Fairfax Financial : 2024 Q1 Interim Report

INTERIM REPORT

For the three months ended March 31, 2024

Consolidated Financial Statements

CONSOLIDATED BALANCE SHEETS as at March 31, 2024 and December 31, 2023 (unaudited - US$ millions)

	Notes	March 31,		December 31,
	2024	2023
Assets
Holding company cash and investments (including assets pledged for derivative obligations - $240.1;	5	2,496.4	1,781.6
December 31, 2023 - $197.7)
Insurance contract receivables		811.0	926.1
Portfolio investments
Subsidiary cash and short term investments (including restricted cash and cash equivalents -	5	7,801.6	7,165.6
$456.3; December 31, 2023 - $637.0)
Bonds (cost $36,213.2; December 31, 2023 - $36,511.9)	5	36,131.2	36,850.8
Preferred stocks (cost $892.7; December 31, 2023 - $898.3)	5	2,436.5	2,447.4
Common stocks (cost $6,469.6; December 31, 2023 - $6,577.2)	5	6,770.7	6,903.4
Investments in associates (fair value $7,831.0; December 31, 2023 - $7,553.2)	5, 6	6,833.6	6,607.6
Derivatives and other invested assets (cost $920.7; December 31, 2023 - $952.0)	5, 7	909.2	1,025.3
Assets pledged for derivative obligations (cost $115.4; December 31, 2023 - $137.7)	5	115.5	139.3
Fairfax India cash, portfolio investments and associates (fair value $3,083.1; December 31,	5, 6	1,971.0	2,282.7
2023 - $3,507.6)
		62,969.3		63,422.1
Reinsurance contract assets held	9	10,808.6	10,887.7
Deferred income tax assets		294.0	301.1
Goodwill and intangible assets		6,352.7	6,376.3
Other assets		8,177.9	8,290.2
Total assets		91,909.9		91,985.1
Liabilities		5,291.4	5,487.2
Accounts payable and accrued liabilities
Derivative obligations	5, 7	372.7	444.9
Deferred income tax liabilities		1,267.7	1,250.3
Insurance contract payables		1,065.0	1,206.9
Insurance contract liabilities	8	45,918.1	46,171.4
Borrowings - holding company and insurance and reinsurance companies	11	8,410.4	7,824.5
Borrowings - non-insurance companies		1,941.1	1,899.0
Total liabilities		64,266.4		64,284.2
Equity	12	21,585.5	21,615.0
Common shareholders' equity
Preferred stock		1,335.5	1,335.5
Shareholders' equity attributable to shareholders of Fairfax		22,921.0		22,950.5
Non-controlling interests		4,722.5	4,750.4
Total equity		27,643.5		27,700.9
		91,909.9		91,985.1

See accompanying notes.

2

CONSOLIDATED STATEMENTS OF EARNINGS for the three months ended March 31, 2024 and 2023 (unaudited - US$ millions except per share amounts)

	Notes
Insurance	16
Insurance revenue
Insurance service expenses	17
Net insurance result
Cost of reinsurance
Recoveries of insurance service expenses	17
Net reinsurance result	16
Insurance service result
Other insurance operating expenses	16, 17
Net finance expense from insurance contracts	10
Net finance income from reinsurance contract assets held	10
Investment income
Interest and dividends	6
Share of profit of associates
Net gains (losses) on investments	5
Other revenue and expenses
Non-insurance revenue
Non-insurance expenses	17
Interest expense
Corporate and other expenses	17
Earnings before income taxes	14
Provision for income taxes

Net earnings

Attributable to:

Shareholders of Fairfax

Non-controlling interests

Net earnings per share

Net earnings per diluted share

Cash dividends paid per share

Shares outstanding (000) (weighted average)

See accompanying notes.

2024 2023

7,686.8 6,279.9

(6,252.6) (5,177.4)

1,434.2 1,102.5

(1,599.7) (1,120.0)

1,202.7 1,004.3

(397.0) (115.7)

1,037.2 986.8

(245.8) (246.1)

(270.2) (225.8)

104.2 62.4

625.4 577.3

589.8 382.3

127.7 333.8

(58.5) 771.2

659.0 1,487.3

1,514.2 1,558.4

(1,500.3) (1,623.1)

(151.5) (124.3)

(90.7) (106.5)

(228.3) (295.5)

1,056.1 1,769.1

(286.4) (365.1)

769.7 1,404.0

776.5 1,250.0

(6.8) 154.0

769.7 1,404.0

$	33.26	$	53.17
$	30.82	$	49.38

• 15.00 $ 10.00
  22,974 23,282

3

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME for the three months ended March 31, 2024 and 2023

(unaudited - US$ millions)

Net earnings

Other comprehensive income (loss), net of income taxes

Items that may be subsequently reclassified to net earnings

2024 2023

769.7 1,404.0

Net unrealized foreign currency translation gains (losses) on foreign subsidiaries	(228.4)	60.6
Gains (losses) on hedge of net investment in Canadian subsidiaries	54.5	(2.4)
Gains (losses) on hedge of net investment in European operations	19.1	(14.3)
Share of other comprehensive income (loss) of associates, excluding net gains (losses) on defined benefit	(22.7)	2.2
plans
Other	1.0	(3.3)
	(176.5)		42.8
Net unrealized foreign currency translation (gains) losses on associates reclassified to net earnings	0.2	(4.8)
	(176.3)		38.0
Items that will not be subsequently reclassified to net earnings
Net gains (losses) on defined benefit plans	14.2	(10.3)
Share of net gains (losses) on defined benefit plans of associates	(1.3)	0.3
Other	12.8		-
	25.7		(10.0)
Other comprehensive income (loss), net of income taxes	(150.6)		28.0
Comprehensive income	619.1		1,432.0
Attributable to:	650.3	1,264.9
Shareholders of Fairfax
Non-controlling interests	(31.2)	167.1
	619.1		1,432.0

See accompanying notes.

4

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY for the three months ended March 31, 2024 and 2023

(unaudited - US$ millions)

						Share-			Accumulated							Equity
			Treasury		based				Common			attributable		Non-
	Common		payments		Retained		other		Preferred		to			Total
		shares at	and other		comprehensive	shareholders'	shareholders	controlling
	shares		cost		reserves		earnings		income (loss)		equity	shares		of Fairfax		interests		equity
Balance as of January 1, 2024	5,995.9	(906.7)		612.7	16,875.3	(962.2)		21,615.0		1,335.5		22,950.5	4,750.4	27,700.9
Net earnings (loss) for the period	-		-		-	776.5		-	776.5		-	776.5	(6.8)	769.7
Other comprehensive income (loss), net of income taxes:
Net unrealized foreign currency translation losses on	-		-		-		-	(201.8)		(201.8)		-	(201.8)	(26.6)	(228.4)
foreign subsidiaries
Gains on hedge of net investment in Canadian	-		-		-		-	54.5		54.5		-	54.5		-	54.5
subsidiaries
Gains on hedge of net investment in European	-		-		-		-	19.1		19.1		-	19.1		-	19.1
operations
Share of other comprehensive loss of associates,
excluding net losses on defined benefit plans	-		-		-		-	(21.0)		(21.0)		-	(21.0)	(1.7)	(22.7)
Net unrealized foreign currency translation losses on	-		-		-		-	0.2		0.2		-	0.2		-	0.2
associates reclassified to net earnings
Net gains (losses) on defined benefit plans	-		-		-		-	14.8		14.8		-	14.8	(0.6)	14.2
Share of net losses on defined benefit plans of	-		-		-		-	(0.9)		(0.9)		-	(0.9)	(0.4)	(1.3)
associates
Other	-		-		-		-	8.9		8.9		-	8.9	4.9	13.8
Issuances for share-based payments	-	53.5		(49.5)		-		-	4.0		-	4.0		-	4.0
Purchases and amortization for share-based payments	-	(51.1)		34.0		-		-	(17.1)		-	(17.1)		-	(17.1)
Purchases for cancellation (note 12)	(59.6)		-		-	(200.7)		-	(260.3)		-	(260.3)		-	(260.3)
Common share dividends	-		-		-	(363.1)		-	(363.1)		-	(363.1)	(16.5)	(379.6)
Preferred share dividends	-		-		-	(12.4)		-	(12.4)		-	(12.4)		-	(12.4)
Net changes in capitalization	-		-	0.4	(35.3)		-	(34.9)		-	(34.9)	15.0	(19.9)
Other	-		-			-		-		4.0			4.0		-			4.0		4.8		8.8
Balance as of March 31, 2024	5,936.3		(904.3)			597.6		17,040.3		(1,084.4)			21,585.5		1,335.5			22,921.0		4,722.5		27,643.5
Balance as of January 1, 2023	6,086.3	(891.3)		615.7	12,952.5	(982.9)		17,780.3		1,335.5		19,115.8	3,902.9	23,018.7
Net earnings for the period	-		-		-	1,250.0		-	1,250.0		-	1,250.0	154.0	1,404.0
Other comprehensive income (loss), net of income taxes:
Net unrealized foreign currency translation gains on	-		-		-		-	44.0		44.0		-	44.0	16.6	60.6
foreign subsidiaries
Losses on hedge of net investment in Canadian	-		-		-		-	(2.4)		(2.4)		-	(2.4)		-	(2.4)
subsidiaries
Losses on hedge of net investment in European	-		-		-		-	(14.3)		(14.3)		-	(14.3)		-	(14.3)
operations
Share of other comprehensive income (loss) of
associates, excluding net gains (losses) on
defined benefit plans	-		-		-		-	3.7		3.7		-	3.7	(1.5)	2.2
Net unrealized foreign currency translation (gains)
losses on associates reclassified to net earnings	-		-		-		-	(4.9)		(4.9)		-	(4.9)	0.1	(4.8)
Net gains (losses) on defined benefit plans	-		-		-		-	(10.4)		(10.4)		-	(10.4)	0.1	(10.3)
Share of net gains (losses) on defined benefit plans of	-		-		-		-	1.1		1.1		-	1.1	(0.8)	0.3
associates
Other	-		-		-		-	(1.9)		(1.9)		-	(1.9)	(1.4)	(3.3)
Issuances for share-based payments	-	45.5		(44.8)		-		-	0.7		-	0.7		-	0.7
Purchases and amortization for share-based payments	-	(23.1)		37.9		-		-	14.8		-	14.8		-	14.8
Purchases for cancellation (note 12)	(38.8)		-		-	(61.2)		-	(100.0)		-	(100.0)		-	(100.0)
Common share dividends	-		-		-	(245.2)		-	(245.2)		-	(245.2)	(4.7)	(249.9)
Preferred share dividends	-		-		-	(12.1)		-	(12.1)		-	(12.1)		-	(12.1)
Net changes in capitalization	-		-	(35.7)	(14.2)	(4.6)		(54.5)		-	(54.5)	(44.2)	(98.7)
Other	-		-			-		(0.6)		15.5			14.9		-			14.9		8.1		23.0
Balance as of March 31, 2023	6,047.5		(868.9)			573.1		13,869.2		(957.1)			18,663.8		1,335.5			19,999.3		4,029.2		24,028.5

See accompanying notes.

5

CONSOLIDATED STATEMENTS OF CASH FLOWS for the three months ended March 31, 2024 and 2023 (unaudited - US$ millions)

	Notes	2024	2023
Operating activities		769.7	1,404.0
Net earnings
Depreciation, amortization and impairment charges		157.5	186.4
Net bond discount amortization		(74.4)	(82.5)
Amortization of share-based payment awards		34.0	37.9
Share of profit of associates	6	(127.7)	(333.8)
Deferred income taxes	14	33.8	234.0
Net losses (gains) on investments	5	58.5	(771.2)
Net sales (purchases) of investments classified at FVTPL		688.0	(2,281.1)
Changes in operating assets and liabilities		57.6	481.3
Cash provided by (used in) operating activities		1,597.0		(1,125.0)

Investing activities

Sales of investments in associates Purchases of investments in associates

Net purchases of premises and equipment and intangible assets Net purchases of investment property

Purchases of subsidiaries, net of cash acquired Cash provided by (used in) investing activities

6	48.5	682.2
6	(34.3)	(216.7)
	(81.1)	(153.8)
	(12.1)	(10.2)
	(18.0)	(23.4)
	(97.0)		278.1

Financing activities	11
Borrowings - holding company and insurance and reinsurance companies:	1,188.3		-
Proceeds, net of issuance costs
Repayments		(537.2)	(2.1)
Net repayments on other revolving credit facilities		-	(10.0)
Borrowings - non-insurance companies:		8.1	63.2
Proceeds, net of issuance costs
Repayments		(10.1)	(8.8)
Net borrowings on revolving credit facilities and short term loans		77.8	23.7
Principal payments on lease liabilities - holding company and insurance and reinsurance companies		(15.2)	(14.9)
Principal payments on lease liabilities - non-insurance companies		(33.0)	(34.8)
Subordinate voting shares:	12	(51.1)	(23.1)
Purchases for treasury
Purchases for cancellation		(260.3)	(100.0)
Common share dividends		(363.1)	(245.2)
Preferred share dividends		(12.4)	(12.1)
Subsidiary shares:		0.4	15.6
Issuances to non-controlling interests, net of issuance costs
Purchases of non-controlling interests		(9.1)	(69.9)
Dividends paid to non-controlling interests		(16.5)	(4.7)
Cash used in financing activities		(33.4)		(423.1)
Increase (decrease) in cash and cash equivalents		1,466.6		(1,270.0)
Cash and cash equivalents - beginning of period	5	5,121.4	6,119.6
Foreign currency translation	5	(26.0)	9.1
Cash and cash equivalents - end of period	6,562.0		4,858.7

See accompanying notes.

6

Index to Notes to Interim Consolidated Financial Statements
1.	Business Operations	8
2.	Basis of Presentation	8
3.	Summary of Material Accounting Policies	8
4.	Critical Accounting Estimates and Judgments	8
5.	Cash and Investments	9
6.	Investments in Associates	13
7.	Derivatives	13
8.	Insurance Contract Liabilities	14
9.	Reinsurance Contract Assets Held	16
10.	Net Finance Income or Expense from Insurance Contracts and Reinsurance Contract Assets Held	17
11.	Borrowings	18
12.	Total Equity	18
13.	Acquisitions and Divestitures	18
14.	Income Taxes	19
15.	Financial Risk Management	19
16.	Segmented Information	22
17.	Expenses	24

7

Notes to Interim Consolidated Financial Statements for the three months ended March 31, 2024 and 2023

(unaudited - 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 primarily 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

These interim consolidated financial statements of the company for the three months ended March 31, 2024 have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS Accounting Standards") applicable to the preparation of interim financial statements, including International Accounting Standard 34 Interim Financial Reporting. Accordingly, certain information and disclosures typically included in annual consolidated financial statements prepared in accordance with IFRS Accounting Standards have been omitted or condensed. These interim consolidated financial statements should be read in conjunction with the company's annual consolidated financial statements for the year ended December 31, 2023, which have been prepared in accordance with IFRS Accounting Standards.

These interim consolidated financial statements were approved for issue by the company's Board of Directors on May 2, 2024.

3. Summary of Material Accounting Policies

The principal accounting policies applied to the preparation of these interim consolidated financial statements are as set out in the company's annual consolidated financial statements for the year ended December 31, 2023, prepared in accordance with IFRS Accounting Standards. Those policies and methods of computation have been consistently applied to all periods presented except as described below.

New accounting pronouncements adopted in 2024

On January 1, 2024 the company adopted the following amendments, which did not have a significant impact on the company's consolidated financial statements: Classification of Liabilities as Current or Non-current(Amendments to IAS 1), Non-currentLiabilities with Covenants (Amendments to IAS 1), Lease Liability in a Sale and Leaseback (Amendments to IFRS 16) and Supplier

Finance Arrangements (Amendments to IAS 7 and IFRS 7).

New accounting pronouncements issued but not yet effective

The following new standard has been issued by the IASB and is not yet effective for the fiscal year beginning January 1, 2024. The company does not expect to adopt the new standard in advance of its effective date.

IFRS 18 Presentation and Disclosure in Financial Statements

On April 9, 2024 the IASB issued IFRS 18 which replaces IAS 1 Presentation of Financial Statements while carrying forward many of the requirements in IAS 1. IFRS 18 introduces new requirements to present specified categories and defined subtotals in the statement of earnings and to provide disclosures on management-defined performance measures in the notes to the financial statements, and also makes certain amendments to IAS 7 Statement of Cash Flows and IAS 33 Earnings per Share. The standard is to be applied retrospectively, with specific transition provisions, for annual reporting periods beginning on or after January 1, 2027 with earlier application permitted. The company is currently evaluating the expected impact of the standard on its consolidated financial statements.

4. Critical Accounting Estimates and Judgments

In these interim consolidated financial statements management has made critical estimates and judgments in determining: (i) the measurement of insurance contracts and reinsurance contract assets held (notes 8 and 9 respectively); and (ii) the fair value of financial instruments classified as Level 3 in the fair value hierarchy (note 5), in a manner consistent with that described in the company's consolidated financial statements for the year ended December 31, 2023.

8

5. Cash and Investments

Presented in the table below are holding company cash and investments and portfolio investments, net of derivative obligations, all of which are classified at FVTPL except for investments in associates and other invested assets.

March 31, 2024 December 31, 2023

Holding company
Cash and cash equivalents	786.2	406.8
Short term investments	506.0	192.9
Bonds	191.3	344.3
Preferred stocks	11.3	12.2
Common stocks(1)	96.5	103.5
Derivatives (note 7)	665.0	524.2
Assets pledged for derivative obligations:	2,256.3		1,583.9
Cash equivalents	103.7	2.5
Short term investments	37.6	127.8
Bonds	98.8	67.4
	240.1		197.7
Holding company cash and investments as presented on the consolidated balance sheet	2,496.4	1,781.6
Derivative obligations (note 7)	(49.9)	(32.5)
Portfolio investments	2,446.5		1,749.1
Cash and cash equivalents(2)	6,079.2	5,157.2
Short term investments	1,722.4	2,008.4
Bonds	36,131.2	36,850.8
Preferred stocks	2,436.5	2,447.4
Common stocks(1)	6,770.7	6,903.4
Investments in associates (note 6)	6,833.6	6,607.6
Derivatives (note 7)	336.0	448.3
Other invested assets(3)	573.2	577.0
Assets pledged for derivative obligations:	60,882.8		61,000.1
115.5	139.3
Bonds
Fairfax India cash, portfolio investments and associates:
Cash and cash equivalents(2)	54.1	197.2
Bonds	185.5	39.2
Common stocks	305.3	616.6
Investments in associates (note 6)	1,426.1	1,429.7
	1,971.0		2,282.7
Portfolio investments as presented on the consolidated balance sheet	62,969.3	63,422.1
Derivative obligations (note 7)	(322.8)		(412.4)
	62,646.5		63,009.7
Total cash and investments, net of derivative obligations	65,093.0		64,758.8

1. Includes aggregate investments in limited partnerships with a carrying value at March 31, 2024 of $2,323.7 (December 31, 2023 - $2,171.8).
2. Includes aggregate restricted cash and cash equivalents at March 31, 2024 of $461.2 (December 31, 2023 - $642.3), principally in portfolio cash and cash equivalents, which is excluded from cash and cash equivalents as presented in the consolidated statement of cash flows.
3. Comprised primarily of investment property.

9

Fixed Income Maturity Profile

Bonds are summarized by their earliest contractual maturity date in the table below. Actual maturities may differ from maturities shown due to the existence of call and put features. The table below excludes: the impact of U.S. treasury bond forward contracts to sell long-dated U.S. treasury bonds with a notional amount at March 31, 2024 of $129.8 (December 31, 2023 - $292.8) that economically hedge the company's exposure to interest rate risk; and interest rate swaps with a notional amount at March 31, 2024 of $1,900.0 (December 31, 2023 - $1,900.0) that provide the company the right to receive fixed rates in exchange for the obligation to pay floating rates in relation to a majority of the net purchases of first mortgage loans completed during 2023.

	March 31, 2024		December 31, 2023
	Amortized		Fair		Amortized		Fair
Due in 1 year or less(2)	cost(1)		value(1)		cost(1)		value(1)
8,696.0	8,461.3	7,780.5	7,545.6
Due after 1 year through 3 years(2)	9,119.6	9,125.9	9,352.1	9,420.5
Due after 3 years through 5 years	5,608.6	5,662.9	5,738.7	5,861.1
Due after 5 years through 10 years(3)	12,659.3	12,765.8	13,645.1	14,047.3
Due after 10 years	723.4	706.4	577.9	566.5
	36,806.9		36,722.3		37,094.3		37,441.0

1. Includes bonds held by the holding company and Fairfax India.
2. Includes the company's investments in first mortgage loans at March 31, 2024 of $4,835.4 (December 31, 2023 - $4,685.4) secured by real estate predominantly in the U.S., Europe and Canada.
3. Includes U.S. treasury bonds at March 31, 2024 of $11,260.5 (December 31, 2023 - $11,868.0) with maturities between 5 to 7 years.

The increase in the company's holdings of bonds due in 1 year or less reflected the shift from due after 1 year through 3 years into due in 1 year or less as a result of the passage of time impacting their earliest contractual maturity date. The decrease in the company's holdings of bonds due after 5 years through 10 years was primarily due to net sales of U.S. treasury bonds of $580.4 to purchase cash equivalent U.S. treasury bills.

10