Intercorporate Relationships

        The following is a list of our principal subsidiaries. Indented companies are subsidiaries of the non-indented company which precedes them. All subsidiaries were wholly-owned, directly or through another subsidiary, as of December 31, 2019 unless otherwise noted.

DESCRIPTION OF THE BUSINESS

Overview

        Fairfax is a holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and the associated investment management. Fairfax's corporate objective is to achieve a high rate of return on invested capital and build long term shareholder value. We seek to differentiate ourselves by combining disciplined underwriting with the investment of our assets on a total return basis.

        The financial performance of a property and casualty company is determined by two principal factors: (i) the operating results of the insurance operations, which is determined by the level of premiums collected in relation to claims and operating costs, and (ii) the returns generated by the investment portfolios of the insurers.

        Our insurance and reinsurance companies operate on a decentralized basis, with autonomous management teams applying a focused underwriting strategy to their markets. Our subsidiaries provide a full range of property and casualty products, maintaining a diversified portfolio of risks across all classes of business, geographic regions, and types of insureds.

        Our investments are centrally managed for all the Fairfax group of companies by Hamblin Watsa Investment Counsel Ltd. ("Hamblin Watsa"), a wholly-owned subsidiary of Fairfax. Hamblin Watsa emphasizes a conservative value investment philosophy, seeking to invest assets on a total return basis, which includes realized and unrealized gains over the long term.

        Since 2011, we have acquired companies that are in industries other than insurance and reinsurance where the companies met our investment criteria. Such companies are run on a decentralized basis with autonomous management.

        For a full description of our business see our corporate profile, the notes to our audited consolidated financial statements and management's discussion and analysis of financial conditions and results of operations, all in our 2019 Annual Report.

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Competition

        The property and casualty insurance industry and the reinsurance industry are both highly competitive, and we believe that they will remain highly competitive in the foreseeable future. Competition in our industry is based on many factors, including premiums charged and other terms and conditions offered, products and services provided, commission structure, financial ratings assigned by independent rating agencies, speed of claims payment, reputation, selling effort, perceived financial strength and the experience of the insurer or reinsurer in the line of insurance or reinsurance to be written. We compete, and will continue to compete, with major U.S. and non-U.S. insurers and reinsurers, as well as certain underwriting syndicates, some of which have greater financial, marketing and management resources than we do. We also are aware that other financial institutions, such as banks, are now able to offer services similar to those offered by our insurance subsidiaries. In addition, in recent years we have seen the creation of alternative products from capital market participants that are intended to compete with reinsurance products.

Cycles of Insurance

        Demand for insurance and reinsurance is influenced significantly by the underwriting results of primary insurers and prevailing general economic conditions. Factors such as changes in the level of employment, wages, consumer spending, business investment and government spending, the volatility and strength of the global capital markets and inflation or deflation all affect the business and economic environment and, ultimately, the demand for insurance and reinsurance products.

        The property and casualty insurance business historically has been characterized by periods of intense price competition due to excess underwriting capacity, known as a soft insurance market, when companies may underprice business to gain market share. Such inadequate pricing reduces underwriting margins. When excess capital is removed from the industry, it leads to periods when shortages of underwriting capacity have permitted attractive premium levels. This is known as a hard insurance market. We expect to continue to experience the effects of this cyclicality.

        In the reinsurance industry, the supply of reinsurance is related to prevailing prices and levels of surplus capacity that, in turn, may fluctuate in response to changes in rates of return being realized. It is possible that premium rates or other terms and conditions of trade could vary in the future, that the present level of demand will not continue because the larger insurers may require less reinsurance or that the present level of supply of reinsurance could increase as a result of capital provided by recent or future market entrants or by existing reinsurers.

Employees

        As at December 31, 2019, Fairfax (the holding company) had 43 employees and our subsidiaries had in aggregate approximately 44,000 full-time employees.

GENERAL DEVELOPMENT OF THE BUSINESS

        Over the past three completed financial years our total assets have increased from $64.1 billion as at December 31, 2017 to $70.5 billion as at December 31, 2019. Common shareholders' equity was $12.5 billion, $11.8 billion and $13.0 billion as at December 31, 2017, 2018 and 2019, respectively. For the year ended December 31, 2017, Fairfax had income of $16.2 billion and net earnings attributable to shareholders of Fairfax of $1.7 billion. For the year ended December 31, 2018, Fairfax had income of $17.8 billion and net earnings attributable to shareholders of Fairfax of $376 million. For the year ended December 31, 2019, Fairfax had income of $21.5 billion and net earnings attributable to shareholders of Fairfax of $2.0 billion.

        For a description of the recent developments of our company, see our Chairman's letter to shareholders in our 2019 Annual Report. For a description of our acquisitions and divestitures over the last three years, see Note 23 (Acquisitions and Divestitures) to our audited consolidated financial statements in our 2019 Annual Report and our 2018 Annual Report. We have not filed a Form 51-102F4 — Business Acquisition Report in respect of any of our acquisitions. For a description of our capital transactions, see Note 16 (Total Equity) to our annual consolidated financial statements in our 2019 Annual Report and our 2018 Annual Report. For a

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description of our debt profile, see Note 15 (Borrowings) to our audited consolidated financial statements in our 2019 Annual Report and our 2018 Annual Report.

RISK FACTORS

        We have identified certain risks and uncertainties to which our business, operations and financial conditions are subject, which are described under "Issues and Risks" on pages 203-215 of our 2019 Annual Report. Additional risks and uncertainties not known to us or that we currently believe are not reasonably likely to materially affect us may also impair our business, results of operations and financial condition. An explanation of our risk management approach can be found in Note 24 (Financial Risk Management) to our audited consolidated financial statements in our 2019 Annual Report.

DIVIDENDS

        We have declared the following dividends since 2017 on our subordinate voting shares and multiple voting shares (collectively, the "Equity Shares"):

•

On January 4, 2017, we declared a dividend of $10.00 per Equity Share, payable on January 26, 2017.



•

On January 3, 2018, we declared a dividend of $10.00 per Equity Share, payable on January 25, 2018.



•

On January 3, 2019, we declared a dividend of $10.00 per Equity Share, payable on January 28, 2019.



•

On January 3, 2020, we declared a dividend of $10.00 per Equity Share, payable on January 28, 2020.

The dividends were payable in U.S. dollars. Future dividends on our Equity Shares, if any, are expected to be paid in U.S. currency.

        Dividends of CDN$1.1445 per Series C preferred share were paid to holders of our Series C preferred shares during each of 2017, 2018 and 2019.

        Dividends of CDN$0.9262, CDN$1.09709 and CDN$1.20741 per Series D preferred share were paid to holders of our Series D preferred shares during each of 2017, 2018 and 2019, respectively.

        Dividends of CDN$0.72752 per Series E preferred share were paid to holders of our Series E preferred shares during each of 2017, 2018 and 2019.

        Dividends of CDN$0.67939, CDN$0.84824 and CDN$0.95992 per Series F preferred share were paid to holders of our Series F preferred shares during each of 2017, 2018 and 2019, respectively.

        Dividends of CDN$0.8295 per Series G preferred share were paid to holders of our Series G preferred shares during each of 2017, 2018 and 2019.

        Dividends of CDN$0.77911, CDN$0.94879 and CDN$1.05992 per Series H preferred share were paid to holders of our Series H preferred shares during each of 2017, 2018 and 2019, respectively.

        Dividends of CDN$0.927 per Series I preferred share were paid to holders of our Series I preferred shares during each of 2017, 2018 and 2019.

        Dividends of CDN$0.85141, CDN$1.0217 and CDN$1.13243 per Series J preferred share were paid to holders of our Series J preferred shares during each of 2017, 2018 and 2019, respectively.

        Dividends of CDN$1.188314, CDN$1.167752 and CDN$1.167752 per Series K preferred share were paid to holders of our Series K preferred shares during each of 2017, 2018 and 2019, respectively.

        Dividends of CDN$1.1875 per Series M preferred share were paid to holders of our Series M preferred shares during each of 2017, 2018 and 2019.

        The declaration and payment of dividends are at the sole discretion of our board of directors and depend on, among other things, our financial condition, general business conditions, legal restrictions regarding the payment of dividends by us and other factors which the board of directors may in the future consider to be relevant. As a holding company with no direct operations, we rely on cash dividends and other payments from our subsidiaries and our own cash balances to pay dividends to our shareholders.

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CAPITAL STRUCTURE

General Description

        For a general description of our capital structure please see "Description of Subordinate Voting Shares and Preferred Shares" on pages 51-62 of our short form base shelf prospectus dated October 22, 2019 filed with the Canadian securities regulatory authorities and incorporated herein by reference.

        On February 1, 2010, we issued 8,000,000 Series E preferred shares. On February 26, 2010, we issued 563,381 subordinate voting shares. On July 28, 2010, we issued 10,000,000 Series G preferred shares. On October 5, 2010, we issued 12,000,000 Series I preferred shares. On March 21, 2012, we issued 9,500,000 Series K preferred shares. On November 15, 2013, we issued 1,000,000 subordinate voting shares. On December 31, 2014, holders representing 3,983,616 Series C preferred shares exercised their right to convert their Series C preferred shares into Series D preferred shares, on a one-for-one basis, with the result that 3,983,616 Series D preferred shares were issued. On March 3, 2015, we issued 1,150,000 subordinate voting shares and 9,200,000 Series M preferred shares. On March 31, 2015, holders representing 3,572,044 Series E preferred shares exercised their right to convert their Series E preferred shares into Series F preferred shares, on a one-for-one basis, with the result that 3,572,044 Series F preferred shares were issued. On April 10, 2015, in connection with the initial public offering of Cara Operations Limited (now known as Recipe) we issued an aggregate of 19,294 subordinate voting shares, on a private placement basis. On September 30, 2015, holders representing 2,567,048 Series G preferred shares exercised their right to convert their Series G preferred shares into Series H preferred shares, on a one-for-one basis, with the result that 2,567,048 Series H preferred shares were issued. On December 31, 2015, holders representing 1,534,447 Series I preferred shares exercised their right to convert their Series I preferred shares into Series J preferred shares, on a one-for-one basis, with the result that 1,534,447 Series J preferred shares were issued. On March 2, 2016, we issued 1,000,000 subordinate voting shares. In the third quarter of 2017, we issued an aggregate of 5,075,894 subordinate voting shares in connection with the acquisition of Allied World Assurance Company Holdings, AG (which was subsequently renamed Allied World Assurance Company Holdings, GmbH and is now known as Allied World Assurance Company Holdings, Ltd). On December 31, 2019, holders representing 25,816 Series C preferred shares exercised their right to convert their Series C preferred shares into Series D preferred shares, on a one-for-one basis, with the result that 25,816 Series D preferred shares were issued. On December 31, 2019, holders representing 1,525,074 Series D preferred shares exercised their right to convert their Series D preferred shares into Series C preferred shares, on a one-for-one basis, with the result that 1,525,074 Series C preferred shares were issued. For a general description of each series of our preferred shares see our prospectus supplements referenced below, each of which has been filed with the Canadian securities regulatory authorities and is incorporated herein by reference:

•

For the Series C preferred shares, see "Description of the Series C Shares" at pages S-11 to S-15 of our prospectus supplement dated September 29, 2009;



•

For the Series D preferred shares, see "Description of the Series D Shares" at pages S-15 to S-19 of our prospectus supplement dated September 29, 2009;



•

For the Series E preferred shares, see "Description of the Series E Shares" at pages S-11 to S-14 of our prospectus supplement dated January 25, 2010;



•

For the Series F preferred shares, see "Description of the Series F Shares" at pages S-15 to S-18 of our prospectus supplement dated January 25, 2010;



•

For the Series G preferred shares, see "Description of the Series G Shares" at pages S-12 to S-15 of our prospectus supplement dated July 21, 2010;



•

For the Series H preferred shares, see "Description of the Series H Shares" at pages S-16 to S-19 of our prospectus supplement dated July 21, 2010;



•

For the Series I preferred shares, see "Description of the Series I Shares" at pages S-12 to S-15 of our prospectus supplement dated September 28, 2010;



•

For the Series J preferred shares, see "Description of the Series J Shares" at pages S-15 to S-19 of our prospectus supplement dated September 28, 2010;

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•

For the Series K preferred shares, see "Description of the Series K Shares" at pages S-13 to S-17 of our prospectus supplement dated March 14, 2012; and



•

For the Series M preferred shares, see "Description of the Series M Shares" at pages S-21 to S-25 of our prospectus supplement dated February 24, 2015.

        Our short form base shelf prospectus and supplementary prospectuses are available on SEDAR at www.sedar.com.

Ratings

Long Term Debt

        As of the date hereof, our senior, unsecured long term debt has been assigned a rating of BBB- with a positive outlook by Standard & Poor's Ratings Services ("S&P"). Moody's Investors Service ("Moody's") has assigned a Baa3 rating with a stable outlook on our senior unsecured long term debt. DBRS Limited ("DBRS") has assigned a BBB "(high)" rating with a stable outlook on our senior unsecured long term debt. A.M. Best ("A.M. Best") has assigned a rating of bbb with a stable outlook on our senior unsecured long term debt.

        S&P's credit ratings are on a long term debt rating scale that ranges from AAA to D, which represents the range from highest to lowest quality of such securities rated. A rating of BBB- by S&P is the fourth highest of ten categories and indicates that the obligation exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. The addition of a plus (+) or minus (-) designation after a rating indicates the relative standing within a particular rating category.

        Moody's credit ratings are on a long term debt rating scale that ranges from Aaa to C, which represents the range from highest to lowest quality of such securities rated. A rating of Baa by Moody's is the fourth highest of nine categories and is assigned to debt securities that may possess certain speculative elements and are subject to moderate credit risk. The addition of a 1, 2 or 3 modifier after a rating indicates the relative standing within a particular rating category. The modifier 1 indicates that the issue ranks in the higher end of its generic rating category, the modifier 2 indicates a mid-range ranking and the modifier 3 indicates that the issue ranks in the lower end of its generic rating category.

        The DBRS credit ratings are on a long term debt rating scale that ranges from AAA to D, which represents the range from highest to lowest quality of such securities rated. A rating of BBB is in the fourth highest category of ten categories and is assigned to debt that is considered to be of adequate credit quality. The capacity for payment of financial obligations is considered acceptable, but the entity may be vulnerable to future events. All rating categories other than AAA and D also contain subcategories "high" and "low". The absence of either a "high" or "low" designation indicates the rating is in the middle of the category.

        A.M. Best credit ratings are on a long term debt rating scale that ranges from aaa to c, which represents the range from highest to lowest quality of such securities rated. A rating of bbb is the fourth highest category of nine categories and is assigned to debt that is considered to be of adequate credit quality, however, the issue is more susceptible to changes in economic or other conditions. The assignment of a plus (+) or minus (-) designation after a rating indicates whether the credit quality is near the top or bottom of a particular rating category.

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        S&P's preferred share rating scale is a current assessment of the creditworthiness of an obligor with respect to a specified preferred share obligation issued in the Canadian market, relative to preferred shares issued by other issuers in the Canadian market. There is a direct correspondence between the specific ratings assigned on the Canadian preferred share scale and the various rating levels on the global debt rating scale. The rating scale ranges from P-1 to D, which represents the range from highest to lowest quality of such securities rated. A rating of P-3 by S&P is the third highest of eight categories and indicates that the obligation is less vulnerable to nonpayment than other speculative issues. The ratings from P-1 to P-5 may be modified by a "High" or "Low" designation which indicate relative standing within the major rating categories.

        The DBRS preferred share rating scale is meant to give an indication of the risk that a borrower will not fulfill its full obligations in a timely manner. The "Pfd-3" rating is the third highest of six categories used by DBRS for preferred shares and is assigned to securities of adequate credit quality. "High" or "low" grades are used to indicate the relative standing within a rating category. The absence of either a "high" or "low" designation indicates the rating is in the middle of the category.

        The "Ba" rating is the fifth highest of the nine categories used by Moody's for hybrid securities. The modifier "2" indicates that the obligation ranks in the middle of the "Ba" rating category. The "hyb" indicator signals the potential for ratings volatility due to less predictable exogenous (and often non-credit linked) factors such as regulatory and/or government intervention coupled with a hybrid's equity-like features.

        The "bb+" rating is the fifth highest category used by A.M. Best for hybrid securities and is assigned to issues with fair credit characteristics. The assignment of a plus (+) or minus (-) designation after a rating indicates whether the credit quality is near the top or bottom of a category.

        These credit ratings are intended to provide investors with an independent measure of credit quality of any issue of securities. The credit ratings accorded to our debt and preferred shares by the rating agencies are not recommendations to purchase, hold or sell any security in as much as such ratings do not comment as to market price or suitability for a particular investor. Any rating may not remain in effect for any given period of time or may be revised or withdrawn entirely by a rating agency in the future if in its judgment circumstances so warrant, and if any such rating is so revised or withdrawn, Fairfax is under no obligation to update this disclosure. We have paid customary rating fees to S&P, Moody's, DBRS and A.M. Best in connection with the above-mentioned ratings. In addition, we have made customary payments in respect of certain other services provided to us by S&P and A.M. Best during the last two years.

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MARKET FOR SECURITIES

Trading Price and Volume

        Our subordinate voting shares are listed for trading on the Toronto Stock Exchange (the "TSX") and trade in Canadian dollars under the symbol "FFH" and in U.S. dollars under the symbol "FFH.U". Our Series C preferred shares are listed on the TSX under the symbol "FFH.PR.C", our Series D preferred shares are listed on the TSX under the symbol "FFH.PR.D", our Series E preferred shares are listed on the TSX under the symbol "FFH.PR.E", our Series F preferred shares are listed on the TSX under the symbol "FFH.PR.F", our Series G preferred shares are listed on the TSX under the symbol "FFH.PR.G", our Series H preferred shares are listed on the TSX under the symbol "FFH.PR.H", our Series I preferred shares are listed on the TSX under the symbol "FFH.PR.I", our Series J preferred shares are listed on the TSX under the symbol "FFH.PR.J", our Series K preferred shares are listed on the TSX under the symbol "FFH.PR.K", and our Series M preferred shares are listed on the TSX under the symbol "FFH.PR.M". The following table sets out the market price range in CDN$ and aggregate trading volume of our subordinate voting shares and preferred shares on the TSX for the periods indicated:

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Prior Sales

        On April 17, 2018, we completed the sale of US$600 million aggregate principal amount of 4.85% Senior Notes due 2028 (the "Initial US Notes") at an issue price of 99.765%. On January 24, 2019, we completed the exchange, pursuant to an exchange offer, of all of the Initial US Notes for an equal principal amount of 4.85% Senior Notes due 2028 (the "Exchange US Notes"). The Exchange US Notes are identical to the Initial US

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Notes, except that the Exchange US Notes have been registered under the U.S. Securities Act. After giving effect to the benefit of a hedge of the treasury benchmark related to the Exchange US Notes, the effective rate on the Exchange US Notes is 4.58% per annum. On February 7, 2019, we completed the sale of US$85 million aggregate principal amount of 4.142% Senior Notes due 2024 at an issue price of 100%. On June 14, 2019, we completed the sale of CDN$500 million aggregate principal amount of 4.23% Senior Notes due 2029.