The counterparty credit rating on Fairfax Financial Holdings Ltd. (NYSE: FFH) is based on the company's improving competitive position, strong consolidated capitalization (even after adjustments for finite reinsurance), and improved earnings and financial flexibility. Offsetting these positive factors are reserves, which, though not an immediate concern, have frequently been strengthened and might require some further modest charges; some very poor acquisitions and sizeable reserve charges for which FFH's ongoing insurance operations (Fairfax) has utilized finite reinsurance; and debt to support operating company obligations, resulting in high debt leverage. Fairfax's competitive position is viewed as good based on its diversification (U.S. commercial, Canadian property/casualty (P/C), reinsurance, and runoff) and market share. FFH, the eighth-largest financial institution in Canada based on 2004
