Mr. Prem Watsa reports

FINANCIAL RESULTS FOR THE SECOND QUARTER

Fairfax Financial Holdings Ltd. had net earnings of $734.4-million ($28.80 net earnings per diluted share after payment of preferred share dividends) in the second quarter of 2023 compared with a net loss of $32-million ($1.83 net loss per diluted share after payment of preferred share dividends) in the second quarter of 2022. Book value per basic share at June 30, 2023 was $834.28 compared to $762.28 at December 31, 2022 (an increase of 10.8% adjusted for the $10 per common share dividend paid in the first quarter of 2023).

(Note: All dollar amounts in this news release are expressed in U.S. dollars except as otherwise noted. The financial results are derived from unaudited consolidated financial statements prepared using the recognition and measurement requirements of International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS"). This news release contains certain non-GAAP and other financial measures, including underwriting profit (loss), adjusted operating income (loss), combined ratio, combined ratio points, book value per basic share, total debt to total capital ratio excluding non-insurance companies and excess (deficiency) of fair value over carrying value, that do not have a prescribed meaning under IFRS and may not be comparable to similar financial measures presented by other issuers. See "Glossary of non-GAAP and other financial measures" in the company's Interim Report for the three and six months ended June 30, 2023.)

"During the second quarter we continued to build on our great start to 2023, with our property and casualty insurance and reinsurance operations producing adjusted operating income of $913.5 million ($1,526.4 million including discounting, net of risk adjustment on claims of $612.9 million), reflecting increased interest and dividends, strong insurance underwriting results and stable share of profit of associates. Our underwriting performance in the second quarter of 2023 continued to produce favourable results, with growth in gross premiums written of 10.0% and net premiums written of 8.4%, primarily reflecting new business and continued incremental rate increases in certain lines of business. We achieved underwriting profit of $337.5 million on an undiscounted basis and a consolidated combined ratio of 93.9% for the quarter.

"The new reporting requirement IFRS 17 has not changed the way management evaluates the business and we continue to be focused on underwriting profit on an undiscounted basis with strong reserving. The effects of discounting and risk adjustment in the quarter resulted in an increase to pre-tax earnings of $221.2 million.

"Net losses on investments of $342.1 million in the quarter was principally comprised of mark to market losses on bonds of $405.3 million due to continued rising interest rates, which was partially offset by mark to market gains on common stocks of $163.7 million.

"We continue to focus on being soundly financed and ended the quarter with approximately $1.1 billion in cash and investments in the holding company and our credit facility undrawn," said Prem Watsa, Chairman and Chief Executive Officer.

The table below presents the sources of the company's net earnings in a format which the company has consistently used as it believes it assists in understanding Fairfax:

Highlights for the second quarter of 2023 (with comparisons to the second quarter of 2022 except as otherwise noted, and excluding the effects of IFRS 17 when discussing the combined ratio and adjusted operating income) include the following:

• Net premiums written by the property and casualty insurance and reinsurance operations increased 8.4% to $6,134.4 million from $5,658.6 million, while gross premiums written increased by 10.0%.
• The consolidated combined ratio of the property and casualty insurance and reinsurance operations was 93.9%, producing an underwriting profit of $337.5 million, compared to a combined ratio of 94.1% and an underwriting profit of $301.7 million in 2022, driven by continued growth in business volumes (net insurance revenue increased by 6.2%), prudent expense management and decreased catastrophe losses of $134.8 million or 2.4 combined ratio points in the quarter.
• Adjusted operating income of the property and casualty insurance and reinsurance operations increased by 41.6% to $913.5 million from $645.3 million, principally due to increased interest and dividend income and strong underwriting profit.
• Net finance expense from insurance contracts and reinsurance contract assets held of $424.0 million in the second quarter of 2023 predominantly consisted of interest accretion resulting from the unwinding of the effects from discounting associated with net claim payments made during the period, compared to net finance income from insurance contracts and reinsurance contract assets held of $730.1 million in the second quarter of 2022 which reflected the benefit of changes in discount rates, that was only partially offset by the interest accretion.
• Consolidated interest and dividends increased significantly in the quarter from $203.1 million to $464.6 million. At June 30, 2023 the company's insurance and reinsurance companies held portfolio investments of $55.2 billion (excluding Fairfax India's portfolio of $2.0 billion), of which approximately $6.5 billion was in cash and short term investments representing approximately 11.7% of those portfolio investments. During the first six months of 2023 the company used cash and net proceeds from sales and maturities of U.S. treasury and other government short-term investments and short dated U.S. treasuries to purchase $6.4 billion of U.S. treasuries with maturities between 3 to 5 years and net purchases of first mortgage loans of $2.0 billion with maturities less than 3 years, which will benefit interest and dividend income in the remainder of 2023.
• Consolidated share of profit of associates of $269.2 million principally reflected share of profit of $130.5 million from Eurobank, $46.2 million from EXCO Resources Inc. and $24.1 million from Gulf Insurance. Share of profit of Poseidon (formerly Atlas) decreased to $6.3 million from $72.0 million due to higher interest expense, interest rate hedging losses (compared to hedging gains in the prior year) that fluctuate quarterly, and transaction costs related to the first quarter privatization of Poseidon. The company expects Poseidon's earnings will normalize throughout the year.
• Net gains on equity exposures of $163.7 million was primarily comprised of unrealized gains on common stocks, convertible bonds and preferred stocks and net gains on equity derivatives. At June 30, 2023 the company continued to hold equity total return swaps on 1,964,155 Fairfax subordinate voting shares with an original notional amount of $732.5 million (Cdn$935.0 million) or approximately $372.96 (Cdn$476.03) per share, on which the company recorded $144.9 million of net gains in the second quarter of 2023.
• Net losses on bonds of $405.3 million included net losses of $318.9 million on U.S. treasuries and net losses of $64.7 million on U.S. treasury bond forward contracts.
• During the second quarter the company, in partnership with Kennedy Wilson, acquired $1.8 billion of first mortgage loans from Pacific Western Bank; the average annual return on the capital deployed with the loans is expected to exceed 10%. The company's fixed income portfolio is conservatively positioned with effectively 74% of the fixed income portfolio invested in government bonds and only 15% in corporate bonds, primarily short-dated.
• On May 10, 2023 Brit completed the sale of Ambridge Group, its Managing General Underwriter operations, to Amynta Group and recorded a pre-tax gain of $259.1 million, which is presented as gain on sale of insurance subsidiary in the consolidated statements of earnings. Brit subsequently paid a dividend of $275.0 million to the holding company.
• Excluding the impact of Fairfax India's performance fees to Fairfax (an accrual of $35.6 million in the second quarter of 2023 and a reversal of $47.0 million in the second quarter of 2022), which are offset upon consolidation, and the impact of a non-cash impairment charge recorded in the second quarter of 2022 of $109.2 million related to the company's investment in Farmers Edge, operating income of the non-insurance companies was stable at $72.5 million compared to $69.7 million in 2022, principally reflecting higher business volume at Thomas Cook India and higher share of profit of associates at Fairfax India.
• Interest expense of $130.4 million (inclusive of $12.6 million on leases) was principally comprised of $82.6 million incurred on borrowings by the holding company and the insurance and reinsurance companies and $35.2 million incurred on borrowings by the non-insurance companies (which are non-recourse to the holding company).
• On July 14, 2023 the company extended the term of its $2.0 billion unsecured revolving credit facility with a syndicate of lenders from June 29, 2027 to July 14, 2028.
• At June 30, 2023 the excess of fair value over carrying value of investments in non-insurance associates and consolidated non-insurance subsidiaries was $760.8 million.
• The company's total debt to total capital ratio, excluding non-insurance companies, decreased to 22.5% at June 30, 2023 compared to 23.7% at December 31, 2022, principally reflecting increased common shareholders' equity as a result of the strong net earnings reported in the first six months.
• During the first six months of 2023 the company purchased 179,744 of its subordinate voting shares for cancellation at an aggregate cost of $114.9 million.
• There were 23.2 million and 23.8 million weighted average common shares effectively outstanding during the second quarters of 2023 and 2022 respectively. At June 30, 2023 there were 23,202,070 common shares effectively outstanding.

As previously announced, Fairfax will hold a conference call to discuss its second quarter 2023 results at 8:30 a.m. Eastern time on Friday August 4, 2023. The call, consisting of a presentation by the company followed by a question period, may be accessed at 1 (888) 390-0867 (Canada or U.S.) or 1 (212) 547-0141 (International) with the passcode "FAIRFAX". A replay of the call will be available from shortly after the termination of the call until 5:00 p.m. Eastern time on Friday, August 18, 2023. The replay may be accessed at 1 (866) 469-7806 (Canada or U.S.) or 1 (203) 369-1474 (International).

Fairfax Financial Holdings Limited is a holding company which, through its subsidiaries, is primarily engaged in property and casualty insurance and reinsurance and the associated investment management.

We seek Safe Harbor.