6                         | )       | 177.9                        |        
|                                   |                                                | Equity warrants and call options                  |         | 0.8               |         | 0.8                          |         | 35.2                         |        
|                                   |                                                |                                                   |         |                   |         |                              |         |                              |        
|                                   | Total equity and equity related holdings       |                                                   | 6,687.4 |                   | 6,655.3 |                              | 7,651.7 |                              | 7,238.8
|                                   |                                                |                                                   |         |                   |         |                              |         |                              |        
|Hedging instruments:               |                                                |                                                   |         |                   |         |                              |         |                              |        
|                                   | Derivatives and other invested assets:         |                                                   |         |                   |         |                              |         |                              |        
|                                   |                                                | Equity total return swaps  short positions       |         | (1,491.7          | )       | 60.3                         |         | (1,965.1                     | )      
|                                   |                                                | Equity index total return swaps  short positions |         | (4,403.1          | )       | 134.0                        |         | (4,891.8                     | )      
|                                   |                                                | Equity index put options(4)                       |         |                  |         | 13.1                         |         |                             |        
|                                   |                                                |                                                   |         |                   |         |                              |         |                              |        
|                                   |                                                | (5,894.8                                          | )       | 207.4             |         | (6,856.9                     | )       | (6.2                         | )      
|                                   |                                                |                                                   |         |                   |         |                              |         |                              |        
|Net exposure and financial effects |                                                | 792.6                                             |         |                   |         | 794.8                        |         |                              |        
|                                   |                                                |                                                   |         |                   |         |                              |         |                              |        

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The
tables that follow illustrate the potential impact on net earnings of various combinations of changes in fair value of the company's equity and equity-related holdings and simultaneous changes in
global equity markets at December 31, 2015 and 2014. The analysis assumes variations ranging from 5% to 10% which the company believes to be reasonably possible based on analysis of the return
on various equity indexes and management's knowledge of global equity markets.

Scenarios
1 and 2 illustrate the potential impact of a 10% change in the fair value of the company's equity and equity-related holdings while global equity markets also change by 10%. Scenarios
3 and 4 illustrate the potential impact of imperfect correlation between the company's equity and equity-related holdings and global equity markets (hedging basis risk) whereby the company's
equity and equity-related holdings decrease by 10% and 5% respectively, while global equity markets remain unchanged. Scenarios 5 and 6 further illustrate hedging basis risk whereby global
equity markets increase by 5% and 10% respectively, while the fair value of the company's equity and equity-related holdings remain unchanged. Certain shortcomings are inherent in the method of
analysis presented as the analysis assumes that all variables, with the exception of those described in each scenario, are held constant.

December 31, 2015

|                                                           |  | Scenario |  
|---------------------------------------------------------- |  | -------- | -
|
|Change in the company's equity and equity-related holdings |  | +10%     |  
|Change in global equity markets                            |  | +10%     |  
|Equity and equity-related holdings                         |  | 488.6    |  
|Equity hedges                                              |  | (589.5   | )
|                                                           |  |          |  
|Pre-tax impact on net earnings                             |  | (100.9   | )
|                                                           |  |          |  
|After-tax impact on net earnings                           |  | (77.7    | )
|                                                           |  |          |  

December 31, 2014

|                                                           |  | Scenario |  
|---------------------------------------------------------- |  | -------- | -
|
|Change in the company's equity and equity-related holdings |  | +10%     |  
|Change in global equity markets                            |  | +10%     |  
|Equity and equity-related holdings                         |  | 576.7    |  
|Equity hedges                                              |  | (685.7   | )
|                                                           |  |          |  
|Pre-tax impact on net earnings                             |  | (109.0   | )
|                                                           |  |          |  
|After-tax impact on net earnings                           |  | (89.0    | )
|                                                           |  |          |  

From an economic perspective, the company believes it is appropriate to include the fair value of $1,280.6 (December 31,
2014  $1,397.2) of its non-insurance investments in associates (see note 6) as a component of its equity and equity-related holdings when measuring
the effectiveness of its equity hedges. Changes in the fair value of the company's equity and equity-related holdings (except for investments in associates) are reflected in the company's net earnings
as the majority of the company's equity investments are classified as FVTPL. Accordingly, the changes in fair value of non-insurance investments in associates have been excluded from each of the
scenarios presented above as any change in the fair value of an investment in associate is generally recognized in the company's consolidated financial reporting only upon ultimate disposition of
the associate.

At
December 31, 2015 the company's exposure to the ten largest issuers of common stock owned in the investment portfolio was $2,572.9, which represented 8.9% of the total investment portfolio
(December 31, 2014  $3,020.9, 11.5%). The exposure to the largest single issuer of common stock held at December 31, 2015 was $425.1, which
represented 1.5% of the total investment portfolio (December 31, 2014  $700.0, 2.7%).

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Risk of Decreasing Price Levels

The risk of decreases in the general price level of goods and services is the potential for negative impacts on the consolidated balance sheet (including the company's equity
and equity-related holdings and fixed income investments in non-sovereign debt) and the consolidated statement of earnings. Among their effects on the economy, decreasing price levels typically result
in decreased consumption, restriction of credit, shrinking output and investment and numerous bankruptcies.

The
company has purchased derivative contracts referenced to consumer price indexes ("CPI") in the geographic regions in which it operates to serve as an economic hedge against the potential adverse
financial impact on the company of decreasing price levels. At December 31, 2015 these contracts have a remaining weighted average life of 6.6 years (December 31,
2014  7.4 years), a notional amount of $109.4 billion (December 31, 2014  $111.8 billion) and
a fair value of $272.6 (December 31, 2014 -$238.4). As the average remaining life of a contract declines, the fair value of the contract (excluding the impact of CPI
changes) will generally decline. The company's maximum potential loss on any contract is limited to the original cost of that contract.

During
2015 the company purchased $2,907.3 (2014  $35,954.2) notional amount of CPI-linked derivative contracts at a cost of $14.6
(2014  $120.6) and paid additional premiums of $4.8 (2014  nil) to increase the strike prices of certain CPI-linked
derivative contracts (primarily the European CPI-linked derivatives). The company's CPI-linked derivative contracts produced net unrealized gains of $35.7 in 2015
(2014  $17.7).

The
CPI-linked derivative contracts are extremely volatile with the result that their market value and liquidity may vary dramatically either up or down in short periods and their ultimate value will
therefore only be known upon their disposition or settlement. The company's purchase of these derivative contracts is consistent with its capital management framework designed to protect its capital
in the long term. Due to the uncertainty of the market conditions which may exist many years into the future, it is not possible to predict the future impact of this aspect of the company's risk
management program.

Foreign Currency Risk

Foreign currency risk is the risk that the fair value or cash flows of a financial instrument or another asset will fluctuate because of changes in exchange rates and as a
result, could produce an adverse effect on earnings and equity when measured in a company's functional currency. The company is exposed to foreign currency risk through transactions conducted in
currencies other than the U.S. dollar, and also through its investments in associates and net investment in subsidiaries that have a functional currency other than the U.S. dollar. Long
and short foreign exchange forward contracts primarily denominated in the euro, the British pound sterling and the Canadian dollar are used to manage foreign currency exposure on foreign currency
denominated transactions. Foreign currency denominated liabilities may be used to manage the company's foreign currency exposures to net investments in foreign operations having a functional currency
other than the U.S. dollar. The company's exposure to foreign currency risk was not significantly different at December 31, 2015 compared to December 31, 2014 except for the
increased exposure to Indian rupees at December 31, 2015 resulting primarily from Fairfax India's purchase of investments in India during 2015 from the net proceeds of its share offerings. The
foregoing statement recognizes the acquisition of Brit during the second quarter of 2015, whose operating entities primarily have a U.S. dollar functional currency.

The
company's foreign currency risk management objective is to mitigate the impact of foreign currency rate fluctuations on total equity, notwithstanding the company's exposure to the Indian rupee
resulting from its investment in Fairfax India. At the consolidated level the company accumulates, and matches, all significant asset and liability foreign currency exposures, thereby identifying any
net unmatched positions, whether long or short. The company may then take action to cure an unmatched position through the acquisition of a derivative contract or the purchase or sale of investments
denominated in the exposed currency.

A
portion of the company's premiums are written in foreign currencies and a portion of the company's loss reserves are denominated in foreign currencies. Moreover, a portion of the company's cash and
investments are held in currencies other than the U.S. dollar. In general, the company manages foreign currency risk on liabilities by investing in financial instruments and other assets
denominated in the same currency as the liabilities to which they relate. The company also monitors the exposure of invested assets to foreign currency risk and limits these amounts as deemed
necessary. The company may nevertheless, from time to time,
experience gains or losses resulting from fluctuations in the values of these foreign currencies, which may favourably or adversely affect operating results.

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At
December 31, 2015 the company had designated the carrying value of Cdn$1,525.0 principal amount of its Canadian dollar denominated unsecured senior notes with a fair value of $1,240.9
(December 31, 2014  principal amount of Cdn$1,525.0 with a fair value of $1,488.7) as a hedge of its net investment in its Canadian subsidiaries for
financial reporting. In 2015 the company recognized pre-tax gains of $218.8 (2014  $118.7) related to foreign currency movements on the unsecured senior notes in
gains on hedge of net investment in Canadian subsidiaries in the consolidated statement of comprehensive income.

The
pre-tax foreign exchange effect on certain line items in the company's consolidated financial statements for the years ended December 31 follows:

|                                                        |                                    | 2015  |       | 2014  |       
|------------------------------------------------------- | ---------------------------------- | ----- | ----- | ----- | ------
|Net gains (losses) on investments                       |                                    |       |       |       |       
|                                                        | Investing activities               |       | (27.6 | )     | (154.5
|                                                        | Underwriting activities            |       | 82.1  |       | 53.5  
|                                                        | Foreign currency forward contracts |       | 58.0  |       | 204.4 
|                                                        |                                    |       |       |       |       
|Foreign currency net gains included in pre-tax earnings |                                    | 112.5 |       | 103.4 |       
|                                                        |                                    |       |       |       |       

The table below shows the approximate effect of a 5% appreciation of the U.S. dollar against each of the Canadian dollar, euro, British pound sterling, Indian rupee and
all other currencies, respectively, on pre-tax earnings (loss), net earnings (loss), pre-tax other comprehensive income (loss) and other comprehensive income (loss). Certain shortcomings are
inherent in the method of analysis presented, including the assumption that the 5% appreciation of the U.S. dollar occurred with all other variables held constant.

|                                          |  | Canadian dollar |   | Euro  |   | British
pound sterling |   | Indian rupee |   | All other currencies |   | Total |  
|----------------------------------------- |  | --------------- | - | ----- | - | ---------------------- | - | ------------ | - | -------------------- | - | ----- | -
|
|Pre-tax earnings (loss)                   |  | 23.9            |   | 4.1   |   | (25.5                  | ) | (2.0         | ) | 27.5                 |   | 7.6   |  
|Net earnings (loss)                       |  | 16.4            |   | 1.5   |   | (17.7                  | ) | (4.3         | ) | 20.5                 |   | 4.8   |  
|Pre-tax other comprehensive income (loss) |  | (61.3           | ) | (29.6 | ) | 7.6                    |   | 7.2          |   | (36.8                | ) | (43.6 | )
|Other comprehensive income (loss)         |  | (61.2           | ) | (25.9 | ) | 12.7                   |   | 1.3          |   | (35.9                | ) | (35.7 | )

The hypothetical impact in 2015 of the foreign currency movements on pre-tax earnings (loss) in the table above principally related to:



The
hypothetical impact in 2015 of the foreign currency movements on pre-tax other comprehensive income (loss) in the table above principally related to:



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Capital Management

The company's capital management framework is designed to protect, in the following order, its policyholders, its bondholders and its preferred shareholders and then finally to
optimize returns to common shareholders. Effective capital management includes measures designed to maintain capital above minimum regulatory levels, above levels required to satisfy issuer credit
ratings and financial strength ratings requirements, and above internally determined and calculated risk management levels. Total capital at December 31, 2015, comprising total debt,
shareholders' equity attributable to shareholders of Fairfax and non-controlling interests, was
$15,370.4 compared to $12,922.8 at December 31, 2014. The company manages its capital based on the following financial measurements and ratios to provide an indication of the company's ability
to issue and service debt without impacting the operating companies or their portfolio investments:

|                                                                                    |  | December 31, 2015 |   | December 31, 2014 |  
|----------------------------------------------------------------------------------- |  | ----------------- | - | ----------------- | -
|Holding company cash and investments (net of short sale and derivative obligations) |  | 1,275.9           |   | 1,212.7           |  
|                                                                                    |  |                   |   |                   |  
|Long term debt  holding company borrowings                                         |  | 2,599.0           |   | 2,656.5           |  
|Long term debt  insurance and reinsurance companies                                |  | 468.5             |   | 385.9             |  
|Long term debt  non-insurance companies                                            |  | 284.0             |   | 136.6             |  
|                                                                                    |  |                   |   |                   |  
|Total debt                                                                          |  | 3,351.5           |   | 3,179.0           |  
|                                                                                    |  |                   |   |                   |  
|Net debt                                                                            |  | 2,075.6           |   | 1,966.3           |  
|                                                                                    |  |                   |   |                   |  
|Common shareholders' equity                                                         |  | 8,952.5           |   | 8,361.0           |  
|Preferred stock                                                                     |  | 1,334.9           |   | 1,164.7           |  
|Non-controlling interests                                                           |  | 1,731.5           |   | 218.1             |  
|                                                                                    |  |                   |   |                   |  
|Total equity                                                                        |  | 12,018.9          |   | 9,743.8           |  
|                                                                                    |  |                   |   |                   |  
|Net debt/total equity                                                               |  | 17.3              | % | 20.2              | %
|Net debt/net total capital(1)                                                       |  | 14.7              | % | 16.8              | %
|Total debt/total capital(2)                                                         |  | 21.8              | % | 24.6              | %
|Interest coverage(3)                                                                |  | 3.9               | x | 12.3              | x
|Interest and preferred share dividend distribution coverage(4)                      |  | 2.9               | x | 9.0               | x

On
March 3, 2015 the company completed three underwritten public offerings to finance the Brit acquisition ($575.9 from the issuance of 1.15 million subordinate voting shares, $275.7
from the issuance of Cdn$350.0 principal amount of 4.95% unsecured senior notes due March 3, 2025 and $179.0 from the issuance of 9.2 million Series M preferred shares).

During
2014 the company completed a private debt offering of $300.0 principal amount of 4.875% senior notes due August 13, 2024 for net proceeds of $294.2. Those net proceeds were used to fund
the redemptions of $50.0 principal amount of OdysseyRe Series B unsecured senior notes and $25.0 principal amount of American Safety
trust preferred securities in 2014 and to fund the repayment, upon maturity, of the Fairfax ($82.4) and OdysseyRe ($125.0) unsecured senior notes on October 1, 2015 and May 1, 2015
respectively.

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The
company's capital management objectives include maintaining sufficient liquid resources at the holding company to be able to pay interest on debt, dividends to preferred shareholders and all other
holding company obligations. Accordingly, the company monitors its interest and preferred share dividend distribution coverage ratio calculated as described in footnote 4 of the
table above.

In
the United States, the National Association of Insurance Commissioners ("NAIC") has developed a model law and risk-based capital ("RBC") formula designed to help regulators identify property
and casualty insurers that may be inadequately capitalized. Under the NAIC's requirements, an insurer must maintain total capital and surplus above a calculated threshold or face varying levels of
regulatory action. The threshold is based on a formula that attempts to quantify the risk of a company's insurance, investment and other business activities. At December 31, 2015 and 2014
Crum & Forster, Zenith National, OdysseyRe and U.S. runoff subsidiaries had capital and surplus in excess of the regulatory minimum requirement of two times the authorized
control level.

In
Canada, property and casualty companies are regulated by the Office of the Superintendent of Financial Institutions on the basis of a minimum supervisory target of 150% of a minimum capital test
("MCT") formula. At December 31, 2015 and 2014 Northbridge's subsidiaries had a weighted average MCT ratio well in excess of the 150% minimum supervisory target.

The
Lloyd's market is subject to the solvency and capital adequacy requirements of the Prudential Regulatory Authority in the U.K. The capital requirements of Brit are based on the output of an
internal model which reflects the risk profile of the business. At December 31, 2015 Brit's available capital consisted of net tangible assets (total assets less any intangible assets and all
liabilities), subordinated debt and contingent funding in the form of letters of credit and amounted to $1,495.5. This represented a surplus of $329.5 over the management capital requirements (capital
required for business strategy and regulatory requirements), compared to Brit's minimum surplus of $185.0.

In
countries other than the U.S. and Canada where the company operates (the United Kingdom, Barbados, Singapore, Malaysia, Sri Lanka, Hong Kong, Poland, Brazil, Indonesia and other
jurisdictions), the company met or exceeded the applicable regulatory capital requirements at December 31, 2015.

25.  Segmented Information

The company identifies its operating segments by operating company, consistent with its management structure. Certain of the operating segments have been aggregated into
reporting segments, with reporting segments categorized by type of business as described below. The accounting policies of the reporting segments are the same as those described in note 3.
Transfer prices for inter-segment transactions are set at arm's length.
Geographic premiums are determined based on the domicile of the various subsidiaries and where the primary underlying risk of the business resides.

Insurance and Reinsurance

Northbridge  A national commercial property and casualty insurer in Canada providing property and casualty insurance products through its
Northbridge Insurance and Federated subsidiaries.

OdysseyRe  A
U.S.-based reinsurer that provides a full range of property and casualty products on a worldwide basis, and that underwrites specialty insurance,
primarily in the U.S. and in the U.K., both directly and through the Lloyd's market in London.

Crum &
Forster  A national commercial property and casualty insurer in the U.S. writing a broad range of commercial coverages. Its subsidiaries,
Seneca Insurance and First Mercury, provide property and casualty insurance to small businesses and certain specialty coverages.

Zenith
National  An insurer primarily engaged in workers' compensation business in the U.S.

Brit  A
market-leading global Lloyd's of London specialty insurer and reinsurer, acquired on June 5, 2015.

Fairfax
Asia  This reporting segment includes the company's operations that underwrite insurance and reinsurance coverages in Singapore (First Capital), Hong
Kong (Falcon), Malaysia (Pacific Insurance), Indonesia (Fairfax Indonesia), and Sri Lanka (Union Assurance, acquired on January 1, 2015). Fairfax Asia also includes the company's equity
accounted interests in Mumbai-based ICICI Lombard (25.6%), Vietnam-based BIC Insurance (35.0%) and Thailand-based Falcon Thailand (40.5%).

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Insurance
and Reinsurance  Other  This reporting segment is comprised of Group Re, Advent, Polish Re and
Fairfax Brasil. Group Re primarily constitutes the participation of CRC Re and Wentworth (both based in Barbados) in the reinsurance of Fairfax's subsidiaries by quota share or through
participation in those subsidiaries' third party reinsurance programs on the same terms as third party reinsurers. Group Re also writes third party business. Advent is a specialty property
reinsurance and insurance company operating through Syndicate 780 at Lloyd's. Polish Re underwrites reinsurance in Central and Eastern Europe. Fairfax Brasil writes commercial
property and casualty insurance in Brazil.

Runoff

The Runoff reporting segment principally comprises RiverStone (UK), Syndicate 3500, RiverStone Insurance and the U.S. runoff company formed on the merger of TIG
Insurance and International Insurance Company combined with Old Lyme, Clearwater Insurance, Commonwealth Insurance Company of America and American Safety.

Other

The Other reporting segment is comprised of the company's non-insurance operations, including Cara (acquired on April 10, 2015), The Keg, Praktiker, Sporting Life,
William Ashley, Pethealth, Thomas Cook India, Quess (formerly known as IKYA), Sterling Resorts, Fairfax India (since its initial public offering on January 30, 2015) and NCML (acquired on
August 19, 2015 by Fairfax India). Ridley was de-consolidated from the company's financial reporting upon its sale on June 18, 2015.

Corporate and Other

Corporate and Other includes the parent entity (Fairfax Financial Holdings Limited), its subsidiary intermediate holding companies and Hamblin Watsa, an investment management
company.

In
the fourth quarter of 2014, Fairfax centralized the ownership of wholly-owned OdysseyRe under a single intermediate holding company in the U.S. (the "OdysseyRe reorganization"). Prior
to the OdysseyRe reorganization, OdysseyRe was owned by Crum & Forster (8.1%), Runoff (TIG Insurance) (20.1%) and Fairfax (71.8%, through various U.S. intermediate holding
companies). The OdysseyRe reorganization had no effect on Fairfax's consolidated financial reporting.

The
OdysseyRe reorganization was principally comprised of the following transactions: OdysseyRe redeemed the investment of Crum & Forster in it and portions of the investments of Runoff and
Fairfax in it in exchange for cash and unaffiliated marketable securities with fair values of $367.5, $510.1 and $12.8 respectively. The remainder of Runoff's investment in OdysseyRe (fair value of
$380.7) was distributed to Fairfax as a dividend-in-kind. Crum & Forster and Runoff remitted to Fairfax a portion of the redemption proceeds received from OdysseyRe (Crum & Forster paid
a dividend of $150.0 and Runoff made an intercompany advance of $350.0), from which Fairfax made a capital contribution to OdysseyRe of $400.0.

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Pre-tax Income (Loss) by Reporting Segment

Pre-tax income (loss) by reporting segment for the years ended December 31 was as follows:

2015

|                                  |                           | Insurance and Reinsurance |   |          |   |          |   |        |   |         |   |        |   |        |  
|--------------------------------- | ------------------------- | ------------------------- | - | -------- | - | -------- | - | ------ | - | ------- | - | ------ | - | ------ | -
|
|
|Gross premiums written            |                           |                           |   |          |   |          |   |        |   |         |   |        |   |        |  
|External                          |                           | 1,058.2                   |   | 2,381.5  |   | 1,854.3  |   | 797.6  |   | 1,080.7 |   | 617.7  |   | 541.1  |  
|Intercompany                      |                           | 1.4                       |   | 22.5     |   | 41.8     |   |       |   | 6.8     |   | 3.2    |   | 93.6   |  
|                                  |                           |                           |   |          |   |          |   |        |   |         |   |        |   |        |  
|                                  |                           | 1,059.6                   |   | 2,404.0  |   | 1,896.1  |   | 797.6  |   | 1,087.5 |   | 620.9  |   | 634.7  |  
|                                  |                           |                           |   |          |   |          |   |        |   |         |   |        |   |        |  
|Net premiums written              |                           | 887.0                     |   | 2,095.0  |   | 1,659.4  |   | 785.4  |   | 946.4   |   | 275.9  |   | 489.8  |  
|                                  |                           |                           |   |          |   |          |   |        |   |         |   |        |   |        |  
|Net premiums earned               |                           |                           |   |          |   |          |   |        |   |         |   |        |   |        |  
|External                          |                           | 938.0                     |   | 2,212.0  |   | 1,504.0  |   | 768.1  |   | 890.7   |   | 336.9  |   | 396.1  |  
|Intercompany                      |                           | (63.3                     | ) | (7.9     | ) | 18.0     |   | (1.7   | ) | 1.8     |   | (49.9  | ) | 46.6   |  
|                                  |                           |                           |   |          |   |          |   |        |   |         |   |        |   |        |  
|                                  |                           | 874.7                     |   | 2,204.1  |   | 1,522.0  |   | 766.4  |   | 892.5   |   | 287.0  |   | 442.7  |  
|Underwriting expenses             |                           | (803.3                    | ) | (1,867.2 | ) | (1,486.6 | ) | (632.0 | ) | (847.1  | ) | (252.2 | ) | (396.5 | )
|                                  |                           |                           |   |          |   |          |   |        |   |         |   |        |   |        |  
|Underwriting profit (loss)        |                           | 71.4                      |   | 336.9    |   | 35.4     |   | 134.4  |   | 45.4    |   | 34.8   |   | 46.2   |  
|                                  |                           |                           |   |          |   |          |   |        |   |         |   |        |   |        |  
|Interest income                   |                           | 31.5                      |   | 161.5    |   | 52.6     |   | 27.8   |   | 23.4    |   | 26.2   |   | 28.4   |  
|Dividends                         |                           | 13.2                      |   | 21.0     |   | 7.0      |   | 3.4    |   | 13.2    |   | 4.9    |   | 2.4    |  
|Investment expenses               |                           | (13.4                     | ) | (22.0    | ) | (12.3    | ) | (7.4   | ) | (8.7    | ) | (2.8   | ) | (11.0  | )
|                                  |                           |                           |   |          |   |          |   |        |   |         |   |        |   |        |  
|Interest and dividends            |                           | 31.3                      |   | 160.5    |   | 47.3     |   | 23.8   |   | 27.9    |   | 28.3   |   | 19.8   |  
|                                  |                           |                           |   |          |   |          |   |        |   |         |   |        |   |        |  
|Share of profit of associates     |                           | 11.0                      |   | 61.3     |   | 19.5     |   | 25.1   |   | 1.6     |   | 12.7   |   | 6.9    |  
|                                  |                           |                           |   |          |   |          |   |        |   |         |   |        |   |        |  
|Other                             |                           |                           |   |          |   |          |   |        |   |         |   |        |   |        |  
|                                  | Revenue                   |                           |  |          |  |          |  |        |  |         |  |        |  |        | 
|                                  | Expenses                  |                           |  |          |  |          |  |        |  |         |  |        |  |        | 
|                                  |                           |                           |   |          |   |          |   |        |   |         |   |        |   |        |  
|                                  |                           |                          |   |         |   |         |   |       |   |        |   |       |   |       |  
|                                  |                           |                           |   |          |   |          |   |        |   |         |   |        |   |        |  
|Operating income (loss)           |                           | 113.7                     |   | 558.7    |   | 102.2    |   | 183.3  |   | 74.9    |   | 75.8   |   | 72.9   |  
|Net gains (losses) on investments |                           | 131.9                     |   | (267.2   | ) | (105.6   | ) | (58.8  | ) | (75.3   | ) | (24.5  | ) | (68.4  | )
|Interest expense                  |                           |                          |   | (5.5     | ) | (1.4     | ) | (3.3   | ) | (9.8    | ) |       |   | (4.1   | )
|Corporate overhead                |                           | (11.0                     | ) | (27.1    | ) | (19.5    | ) | (9.4   | ) | (16.4   | ) | (0.1   | ) | 0.4    |  
|                                  |                           |                           |   |          |   |          |   |        |   |         |   |        |   |        |  
|Pre-tax income (loss)             |                           | 234.6                     |   | 258.9    |   | (24.3    | ) | 111.8  |   | (26.6   | ) | 51.2   |   | 0.8    |  
|Income taxes                      |                           |                           |   |          |   |          |   |        |   |         |   |        |   |        |  
|                                  |                           |                           |   |          |   |          |   |        |   |         |   |        |   |        |  
|Net earnings                      |                           |                           |   |          |   |          |   |        |   |         |   |        |   |        |  
|                                  |                           |                           |   |          |   |          |   |        |   |         |   |        |   |        |  
|Attributable to:                  |                           |                           |   |          |   |          |   |        |   |         |   |        |   |        |  
|                                  | Shareholders of Fairfax   |                           |   |          |   |          |   |        |   |         |   |        |   |        |  
|                                  | Non-controlling interests |                           |   |          |   |          |   |        |   |         |   |        |   |        |  
|                                  |                           |                           |   |          |   |          |   |        |   |         |   |        |   |        |  
|                                  |                           |                           |   |          |   |          |   |        |   |         |   |        |   |        |  
|                                  |                           |                           |   |          |   |          |   |        |   |         |   |        |   |        |  

103

---



2014

|                                     |                           | Insurance and Reinsurance |   |          |   |          |   |        |   |        |   |        |   |          |  
|------------------------------------ | ------------------------- | ------------------------- | - | -------- | - | -------- | - | ------ | - | ------ | - | ------ | - | -------- | -
|
|
|Gross premiums written               |                           |                           |   |          |   |          |   |        |   |        |   |        |   |          |  
|External                             |                           | 1,107.3                   |   | 2,704.1  |   | 1,696.1  |   | 733.0  |   | 567.9  |   | 487.6  |   | 7,296.0  |  
|Intercompany                         |                           | 2.0                       |   | 35.4     |   | 3.4      |   |       |   | (4.4   | ) | 65.7   |   | 102.1    |  
|                                     |                           |                           |   |          |   |          |   |        |   |        |   |        |   |          |  
|                                     |                           | 1,109.3                   |   | 2,739.5  |   | 1,699.5  |   | 733.0  |   | 563.5  |   | 553.3  |   | 7,398.1  |  
|                                     |                           |                           |   |          |   |          |   |        |   |        |   |        |   |          |  
|Net premiums written                 |                           | 967.1                     |   | 2,393.8  |   | 1,346.3  |   | 720.9  |   | 280.1  |   | 413.9  |   | 6,122.1  |  
|                                     |                           |                           |   |          |   |          |   |        |   |        |   |        |   |          |  
|Net premiums earned                  |                           |                           |   |          |   |          |   |        |   |        |   |        |   |          |  
|External                             |                           | 951.3                     |   | 2,347.2  |   | 1,316.7  |   | 715.5  |   | 306.7  |   | 341.2  |   | 5,978.6  |  
|Intercompany                         |                           | (9.0                      | ) | 9.4      |   | (10.2    | ) | (1.2   | ) | (34.5  | ) | 51.5   |   | 6.0      |  
|                                     |                           |                           |   |          |   |          |   |        |   |        |   |        |   |          |  
|                                     |                           | 942.3                     |   | 2,356.6  |   | 1,306.5  |   | 714.3  |   | 272.2  |   | 392.7  |   | 5,984.6  |  
|Underwriting expenses                |                           | (899.6                    | ) | (1,996.2 | ) | (1,304.0 | ) | (624.8 | ) | (236.0 | ) | (372.0 | ) | (5,432.6 | )
|                                     |                           |                           |   |          |   |          |   |        |   |        |   |        |   |          |  
|Underwriting profit (loss)           |                           | 42.7                      |   | 360.4    |   | 2.5      |   | 89.5   |   | 36.2   |   | 20.7   |   | 552.0    |  
|                                     |                           |                           |   |          |   |          |   |        |   |        |   |        |   |          |  
|Interest income                      |                           | 22.5                      |   | 161.5    |   | 41.0     |   | 26.6   |   | 20.9   |   | 27.1   |   | 299.6    |  
|Dividends                            |                           | 17.4                      |   | 26.8     |   | 5.6      |   | 2.3    |   | 5.0    |   | 3.6    |   | 60.7     |  
|Investment expenses                  |                           | (17.7                     | ) | (32.7    | ) | (13.7    | ) | (7.6   | ) | (3.6   | ) | (12.0  | ) | (87.3    | )
|                                     |                           |                           |   |          |   |          |   |        |   |        |   |        |   |          |  
|Interest and dividends               |                           | 22.2                      |   | 155.6    |   | 32.9     |   | 21.3   |   | 22.3   |   | 18.7   |   | 273.0    |  
|                                     |                           |                           |   |          |   |          |   |        |   |        |   |        |   |          |  
|Share of profit (loss) of associates |                           | 10.3                      |   | 26.6     |   | 6.2      |   | 0.8    |   | 38.2   |   | 8.3    |   | 90.4     |  
|                                     |                           |                           |   |          |   |          |   |        |   |        |   |        |   |          |  
|Other                                |                           |                           |   |          |   |          |   |        |   |        |   |        |   |          |  
|                                     | Revenue                   |                           |  |          |  |          |  |        |  |        |  |        |  |          | 
|                                     | Expenses                  |                           |  |          |  |          |  |        |  |        |  |        |  |          | 
|                                     |                           |                           |   |          |   |          |   |        |   |        |   |        |   |          |  
|                                     |                           |                          |   |         |   |         |   |       |   |       |   |       |   |         |  
|                                     |                           |                           |   |          |   |          |   |        |   |        |   |        |   |          |  
|Operating income (loss)              |                           | 75.2                      |   | 542.6    |   | 41.6     |   | 111.6  |   | 96.7   |   | 47.7   |   | 915.4    |  
|Net gains (losses) on investments(1) |                           | 213.1                     |   | 579.3    |   | 632.1    |   | 106.8  |   | (19.3  | ) | 135.8  |   | 1,647.8  |  
|Loss on repurchase of long term debt |                           |                          |   |         |   |         |   |       |   |       |   |       |   |         |  
|Interest expense                     |                           |                          |   | (12.7    | ) | (1.4     | ) | (3.3   | ) |       |   | (4.2   | ) | (21.6    | )
|Corporate overhead                   |                           | (12.2                     | ) | (27.5    | ) | (31.6    | ) | (8.8   | ) | (0.1   | ) | (0.4   | ) | (80.6    | )
|                                     |                           |                           |   |          |   |          |   |        |   |        |   |        |   |          |  
|Pre-tax income (loss)                |                           | 276.1                     |   | 1,081.7  |   | 640.7    |   | 206.3  |   | 77.3   |   | 178.9  |   | 2,461.0  |  
|Income taxes                         |                           |                           |   |          |   |          |   |        |   |        |   |        |   |          |  
|                                     |                           |                           |   |          |   |          |   |        |   |        |   |        |   |          |  
|Net earnings                         |                           |                           |   |          |   |          |   |        |   |        |   |        |   |          |  
|                                     |                           |                           |   |          |   |          |   |        |   |        |   |        |   |          |  
|Attributable to:                     |                           |                           |   |          |   |          |   |        |   |        |   |        |   |          |  
|                                     | Shareholders of Fairfax   |                           |   |          |   |          |   |        |   |        |   |        |   |          |  
|                                     | Non-controlling interests |                           |   |          |   |          |   |        |   |        |   |        |   |          |  
|                                     |                           |                           |   |          |   |          |   |        |   |        |   |        |   |          |  
|                                     |                           |                           |   |          |   |          |   |        |   |        |   |        |   |          |  
|                                     |                           |                           |   |          |   |          |   |        |   |        |   |        |   |          |  

104

---



Investments in Associates, Additions to Goodwill, Segment Assets and Segment Liabilities

Investments in associates, additions to goodwill, segment assets and segment liabilities by reporting segment as at and for the years ended December 31 were
as follows:

|                                                     | Investments in
associates |       | Additions to
goodwill |       | Segment assets |       | Segment
liabilities
|---------------------------------------------------- | ------------------------- | ----- | --------------------- | ----- | -------------- | ----- | -------------------
|
|Insurance and Reinsurance                            |                           |       |                       |       |                |       |                    
|                                                     | Northbridge               | 193.2 |                       | 164.7 |                |      |                    
|                                                     | OdysseyRe                 | 307.2 |                       | 519.8 |                | 10.5  |                    
|                                                     | Crum & Forster            | 163.9 |                       | 95.7  |                | 31.8  |                    
|                                                     | Zenith National           | 105.4 |                       | 60.5  |                |      |                    
|                                                     | Brit(1)                   | 96.3  |                       |      |                | 154.3 |                    
|                                                     | Fairfax Asia              | 213.9 |                       | 163.6 |                | 13.7  |                    
|                                                     | Other                     | 89.2  |                       | 107.4 |                |      |                    
|                                                     |                           |       |                       |       |                |       |                    
|Operating companies                                  | 1,169.1                   |       | 1,111.7               |       | 210.3          |       | 68.5               
|Runoff                                               | 310.0                     |       | 275.5                 |       |               |       |                   
|Other                                                | 204.0                     |       | 17.9                  |       | 255.3          |       | 152.4              
|Corporate and Other and eliminations and adjustments | 249.8                     |       | 212.6                 |       |               |       |                   
|                                                     |                           |       |                       |       |                |       |                    
|Consolidated                                         | 1,932.9                   |       | 1,617.7               |       | 465.6          |       | 220.9              
|                                                     |                           |       |                       |       |                |       |                    

Product Line

Net premiums earned by product line for the years ended December 31 was as follows:

|                                                |                 | Property |         | Casualty |         | Specialty |         | Total  
|----------------------------------------------- | --------------- | -------- | ------- | -------- | ------- | --------- | ------- | -------
|
|Net premiums earned  Insurance and Reinsurance |                 |          |         |          |         |           |         |        
|                                                | Northbridge     |          | 376.4   |          | 405.0   |           | 412.9   |        
|                                                | OdysseyRe       |          | 1,232.6 |          | 1,317.9 |           | 759.3   |        
|                                                | Crum & Forster  |          | 213.2   |          | 184.6   |           | 1,222.5 |        
|                                                | Zenith National |          | 24.9    |          | 20.3    |           | 741.5   |        
|                                                | Brit(1)         |          | 253.9   |          |        |           | 429.6   |        
|                                                | Fairfax Asia    |          | 46.4    |          | 25.6    |           | 179.0   |        
|                                                | Other           |          | 198.0   |          | 171.5   |           | 131.3   |        
|                                                |                 |          |         |          |         |           |         |        
|Operating companies                             |                 | 2,345.4  |         | 2,124.9  |         | 3,876.1   |         | 3,308.6
|Runoff                                          |                 | 0.4      |         | 2.6      |         | 381.2     |         | 224.5  
|                                                |                 |          |         |          |         |           |         |        
|Consolidated net premiums earned                |                 | 2,345.8  |         | 2,127.5  |         | 4,257.3   |         | 3,533.1
|Interest and dividends                          |                 |          |         |          |         |           |         |        
|Share of profit of associates                   |                 |          |         |          |         |           |         |        
|Net gains (losses) on investments               |                 |          |         |          |         |           |         |        
|Other                                           |                 |          |         |          |         |           |         |        
|                                                |                 |          |         |          |         |           |         |        
|Consolidated revenue                            |                 |          |         |          |         |           |         |        
|                                                |                 |          |         |          |         |           |         |        
|Allocation of net premiums earned               |                 | 31.8%    |         | 34.2%    |         | 57.8%     |         | 56.9%  

105

---



Geographic Region

Net premiums earned by geographic region for the years ended December 31 was as follows:

|                                                |                 | Canada  |       | United States |       | Asia(1) |         | International(2) |         | Total
|----------------------------------------------- | --------------- | ------- | ----- | ------------- | ----- | ------- | ------- | ---------------- | ------- | -----
|
|Net premiums earned  Insurance and Reinsurance |                 |         |       |               |       |         |         |                  |         |      
|                                                | Northbridge     |         | 866.2 |               | 933.0 |         | 8.5     |                  | 9.2     |      
|                                                | OdysseyRe       |         | 91.3  |               | 96.3  |         | 1,311.6 |                  | 1,346.5 |      
|                                                | Crum & Forster  |         |      |               |      |         | 1,521.8 |                  | 1,306.3 |      
|                                                | Zenith National |         |      |               |      |         | 766.4   |                  | 714.3   |      
|                                                | Brit(3)         |         | 43.8  |               |      |         | 595.6   |                  |        |      
|                                                | Fairfax Asia    |         | 0.1   |               | 0.1   |         | 0.4     |                  | 0.3     |      
|                                                | Other           |         | 4.1   |               | 8.2   |         | 118.5   |                  | 89.4    |      
|                                                |                 |         |       |               |       |         |         |                  |         |      
|Operating companies                             |                 | 1,005.5 |       | 1,037.6       |       | 4,322.8 |         | 3,466.0          |         | 681.4
|Runoff                                          |                 | 56.5    |       |              |       | 318.5   |         | 150.1            |         |     
|                                                |                 |         |       |               |       |         |         |                  |         |      
|Consolidated net premiums earned                |                 | 1,062.0 |       | 1,037.6       |       | 4,641.3 |         | 3,616.1          |         | 681.4
|Interest and dividends                          |                 |         |       |               |       |         |         |                  |         |      
|Share of profit of associates                   |                 |         |       |               |       |         |         |                  |         |      
|Net gains (losses) on investments               |                 |         |       |               |       |         |         |                  |         |      
|Other                                           |                 |         |       |               |       |         |         |                  |         |      
|                                                |                 |         |       |               |       |         |         |                  |         |      
|Consolidated revenue                            |                 |         |       |               |       |         |         |                  |         |      
|                                                |                 |         |       |               |       |         |         |                  |         |      
|Allocation of net premiums earned               |                 | 14.4%   |       | 16.7%         |       | 63.0%   |         | 58.2%            |         | 9.2% 

26.  Expenses

Losses on claims, net, operating expenses and other expenses for the years ended December 31 were comprised as follows:

|                                                  |  | 2015    |  | 2014   
|------------------------------------------------- |  | ------- |  | -------
|Losses and loss adjustment expenses               |  | 4,182.3 |  | 3,584.0
|Wages and salaries                                |  | 1,082.3 |  | 904.3  
|Other reporting segment cost of sales             |  | 1,009.6 |  | 978.3  
|Employee benefits                                 |  | 259.3   |  | 204.1  
|Depreciation, amortization and impairment charges |  | 133.3   |  | 94.2   
|Operating lease costs                             |  | 132.2   |  | 96.9   
|Audit, legal and tax professional fees            |  | 112.0   |  | 99.6   
|Information technology costs                      |  | 97.4    |  | 79.8   
|Premium taxes                                     |  | 93.6    |  | 93.2   
|Share-based payments to directors and employees   |  | 34.8    |  | 36.8   
|Other reporting segment marketing costs           |  | 29.5    |  | 20.8   
|Restructuring costs                               |  | 3.1     |  | 22.1   
|Loss on repurchase of long term debt (note 15)    |  |        |  | 3.6    
|Administrative expense and other                  |  | 390.2   |  | 296.1  
|                                                  |  |         |  |        
|                                                  |  | 7,559.6 |  | 6,513.8
|                                                  |  |         |  |        

106

---



27.  Supplementary Cash Flow Information

Cash and cash equivalents were included on the consolidated balance sheets as follows:

|                                                                                |                                                    | December 31,
2015                       |         | December 31,
2014
|------------------------------------------------------------------------------- | -------------------------------------------------- | --------------------------------------- | ------- | -----------------
|Holding company cash and investments:                                           |                                                    |                                         |         |                  
|                                                                                | Cash and balances with banks                       |                                         | 151.5   |                  
|                                                                                | Treasury bills and other eligible bills            |                                         | 70.9    |                  
|                                                                                |                                                    |                                         |         |                  
|                                                                                |                                                    | 222.4                                   |         | 317.7            
|                                                                                |                                                    |                                         |         |                  
|Subsidiary cash and short term investments:                                     |                                                    |                                         |         |                  
|                                                                                | Cash and balances with banks                       |                                         | 1,628.4 |                  
|                                                                                | Treasury bills and other eligible bills            |                                         | 1,599.3 |                  
|                                                                                |                                                    |                                         |         |                  
|                                                                                |                                                    | 3,227.7                                 |         | 3,034.5          
|                                                                                |                                                    |                                         |         |                  
|Subsidiary assets pledged for short sale and derivative obligations:            |                                                    |                                         |         |                  
|                                                                                | Cash and balances with banks                       |                                         | 7.7     |                  
|                                                                                |                                                    |                                         |         |                  
|Fairfax India: cash and balances with banks                                     |                                                    | 22.0                                    |         |                 
|                                                                                |                                                    |                                         |         |                  
|Cash and cash equivalents included on the consolidated balance sheets           |                                                    | 3,479.8                                 |         | 3,352.2          
|                                                                                |                                                    |                                         |         |                  
|Less: Cash and cash equivalents  restricted(1)                                 |                                                    |                                         |         |                  
|                                                                                | Subsidiary cash and cash equivalents  restricted: |                                         |         |                  
|                                                                                |                                                    | Cash and balances with banks            |         | 152.2            
|                                                                                |                                                    | Treasury bills and other eligible bills |         | 202.0            
|                                                                                |                                                    |                                         |         |                  
|                                                                                |                                                    | 354.2                                   |         | 333.5            
|                                                                                |                                                    |                                         |         |                  
|Cash and cash equivalents included on the consolidated statements of cash flows |                                                    | 3,125.6                                 |         | 3,018.7          
|                                                                                |                                                    |                                         |         |                  

107

---



Details
of certain cash flows included in the consolidated statements of cash flows for the years ended December 31 were as follows:

|    |                                                         |  | 2015   |   | 2014   |  
|--- | ------------------------------------------------------- |  | ------ | - | ------ | -
|(a) | Net (purchases) sales of securities classified as FVTPL |  |        |   |        |  
|    | Short term investments                                  |  | (805.7 | ) | 918.9  |  
|    | Bonds                                                   |  | (455.4 | ) | (620.9 | )
|    | Preferred stocks                                        |  | 39.8   |   | 60.3   |  
|    | Common stocks                                           |  | 252.5  |   | (527.5 | )
|    | Derivatives and short sales                             |  | 484.5  |   | (420.8 | )
|    |                                                         |  |        |   |        |  
|    |                                                         |  | (484.3 | ) | (590.0 | )
|    |                                                         |  |        |   |        |  
|(b) | Changes in operating assets and liabilities             |  |        |   |        |  
|    | Net decrease in restricted cash and cash equivalents    |  | 79.4   |   | 4.7    |  
|    | Provision for losses and loss adjustment expenses       |  | (291.5 | ) | (926.8 | )
|    | Provision for unearned premiums                         |  | (221.8 | ) | 102.1  |  
|    | Insurance contract receivables                          |  | 24.7   |   | 21.7   |  
|    | Recoverable from reinsurers                             |  | 475.2  |   | 860.7  |  
|    | Other receivables                                       |  | (90.3  | ) | (33.2  | )
|    | Funds withheld payable to reinsurers                    |  | (150.7 | ) | 5.0    |  
|    | Accounts payable and accrued liabilities                |  | 270.0  |   | 23.3   |  
|    | Income taxes payable                                    |  | (33.2  | ) | 27.0   |  
|    | Other                                                   |  | (118.6 | ) | (13.7  | )
|    |                                                         |  |        |   |        |  
|    |                                                         |  | (56.8  | ) | 70.8   |  
|    |                                                         |  |        |   |        |  
|(c) | Net interest and dividends received                     |  |        |   |        |  
|    | Interest and dividends received                         |  | 661.0  |   | 612.3  |  
|    | Interest paid                                           |  | (211.4 | ) | (192.3 | )
|    |                                                         |  |        |   |        |  
|    |                                                         |  | 449.6  |   | 420.0  |  
|    |                                                         |  |        |   |        |  
|(d) | Net income taxes paid                                   |  | (259.0 | ) | (52.3  | )
|    |                                                         |  |        |   |        |  

28.  Related Party Transactions

Compensation for the company's key management team for the years ended December 31 was as follows:

|                                                |  | 2015 |  | 2014
|----------------------------------------------- |  | ---- |  | ----
|Salaries and other short-term employee benefits |  | 8.3  |  | 10.7
|Share-based payments                            |  | 2.1  |  | 1.4 
|                                                |  |      |  |     
|                                                |  | 10.4 |  | 12.1
|                                                |  |      |  |     

Compensation for the company's Board of Directors for the years ended December 31 was as follows:

|                     |  | 2015 |  | 2014
|-------------------- |  | ---- |  | ----
|Retainers and fees   |  | 0.6  |  | 0.8 
|Share-based payments |  | 0.2  |  | 0.1 
|                     |  |      |  |     
|                     |  | 0.8  |  | 0.9 
|                     |  |      |  |     

The compensation presented above is determined in accordance with the company's IFRS accounting policies and may differ from the compensation presented in the company's
Management Proxy Circular.

108

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29.  Subsidiaries

During 2015 the company acquired controlling interests in Brit, Union Assurance, Cara and (through Fairfax India) NCML, incorporated Fairfax India and divested its ownership of
Ridley Inc. During 2014 the company acquired controlling interests in Pethealth, Praktiker, Fairfax Indonesia, The Keg and (through Thomas Cook India) Sterling Resorts. The foregoing
transactions are described in note 23. The company has a number of wholly-owned subsidiaries not presented in the tables below, that are intermediate holding companies of investments in
subsidiaries and intercompany balances, all of which are eliminated on consolidation.

|December 31, 2015                                           |                                                                    | Domicile       |               | Fairfax's ownership(100% other than
as shown below)
|----------------------------------------------------------- | ------------------------------------------------------------------ | -------------- | ------------- | ---------------------------------------------------
|Insurance and Reinsurance                                   |                                                                    |                |               |                                                    
|Northbridge Financial Corporation (Northbridge)             |                                                                    | Canada         |               |                                                    
|Odyssey Re Holdings Corp. (OdysseyRe)                       |                                                                    | United States  |               |                                                    
|                                                            | Hudson Insurance Company (Hudson Insurance)                        |                | United States |                                                    
|Crum & Forster Holdings Corp. (Crum & Forster)              |                                                                    | United States  |               |                                                    
|Zenith National Insurance Corp. (Zenith National)           |                                                                    | United States  |               |                                                    
|Brit Limited (Brit)                                         |                                                                    | United Kingdom |               | 70.1%                                              
|Advent Capital (Holdings) Ltd. (Advent)                     |                                                                    | United Kingdom |               |                                                    
|Polskie Towarzystwo Reasekuracji Spólka Akcyjna (Polish Re) |                                                                    | Poland         |               |                                                    
|Colonnade Insurance S.A. (Colonnade)                        |                                                                    | Luxembourg     |               |                                                    
|Fairfax Brasil Seguros Corporativos S.A. (Fairfax Brasil)   |                                                                    | Brazil         |               |                                                    
|Group Re,which underwrites business in:                     |                                                                    |                |               |                                                    
|                                                            | CRC Reinsurance Limited (CRC Re)                                   |                | Barbados      |                                                    
|                                                            | Wentworth Insurance Company Ltd. (Wentworth)                       |                | Barbados      |                                                    
|Fairfax Asia,which consists of:                             |                                                                    |                |               |                                                    
|                                                            | Falcon Insurance (Hong Kong) Company Ltd. (Falcon)                 |                | Hong Kong     |                                                    
|                                                            | First Capital Insurance Limited (First Capital)                    |                | Singapore     |                                                    
|                                                            | The Pacific Insurance Berhad (Pacific Insurance)                   |                | Malaysia      |                                                    
|                                                            | PT Fairfax Insurance Indonesia (Fairfax Indonesia)                 |                | Indonesia     |                                                    
|                                                            | Union Assurance General Limited (Union Assurance)                  |                | Sri Lanka     |                                                    
|                                                            | ICICI Lombard General Insurance Company Limited (ICICI Lombard)(1) |                | India         |                                                    
|Runoff                                                      |                                                                    |                |               |                                                    
|TIG Insurance Company (TIG Insurance)                       |                                                                    | United States  |               |                                                    
|American Safety Holdings Corp. (American Safety)            |                                                                    | United States  |               |                                                    
|Clearwater Insurance Company (Clearwater)                   |                                                                    | United States  |               |                                                    
|RiverStone Insurance (UK) Limited (RiverStone (UK))         |                                                                    | United Kingdom |               |                                                    
|RiverStone Insurance Limited (RiverStone Insurance)         |                                                                    | United Kingdom |               |                                                    
|RiverStone Managing Agency Limited                          |                                                                    | United Kingdom |               |                                                    

109

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|December 31, 2015                                                                           |  | Domicile |  | Fairfax's
ownership |     | Primary business                                                   
|------------------------------------------------------------------------------------------- |  | -------- |  | ------------------- | --- | -------------------------------------------------------------------
|Other reporting segment                                                                     |  |          |  |                     |     |                                                                    
|Hamblin Watsa Investment Counsel Ltd. (Hamblin Watsa)                                       |  | Canada   |  | 100.0%              |     | Investment management                                              
|Pethealth Inc. (Pethealth)                                                                  |  | Canada   |  | 100.0%              |     | Pet medical insurance and database services                        
|Restaurants and Retail                                                                      |  |          |  |                     |     |                                                                    
|Cara Operations Limited (Cara)                                                              |  | Canada   |  | 40.5%               | (1) | Franchisor, owner and operator of restaurants                      
|Keg Restaurants Ltd. (The Keg)                                                              |  | Canada   |  | 51.0%               |     | Owner and operator of premium dining restaurants                   
|Praktiker Hellas Commercial Societe Anonyme (Praktiker)                                     |  | Greece   |  | 100.0%              |     | Retailer of home improvement goods                                 
|Sporting Life Inc. (Sporting Life)                                                          |  | Canada   |  | 75.0%               |     | Retailer of sporting goods and sports apparel                      
|William Ashley China Corporation (William Ashley)                                           |  | Canada   |  | 100.0%              |     | Retailer of tableware and gifts                                    
|India focused                                                                               |  |          |  |                     |     |                                                                    
|Fairfax India Holdings Limited (Fairfax India) which owns:                                  |  | Canada   |  | 28.1%               | (1) | Invests in public and private Indian businesses                    
|88.1% of National Collateral Management Services Limited (NCML)                             |  | India    |  | 24.8%               |     | Provider of agricultural commodities storage                       
|Thomas Cook (India) Limited (Thomas Cook India) which owns:                                 |  | India    |  | 67.8%               |     | Provider of integrated travel and travel-related financial services
|69.6% of Quess Corp Limited (Quess) (formerly IKYA Human Capital Solutions Private Limited) |  | India    |  | 47.2%               |     | Provider of specialized human resources services                   
|100.0% of Sterling Holiday Resorts (India) Limited (Sterling Resorts)                       |  | India    |  | 67.8%               |     | Owner and operator of holiday resorts                              

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