Fairfax Financial Holdings Ltd.

The stable outlook reflects Fairfax's very strong competitive position, reinforced by operating earnings expansion, improving capitalization supporting robust top-line growth, and moderating financial leverage. Contrary to our expectations, we could lower our ratings by one notch within the next 24 months if: The anticipated improvement in capitalization doesn't materialize, leading to capital adequacy that isn't redundant at the 'A' confidence level on a sustained basis; Financial leverage (excluding nonrecourse debt held at noninsurance operations) is above 35% (consolidated ratio above 40%); Fixed-charge coverage is below 4x on a sustained basis; or The company's volatility profile changes because of increased risk tolerance or shifts in investment or business mix, resulting in higher risk exposure. We could raise our ratings on Fairfax

...Fairfax Financial Holdings Ltd. (TSX:FFH; Fairfax) benefits from its large and diversified P/C re/insurance operations, which are well established in their respective markets. In 2021, Fairfax's gross premiums written (GPW) jumped 25.4% to $23.8 billion (excluding run-off and life), benefiting from favorable P/C re/insurance pricing, supported by $19.3 billion of shareholders' equity (including insurance noncontrolling interests). Based on 2021 premiums, Fairfax had the second largest Lloyd's syndicate, ranked the fourth largest U.S. excess and surplus writer, the fourth largest Canadian commercial lines writer, and one of the top 20 global reinsurers. In the first quarter of 2022, GPW rose 21.9% year over year, building on last year's strong price increases in most major business segments and new business writings. In 2021, Fairfax generated a strong combined ratio of 96.0% (including corporate expenses and excluding run-off; 95.0% as reported). Similarly, in the first quarter of 2022,...

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