Fairfax Financial Holdings Ltd.

The stable outlook is based on S&P Global Ratings' expectation that earnings accrual and capital management initiatives will strengthen capitalization over the next 12-24 months and Fairfax will maintain its strong competitive position anchored by its large insurance operations. We could lower the ratings in the next 12-24 months if, contrary to our expectations: Capitalization is not redundant at the 'A' confidence level; Fixed-charge coverage is below 4x on a sustained basis; or The volatility profile changes due to an increase in risk tolerance or shifts in investment or business mix resulting in high-risk exposure. We do not anticipate raising our rating in the next 12-24 months. However, we could consider an upgrade based on sustainable improvement in the company's

...Fairfax Financial Holdings Ltd.'s (TSX:FFH; Fairfax) credit profile benefits from the company's large and diversified re/insurance operations that are well established in their respective markets. These operations are well positioned to take advantage of the hardening rate environment, which should add to the prospective underwriting earnings. A potentially improving investment earnings profile is expected to further add to operating earnings strength. However, the earnings outlook is tempered by the COVID-19 losses, market volatility, and current interest rate environment. Fairfax reported 2.6 points impact to its combined ratio in the first quarter from COVID-19 losses. If the sector's COVID-19 losses are not outsize and the economy starts to recover in the second half, anticipated earnings improvement in 2021-2022 could progressively improve the company's fixed-charge coverage. S&P Global Ratings expects earnings accrual along with monetization of certain investments to support risk-adjusted...

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