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FRFHF Fairfax Financial Holdings LTD/ Can

Filed: 29 Oct 20, 8:00pm




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INTERIM REPORT
For the nine months ended
September 30, 2020



Consolidated Financial Statements

Consolidated Balance Sheets
as at September 30, 2020 and December 31, 2019
(unaudited - US$ millions)
Notes 
September 30, 2020December 31, 2019
Assets
Holding company cash and investments (including assets pledged for short sale and derivative obligations – $103.9; December 31, 2019 – $5.5)3, 5, 191,153.0 975.5 
Insurance contract receivables6,035.9 5,435.0 
Portfolio investments
Subsidiary cash and short term investments (including restricted cash and cash equivalents – $669.8; December 31, 2019 – $664.8)5, 1911,386.6 10,021.3 
Bonds (cost $15,841.2; December 31, 2019 – $15,353.9)516,464.1 15,618.1 
Preferred stocks (cost $263.6; December 31, 2019 – $241.3)5582.9 578.2 
Common stocks (cost $4,510.3; December 31, 2019 – $4,158.2)3, 53,910.6 4,246.6 
Investments in associates (fair value $3,970.3; December 31, 2019 – $4,521.7)3, 5, 64,792.5 4,360.2 
Derivatives and other invested assets (cost $1,023.9; December 31, 2019 – $1,168.7)5, 7698.7 759.1 
Assets pledged for short sale and derivative obligations (cost $194.3; December 31, 2019 – $146.7)5, 7194.8 146.9 
Fairfax India cash, portfolio investments and investments in associates (fair value $2,714.2; December 31, 2019 – $3,559.6 inclusive of Fairfax Africa)5, 6, 15, 191,835.3 2,504.6 
39,865.5 38,235.0 
Assets held for sale15351.6 2,785.6 
Deferred premium acquisition costs1,482.0 1,344.3 
Recoverable from reinsurers (including recoverables on paid losses – $683.5; December 31, 2019 – $637.3)8, 99,930.9 9,155.8 
Deferred income taxes612.4 375.9 
Goodwill and intangible assets6,196.6 6,194.1 
Other assets5,712.6 6,007.3 
Total assets71,340.5 70,508.5 
Liabilities
Accounts payable and accrued liabilities4,792.2 4,814.1 
Short sale and derivative obligations (including at the holding company – $57.1; December 31, 2019 – $0.3)5, 7209.5 205.9 
Liabilities associated with assets held for sale15239.6 2,035.1 
Insurance contract payables3,069.6 2,591.0 
Insurance contract liabilities837,993.6 35,722.6 
Borrowings – holding company and insurance and reinsurance companies106,516.7 5,156.9 
Borrowings – non-insurance companies102,132.9 2,075.7 
Total liabilities54,954.1 52,601.3 
Equity    11
Common shareholders’ equity11,600.8 13,042.6 
Preferred stock1,335.5 1,335.5 
Shareholders’ equity attributable to shareholders of Fairfax12,936.3 14,378.1 
Non-controlling interests3,450.1 3,529.1 
Total equity16,386.4 17,907.2 
71,340.5 70,508.5 





See accompanying notes.
2



CONSOLIDATED STATEMENTS OF EARNINGS
for the three and nine months ended September 30, 2020 and 2019
(unaudited - US$ millions except per share amounts)

Third quarterFirst nine months
Notes 
2020201920202019
Income
Gross premiums written174,743.2 4,211.6 14,221.6 13,273.6 
Net premiums written173,735.2 3,318.3 11,137.1 10,614.1 
Gross premiums earned4,632.4 4,159.1 13,107.7 12,341.3 
Premiums ceded to reinsurers(1,060.6)(893.6)(2,814.6)(2,394.0)
Net premiums earned173,571.8 3,265.5 10,293.1 9,947.3 
Interest and dividends181.8 214.9 604.7 672.4 
Share of profit (loss) of associates650.8 149.6 (177.5)415.1 
Net gains (losses) on investments5(27.3)(96.7)(922.7)1,075.8 
Gain on deconsolidation of insurance subsidiary15— — 117.1 — 
Other revenue171,215.5 1,392.6 3,302.1 3,889.2 
4,992.6 4,925.9 13,216.8 15,999.8 
Expenses
Losses on claims, gross82,961.2 2,600.1 8,713.7 8,283.3 
Losses on claims, ceded to reinsurers(594.9)(488.5)(1,894.4)(1,759.0)
Losses on claims, net182,366.3 2,111.6 6,819.3 6,524.3 
Operating expenses18617.2 609.3 1,893.7 1,821.6 
Commissions, net9616.6 560.8 1,734.3 1,624.8 
Interest expense10120.9 121.5 358.8 355.0 
Other expenses17, 181,192.1 1,452.8 3,403.8 3,880.5 
4,913.1 4,856.0 14,209.9 14,206.2 
Earnings (loss) before income taxes79.5 69.9 (993.1)1,793.6 
Provision for (recovery of) income taxes1337.7 (4.5)(72.1)325.1 
Net earnings (loss)41.8 74.4 (921.0)1,468.5 
Attributable to:
Shareholders of Fairfax133.7 68.6 (690.7)1,332.1 
Non-controlling interests(91.9)5.8 (230.3)136.4 
41.8 74.4 (921.0)1,468.5 
Net earnings (loss) per share12$4.66 $2.13 $(27.27)$48.20 
Net earnings (loss) per diluted share12$4.44 $2.04 $(27.27)$46.23 
Cash dividends paid per share$— $— $10.00 $10.00 
Shares outstanding (000) (weighted average)
1226,306 26,851 26,532 26,926 





















See accompanying notes.
3



CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
for the three and nine months ended September 30, 2020 and 2019
(unaudited – US$ millions)

Third quarterFirst nine months
Notes 2020201920202019
Net earnings (loss)41.8 74.4 (921.0)1,468.5 
Other comprehensive income (loss), net of income taxes
Items that may be reclassified to net earnings (loss)
Net unrealized foreign currency translation gains (losses) on foreign operations88.5 (182.2)(370.9)(31.8)
Gains (losses) on hedge of net investment in Canadian subsidiaries(40.2)27.9 63.1 (61.2)
Gains (losses) on hedge of net investment in European operations7(36.6)13.5 (38.2)(26.3)
Share of other comprehensive income (loss) of associates, excluding net gains on defined benefit plans89.9 (50.9)1.0 (61.9)
Net unrealized foreign currency translation losses reclassified to net earnings (loss)15— — 161.9 — 
101.6 (191.7)(183.1)(181.2)
Items that will not be reclassified to net earnings (loss)
Net losses on defined benefit plans(1.3)— (28.4)— 
Share of net gains on defined benefit plans of associates3.1 6.7 14.3 25.2 
1.8 6.7 (14.1)25.2 
Other comprehensive income (loss), net of income taxes
103.4 (185.0)(197.2)(156.0)
Comprehensive income (loss)145.2 (110.6)(1,118.2)1,312.5 
Attributable to:
Shareholders of Fairfax198.3 (49.7)(797.3)1,219.4 
Non-controlling interests(53.1)(60.9)(320.9)93.1 
145.2 (110.6)(1,118.2)1,312.5 



Third quarterFirst nine months
 2020201920202019
Income tax (expense) recovery included in other comprehensive income (loss)
Income tax on items that may be reclassified to net earnings (loss)
Net unrealized foreign currency translation gains (losses) on foreign operations2.0 (2.8)8.7 (4.1)
Net unrealized foreign currency translation losses reclassified to net earnings (loss)— — 0.4 — 
Share of other comprehensive income (loss) of associates, excluding net gains on defined benefit plans(8.5)5.0 (4.2)5.7 
(6.5)2.2 4.9 1.6 
Income tax on items that will not be reclassified to net earnings (loss)
Net losses on defined benefit plans0.5 — 10.5 — 
Share of net gains on defined benefit plans of associates(0.7)(1.1)(2.3)(4.3)
(0.2)(1.1)8.2 (4.3)
Total income tax (expense) recovery(6.7)1.1 13.1 (2.7)










See accompanying notes.
4



CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
for the nine months ended September 30, 2020 and 2019
(unaudited - US$ millions)

Common shares(1)
Treasury shares at costShare-based payments and other reservesRetained earningsAccumulated other comprehensive income (loss)
Common shareholders’
equity
Preferred sharesEquity attributable to shareholders of FairfaxNon-controlling interestsTotal equity
Balance as of January 1, 20206,797.2 (661.1)239.0 7,379.2 (711.7)13,042.6 1,335.5 14,378.1 3,529.1 17,907.2 
Net loss for the period— — — (690.7)— (690.7)— (690.7)(230.3)(921.0)
Other comprehensive income (loss), net of income taxes:
Net unrealized foreign currency translation losses on foreign operations— — — — (292.9)(292.9)— (292.9)(78.0)(370.9)
Gains on hedge of net investment in Canadian subsidiaries— — — — 63.1 63.1 — 63.1 — 63.1 
Losses on hedge of net investment in European operations— — — — (38.2)(38.2)— (38.2)— (38.2)
Share of other comprehensive income (loss) of associates, excluding net gains (losses) on defined benefit plans— — — — 11.8 11.8 — 11.8 (10.8)1.0 
Net unrealized foreign currency translation losses reclassified to net loss (note 15)— — — — 161.9 161.9 — 161.9 — 161.9 
Net losses on defined benefit plans— — — — (27.8)(27.8)— (27.8)(0.6)(28.4)
Share of net gains (losses) on defined benefit plans of associates— — — — 15.5 15.5 — 15.5 (1.2)14.3 
Issuances for share-based payments— 54.6 (58.8)— — (4.2)— (4.2)(0.3)(4.5)
Purchases and amortization for share-based payments— (132.3)65.6 — — (66.7)— (66.7)4.9 (61.8)
Purchases for cancellation(72.6)— — (14.3)— (86.9)— (86.9)— (86.9)
Common share dividends— — — (275.7)— (275.7)— (275.7)(158.2)(433.9)
Preferred share dividends— — — (32.9)— (32.9)— (32.9)— (32.9)
Acquisition of subsidiary (note 15)— — — — — — — — 94.2 94.2 
Deconsolidation of subsidiary (note 15)— 9.5 (6.4)(57.8)28.0 (26.7)— (26.7)340.4 313.7 
Other net changes in capitalization (note 11)— — (0.4)(151.0)— (151.4)— (151.4)(39.1)(190.5)
Balance as of September 30, 20206,724.6 (729.3)239.0 6,156.8 (790.3)11,600.8 1,335.5 12,936.3 3,450.1 16,386.4 
Balance as of January 1, 20196,859.0 (587.5)208.9 5,864.2 (565.3)11,779.3 1,335.5 13,114.8 4,250.4 17,365.2 
Net earnings for the period— — — 1,332.1 — 1,332.1 — 1,332.1 136.4 1,468.5 
Other comprehensive income (loss), net of income taxes:
Net unrealized foreign currency translation losses on foreign operations— — — — (7.6)(7.6)— (7.6)(24.2)(31.8)
Losses on hedge of net investment in Canadian subsidiaries— — — — (61.2)(61.2)— (61.2)— (61.2)
Losses on hedge of net investment in European operations— — — — (26.3)(26.3)— (26.3)— (26.3)
Share of other comprehensive loss of associates, excluding net gains (losses) on defined benefit plans— — — — (43.6)(43.6)— (43.6)(18.3)(61.9)
Share of net gains (losses) on defined benefit plans of associates— — — — 26.0 26.0 — 26.0 (0.8)25.2 
Issuances for share-based payments— 26.9 (30.2)— — (3.3)— (3.3)— (3.3)
Purchases and amortization for share-based payments— (104.3)55.4 — — (48.9)— (48.9)3.9 (45.0)
Purchases for cancellation(61.8)— — (56.2)— (118.0)— (118.0)— (118.0)
Common share dividends— — — (278.0)— (278.0)— (278.0)(166.8)(444.8)
Preferred share dividends— — — (34.2)— (34.2)— (34.2)— (34.2)
Acquisitions of subsidiaries— — — — — — — — 145.8 145.8 
Deconsolidation of subsidiary— — — — — — — — (466.2)(466.2)
Other net changes in capitalization— — (5.7)(93.4)— (99.1)— (99.1)29.0 (70.1)
Balance as of September 30, 20196,797.2 (664.9)228.4 6,734.5 (678.0)12,417.2 1,335.5 13,752.7 3,889.2 17,641.9 
(1)    Includes multiple voting shares with a carrying value of $3.8 at January 1, 2019, September 30, 2019, January 1, 2020 and September 30, 2020.













See accompanying notes.
5



CONSOLIDATED STATEMENTS OF CASH FLOWS
for the three and nine months ended September 30, 2020 and 2019
(unaudited - US$ millions)

Third quarterFirst nine months
Notes2020201920202019
Operating activities
Net earnings (loss)41.8 74.4 (921.0)1,468.5 
Depreciation, amortization and impairment charges18159.4 185.7 548.6 459.4 
Net bond discount amortization(3.7)(47.2)(25.3)(101.1)
Amortization of share-based payment awards21.6 19.1 65.6 55.4 
Share of (profit) loss of associates6(50.8)(149.6)177.5 (415.1)
Deferred income taxes13(47.3)(51.1)(207.0)180.2 
Net (gains) losses on investments5, 1527.2 96.4 925.0 (1,068.2)
Gain on deconsolidation of insurance subsidiary15— — (117.1)— 
Loss on repurchase of borrowings10— 23.7 — 23.7 
Net (increase) decrease in fair value of investment property50.1 0.3 (2.3)(7.6)
Net purchases of securities classified at FVTPL19(846.3)(126.1)(1,698.1)(1,068.3)
Changes in operating assets and liabilities1,010.3 690.2 1,588.5 1,197.7 
Cash provided by operating activities312.3 715.8 334.4 724.6 
Investing activities
Sales of investments in associates674.4 14.3 106.4 249.8 
Purchases of investments in associates6(2.2)(111.7)(15.6)(529.3)
Net purchases of premises and equipment and intangible assets(86.9)(99.7)(226.3)(221.9)
Net purchases of investment property5(0.1)(4.8)(2.2)(175.8)
Purchases of subsidiaries, net of cash acquired— (16.2)— (211.7)
Deconsolidation of subsidiary, net of cash divested15— — 221.7 (41.6)
Cash provided by (used in) investing activities(14.8)(218.1)84.0 (930.5)
Financing activities
Borrowings - holding company and insurance and reinsurance companies:10
Proceeds, net of issuance costs— — 645.0 456.5 
Repayments— (326.7)(0.2)(326.7)
     Net borrowings (repayments) on revolving credit facilities(228.0)(5.0)742.0 614.1 
Borrowings - non-insurance companies:10
Proceeds, net of issuance costs18.1 2.0 74.9 269.1 
Repayments(20.6)(3.6)(61.4)(271.9)
Net borrowings (repayments) on revolving credit facilities and short term loans(132.1)94.9 74.6 86.7 
Principal payments on lease liabilities - holding company and insurance and reinsurance companies(15.8)(17.5)(46.9)(41.0)
Principal payments on lease liabilities - non-insurance companies(42.6)(41.6)(123.9)(121.6)
Subordinate voting shares:11
Purchases for treasury(12.1)(29.8)(132.3)(104.3)
Purchases for cancellation(19.9)— (86.9)(118.0)
Common share dividends— — (275.7)(278.0)
Preferred share dividends(11.0)(11.4)(32.9)(34.2)
Subsidiary shares:
Issuances to non-controlling interests, net of issuance costs— 1.4 — 43.2 
Purchases of non-controlling interests11(223.0)(85.5)(244.6)(122.2)
Sales to non-controlling interests— — — 1.3 
Dividends paid to non-controlling interests11(5.1)(7.3)(158.2)(188.7)
Cash provided by (used in) financing activities(692.1)(430.1)373.5 (135.7)
Increase (decrease) in cash and cash equivalents(394.6)67.6 791.9 (341.6)
Cash and cash equivalents – beginning of period4,975.3 4,159.2 3,863.3 4,536.9 
Foreign currency translation52.3 (37.2)(22.2)(5.7)
Cash and cash equivalents – end of period194,633.0 4,189.6 4,633.0 4,189.6 

See accompanying notes.
6


Index to Notes to Interim Consolidated Financial Statements
7


Notes to Interim Consolidated Financial Statements
for the three and nine months ended September 30, 2020 and 2019
(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 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 and nine months ended September 30, 2020 have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) 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 as issued by the IASB 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, 2019, which have been prepared in accordance with IFRS as issued by the IASB. These interim consolidated financial statements have been prepared on a historical cost basis, except for derivative financial instruments, investment property and fair value through profit and loss (“FVTPL”) financial assets and liabilities that have been measured at fair value, and non-current assets and disposal groups held for sale that have been measured at the lower of carrying value and fair value less costs to sell.
These interim consolidated financial statements were approved for issue by the company’s Board of Directors on October 29, 2020.
3.    Summary of Significant 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, 2019, prepared in accordance with IFRS as issued by the IASB. Those policies and methods of computation have been consistently applied to all periods presented except as described below.

New accounting pronouncements adopted in 2020

COVID-19-related Rent Concessions (Amendment to IFRS 16)
On May 28, 2020 the IASB issued an amendment to IFRS 16 Leases to provide an optional practical expedient for lessees so that rent concessions received as a direct consequence of the COVID-19 pandemic do not have to be accounted for as lease modifications under IFRS 16. Early adoption of the amendment on April 1, 2020 in accordance with the applicable transition provisions did not have a significant impact on the company's consolidated financial statements.

Conceptual Framework for Financial Reporting ("Conceptual Framework")
The revised Conceptual Framework includes revised definitions of an asset and a liability as well as new guidance on measurement, derecognition, presentation and disclosure. It does not constitute an accounting pronouncement and did not result in any immediate change to IFRS, and will be used by the IASB and IFRS Interpretations Committee in setting future standards. Adoption of the revised Conceptual Framework on January 1, 2020 did not have an impact on the company's consolidated financial statements. The revised Conceptual Framework will apply when the company has to develop an accounting policy for an issue not addressed by IFRS.

Definition of a Business (Amendments to IFRS 3)
The amendments to IFRS 3 Business Combinations narrow the definition of a business and clarify the distinction between a business combination and an asset acquisition. Prospective adoption of these amendments on January 1, 2020 did not have a significant impact on the company's consolidated financial statements.

Definition of Material (Amendments to IAS 1 and IAS 8)
The amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors clarify the definition of "material". Prospective adoption of these amendments on January 1, 2020 did not have a significant impact on the company's consolidated financial statements.

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New accounting pronouncements issued but not yet effective

During the first nine months of 2020 the IASB issued the following amendments: Interest Rate Benchmark Reform — Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16), effective January 1, 2021; and Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37), Reference to the Conceptual Framework (Amendments to IFRS 3), and Annual Improvements to IFRS Standards 2018–2020, which are effective January 1, 2022. The IASB also deferred the effective date of Classification of Liabilities as Current or Non-current (Amendments to IAS 1) to January 1, 2023. The company is currently evaluating the expected impact of these pronouncements on its consolidated financial statements.

IFRS 17 Insurance Contracts ("IFRS 17")
On May 18, 2017 the IASB issued IFRS 17, a comprehensive standard that provides guidance on the recognition, measurement, presentation and disclosure of insurance contracts. IFRS 17 requires entities to measure insurance contract liabilities at their current estimates of fulfillment cash flows using one of three approaches and to discount loss reserves. On June 25, 2020 the IASB issued amendments to IFRS 17 that included targeted improvements and the deferral of the effective date to January 1, 2023. The company’s adoption of IFRS 17 continues to focus on analyzing available accounting policies and implementing information technology systems and processes.

Comparatives

At December 31, 2019 the company had accounted for its 30.5% equity interest in Eurobank Ergasias Services & Holdings S.A. (“Eurobank”), a financial services provider in Greece listed on the Athens Stock Exchange, as a common stock at fair value through profit and loss on the consolidated balance sheet, with an additional 1.9% equity interest included in assets held for sale. Classification as a common stock was principally due to having judged the Hellenic Financial Stability Fund, a Greek regulatory entity with a minority shareholding in Eurobank, as holding certain veto rights that precluded the company from exercising significant influence from December 19, 2019 when regulatory restrictions on the company's voting rights in Eurobank were removed.

During the first quarter of 2020 the company concluded that it obtained significant influence over Eurobank on December 19, 2019 upon becoming able to exercise its full voting rights and corrected its accounting by revising the comparatives to apply the equity method of accounting to its investment in Eurobank for the last thirteen days of its fiscal year ended December 31, 2019. As the previously reported carrying value of Eurobank at December 31, 2019 of $1,164.4 was not significantly different from that which would have been reported under the equity method of accounting, the company reclassified its investment in Eurobank from holding company cash and investments of $123.4 and common stocks of $1,041.0 to investments in associates on the consolidated balance sheet at December 31, 2019. Accordingly, comparatives at December 31, 2019 in the notes to these interim consolidated financial statements also reflect that revision.

4.    Critical Accounting Estimates and Judgments
In the preparation of the company's interim consolidated financial statements, management has made a number of critical estimates and judgments in the preparation of notes 5, 6, 8, 13, 14 and 15 in a manner consistent with those described in the company's annual consolidated financial statements for the year ended December 31, 2019. The broad effects of the COVID-19 pandemic on the company are described in note 16 and the effects on the company's development of critical estimates during the third quarter and first nine months of 2020 are described below.

Determination of fair value for financial instruments classified as Level 3
Fair values for substantially all of the company's financial instruments are measured using market or income approaches. Considerable judgment may be required in developing estimates of fair value, particularly for financial instruments classified as Level 3 in the fair value hierarchy as such estimates incorporate unobservable inputs that require management to use its own assumptions. While the company's valuation techniques for Level 3 financial instruments remained unchanged during the third quarter and first nine months of 2020, the development of unobservable inputs included added estimation uncertainty due to the global economic disruption caused by the ongoing COVID-19 pandemic. Estimates of the amount and timing of future cash flows, discount rates, growth rates and other inputs incorporated into fair value measurements of Level 3 financial instruments are inherently more difficult to determine due to the unpredictable duration and impacts of the COVID-19 pandemic, including further actions that may be taken by governments to contain it and the timing of the re-opening of the economy in various parts of the world. The company has assumed that the economic impacts of COVID-19 will remain for the duration of government mandated restrictions by jurisdiction as currently known, with gradual lifting of those restrictions. The uncertainty in those assumptions have been incorporated into the company's valuations of Level 3 financial instruments primarily through wider credit spreads and higher discount rates, as applicable, compared to those applied at December 31, 2019. There were no significant changes to the assumptions applied during the third quarter of 2020 compared to those in the second quarter of 2020. See note 5 for details of the company's Level 3 financial instruments. Additional
9


volatility in the fair values of Level 3 financial instruments may arise in future periods if actual results differ materially from the company's estimates.
Determination of recoverable amounts for goodwill, indefinite-lived intangible assets and investments in associates
Goodwill and indefinite-lived intangible assets are assessed annually for impairment, or more frequently if there are indicators of impairment, by comparing the carrying value of the cash-generating unit (‘‘CGU’’) or group of CGUs to which these assets are allocated to their recoverable amounts. The company typically uses discounted cash flows to estimate the recoverable amount of a CGU or group of CGUs to which goodwill or indefinite-lived intangible assets have been allocated. Discounted cash flows are also used to estimate the recoverable amount of investments in associates that are based on a value-in-use model.

During the first six months of 2020 the company performed impairment assessments for goodwill, indefinite-lived intangible assets and investments in associates related to non-insurance sectors more significantly impacted by COVID-19. Impairment assessments were performed again in the third quarter of 2020 for the affected investments in associates as described in note 6. The analyses in the first nine months of 2020 were performed based on current market conditions, which included added estimation uncertainty in determining discounted cash flows and the underlying assumptions about discount rates, working capital requirements and other inputs, due to the unpredictable duration and impacts of the COVID-19 pandemic as described in the preceding paragraph. The company assumed that the economic impacts of COVID-19 will remain for the duration of government mandated restrictions by jurisdiction as currently known, with gradual lifting of those restrictions. The uncertainty in those assumptions were incorporated into the company's discounted cash flows used to determine recoverable amounts primarily through higher discount rates compared to those applied at December 31, 2019.

During the first six months of 2020 the company had concluded there were no significant impairments of its non-insurance goodwill and indefinite-lived intangible assets. During the third quarter of 2020 the company assessed those goodwill and indefinite-lived intangible assets for changes to indicators of impairment compared to the second quarter of 2020, determined there were no significant changes, and concluded that there were no significant impairments during the third quarter of 2020.

Additional volatility in the recoverable amounts of goodwill, indefinite-lived intangible assets and investments in associates may arise in future periods if actual results differ materially from the company's estimates.



10


5.    Cash and Investments
Presented in the table below are holding company cash and investments and portfolio investments, net of short sale and derivative obligations, all of which are classified at FVTPL except for investments in associates and other invested assets.
September 30, 2020December 31, 2019
Holding company
Cash and cash equivalents(1)
133.9 183.9 
Short term investments387.6 128.3 
Bonds398.1 395.9 
Preferred stocks4.5 4.7 
Common stocks(2)
74.7 173.5 
Derivatives (note 7)50.3 83.7 
1,049.1 970.0 
Assets pledged for short sale and derivative obligations:
Short term investments102.3 2.8 
Bonds1.6 2.7 
103.9 5.5 
Holding company cash and investments as presented on the consolidated balance sheet1,153.0 975.5 
Short sale and derivative obligations (note 7)(57.1)(0.3)
1,095.9 975.2 
Portfolio investments
Cash and cash equivalents(1)
5,016.7 3,954.5 
Short term investments6,369.9 6,066.8 
Bonds16,464.1 15,618.1 
Preferred stocks582.9 578.2 
Common stocks(2)
3,910.6 4,246.6 
Investments in associates (notes 3 and 6)4,792.5 4,360.2 
Derivatives (note 7)143.0 202.7 
Other invested assets(3)
555.7 556.4 
37,835.4 35,583.5 
Assets pledged for short sale and derivative obligations:
Short term investments139.7 72.4 
Bonds55.1 74.5 
194.8 146.9 
Fairfax India cash, portfolio investments and associates:
Cash and cash equivalents(1)
95.6 104.7 
Bonds45.3 124.1 
Common stocks351.1 359.7 
Investments in associates (note 6)1,320.0 1,391.3 
1,812.0 1,979.8 
Fairfax Africa cash, portfolio investments and associates:(4)
Cash and cash equivalents(1)
— 86.2 
Short term investments— 104.0 
Bonds— 100.1 
Investments in associates (note 6)23.3 232.9 
Derivatives (note 7)— 1.6 
23.3 524.8 
Portfolio investments as presented on the consolidated balance sheet39,865.5 38,235.0 
Short sale and derivative obligations (note 7)(152.4)(205.6)
39,713.1 38,029.4 
Total investments, net of short sale and derivative obligations40,809.0 39,004.6 
(1)    Includes aggregate restricted cash and cash equivalents at September 30, 2020 of $698.4 (December 31, 2019 - $691.5). See note 19.
(2)    Includes aggregate investments in limited partnerships with a carrying value at September 30, 2020 of $1,734.3 (December 31, 2019 - $2,056.8).
(3)    Comprised primarily of investment property.
(4)    Fairfax Africa's assets, with the exception of its equity accounted investment in Atlas Mara, were included in assets held for sale on the consolidated balance sheet at September 30, 2020 pursuant to the transaction described in note 15.
11


Fixed Income Maturity Profile
Bonds are summarized by their earliest contractual maturity date in the table below. Actual maturities may differ from maturities shown below due to the existence of call and put features. At September 30, 2020 bonds containing call, put and both call and put features represented $6,966.5, $1.2 and $1,050.8 respectively (December 31, 2019 - $3,415.4, $2.6 and $952.7) of the total fair value of bonds. The table below does not reflect the impact of U.S. treasury bond forward contracts with a notional amount at September 30, 2020 of $341.1 (December 31, 2019 - $846.5) that economically hedge the company's exposure to interest rate risk as described in note 7. The decrease in the company's holdings of bonds due in 1 year or less was primarily due to net sales and maturities of short-dated U.S. treasury and Canadian government bonds for net proceeds of $1,821.0 and $517.9 respectively. Those proceeds were primarily reinvested into $2,016.0 of short to mid-dated high quality U.S. corporate bonds which increased the company's holdings of bonds due after 1 year through 5 years. The decrease in the company's holdings of bonds due after 10 years was primarily due to net sales of India government bonds which have earned the company a return of 8.9% since inception, including the impact of foreign exchange.
September 30, 2020December 31, 2019
Amortized cost(1)
Fair value(1)
Amortized cost(2)
Fair value(2)
Due in 1 year or less5,462.2 5,418.3 8,158.1 8,206.3 
Due after 1 year through 5 years9,514.1 10,025.2 5,872.8 5,980.8 
Due after 5 years through 10 years943.4 1,016.4 1,227.6 1,242.3 
Due after 10 years413.0 504.3 784.9 886.0 
16,332.7 16,964.2 16,043.4 16,315.4 
(1)    Includes bonds held by the holding company and Fairfax India. At September 30, 2020 Fairfax Africa's bonds were included in assets held for sale on the consolidated balance sheet pursuant to the transaction described in note 15.
(2)    Includes bonds held by the holding company, Fairfax India and Fairfax Africa.
12


Fair Value Disclosures
The company’s use of quoted market prices (Level 1), valuation models with significant observable market information as inputs (Level 2) and valuation models with significant unobservable information as inputs (Level 3) in the valuation of securities and derivative contracts by type of issuer was as follows:
September 30, 2020December 31, 2019
Quoted
prices
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Total fair
value
asset
(liability)
Quoted
prices
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Total fair
value
asset
(liability)
Cash and cash equivalents(1)
5,246.2 — — 5,246.2 4,329.3 — — 4,329.3 
Short term investments:
Canadian government550.4 — — 550.4 373.9 — — 373.9 
Canadian provincials692.0 — — 692.0 755.3 — — 755.3 
U.S. treasury4,481.1 — — 4,481.1 3,154.4 — — 3,154.4 
Other government118.9 145.6 — 264.5 220.6 155.2 — 375.8 
Corporate and other— 1,011.5 — 1,011.5 — 1,714.9 — 1,714.9 
5,842.4 1,157.1 — 6,999.5 4,504.2 1,870.1 — 6,374.3 
Bonds:
Canadian government— 141.9 — 141.9 — 664.4 — 664.4 
Canadian provincials— 50.7 — 50.7 — 2.9 — 2.9 
U.S. treasury— 3,830.1 — 3,830.1 — 5,610.8 — 5,610.8 
U.S. states and municipalities— 353.7 — 353.7 — 216.5 — 216.5 
Other government— 1,057.1 — 1,057.1 — 1,656.0 — 1,656.0 
Corporate and other— 10,061.6 1,469.1 11,530.7 — 6,744.7 1,420.1 8,164.8 
— 15,495.1 1,469.1 16,964.2 — 14,895.3 1,420.1 16,315.4 
Preferred stocks:
Canadian— 9.6 83.7 93.3 — 8.4 82.5 90.9 
U.S.��� — 17.0 17.0 — — 5.0 5.0 
Other(2)
8.1 — 469.0 477.1 5.3 — 481.7 487.0 
8.1 9.6 569.7 587.4 5.3 8.4 569.2 582.9 
Common stocks:
Canadian532.6 82.6 158.3 773.5 577.9 103.7 114.8 796.4 
U.S.361.7 28.5 968.9 1,359.1 360.6 33.2 1,029.3 1,423.1 
Other(3)
1,079.0 318.9 805.9 2,203.8 1,125.1 397.8 1,037.4 2,560.3 
1,973.3 430.0 1,933.1 4,336.4 2,063.6 534.7 2,181.5 4,779.8 
Derivatives and other invested assets    0.3 83.2 665.5 749.0 — 80.1 764.3 844.4 
Short sale and derivative obligations (note 7)— (192.3)(17.2)(209.5)— (205.9)— (205.9)
Holding company cash and investments and portfolio investments measured at fair value13,070.3 16,982.7 4,620.2 34,673.2 10,902.4 17,182.7 4,935.1 33,020.2 
37.7 %49.0 %13.3 %100.0 %33.0%52.0 %15.0%100.0 %
Investments in associates (note 6)(3)(4)
2,095.4 16.5 4,080.6 6,192.5 3,147.3 19.4 4,034.2 7,200.9 
(1)    Includes restricted cash and cash equivalents at September 30, 2020 of $698.4 (December 31, 2019 - $691.5). See note 19.
(2)    Primarily comprised of the company’s investment in compulsory convertible preferred shares of Go Digit Infoworks Services Limited (‘‘Digit’’). The company also holds a 49.0% equity interest in Digit that is accounted for as an investment in associate.
(3)    The company has presented its investment in Eurobank of $1,164.4 at December 31, 2019 as an investment in associate whereas it was previously presented as a Level 1 common stock as described in note 3.
(4)    The fair value of investments in associates is presented separately as such investments are measured using the equity method of accounting.
Valuation techniques and processes at September 30, 2020 included additional considerations related to the COVID-19 pandemic as described in note 4, with no other significant changes compared to the valuation techniques and processes described in the Summary of Significant Accounting Policies in the company's consolidated financial statements for the year ended December 31, 2019.

13


Certain limited partnerships included in common stocks in the table above are classified as Level 3 because their net asset values are unobservable or because they contractually require greater than three months to liquidate or redeem. During the first nine months of 2020 and 2019 there were no significant transfers of financial instruments between Level 1 and Level 2, and there were no significant transfers of financial instruments in or out of Level 3 as a result of changes in the observability of valuation inputs except as described in the following table.
2020
Private placement debt securities(1)
Private company preferred
shares
Limited partnerships and other(2)(a)
Private equity funds(a)
Common sharesDerivatives
and other
invested
assets
Total 
Balance - January 11,420.1 569.2 1,846.7 129.2 205.6 764.3 4,935.1 
Net realized and unrealized gains (losses) included in the consolidated statement of earnings(34.6)(19.0)(47.2)1.5 12.3 (149.9)(236.9)
Purchases856.1 20.7 186.5 — 4.3 50.2 1,117.8 
Transfer out of category due to change in accounting treatment(b)
(149.3)— — — — — (149.3)
Sales and distributions(467.1)— (349.4)(18.8)(7.2)(6.2)(848.7)
Transfer out of category— — (22.2)— — — (22.2)
Unrealized foreign currency translation gains (losses) on foreign operations included in other comprehensive income (loss)(9.5)(1.2)(4.7)(1.5)(2.0)(9.4)(28.3)
Assets held for sale (note 15)(146.6)— — — — (0.7)(147.3)
Balance - September 301,469.1 569.7 1,609.7 110.4 213.0 648.3 4,620.2 
2019
Private placement debt securities(1)
Private company preferred
shares
Limited partnerships and other(2)(a)
Private equity funds(a)
Common sharesDerivatives
and other
invested
assets
Total 
Balance - January 11,992.9 255.7 1,810.7 170.0 668.0 476.7 5,374.0 
Net realized and unrealized gains (losses) included in the consolidated statement of earnings(166.4)19.8 100.2 (0.7)127.9 118.0 198.8 
Purchases256.0 48.2 160.6 — 11.3 184.3 660.4 
Transfer out of category— — (39.0)— (574.3)(c)— (613.3)
Sales and distributions(367.7)(108.7)(d)(173.6)(10.0)(47.6)(109.2)(816.8)
Unrealized foreign currency translation gains on foreign operations included in other comprehensive income (loss)12.6 1.5 0.8 2.2 1.8 0.8 19.7 
Balance - September 301,727.4 216.5 1,859.7 161.5 187.1 670.6 4,822.8 
(a)    Included in common stocks in the fair value hierarchy table presented on the previous page and in holding company cash and investments or common stocks on the consolidated balance sheets.
(b)     On July 1, 2020 the company commenced consolidating Farmers Edge as described in note 6, which included the elimination of its investment in Farmers Edge convertible debentures.
(c)     During the first nine months of 2019 the company's investment in ICICI Lombard common stock was transferred from Level 3 to Level 1 as the Indian regulatory selling restriction placed on the company's holdings was removed. Accordingly, the company ceased applying a discount for lack of marketability (an unobservable key valuation input) to the traded market price of those holdings.
(d)     On April 17, 2019 the company derecognized its investment in AGT preferred shares of $108.7 pursuant to the acquisition of AGT.
(1)    Certain private placement debt securities are valued using industry accepted discounted cash flow models that incorporate unobservable credit spreads of the issuers. At September 30, 2020 there were 9 such investments, with an aggregate fair value of $650.6 and the largest being $319.1 (December 31, 2019 - 16 such investments, with an aggregate fair value of $1,051.0 and the largest being $442.1). By increasing (decreasing) the credit spreads by 100 basis points at September 30, 2020, the fair value of these private placement debt securities would collectively decrease by $15.4 (increase by $16.4).
(2)    Limited partnerships and other are investment funds that invest in a diverse range of industries and geographies. These investment funds were valued primarily based on net asset value statements provided by third party fund managers and general partners. The fair values in those statements are determined using quoted prices of the underlying assets, and to a lesser extent, observable inputs where available and unobservable inputs, in conjunction with industry accepted valuation models, where required. In some instances, such investments are classified as Level 3 if they require at least three months’ notice to liquidate or redeem. At September 30, 2020 limited partnerships and other consisted of 51 investments, the three largest being $264.6 (beverage manufacturing), $125.0 (oil and gas extraction) and $107.7 (primarily household appliance manufacturing) (December 31, 2019 - 49 investments, the three largest being $482.3 (beverage manufacturing), $128.9 (primarily household appliance manufacturing) and $128.3 (industrials)).

14


Net gains (losses) on investments
Third quarter
20202019
Net realized gains
(losses)
Net change in unrealized gains (losses)Net gains (losses) on investmentsNet
realized gains
(losses)
Net change in unrealized gains (losses)Net gains (losses) on investments
Bonds3.9 69.4 73.3 14.3 27.4 41.7 
Preferred stocks— 8.8 8.8 — (4.2)(4.2)
Common stocks(14.4)127.1 112.7 166.4 (125.4)41.0 
(10.5)205.3 194.8 180.7 (102.2)78.5 
Derivatives:
Common stock and equity index short positions(152.9)(2)(15.3)(168.2)(6.1)(2)(9.2)(15.3)
Common stock and equity index long positions48.9 (2)(58.6)(9.7)8.2 (2)(16.4)(8.2)
Equity warrant forward contracts— — — 3.6 (3)(8.4)(3)(4.8)
Equity warrants and options— 24.5 (3)24.5 — 7.7 (3)7.7 
CPI-linked derivatives(42.2)33.9 (8.3)— 13.1 13.1 
U.S. treasury bond forwards(54.2)53.0 (1.2)(73.4)23.3 (50.1)
Other3.5 (0.3)3.2 — (3)(24.9)(3)(24.9)
(196.9)37.2 (159.7)(67.7)(14.8)(82.5)
Foreign currency net gains (losses) on:
Investing activities0.9 73.3 74.2 (4)5.0 (63.2)(58.2)
Underwriting activities(1.9)— (1.9)2.8 — 2.8 
Foreign currency contracts31.0 (19.8)11.2 (82.6)47.2 (35.4)
30.0 53.5 83.5 (74.8)(16.0)(90.8)
Disposition of associates21.4 — 21.4 (6)0.8 — 0.8 
Non-insurance subsidiary held for sale— (164.0)(164.0)(7)— — — 
Other(8.8)5.5 (3.3)11.4 (14.1)(2.7)
Net gains (losses) on investments    
(164.8)137.5 (27.3)50.4 (147.1)(96.7)

First nine months
20202019
Net realized gains (losses)(1)
Net change in unrealized gains (losses)Net gains (losses) on investmentsNet
realized gains
(losses)
Net change in unrealized gains (losses)Net gains (losses) on investments
Bonds140.4 330.5 470.9 (264.6)(8)470.5 (8)205.9 
Preferred stocks— (0.9)(0.9)(23.4)42.6 19.2 
Common stocks224.6 (831.6)(607.0)335.2 (9)367.5 (9)702.7 
365.0 (502.0)(137.0)47.2 880.6 927.8 
Derivatives:
Common stock and equity index short positions(438.1)(2)47.5 (390.6)127.1 (2)(15.4)111.7 
Common stock and equity index long positions80.8 (2)(41.8)39.0 (53.5)(2)39.4 (14.1)
Equity warrant forward contracts— 

— 

— 103.6 (3)(38.4)(3)65.2 
Equity warrants and options— (111.3)(3)(111.3)(4.7)55.3 (3)50.6  
CPI-linked derivatives(275.5)275.8 0.3 — 4.4 4.4 
U.S. treasury bond forwards(109.3)(1.4)(110.7)(147.8)39.1 (108.7)
Other18.1 (51.5)(33.4)23.0 (3)(107.2)(3)(84.2)
(724.0)117.3 (606.7)47.7 (22.8)24.9 
Foreign currency net gains (losses) on:
Investing activities(51.6)43.3 (8.3)(4)13.6 (55.3)(41.7)
Underwriting activities1.5 — 1.5 18.4 — 18.4 
Foreign currency contracts(10.5)(5.5)(16.0)(46.6)(10.1)(56.7)
(60.6)37.8 (22.8)(14.6)(65.4)(80.0)
Disposition of associates14.6 — 14.6 (5)(6)10.9 — 10.9 
Non-insurance subsidiaries held for sale or deconsolidated— (164.0)(164.0)(7)171.3 (10)— 171.3 
Other(17.2)10.4 (6.8)15.9 5.0 20.9 
Net gains (losses) on investments    
(422.2)(500.5)(922.7)278.4 797.4 1,075.8 
(1)     Amounts recorded in net realized gains (losses) in the first nine months of 2020 include net gains (losses) on investments that were disposed of pursuant to the deconsolidation of European Run-off on March 31, 2020 as described in note 15.
(2)     Amounts recorded in net realized gains (losses) include net gains (losses) on total return swaps where the counterparties are required to cash-settle monthly or quarterly the market value movement since the previous reset date notwithstanding that the total return swap positions remain open subsequent to the cash settlement.
(3)    Includes the Atlas (formerly Seaspan) $8.05 equity warrants, and forward contracts relating to commitments to purchase Tranche 2 warrants and debentures in January 2019.
(4)    Foreign currency net gains on investing activities in the third quarter of 2020 primarily related to the strengthening of the Canadian dollar and euro relative to the U.S. dollar. Foreign currency net losses on investing activities in the first nine months of 2020 primarily related to strengthening of the U.S. dollar relative to the Canadian dollar, Indian rupee and British pound.
(5)    On February 28, 2020 the company sold its investment in APR Energy to Atlas in an all-stock transaction as described in note 6.
(6)    On September 30, 2020 the company sold its investment in Davos Brands for cash proceeds of $58.6 and recorded a net realized gain of $19.3 as described in note 6.
(7)    Pursuant to a proposed transaction on July 10, 2020 Fairfax Africa was classified as held for sale which resulted in a non-cash loss of $164.0 as described in note 15.
15


(8)    On June 28, 2019 EXCO emerged from bankruptcy protection and settled the company's EXCO bonds with common shares, resulting in the company recording a net loss on investment of $179.3 (realized losses of $296.3, of which $117.0 was recorded as unrealized losses in prior years).
(9)    During the third quarter of 2019 the company sold a 5.0% equity interest in ICICI Lombard for gross proceeds of $361.4 and recorded net gains on investments in the third quarter and first nine months of 2019 of $39.5 and $114.0 (realized gains of $149.9, of which $110.4 and $35.9 were recorded as unrealized gains in prior quarters and prior years respectively). During the third quarter and first nine months of 2019 the company also recorded unrealized net gains on investments of $62.6 and $135.9 on its remaining 4.9% equity interest in ICICI Lombard. The aggregate net gain on investment of $102.1 recorded during the third quarter of 2019 primarily reflected to the removal of the discount for lack of marketability previously applied by the company to the traded market price of its ICICI Lombard common stock.
(10)    On May 17, 2019 the company deconsolidated Grivalia Properties upon its merger into Eurobank and recognized a non-cash gain of $171.3.

16


6.    Investments in Associates
Investments in associates and joint ventures were comprised as follows:
Share of profit (loss)
September 30, 2020December 31, 2019Third quarterFirst nine months
Owner-ship(a)
Fair value(b)
Carrying value
Owner-ship(a)(c)
Fair value(b)(c)
Carrying value(c)
2020201920202019
Insurance and reinsurance(2)
— 1,485.2 1,187.9 — 706.5 492.1 18.8 79.1 64.8 165.4 
Non-insurance(1)(3)
India
Bangalore International Airport Limited ("Bangalore Airport")54.0 %1,383.4 648.0 54.0 %1,429.8 689.3 (16.8)9.0 (18.9)21.1 
Quess Corp Limited ("Quess")33.2 %274.1 552.5 33.2 %332.1 704.1 0.4 1.8 (125.7)4.9 
IIFL Finance Limited ("IIFL Finance")29.9 %121.6 223.9 35.4 %221.4 223.6 0.5 62.2 12.1 197.1 
Sanmar Chemicals Group ("Sanmar")42.9 %335.1 138.5 42.9 %412.9 178.7 (13.9)— (39.1)— 
CSB Bank Limited ("CSB Bank")49.7 %221.7 158.7 49.7 %229.3 157.8 7.8 (4.8)8.2 (5.0)
IIFL Securities Limited ("IIFL Securities")35.4 %59.1 121.6 35.4 %65.0 121.1 2.3 0.7 7.1 0.7 
Seven Islands Shipping Limited ("Seven Islands")48.5 %91.7 93.2 48.5 %88.8 84.7 6.8 1.6 11.2 1.6 
Other— 42.4 31.2 — 24.3 32.1 0.1 (0.2)— (0.2)
2,529.1 1,967.6 2,803.6 2,191.4 (12.8)70.3 (145.1)220.2 
Africa
Atlas Mara Limited ("Atlas Mara")42.3 %23.3 23.3 42.4 %78.1 82.3 (13.5)(0.8)(30.3)(50.5)
AFGRI Holdings Proprietary Limited ("AFGRI")(4)
— — — 62.8 %141.0 79.6 (4.5)(4.5)(18.4)24.0 
Other(4)
— — — — 66.3 71.0 (7.8)(1.0)(12.7)(1.6)
23.3 23.3 285.4 232.9 (25.8)(6.3)(61.4)(28.1)
Agriculture
Astarta Holding N.V. ("Astarta")28.4 %31.0 79.4 27.4 %28.9 115.5 6.6 1.0 (24.2)(11.0)
Farmers Edge Inc. ("Farmers Edge")(5)
— — — 50.4 %43.8 41.0 — (9.7)(21.8)(29.4)
31.0 79.4 72.7 156.5 6.6 (8.7)(46.0)(40.4)
Real estate— 167.6 161.5 — 179.8 173.7 (3.9)(2.0)(8.7)53.7 
Other
Eurobank Ergasias Services & Holdings S.A. ("Eurobank")(6)
30.5 %499.4 1,136.5 30.5 %1,164.4 1,164.4 30.3 — 6.2 — 
Atlas Corp. ("Atlas", formerly Seaspan Corporation)(7)
36.6 %805.9 895.9 32.5 %994.5 626.9 19.4 6.4 97.6 96.7 
Resolute Forest Products Inc. ("Resolute")28.8 %110.7 165.9 27.7 %104.0 207.5 2.7 4.1 (74.3)11.6 
Partnerships, trusts and other(8)
— 540.3 517.8 — 890.0 739.0 15.5 6.7 (10.6)(64.0)
1,956.3 2,716.1 3,152.9 2,737.8 67.9 17.2 18.9 44.3 
4,707.3 4,947.9 6,494.4 5,492.3 32.0 70.5 (242.3)249.7 
6,192.5 6,135.8 7,200.9 5,984.4 50.8 149.6 (177.5)415.1 
As presented on the consolidated balance sheet:
Investments in associates3,970.3 4,792.5 4,521.7 4,360.2 
Fairfax India and Fairfax Africa investments in associates2,222.2 1,343.3 2,679.2 1,624.2 
6,192.5 6,135.8 7,200.9 5,984.4 
(a)    Ownership percentages include the effects of financial instruments that are considered in-substance equity.
(b)    See note 5 for fair value hierarchy information.
(c)    Excludes European Run-off's investments in associates and joint ventures with a carrying value of $368.8 and a fair value of $430.5 that were included in assets held for sale on the consolidated balance sheet at December 31, 2019 and principally comprised of investments in Gulf Insurance, Atlas (formerly Seaspan Corporation), APR Energy and Resolute.

Impairment assessments

(1)    At September 30, 2020 the company conducted impairment assessments of its non-insurance associates and joint ventures that had carrying values that exceeded their fair values as determined based on current market conditions affected by the COVID-19 pandemic. From those assessments the company concluded there were no impairments except as described below.

    For certain non-insurance associates and joint ventures where the market prices of their shares were lower than carrying value, the company performed a value-in-use analysis based on multi-year free cash flow projections. A non-cash impairment charge was recorded where the recoverable amount (higher of fair value and value-in-use) was determined to be lower than the carrying value. Key assumptions for significant value-in-use analyses are set out in the table that follows.
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September 30, 2020
Impairment recorded in 2020(a)
Source of free cash flow projections
Discount rate(b)
Long term growth rate(c)
Associate or joint ventureFair valueCarrying valueThird quarterFirst nine monthsSeptember 30, 2020December 31, 2019Summary of cash flow and other assumptions
Eurobank(d)
499.4 1,136.5 — — Internal estimates consistent with third party analyst reports9.8 %N/A1.5 %Growth in net interest, fee and commission income comparable to industry peers, and a gradual decline in provisions expense as non-performing exposures continue to decrease.
Atlas(d)
805.9 895.9 — — Internal estimates consistent with third party analyst reports9.8 %N/A2.0 %Annual capital expenditures reverting to replacement levels in the long term and working capital requirements remaining at historical levels.
Quess(d)
274.1 552.5 — (98.3)Quess management14.2 %12.8 %6.0 %Annual capital expenditures reverting to lower historical levels, working capital requirements comparable to industry peers and reduced cash taxes payable in the next eight years through utilization of existing tax incentives.
IIFL Finance121.6 223.9 — — IIFL Finance management17.5 %N/A3.0 %Growth in net interest income from a growing loan portfolio and a gradual decline in provisions expense that is comparable to industry peers.
Resolute110.7 165.9 — (56.5)Internal estimates consistent with third party analyst reports11.5 %10.3 %1.5 %Valuation of pension funding liability on a going concern basis, annual capital expenditures reverting to lower historical levels, working capital requirements comparable to industry peers and no significant cash taxes payable in the next four years through utilization of existing tax losses.
IIFL Securities59.1 121.6 — — IIFL Securities management13.0 %12.3 %6.0 %Annual capital expenditures normalizing to levels that are comparable to non-capital intensive service-based peers and working capital requirements comparable to industry peers.
All other112.6 133.7 (16.6)(72.9)
1,983.4 3,230.0 (16.6)(227.7)
(a)    Impairments are included in share of profit (loss) of associates in the consolidated statement of earnings. All other impairments of $16.6 and $72.9 recorded during the third quarter and first nine months of 2020 included non-cash impairment charges on Atlas Mara of $16.6 and $35.0, and Astarta of nil and $26.3. Impairments recorded on associates of $12.6 during the third quarter and first nine months of 2019 included a non-cash impairment charge on Astarta of $10.1.
(b)    The discount rate is representative of the cost of capital of industry peers.
(c)    The long term growth rate is consistent with growth expectations for the industry and the economies in which each associate or joint venture operates. Long term growth rates applied at September 30, 2020 remained unchanged from those at December 31, 2019 where applicable.
(d)    At September 30, 2020 the recoverable amounts of Eurobank, Atlas and Quess represented approximately 106%, 118% and 110% of their respective carrying values. At December 31, 2019 the recoverable amount of Quess represented approximately 109% of its carrying value and value-in-use analyses were not required for Eurobank and Atlas.

Insurance and reinsurance associates and joint ventures
(2)    On March 31, 2020 the company received a 60.0% joint venture interest with a fair value of $605.0 in RiverStone Barbados pursuant to its contribution of European Run-off to RiverStone Barbados as described in note 15.
Non-insurance associates and joint ventures
(3)    During the first nine months of 2020 the company recognized distributions and dividends of $64.4 (2019 - $621.1) from its non-insurance associates and joint ventures.
(4)    Fairfax Africa associates, with the exception of Atlas Mara, were included in assets held for sale on the consolidated balance sheet at September 30, 2020 pursuant to the transaction described in note 15.
(5)    On July 1, 2020 the company commenced consolidating Farmers Edge as the company held convertible debentures and warrants that, together with its holdings of common shares, represented a substantive potential voting interest of approximately 67%.
(6)    The carrying value and fair value of non-insurance associates at December 31, 2019 was revised to include the company's investment in Eurobank of $1,164.4 that was previously included in holding company cash and investments and common stocks on the company's consolidated balance sheet as described in note 3.
(7)    On February 27, 2020 Seaspan Corporation ("Seaspan") completed a reorganization pursuant to which Atlas Corp. ("Atlas"), a newly created holding company, became its parent. Shareholders of Seaspan, including the company, exchanged their Seaspan shares for Atlas shares with no change in ownership percentage. On February 28, 2020 Atlas acquired all issued and outstanding shares of APR Energy plc ("APR Energy") from the company and other APR Energy shareholders in an all-stock transaction at a deemed value of $388.3 (including certain Atlas shares reserved for holdback). Accordingly, the company derecognized its investment in APR Energy, recorded a pre-tax loss of $7.6, increased its equity accounted carrying value of Atlas by the fair value of the APR Energy shares exchanged (considered to be equal to the fair value of the newly issued Atlas common shares received of $178.1, which excludes the Atlas shares received by European Run-off of $45.9), and continued to apply the equity method of accounting to its investment in Atlas.
    On February 28, 2020 the company invested $100.0 in Atlas 5.50% unsecured debentures due March 1, 2027, which increased the company's aggregate investment in Atlas debentures to a principal amount of $575.0. At September 30, 2020 the company's holdings of Atlas debentures and warrants had fair values of $570.6 and $74.8 and were presented as bonds and derivatives respectively on the consolidated balance sheet.
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(8)    On September 30, 2020 the company sold its investment in Davos Brands for cash proceeds of $58.6 and recorded a net realized gain of $19.3 in the consolidated statement of earnings. The company and other former shareholders of Davos Brands are eligible to receive additional consideration contingent on the brand performance over the next ten years of Aviation American Gin, which is majority owned by Davos Brands.
7.    Short Sales and Derivatives
The following table summarizes the company’s derivative financial instruments:
September 30, 2020December 31, 2019
Notional
amount
Cost 
Fair value 
Notional
amount 
Cost Fair value 
Assets 
Liabilities 
Assets Liabilities 
Equity contracts:
Equity total return swaps – short positions265.8 — — 36.9 369.8 — — 84.6 
Equity total return swaps – long positions1,178.0 — 30.4 64.1 406.3 — 11.1 3.0 
Equity warrants and options(1)
629.2 100.3 82.2 5.4 528.1 114.8 200.3 — 
CPI-linked derivative contracts75,663.0 369.0 12.1 — 99,804.7 614.9 6.7 — 
U.S. treasury bond forward contracts341.1 — 3.0 2.3 846.5 — 3.9 1.7 
Foreign currency forward and swap contracts— — 26.8 70.7 — 1.8 55.3 114.5 
Foreign currency options— 102.3 4.3 — — 102.7 8.2 — 
Other derivative contracts— 57.1 34.5 30.1 — 3.4 2.5 2.1 
Total193.3 209.5 288.0 205.9 
(1)    Includes the company’s investment in Atlas (formerly Seaspan) $8.05 warrants with a fair value at September 30, 2020 of $74.8 (December 31, 2019 – $164.8). See note 6.
Derivative contracts entered into by the company, with limited exceptions, are considered investments or economic hedges and are not designated as hedges for financial reporting.
Equity contracts
The company may maintain short equity and equity index total return swaps for investment purposes that provide a return which is inverse to changes in the fair values of the underlying equity indexes and certain individual equities.
During the third quarter and first nine months of 2020 the company paid net cash of $152.9 and $438.1 (2019 - paid net cash of $6.1 and received net cash of $127.1) in connection with the reset provisions of its short equity total return swaps (excluding the impact of collateral requirements). During the third quarter and first nine months of 2020 the company closed out $90.2 and $494.6 notional amount of its short equity total return swaps and recorded net losses on investments of $36.2 and $176.7 (realized losses of $79.2 and $327.3, of which $43.0 and $150.6 was recorded as unrealized losses in prior quarters and prior years). During the third quarter and first nine months of 2020 the company did not initiate any short equity total return swaps. During the first nine months of 2019 the company closed out $89.9 notional amount of its short equity total return swaps and recorded net gains on investment of $30.3 (realized losses of $7.9, of which $38.2 was recorded as unrealized losses in prior years).
During the third quarter and first nine months of 2020 the company entered into $148.8 and $1,183.9 notional amounts of long equity total return swaps for investment purposes following significant declines in global equity markets in the first quarter of 2020. At September 30, 2020 the company held long equity total return swaps on individual equities for investment purposes with an original notional amount of $1,342.9 (December 31, 2019 - $501.5). During the third quarter and first nine months of 2020 the company received net cash of $48.9 and $80.8 (2019 - received net cash of $8.2 and paid net cash of $53.5) in connection with the reset provisions of its long equity total return swaps (excluding the impact of collateral requirements). During the third quarter and first nine months of 2020 the company closed out $212.7 and $464.7 notional amounts of its long equity total return swaps and recorded net realized gains on investments of $52.9 and $122.3. During the third quarter and first nine months of 2019 the company did not initiate or close out any long equity total return swaps.
At September 30, 2020 the aggregate fair value of the collateral deposited for the benefit of derivative counterparties included in holding company cash and investments and in assets pledged for short sale and derivative obligations was $298.7 (December 31, 2019 - $152.4), comprised of collateral of $205.2 (December 31, 2019 - $70.3) required to be deposited to enter into such derivative contracts (principally related to total return swaps) and $93.5 (December 31, 2019 - $82.1) securing amounts owed to counterparties to the company's derivative contracts arising in respect of changes in the fair values of those derivative contracts since the most recent reset date.
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CPI-linked derivative contracts
The company has entered into derivative contracts referenced to consumer price indexes (“CPI”) of the geographic regions in which it operates that serve as an economic hedge against the potential adverse financial impact on the company of decreasing price levels. At September 30, 2020 the company held CPI-linked derivative contracts with a fair value of $12.1 (December 31, 2019 - $6.7), notional amount of $75.7 billion (December 31, 2019 - $99.8 billion) and weighted average term until expiry of 2.9 years (December 31, 2019 - 2.8 years).
The company’s CPI-linked derivative contracts produced net losses on investments of $8.3 and net gains on investments of $0.3 in the third quarter and first nine months of 2020 (2019 - net gains of $13.1 and $4.4). Net unrealized gains (losses) on CPI-linked derivative contracts typically reflect the market's expectation of decreases (increases) in the values of the CPI indexes underlying those contracts at their respective maturities (the contracts benefit the company during periods of decreasing CPI index values). During the third quarter and first nine months of 2020 certain CPI-linked derivative contracts referenced to CPI in the United States, European Union and United Kingdom with notional amounts of $3,506.3 and $25,171.4 matured.
U.S. treasury bond forward contracts
To economically hedge its exposure to interest rate risk (primarily exposure to long dated U.S. corporate bonds and U.S. state and municipal bonds held in its fixed income portfolio), the company held forward contracts to sell long dated U.S. treasury bonds with a notional amount of $341.1 at September 30, 2020 (December 31, 2019 - $846.5). These contracts have an average term to maturity of less than three months and may be renewed at market rates. The company’s U.S treasury bond forward contracts produced net losses on investments of $1.2 and $110.7 in the third quarter and first nine months of 2020 (2019 - net losses of $50.1 and $108.7).
Foreign currency forward contracts
Long and short foreign currency forward contracts primarily denominated in the euro, the British pound sterling and the Canadian dollar are used to manage certain foreign currency exposures arising from the company's foreign currency denominated transactions. These contracts have an average term to maturity of less than one year and may be renewed at market rates.
Counterparty collateral
The company endeavours to limit counterparty risk through diligent selection of counterparties to its derivative contracts and through the terms of negotiated agreements. Collateral deposited for the benefit of the company at September 30, 2020 consisted of cash of $24.5 and government securities of $2.8 (December 31, 2019 - $5.3 and $10.8). On the consolidated balance sheet the cash collateral is recognized within subsidiary cash and short term investments and a corresponding liability is recognized within accounts payable and accrued liabilities. The company had not exercised its right to sell or repledge collateral at September 30, 2020. See note 16 for details of the company's counterparty risk and the management thereof.

Hedge of net investment in European operations
At September 30, 2020 the company had designated the carrying value of €750.0 principal amount of its euro denominated unsecured senior notes with a fair value of $914.5 (December 31, 2019 - carrying value of €277.0 principal amount with a fair value of $336.2) as a hedge of its net investment in European operations with a euro functional currency. The increase in principal amount of euro denominated unsecured senior notes designated as a hedging instrument during the first nine months of 2020 was due to the classification of Eurobank as an investment in associate (notes 3 and 6) which increased the company's net investment in European operations with a euro functional currency. During the third quarter and first nine months of 2020 the company recognized pre-tax losses of $36.6 and $38.2 (2019 - pre-tax gain of $13.5 and pre-tax loss of $26.3) related to exchange rate movements on the euro denominated unsecured senior notes in gains (losses) on hedge of net investment in European operations in the consolidated statement of comprehensive income.

8.    Insurance Contract Liabilities
September 30, 2020December 31, 2019
GrossCededNetGrossCededNet
Provision for unearned premiums8,156.4 1,772.7 6,383.7 7,222.4 1,583.7 5,638.7 
Provision for losses and loss adjustment expenses29,837.2 7,474.7 22,362.5 28,500.2 6,934.8 21,565.4 
Insurance contract liabilities37,993.6 9,247.4 28,746.2 35,722.6 8,518.5 27,204.1 
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Provision for losses and loss adjustment expenses
Changes in the provision for losses and loss adjustment expenses for the first nine months ended September 30 were as follows:
20202019
Provision for losses and loss adjustment expenses – January 128,500.2 29,081.7 
Decrease in estimated losses and expenses for claims occurring in the prior years(218.7)(67.8)
Losses and expenses for claims occurring in the current year(1)
8,734.5 8,353.3 
Paid on claims occurring during:
the current year(1,575.9)(1,661.5)
the prior years(5,770.9)(5,985.8)
Acquisitions of subsidiaries— 14.3 
Foreign exchange effect and other168.0 (264.9)
Provision for losses and loss adjustment expenses – September 3029,837.2 29,469.3 
(1)    Effective January 1, 2019 Run-off Syndicate 3500 reinsured a portfolio of business predominantly comprised of casualty (principally employers' liability and public liability), professional indemnity, property, marine and aviation exposures relating to accident years 2018 and prior. Pursuant to this transaction Run-off Syndicate 3500 assumed $556.8 of net insurance contract liabilities for consideration of $561.5.
    
The changes in provision for losses and loss adjustment expenses presented in the table above for the first nine months of 2020 exclude European Run-off's losses and loss adjustment expenses of $196.9 and the two European Run-off transactions described in the subsequent paragraphs, as the liabilities of European Run-off were included in liabilities associated with assets held for sale on the consolidated balance sheet at December 31, 2019 and European Run-off was deconsolidated on March 31, 2020 as described in note 15.
Effective January 31, 2020 a portfolio of business predominantly comprised of U.S. asbestos, pollution and other hazards ("APH") exposures relating to accident years 2001 and prior was transferred to RiverStone (UK) through a Part VII transfer under the Financial Services and Markets Act 2000, as amended. Pursuant to this transaction RiverStone (UK) assumed net insurance contract liabilities of $134.7 for cash consideration of $143.3.
Effective January 1, 2020 Run-off Syndicate 3500 reinsured a portfolio of business predominantly comprised of property, liability and marine exposures relating to accident years 2019 and prior. Pursuant to this transaction Run-off Syndicate 3500 assumed net insurance contract liabilities of $145.5 for consideration of $146.5.

9.    Reinsurance
Reinsurers’ share of insurance contract liabilities was comprised as follows:
September 30, 2020December 31, 2019
Gross recoverable from reinsurersProvision for uncollectible reinsuranceRecoverable from reinsurersGross recoverable
from reinsurers
Provision for uncollectible reinsuranceRecoverable from reinsurers
Provision for losses and loss adjustment expenses7,497.2 (22.5)7,474.7 6,956.7 (21.9)6,934.8 
Reinsurers’ share of paid losses818.2 (134.7)683.5 776.9 (139.6)637.3 
Provision for unearned premiums1,772.7 — 1,772.7 1,583.7 — 1,583.7 
10,088.1 (157.2)9,930.9 9,317.3 (161.5)9,155.8 
Included in commissions, net in the consolidated statement of earnings for the third quarter and first nine months of 2020 is commission income earned on premiums ceded to reinsurers of $218.8 and $588.4 (2019 - $182.0 and $484.1).

10.    Borrowings
September 30, 2020December 31, 2019
Principal
Carrying
value(1)
Fair value(2)
Principal
Carrying
value(1)
Fair value(2)
Holding company5,473.4 5,440.7 5,858.8 4,148.7 4,117.3 4,444.9 
Insurance and reinsurance companies1,066.9 1,076.0 1,107.3 1,028.1 1,039.6 1,063.8 
Non-insurance companies(3)(4)
2,145.1 2,132.9 2,136.9 2,084.2 2,075.7 2,076.6 
Total borrowings8,685.4 8,649.6 9,103.0 7,261.0 7,232.6 7,585.3 
(1)    Principal net of unamortized issue costs and discounts (premiums).
(2)    Based principally on quoted market prices with the remainder based on discounted cash flow models using market observable inputs (Levels 1 and 2 respectively in the fair value hierarchy).
(3)    These borrowings are non-recourse to the holding company.
(4)    At September 30, 2020 Fairfax Africa’s borrowings with a carrying value of $118.8 were included in liabilities associated with assets held for sale on the consolidated balance sheet pursuant to the transaction described in note 15.
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Holding company
At March 31, 2020 the company had drawn $1,770.0 on its credit facility, solely as a precaution, to support the insurance and reinsurance companies should it be needed as a result of the effects of the COVID-19 pandemic. The company repaid $800.0 during the second quarter of 2020 and a further $270.0 during the third quarter of 2020, leaving $700.0 borrowed on its credit facility at September 30, 2020 (December 31, 2019 - nil). The principal financial covenants of the credit facility require the company to maintain a ratio of consolidated debt to consolidated capitalization not exceeding 0.35:1 and consolidated shareholders’ equity attributable to shareholders of Fairfax of not less than $9.5 billion. At September 30, 2020 the company was in compliance with its financial covenants, with a consolidated debt to consolidated capitalization ratio of 0.318:1 and consolidated shareholders’ equity attributable to shareholders of Fairfax of $12.9 billion, both calculated as defined in the financial covenants.
On April 29, 2020 the company completed an offering of $650.0 principal amount of 4.625% unsecured senior notes due April 29, 2030 at par for net proceeds after commissions and expenses of $645.0. Commissions and expenses of $5.0 were included in the carrying value of the notes. The company used $500.0 of the net proceeds from the offering towards the repayment on its credit facility as described in the preceding paragraph. On October 28, 2020 the notes were exchanged by their holders for an equal principal amount of substantially identical notes that had been registered under the U.S. Securities Act.

Non- insurance companies

On June 26, 2020 Fairfax India extended its $550.0 principal amount floating rate term loan for one year to June 28, 2021 with an option to extend for an additional year.
Pursuant to the acquisition of Horizon North on May 29, 2020 the company consolidated Horizon North's Cdn$175.0 floating rate revolving credit facility maturing December 30, 2022.
On February 21, 2020 AGT extended the maturity of its Cdn$525.0 floating rate secured senior credit facility to March 15, 2021. At September 30, 2020 there was $395.7 (Cdn$528.6) borrowed on this credit facility (December 31, 2019 - $386.9 (Cdn$501.7)).

Interest Expense
Interest expense in the third quarter and first nine months of 2020 of $120.9 and $358.8 (2019 - $121.5 and $355.0) was comprised of interest expense on borrowings of $105.7 and $311.6 (2019 - $102.3 and $304.2) and interest expense on accretion of lease liabilities of $15.2 and $47.2 (2019 - $19.2 and $50.8).

11.    Total Equity
Equity attributable to shareholders of Fairfax
Common stock
The number of shares outstanding was as follows:
20202019
Subordinate voting shares – January 126,082,299 26,489,177 
Purchases for cancellation(293,038)(249,361)
Treasury shares acquired(439,852)(228,496)
Treasury shares reissued137,812 59,967 
Subordinate voting shares – September 3025,487,221 26,071,287 
Multiple voting shares – beginning and end of period1,548,000 1,548,000 
Interest in multiple and subordinate voting shares held through ownership interest in shareholder – beginning and end of period(799,230)(799,230)
Common stock effectively outstanding – September 3026,235,991 26,820,057 
During the third quarter and first nine months of 2020 the company purchased for cancellation 67,355 and 293,038 (2019 - nil and 249,361) subordinate voting shares under the terms of its normal course issuer bid at a cost of $19.9 and $86.9 (2019 - nil and $118.0), of which $3.2 and $14.3 (2019 - nil and $56.2) was charged to retained earnings.

During the third quarter and first nine months of 2020 the company purchased for treasury 42,169 and 439,852 subordinate voting shares on the open market at a cost of $12.1 and $132.3 (2019 - 65,815 and 228,496 subordinate voting shares at a cost of $29.8 and $104.3) for use in its share-based payment awards.
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Preferred stock
On September 30, 2020 there was a net conversion of 286,891 Series H floating rate cumulative preferred shares with an aggregate carrying value of $6.8 and stated capital of Cdn$7.2 into an equal number of Series G fixed rate cumulative preferred shares. On March 31, 2020 there was a net conversion of 1,472,998 Series F floating rate cumulative preferred shares with an aggregate carrying value of $33.7 and stated capital of Cdn$36.8 into an equal number of Series E fixed rate cumulative preferred shares. The total number of preferred shares outstanding and their aggregate carrying value and stated capital remains unchanged compared to December 31, 2019.
Non-controlling interests
Non-controlling interestNet earnings (loss) attributable to
non-controlling interests
September 30, 2020December 31, 2019Third quarterFirst nine months
SubsidiaryDomicileVoting percentageCarrying valueVoting percentageCarrying value2020201920202019
Allied World(1)
Bermuda29.1 %1,264.3 29.9 %1,256.3 19.7 13.2 39.7 65.7 
Fairfax India(2)
Canada6.7 %1,117.5 6.2 %1,117.2 (2.7)16.5 (41.5)87.6 
Recipe(3)
Canada38.9 %425.5 38.4 %437.5 1.1 3.7 (50.2)19.1 
Horizon North(4)
Canada51.0 %116.6 — — 6.1 — 9.0 — 
Thomas Cook IndiaIndia33.1 %72.2 33.1 %93.8 (6.1)(0.7)(19.6)(0.8)
Brit(5)
U.K.— 60.0 10.7 %197.4 0.5 (0.6)(8.2)9.9 
Fairfax Africa(6)
Canada1.6 %56.7 1.5 %195.6 (96.2)(26.6)(127.9)(48.9)
All other(7)
— 337.3 — 231.3 (14.3)0.3 (31.6)3.8 
3,450.1 3,529.1 (91.9)5.8 (230.3)136.4 
(1)    On June 30, 2020 Allied World received a capital contribution from the company of $100.0 primarily to support its underwriting plans, which increased the company’s ownership interest in Allied World to 70.9% from 70.1% at December 31, 2019. On April 30, 2020 Allied World paid a dividend of $126.4 to its minority shareholders (OMERS, AIMCo and others).
(2)    The carrying value of Fairfax India's non-controlling interests remained stable during the first nine months of 2020, primarily reflecting the deconsolidation of European Run-off and its investment in Fairfax India ($91.8) as described in note 15, partially offset by the non-controlling interests' share of Fairfax India's net loss ($41.5) and the weakening of the Indian Rupee relative to the U.S. dollar ($34.5). Net earnings attributable to non-controlling interests of Fairfax India in the first nine months of 2019 primarily reflected the non-controlling interests' 66.2% share of Fairfax India's share of a spin-off distribution gain at IIFL Holdings on May 31, 2019.
(3)    The decrease in carrying value of Recipe's non-controlling interests during the first nine months of 2020 primarily reflected the non-controlling interests' share of Recipe's net loss ($50.2) and the weakening of the Canadian dollar relative to the U.S. dollar ($10.1), partially offset by the deconsolidation of European Run-off and its investment in Recipe ($54.1) as described in note 15.
(4)    The company acquired Horizon North on May 29, 2020 as described in note 15.
(5)    The decrease in carrying value of Brit's non-controlling interests during the first nine months of 2020 primarily reflected the company's acquisition of the remaining shares of Brit that it did not already own on August 28, 2020 from Brit's minority shareholder (OMERS) for cash consideration of $220.0, inclusive of an accrued dividend paid of $13.6 on the shares purchased, partially offset by a third party's investment of $60.0 in Brit's newly formed subsidiary Ki insurance during the third quarter of 2020. Ki insurance is a fully digital and algorithmically-driven Lloyd’s of London syndicate that expects to commence operations in the fourth quarter of 2020. On April 9, 2020 Brit paid a dividend of $20.6 to OMERS.
(6)    The decrease in carrying value of Fairfax Africa's non-controlling interests during the first nine months of 2020 primarily reflected the non-controlling interests' share of Fairfax Africa's net loss ($127.9) which included the loss due to the classification of Fairfax Africa as held for sale ($67.2) and share of other comprehensive loss of associates ($17.2), partially offset by the deconsolidation of European Run-off and its investment in Fairfax Africa ($15.7). See note 15 for details.
(7)    The increase in carrying value of All other's non-controlling interest during the first nine months of 2020 principally reflected the deconsolidation of European Run-off and its investments in various non-insurance subsidiaries of the company as described in note 15.
Non-controlling interest voting percentages were consistent with economic ownership for each subsidiary at September 30, 2020 except for Fairfax India, Recipe and Fairfax Africa whose non-controlling interest economic ownership percentages were 72.1%, 59.9% and 40.9% respectively.
The acquisition of the minority interest in Brit described in footnote (5) above decreased non-controlling interests by $189.6 and retained earnings by $30.4. The payment of dividends to the minority shareholders of Allied World and Brit described in footnotes (1) and (5) above increased non-controlling interests, and decreased retained earnings, by $107.2. These transactions were recorded in other net changes in capitalization in the consolidated statement of changes in equity.

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12.    Earnings per Share
Net earnings (loss) per common share is calculated as follows using the weighted average common shares outstanding: 
Third quarterFirst nine months
2020201920202019
Net earnings (loss) attributable to shareholders of Fairfax133.7 68.6 (690.7)1,332.1 
Preferred share dividends(11.0)(11.4)(32.9)(34.2)
Net earnings (loss) attributable to common shareholders – basic and diluted122.7 57.2 (723.6)1,297.9 
Weighted average common shares outstanding – basic26,306,083 26,850,937 26,531,553 26,926,461 
Share-based payment awards1,309,855 1,196,581 — 1,150,737 
Weighted average common shares outstanding – diluted27,615,938 28,047,518 26,531,553 28,077,198 
Net earnings (loss) per common share – basic$4.66 $2.13 $(27.27)$48.20 
Net earnings (loss) per common share – diluted$4.44 $2.04 $(27.27)$46.23 
Share-based payment awards of 1,269,553 were not included in the calculation of net loss per diluted common share for the first nine months of 2020 as inclusion of the awards would be anti-dilutive.

13.    Income Taxes
The company’s provision for (recovery of) income taxes for the three and nine months ended September 30 were comprised as follows:
Third quarterFirst nine months
2020201920202019
Current income tax:
Current year expense79.4 45.4 133.3 139.9 
Adjustments to prior years’ income taxes5.6 1.2 1.6 5.0 
85.0 46.6 134.9 144.9 
Deferred income tax:
Origination and reversal of temporary differences(43.5)(47.4)(194.6)173.8 
Adjustments to prior years' deferred income taxes(2.7)(2.1)(5.0)6.7 
Other(1.1)(1.6)(7.4)(0.3)
(47.3)(51.1)(207.0)180.2 
Provision for (recovery of) income taxes37.7 (4.5)(72.1)325.1 
A significant portion of the company's earnings (loss) before income taxes may be earned or incurred outside of Canada. The statutory income tax rates for jurisdictions outside of Canada generally differ from the Canadian statutory income tax rate (and may be significantly higher or lower). The company’s earnings (loss) before income taxes by jurisdiction and the associated provision for (recovery of) income taxes for the three and nine months ended September 30 were as follows:
Third quarter
20202019
Canada(1)
U.S.(2)
U.K.(3)
Other(4)
Total
Canada(1)
U.S.(2)
U.K.(3)
Other(4)
Total
Earnings (loss) before income taxes30.8 (28.6)(44.6)121.9 79.5 (89.5)42.5 (18.4)135.3 69.9 
Provision for (recovery of) income taxes58.3 (7.0)(24.5)10.9 37.7 1.5 8.4 (5.8)(8.6)(4.5)
Net earnings (loss)(27.5)(21.6)(20.1)111.0 41.8 (91.0)34.1 (12.6)143.9 74.4 
First nine months
20202019
Canada(1)
U.S.(2)
U.K.(3)
Other(4)
Total
Canada(1)
U.S.(2)
U.K.(3)
Other(4)
Total
Earnings (loss) before income taxes(189.2)(638.1)(143.8)(22.0)(993.1)119.4 961.6 123.8 588.8 1,793.6 
Provision for (recovery of) income taxes47.0 (129.3)(2.2)12.4 (72.1)64.1 208.3 5.5 47.2 325.1 
Net earnings (loss)(236.2)(508.8)(141.6)(34.4)(921.0)55.3 753.3 118.3 541.6 1,468.5 
(1)    Includes Fairfax India and Fairfax Africa.
(2)    Principally comprised of Crum & Forster, Zenith National, Odyssey Group (notwithstanding that certain operations of Odyssey Group conduct business outside of the U.S.), U.S. Run-off and other associated holding company results.
(3)    Principally comprised of Brit, European Run-off (deconsolidated on March 31, 2020) and other associated holding company results.
(4)    Includes companies in India, Asia, Europe (excluding the U.K.) and Allied World (the majority of Allied World's net earnings (loss) is sourced from its Bermuda operations notwithstanding that certain operations of Allied World conduct business in the U.S. and the U.K.).

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The decrease in pre-tax profitability in the U.S., U.K. and Other in the third quarter of 2020 compared to the third quarter of 2019 primarily reflected lower underwriting profit, while the increase in pre-tax profitability in Canada primarily reflected higher underwriting profit and investment income. The decrease in pre-tax profitability across all jurisdictions in the first nine months of 2020 compared to the first nine months of 2019 primarily reflected net unrealized investment losses due to significant declines in global financial markets as a result of the COVID-19 pandemic.
Reconciliations of the provision for (recovery of) income taxes calculated at the Canadian statutory income tax rate to the provision for (recovery of) income taxes at the effective tax rate for the three and nine months ended September 30 are presented in the following table:
Third quarterFirst nine months
2020201920202019
Canadian statutory income tax rate26.5 %26.5 %26.5 %26.5 %
Provision for (recovery of) income taxes at the Canadian statutory income tax rate21.0 18.5 (263.2)475.3 
Non-taxable investment income(27.1)(45.9)(83.8)(113.5)
Tax rate differential on income and losses outside Canada(9.1)(35.5)101.9 (158.1)
Change in unrecorded tax benefit of losses and temporary differences43.5 41.0 142.7 64.3 
Provision (recovery) relating to prior years2.9 (0.9)(3.4)11.7 
Foreign exchange effect— (2.4)20.9 (10.3)
Change in tax rate for deferred income taxes2.6 (11.9)(5.3)(13.6)
United States base erosion minimum tax— 14.5 — 35.7 
Other including permanent differences3.9 18.1 18.1 33.6 
Provision for (recovery of) income taxes37.7 (4.5)(72.1)325.1 
Non-taxable investment income is principally comprised of dividend income, non-taxable interest income and long term capital gains, and the 50% of net capital gains which are not taxable in Canada. Non-taxable investment income of $83.8 in first nine months of 2020 (2019 - $113.5) principally reflected the gain on deconsolidation of European Run-off, as described in note 15, that was not taxable in Canada or Barbados.
The tax rate differential on income and losses outside Canada of $9.1 in the third quarter of 2020 principally related to income taxed at lower rates at Allied World. The tax rate differential on income and losses outside Canada of $101.9 in the first nine months of 2020 principally related to losses tax-effected at lower rates in the U.S., Barbados, and at Brit, partially offset by income at Allied World taxed at lower rates. The tax rate differential on income and losses outside Canada of $35.5 and $158.1 in the third quarter and first nine months of 2019 principally related to income taxed at lower rates in the U.S., and at Fairfax India, Brit and Allied World.
The change in unrecorded tax benefit of losses and temporary differences of $43.5 in the third quarter of 2020 principally related to unrecorded deferred tax assets in Canada of $58.2, partially offset by the utilization of unrecorded deferred tax assets in the U.K. of $14.8. The change in unrecorded tax benefit of losses and temporary differences of $142.7 in the first nine months of 2020 principally related to unrecorded deferred tax assets in Canada and the U.K. of $92.7 and $43.4. The change in unrecorded tax benefit of losses and temporary differences of $41.0 and $64.3 in the third quarter and first nine months of 2019 principally related to unrecorded deferred tax assets in Canada of $38.1 and $55.0.

14.    Contingencies and Commitments
There were no significant changes to the company's contingencies and commitments at September 30, 2020 compared to those identified and disclosed in the company's annual consolidated financial statements for the year ended December 31, 2019.

15.    Acquisitions and Divestitures

Subsequent to September 30, 2020
Proposed Fairfax Africa transaction with Helios Holdings Limited
On July 10, 2020 Fairfax Africa entered into an agreement with Helios Holdings Limited ("Helios") pursuant to which Helios will acquire a 45.9% voting and equity interest in Fairfax Africa in exchange for contributing its entitlement to cash flows from certain fee streams and being appointed sole investment advisor to Fairfax Africa. Closing of the transaction, expected to be in the fourth quarter of 2020, is subject to various conditions including regulatory and shareholder approvals, and the acquisition of Fairfax Africa's 42.3% equity interest in Atlas Mara by the company for consideration of approximately $40. In addition, the company has guaranteed the repayment obligations of Atlas Mara's $40.0 secured borrowing with Fairfax Africa. Upon closing, Fairfax Africa will be renamed Helios Fairfax Partners Corporation ("HFP") and continue to be listed on the Toronto Stock Exchange. The company expects that upon closing it will deconsolidate Fairfax Africa from the Non-insurance companies reporting segment and account for its interest in
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HFP as an investment in associate in its consolidated financial reporting. Fairfax Africa is an investment holding company whose investment objective is to achieve long term capital appreciation, while preserving capital, by investing in public and private equity securities and debt instruments in Africa and African businesses or other businesses with customers, suppliers or business primarily conducted in, or dependent on, Africa. Helios, an Africa-focused private investment firm led and predominantly staffed by African professionals, manages geographically diversified portfolios of private equity and credit investments in over 30 African countries.
At September 30, 2020 Fairfax Africa, with the exception of its equity accounted investment in Atlas Mara, constituted a disposal group held for sale whose carrying value exceeded its estimated fair value less costs to sell. Accordingly, the company recorded a non-cash net loss on investments of $164.0 in the consolidated statement of earnings that decreased the carrying values of Fairfax Africa's investments in associates, goodwill and intangible assets and other assets (premises and equipment and right-of-use assets). At closing the company will deconsolidate Fairfax Africa, reclassify foreign currency translation losses of Fairfax Africa from accumulated other comprehensive income (loss) to the consolidated statement of earnings, and record the initial carrying value of its equity accounted investment in HFP at the market traded share price of HFP. At September 30, 2020 the company’s accumulated other comprehensive loss included foreign currency translation losses of Fairfax Africa of approximately $64.
Assets held for sale and liabilities associated with assets held for sale as presented on the company’s consolidated balance sheet at September 30, 2020 were comprised of Fairfax Africa assets and liabilities as follows:
Assets held for sale:
Portfolio investments(1)
240.8
Other assets110.8
351.6
Liabilities associated with assets held for sale:
Accounts payable and accrued liabilities120.8
Borrowings - non-insurance companies118.8
239.6
(1)    Includes cash and cash equivalents of $104.2. See note 19.

Nine months ended September 30, 2020

Acquisition of Horizon North Logistics
On May 29, 2020 Horizon North Logistics Inc. ("Horizon North") legally acquired 100% of Dexterra by issuing common shares to the company representing a 49.0% equity interest in Horizon North. The company obtained de facto voting control of Horizon North as its largest shareholder and accounted for the transaction as a reverse acquisition of Horizon North by Dexterra. The assets, liabilities and results of operations of Horizon North were consolidated in the Non-insurance companies reporting segment. Horizon North, based in the province of Alberta, is a publicly listed corporation providing a range of industrial services and modular construction solutions.

Contribution of European Run-off to a joint venture
On March 31, 2020 the company contributed its wholly owned European run-off group ("European Run-off") to RiverStone (Barbados) Ltd. (“RiverStone Barbados”), a newly created joint venture entity, for cash proceeds of $599.5 and a 60.0% equity interest in RiverStone Barbados with a fair value of $605.0. OMERS, the pension plan for municipal employees in the province of Ontario, jointly manages RiverStone Barbados and had contemporaneously subscribed for a 40.0% equity interest for cash consideration of $599.5, based on the fair value of European Run-off at December 31, 2019 pursuant to the subscription agreement entered into on December 20, 2019. At the closing date the company deconsolidated the assets and liabilities of European Run-off from assets held for sale and liabilities associated with assets held for sale on the consolidated balance sheet respectively, which included European Run-off's unrestricted cash and cash equivalents of $377.8, and commenced applying the equity method of accounting to its joint venture interest in RiverStone Barbados. The company recorded a pre-tax gain on deconsolidation of insurance subsidiary of $117.1 in the consolidated statement of earnings, comprised of a gain of $243.4 on the disposal of 40.0% of European Run-off, a gain of $35.6 on remeasurement to fair value at the closing date of the 60.0% of European Run-off retained, and foreign currency translation losses of $161.9 that were reclassified from accumulated other comprehensive income to the consolidated statement of earnings. The deconsolidation of European Run-off increased the company's non-controlling interests by $340.4 as RiverStone Barbados holds investments in certain of the company's non-insurance subsidiaries as described in note 11. The company has the option to purchase OMERS' interest in RiverStone Barbados at certain dates commencing in 2023.

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16.    Financial Risk Management
Overview
There were no significant changes to the types of the company's risk exposures or the processes used by the company for managing those risk exposures at September 30, 2020 compared to those identified and disclosed in the company's annual consolidated financial statements for the year ended December 31, 2019, except as discussed below.
COVID-19 pandemic
The rapid spread of the COVID-19 virus, which was declared by the World Health Organization to be a pandemic on March 11, 2020, and actions taken globally in response to COVID-19, have significantly disrupted business activities throughout the world. The company's businesses rely, to a certain extent, on free movement of goods, services, and capital from around the world, which has been significantly restricted as a result of the COVID-19 pandemic.
Given the ongoing and dynamic nature of the circumstances surrounding COVID-19, it is difficult to predict how significant the impact of COVID-19, including any responses to it, will be on the global economy and the company's businesses in particular, or for how long any disruptions are likely to continue. The extent of such impact will depend on future developments, which are highly uncertain, rapidly evolving and difficult to predict, including new information which may emerge concerning the severity of COVID-19 and additional actions which may be taken to contain COVID-19, as well as the timing of the re-opening of the economy in various parts of the world. Such further developments could have a material adverse effect on the company's business, financial condition, results of operations and cash flows.
With the overall slowdown in the global economy as a result of the COVID-19 pandemic, the company expects its insurance and reinsurance operations to experience a reduction in premiums written in certain segments where premiums are directly, or indirectly, linked to economic activity. Also, various government officials, including U.S. state insurance commissioners, have taken actions to protect consumers from hardship caused by COVID-19 which in the aggregate may adversely impact the company's results of operations in the near term. While it is likely that certain lines of business may experience increased loss activity due to COVID-19, there are also many segments in which the company operates that may experience improved loss experience due to reduced exposures to loss. Certain of the company's non-insurance operations continue to experience a reduction in revenue due to current economic conditions, particularly for those in the Restaurants and retail and Thomas Cook India operating segments whose business volumes are directly linked to the re-opening of the economy in the jurisdictions in which they operate. The ultimate impact of COVID-19 on the company will not be fully known for many months, perhaps years.
Underwriting Risk
Underwriting risk is the risk that the total cost of claims, claims adjustment expenses, commissions and premium acquisition costs will exceed premiums received and can arise as a result of numerous factors, including pricing risk, reserving risk and catastrophe risk. As discussed in the preceding section, COVID-19 has increased uncertainty and may adversely impact the company's underwriting results in the near term. There were no other significant changes to the company's exposure to underwriting risk, and there were no changes to the framework used to monitor, evaluate and manage underwriting risk at September 30, 2020 compared to December 31, 2019.
Credit Risk
Credit risk is the risk of loss resulting from the failure of a counterparty to honour its financial obligations to the company, and arises predominantly from cash and short term investments, investments in bonds, insurance contract receivables, recoverable from reinsurers and receivables from counterparties to derivative contracts (primarily total return swaps and CPI-linked derivatives). During the first nine months of 2020 the company's exposure to credit risk increased primarily due to the potential effects of the COVID-19 pandemic on the company's reinsurers and the underlying issuers of the company's investments in bonds. The company's holdings of bonds rated AAA/Aaa decreased primarily due to net sales and maturities of short-dated U.S. treasury and Canadian government bonds for net proceeds of $1,821.0 and $517.9 respectively. The increase in bonds rated A/A, BBB/Baa and BB/Ba was primarily due to net purchases of higher yielding U.S. corporate bonds of $726.5, $1,698.8 and $213.8 respectively, partially offset by net sales of India government bonds rated BBB/Baa of $453.5. Management considers high quality debt instruments to be those with a S&P or Moody's issuer credit rating of BBB/Baa or higher. There were no significant changes to the framework used to monitor, evaluate and manage credit risk at September 30, 2020 compared to December 31, 2019.
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The composition of the company's investments in bonds classified according to the higher of each security's respective S&P and Moody's issuer credit rating was as follows:
September 30, 2020December 31, 2019
Issuer Credit RatingAmortized costCarrying value 
%
Amortized costCarrying value %
AAA/Aaa4,450.4 4,490.2 26.6 6,795.2 6,820.4 41.8 
AA/Aa870.4 902.2 5.3 870.0 881.8 5.4 
A/A3,885.7 4,109.4 24.2 2,979.4 3,008.0 18.4 
BBB/Baa4,328.6 4,669.0 27.5 3,059.6 3,206.2 19.7 
BB/Ba480.7 496.0 2.9 121.9 135.0 0.8 
B/B62.3 65.6 0.4 59.9 61.6 0.4 
Lower than B/B35.5 36.1 0.2 31.6 16.4 0.1 
Unrated2,219.1 2,195.7 12.9 2,125.8 2,186.0 13.4 
Total16,332.7 16,964.2 100.0 16,043.4 16,315.4 100.0 
Counterparties to Derivative Contracts
Derivative counterparty risk is the risk that a counterparty to the company's derivative contracts may not fulfill its obligations under the contract. Agreements negotiated with counterparties provide for a single net settlement of all financial instruments covered by an agreement in the event of default by a counterparty, thereby permitting obligations owed by the company to that counterparty to be offset against amounts receivable from that counterparty (the “net settlement arrangements”). The company's net derivative counterparty risk was as follows assuming all derivative counterparties are simultaneously in default:
September 30, 2020December 31, 2019
Total derivative assets(1)
80.7 85.2 
Obligations that may be offset under net settlement arrangements(29.1)(19.2)
Fair value of collateral deposited for the benefit of the company(2)
(26.2)(14.2)
Excess collateral pledged by the company in favour of counterparties12.7 1.9 
Net derivative counterparty exposure after net settlement and collateral arrangements38.1 53.7 
(1)    Excludes equity warrants, equity call options and other derivatives which are not subject to counterparty risk.
(2)    Excludes excess collateral pledged by counterparties at September 30, 2020 of $1.1 (December 31, 2019 - $1.9).
Collateral deposited for the benefit of the company at September 30, 2020 consisted of cash of $24.5 and government securities of $2.8 (December 31, 2019 - $5.3 and $10.8). The company had not exercised its right to sell or repledge collateral at September 30, 2020.
Recoverable from Reinsurers
Credit risk arises on the company's recoverable from reinsurers to the extent reinsurers may be unable or unwilling to reimburse the company under the terms of reinsurance arrangements. During the first nine months of 2020 the company continued to conduct assessments of the creditworthiness of its reinsurers, with particular focus on the actions of its reinsurers in response to the economic effects of the COVID-19 pandemic, and concluded that no impairments had occurred. The provision for uncollectible reinsurance at September 30, 2020 is disclosed in note 9.

Liquidity Risk
Liquidity risk is the potential for loss if the company is unable to meet financial commitments in a timely manner at reasonable cost as they fall due. As discussed above, COVID-19 has increased uncertainty and may adversely impact the company's cash flows in the near term, including by virtue of the need to provide capital to support growth in the insurance and reinsurance companies in a favourable pricing environment and to support fluctuations in their investment portfolios due to the economic effects of the COVID-19 pandemic. At September 30, 2020 the company had therefore maintained drawn, solely as a precaution, $700.0 on the company's credit facility to support the insurance and reinsurance companies should it be needed. There were no other significant changes to the company's exposure to liquidity risk or the framework used to monitor, evaluate and manage liquidity risk at September 30, 2020 compared to December 31, 2019.
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The holding company's remaining known significant commitments for 2020 consist of payments relating to interest expense, corporate overhead, preferred share dividends, income taxes and other investment related activities, including the expected acquisition of Fairfax Africa's interest in Atlas Mara, as described in note 15. The company may also in 2020 make payments related to its credit facility, derivative contracts and capital support for its insurance and reinsurance companies (for underwriting initiatives in favourable insurance markets).

During the third quarter and first nine months of 2020 the holding company received net cash of $33.7 and $175.6 (2019 - received net cash of $7.9 and paid net cash of $19.6) and the insurance and reinsurance subsidiaries paid net cash of $137.7 and $532.9 (2019 - paid net cash of $5.8 and received net cash of $93.2) in connection with long and short equity total return swap derivative contracts (excluding the impact of collateral requirements).

Market Risk
Market risk, comprised of foreign currency risk, interest rate risk and other price risk, is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The company is exposed to market risk principally in its investing activities, and also in its underwriting activities where those activities expose the company to foreign currency risk. The company's investment portfolios are managed with a long term, value-oriented investment philosophy emphasizing downside protection, with policies to limit and monitor individual issuer exposures and aggregate equity exposure at the subsidiary and consolidated levels.
Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The company's exposure to interest rate risk increased during the first nine months of 2020 primarily due to economic disruption caused by the COVID-19 pandemic and also due to net purchases of short to mid-dated high quality U.S. corporate bonds of $2,016.0, partially offset by net sales and maturities of short-dated U.S. treasury bonds for net proceeds of $1,821.0 and net sales of India government bonds for net proceeds of $453.5. There were no other significant changes to the company's framework used to monitor, evaluate and manage interest rate risk at September 30, 2020 compared to December 31, 2019.

The table below displays the potential impact of changes in interest rates on the company's fixed income portfolio based on parallel 200 basis point shifts up and down, in 100 basis point increments, which the company believes to be reasonably possible in the current economic environment of the COVID-19 pandemic. This analysis was performed on each individual security to determine the hypothetical effect on net earnings.
September 30, 2020December 31, 2019
Fair value of
fixed income
portfolio(1)
Hypothetical
$ change effect
on net earnings(1)
Hypothetical
% change
in fair value(1)
Fair value of
fixed income
portfolio
(1)
Hypothetical
$ change effect
on net earnings
(1)
Hypothetical
% change
in fair value
(1)
Change in Interest Rates
200 basis point increase16,193.5 (637.1)(4.5)15,752.1 (463.3)(3.5)
100 basis point increase16,565.0 (329.9)(2.4)16,018.9 (243.6)(1.8)
No change16,964.2 — — 16,315.4 — — 
100 basis point decrease17,444.3 396.9 2.8 16,712.8 326.8 2.4 
200 basis point decrease18,000.8 856.1 6.1 17,162.3 695.8 5.2 
(1)    Includes the impact of forward contracts to sell long dated U.S. treasury bonds with a notional amount at September 30, 2020 of $341.1 (December 31, 2019 - $846.5).

Market Price Fluctuations
Market price fluctuation is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or foreign currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or other factors affecting all similar financial instruments in the market. The company holds significant investments in equity and equity-related instruments. The market value and the liquidity of these investments are volatile and may vary dramatically either up or down in short periods, and their ultimate value will therefore only be known over the long term or on disposition. As discussed in the preceding sections, the COVID-19 pandemic has increased market uncertainty and may adversely impact the fair value or future cash flows of the company's equity and equity-related holdings.

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The company's exposure to equity price risk through its equity and equity-related holdings decreased at September 30, 2020 compared to December 31, 2019 as shown in the following table which summarizes the net effect of the company's equity and equity-related holdings (long exposures net of short exposures) on the company's financial position at September 30, 2020 and December 31, 2019 and results of operations for the three and nine months ended September 30, 2020 and 2019:
September 30, 2020December 31, 2019Pre-tax earnings (loss)
Exposure/Notional
amount
Carrying
value
Exposure/Notional
amount
Carrying
value
Third quarterFirst nine months
2020201920202019
Long equity exposures:
Common stocks4,159.5 4,159.5 4,604.2 4,604.2 109.2 39.3 (611.0)694.1 
Preferred stocks – convertible(1)
25.5 25.5 20.7 20.7 0.5 (3.0)2.9 (0.5)
Bonds – convertible331.8 331.8 667.6 667.6 30.7 (20.6)20.5 (5.5)
Investments in associates(1)(2)
4,707.3 4,947.9 6,494.4 5,492.3 21.4 1.0 14.6 0.7 
Non-insurance subsidiaries held for sale or deconsolidated (3)(4)
— — — — (164.0)— (164.0)171.3 
Derivatives and other invested assets:
Equity total return swaps – long positions1,178.0 (33.7)406.3 8.1 (9.7)(8.2)39.0 (14.1)
Equity warrant forward contracts(5)
— — — — — (4.8)— 65.2 
Equity warrants and options(5)
76.8 76.8 200.3 200.3 24.5 7.7 (111.3)50.6 
Total equity and equity related holdings10,478.9 9,507.8 12,393.5 10,993.2 12.6 11.4 (809.3)961.8 
Short equity exposures:
Derivatives and other invested assets:
Equity total return swaps – short positions(265.8)(36.9)(369.8)(84.6)(168.2)(15.3)(390.6)111.7 
Other— — — — — (2.6)— (2.6)
(265.8)(36.9)(369.8)(84.6)(168.2)(17.9)(390.6)109.1 
Net equity exposures and financial effects10,213.1 12,023.7 (155.6)(6.5)(1,199.9)1,070.9 
(1)    Excludes the company’s insurance and reinsurance investments in associates and joint ventures and certain other equity and equity-related holdings which are considered long term strategic holdings. See note 6.
(2)    On September 30, 2020 the company sold its investment in Davos Brands for cash proceeds of $58.6 and recorded a net realized gain of $19.3 as described in note 6.
(3)    Pursuant to a proposed transaction on July 10, 2020 Fairfax Africa was classified as held for sale which resulted in a non-cash loss of $164.0 as described in note 15.
(4)    On May 17, 2019 the company deconsolidated Grivalia Properties upon its merger into Eurobank and recognized a non-cash gain of $171.3.
(5)    Includes the Atlas (formerly Seaspan) $8.05 warrants and forward contracts.

The table that follows illustrates the potential impact on net earnings of changes in global equity markets and the fair value of the company's equity and equity-related holdings (long exposures net of short exposures). The analysis assumes variations in global equity markets at September 30, 2020 of 10% and 20% (December 31, 2019 - 5% and 10%) which the company believes to be reasonably possible in the current economic environment of the COVID-19 pandemic.
September 30, 2020
Change in global equity markets20% increase10% increaseNo change10% decrease20% decrease
Fair value of equity and equity-related holdings6,582.3 6,043.1 5,505.8 4,969.3 4,434.4 
Hypothetical $ change in net earnings913.8 456.0 — (455.1)(908.6)
Hypothetical % change in fair value19.6 9.8 — (9.7)(19.5)
December 31, 2019
Change in global equity markets10% increase5% increaseNo change5% decrease10% decrease
Fair value of equity and equity-related holdings6,048.3 5,788.2 5,529.3 5,271.8 5,015.7 
Hypothetical $ change in net earnings433.9 216.4 — (215.1)(428.8)
Hypothetical % change in fair value9.4 4.7 — (4.7)(9.3)

The change in fair value of non-insurance investments in associates and joint ventures has been excluded from the scenarios presented above as a change in fair value of an equity accounted investment is generally recognized in the company’s consolidated financial reporting only upon disposition of the investment. The change in fair value of insurance and reinsurance investments in associates and joint ventures and certain other equity and equity-related holdings has also been excluded from the scenarios presented above as those investments are considered long term strategic holdings.
Risk of Decreasing Price Levels
The company has purchased derivative contracts referenced to the CPI of the geographic regions in which it operates that serve as an economic hedge against the potential adverse financial impact on the company of decreasing price levels. See note 7 for details.
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Foreign Currency Risk
Foreign currency risk is the risk that the fair value or cash flows of a financial instrument or another asset or liability will fluctuate because of changes in foreign currency exchange rates and produce an adverse effect on earnings or equity when measured in a company's functional currency. There were no significant changes to the company's exposure to foreign currency risk or the framework used to monitor, evaluate and manage foreign currency risk at September 30, 2020 compared to December 31, 2019.
Capital Management
The company's capital management framework is designed to protect, in the following order, its policyholders, its bondholders and its preferred shareholders and then finally to optimize returns to common shareholders. Effective capital management includes measures designed to maintain capital above minimum regulatory levels, above levels required to satisfy issuer credit ratings and financial strength ratings requirements, and above internally determined and calculated risk management levels. Total capital, comprising total debt, shareholders' equity attributable to shareholders of Fairfax and non-controlling interests, was $25,036.0 at September 30, 2020 compared to $25,139.8 at December 31, 2019.

The company manages its capital based on the following financial measurements and ratios:
ConsolidatedExcluding consolidated non-insurance companies
September 30, 2020December 31, 2019September 30, 2020December 31, 2019
Holding company cash and investments (net of short sale and derivative obligations)1,095.9 975.2 1,095.9 975.2 
Borrowings – holding company5,440.7 4,117.3 5,440.7 4,117.3 
Borrowings – insurance and reinsurance companies1,076.0 1,039.6 1,076.0 1,039.6 
Borrowings – non-insurance companies2,132.9 2,075.7 — — 
Total debt8,649.6 7,232.6 6,516.7 5,156.9 
Net debt(1)
7,553.7 6,257.4 5,420.8 4,181.7 
Common shareholders’ equity11,600.8 13,042.6 11,600.8 13,042.6 
Preferred stock1,335.5 1,335.5 1,335.5 1,335.5 
Non-controlling interests3,450.1 3,529.1 1,389.5 1,519.8 
Total equity16,386.4 17,907.2 14,325.8 15,897.9 
Net debt/total equity46.1%34.9%37.8%26.3%
Net debt/net total capital(2)    
31.6%25.9%27.5%20.8%
Total debt/total capital(3)
34.5%28.8%31.3%24.5%
Interest coverage(4)
n/a6.5xn/a(6)9.8x(6)
Interest and preferred share dividend distribution coverage(5)
n/a5.7xn/a(6)7.9x(6)
(1)    Net debt is calculated by the company as total debt less holding company cash and investments (net of short sale and derivative obligations).
(2)    Net total capital is calculated by the company as the sum of total equity and net debt.
(3)    Total capital is calculated by the company as the sum of total equity and total debt.
(4)    Interest coverage is calculated by the company as earnings (loss) before income taxes and interest expense on borrowings, divided by interest expense on borrowings.
(5)    Interest and preferred share dividend distribution coverage is calculated by the company as earnings (loss) before income taxes and interest expense on borrowings divided by the sum of interest expense on borrowings and preferred share dividends adjusted to a pre-tax equivalent at the company’s Canadian statutory income tax rate.
(6)    Excludes earnings (loss) before income taxes, and interest expense on borrowings, of consolidated non-insurance companies.
Borrowings - holding company increased to $5,440.7 at September 30, 2020 from $4,117.3 at December 31, 2019, primarily reflecting $700.0 drawn on the company's credit facility (solely as a precaution, to support growth in the insurance and reinsurance companies in a favourable pricing environment and to support fluctuations in their investment portfolios due to the economic effects of the COVID-19 pandemic) and the issuance on April 29, 2020 of $650.0 principal amount of 4.625% unsecured senior notes due April 29, 2030, partially offset by the impact of foreign exchange on the holding company's Canadian dollar denominated borrowings.
Borrowings - insurance and reinsurance companies of $1,076.0 at September 30, 2020 remained stable compared to $1,039.6 at December 31, 2019.
Borrowings - non-insurance companies increased to $2,132.9 at September 30, 2020 from $2,075.7 at December 31, 2019, primarily reflecting the consolidation of the borrowings of Horizon North and increased borrowings at non-insurance companies on their revolving credit facilities to support their operations should it be needed as a result of the effects of the COVID-19 pandemic, partially offset by the classification of Fairfax Africa's borrowings as liabilities associated with assets held for sale and the impact of foreign currency translation on Canadian dollar borrowings.
31


Common shareholders’ equity decreased to $11,600.8 at September 30, 2020 from $13,042.6 at December 31, 2019, primarily reflecting net loss attributable to shareholders of Fairfax ($690.7), payments of common and preferred share dividends ($308.6), purchases of subordinate voting shares for use in share-based payment awards ($132.3) and for cancellation ($86.9), and other comprehensive loss of $106.6 (comprised principally of net unrealized foreign currency translation losses on foreign operations ($268.0), net unrealized foreign currency translation losses reclassified to net loss ($161.9) on deconsolidation of European Run-off and net loss on defined benefit plans ($27.8), partially offset by share of other comprehensive income of associates ($27.3)).
Non-controlling interests decreased to $3,450.1 at September 30, 2020 from $3,529.1 at December 31, 2019, primarily reflecting non-controlling interests' share of net loss ($230.3), the company's acquisition of the remaining shares of Brit that it did not already own and other comprehensive loss ($90.6), partially offset by the deconsolidation of European Run-off and its investments in certain of the company's non-insurance subsidiaries ($340.4), and the consolidation of Horizon North.
The changes in borrowings and common shareholders’ equity affected the company’s leverage ratios as follows: the consolidated net debt/net total capital ratio increased to 31.6% at September 30, 2020 from 25.9% at December 31, 2019 primarily as a result of increased net debt and decreased net total capital. The increase in net debt was primarily due to increased borrowings by the holding company as described in the preceding paragraphs, partially offset by increased holding company cash and investments. The decrease in net total capital was primarily due to decreased common shareholders' equity, partially offset by increased net debt, as described in the preceding paragraphs. The consolidated total debt/total capital ratio excluding consolidated non-insurance companies increased to 31.3% at September 30, 2020 from 24.5% at December 31, 2019 primarily due to increased total debt and decreased total capital (reflecting decreased common shareholders' equity, partially offset by increased total debt).


17.    Segmented Information

The company is a holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and the associated investment management. On July 10, 2020 Fairfax Africa entered into an agreement that resulted in its assets and liabilities, with the exception of its equity accounted investment in Atlas Mara, being classified as held for sale on the consolidated balance sheet. On July 1, 2020 and May 29, 2020 the company commenced consolidating Farmers Edge and Horizon North respectively in the Non-insurance companies reporting segment, and on March 31, 2020 the European Run-off group, comprised primarily of RiverStone UK, Advent and TIG Barbados, was deconsolidated from the Run-off reporting segment. The aforementioned transactions are described in note 6 and note 15. There were no other significant changes to the identifiable assets and liabilities by reporting segment at September 30, 2020 compared to December 31, 2019.

32


An analysis of pre-tax income (loss) by reporting segment for the three and nine months ended September 30 is presented below:

Quarter ended September 30, 2020
Insurance and Reinsurance
NorthbridgeOdyssey GroupCrum & ForsterZenith NationalBritAllied World
Fairfax
Asia
Other
Ongoing
operations
Run-off 
Non-insurance companies
Corporate
and Other
Eliminations
and
adjustments
Consolidated
Gross premiums written
External456.0 1,032.8 789.9 150.3 597.3 1,157.3 118.2 441.4 4,743.2 — — — — 4,743.2 
Intercompany1.3 63.0 9.7 — 5.1 10.9 1.4 40.9 132.3 — — — (132.3)— 
457.3 1,095.8 799.6 150.3 602.4 1,168.2 119.6 482.3 4,875.5 — — — (132.3)4,743.2 
Net premiums written379.0 969.3 657.9 146.3 487.2 726.6 59.4 309.5 3,735.2 — — — — 3,735.2 
Net premiums earned
External379.5 936.1 621.5 167.8 421.0 721.9 53.5 270.5 3,571.8 — — — — 3,571.8 
Intercompany(1.7)8.8 (7.0)(0.9)(1.8)(20.7)(0.6)23.9 — — — — — — 
377.8 944.9 614.5 166.9 419.2 701.2 52.9 294.4 3,571.8 — — — — 3,571.8 
Underwriting expenses(2)
(339.6)(938.9)(610.4)(154.7)(478.1)(652.9)(50.8)(294.0)(3,519.4)(17.2)— — — (3,536.6)
Underwriting profit (loss)38.2 6.0 4.1 12.2 (58.9)48.3 2.1 0.4 52.4 (17.2)— — — 35.2 
Interest income13.6 38.8 21.3 5.6 15.7 33.2 3.3 12.0 143.5 5.7 4.8 12.2 (2.3)163.9 
Dividends1.3 2.5 0.1 0.1 0.8 3.6 1.8 1.0 11.2 0.9 10.3 0.1 — 22.5 
Investment expenses(3.0)(6.8)(3.7)(1.5)(3.2)(7.1)(0.2)(1.5)(27.0)(1.5)(9.6)(0.5)34.0 (4.6)
Interest and dividends11.9 34.5 17.7 4.2 13.3 29.7 4.9 11.5 127.7 5.1 5.5 11.8 31.7 181.8 
Share of profit (loss) of associates2.7 21.3 6.6 4.1 11.1 14.7 9.4 4.7 74.6 2.8 (38.6)12.0 — 50.8 
Other
Revenue— — — — — — — — — — 1,228.1 — (12.6)1,215.5 
Expenses— — — — — — — — — — (1,194.4)— 2.3 (1,192.1)
— — — — — — — — — — 33.7 — (10.3)23.4 
Operating income (loss)52.8 61.8 28.4 20.5 (34.5)92.7 16.4 16.6 254.7 (9.3)0.6 23.8 21.4 291.2 
Net gains (losses) on investments(1)
62.2 (37.7)(43.3)(19.8)(2.4)11.3 13.6 19.7 3.6 (1.8)(38.6)9.5 — (27.3)
Interest expense(0.3)(1.5)(1.2)(0.9)(4.5)(7.5)(0.1)(0.3)(16.3)(0.2)(41.8)(62.6)— (120.9)
Corporate overhead and other(1.8)(1.1)(7.5)(3.3)(3.4)(17.3)(2.0)— (36.4)— — 6.9 (34.0)(63.5)
Pre-tax income (loss)112.9 21.5 (23.6)(3.5)(44.8)79.2 27.9 36.0 205.6 (11.3)(79.8)(22.4)(12.6)79.5 
Income taxes(37.7)
Net earnings41.8 
Attributable to:
Shareholders of Fairfax133.7 
Non-controlling interests(91.9)
41.8 
(1)    Includes an aggregate non-cash loss of $164.0 principally at Odyssey Group, Allied World, Zenith and Brit pursuant to Fairfax Africa being classified as held for sale as described in note 15.
(2)    Underwriting expenses for segment reporting were comprised as shown below for the quarter ended September 30, 2020. Accident year underwriting expenses exclude the impact of net favourable or adverse prior year claims reserve development.


Insurance and Reinsurance
NorthbridgeOdyssey GroupCrum & ForsterZenith NationalBritAllied World
Fairfax
Asia
Other Ongoing operations
Loss & LAE - accident year230.8 717.6 396.3 102.2 295.9 488.2 34.4 173.5 2,438.9 
Commissions70.4 175.6 109.9 19.0 112.7 61.7 7.4 59.9 616.6 
Premium acquisition costs and other underwriting expenses55.6 78.0 105.9 47.9 77.6 103.0 12.7 57.5 538.2 
Underwriting expenses - accident year356.8 971.2 612.1 169.1 486.2 652.9 54.5 290.9 3,593.7 
Net (favourable) adverse claims reserve development(17.2)(32.3)(1.7)(14.4)(8.1)— (3.7)3.1 (74.3)
Underwriting expenses - calendar year339.6 938.9 610.4 154.7 478.1 652.9 50.8 294.0 3,519.4 








33



Quarter ended September 30, 2019
Insurance and Reinsurance
NorthbridgeOdyssey GroupCrum & ForsterZenith NationalBritAllied WorldFairfax
Asia 
OtherOngoing
operations
Run-off Non-insurance companiesCorporate
and Other
Eliminations
and
adjustments
Consolidated 
Gross premiums written
External414.9 911.1 724.3 155.1 523.3 936.7 116.8 428.9 4,211.1 0.5 — — — 4,211.6 
Intercompany0.8 18.7 7.8 — 7.2 12.0 0.1 21.1 67.7 (1.6)— — (66.1)— 
415.7 929.8 732.1 155.1 530.5 948.7 116.9 450.0 4,278.8 (1.1)— — (66.1)4,211.6 
Net premiums written    335.3 855.2 598.3 152.4 413.9 613.3 55.9 293.8 3,318.1 0.2 — — — 3,318.3 
Net premiums earned
External334.1 849.2 571.4 186.7 379.4 609.8 55.3 258.8 3,244.7 20.8 — — — 3,265.5 
Intercompany(1.7)5.8 (10.3)(0.6)8.9 (4.7)(3.3)14.5 8.6 (8.6)— — — — 
332.4 855.0 561.1 186.1 388.3 605.1 52.0 273.3 3,253.3 12.2 — — — 3,265.5 
Underwriting expenses(1)
(324.0)(834.8)(549.3)(162.0)(404.1)(582.1)(50.4)(265.3)(3,172.0)(44.2)— — — (3,216.2)
Underwriting profit (loss)8.4 20.2 11.8 24.1 (15.8)23.0 1.6 8.0 81.3 (32.0)— — — 49.3 
Interest income18.3 48.5 24.2 9.5 22.3 40.7 4.2 15.0 182.7 15.8 5.1 5.6 (2.3)206.9 
Dividends2.1 2.1 0.6 0.3 1.2 2.6 1.9 1.0 11.8 1.7 3.1 0.4 — 17.0 
Investment expenses(2.7)(7.1)(4.0)(1.9)(2.7)(8.8)(2.0)(2.2)(31.4)(3.8)(9.7)— 35.9 (9.0)
Interest and dividends17.7 43.5 20.8 7.9 20.8 34.5 4.1 13.8 163.1 13.7 (1.5)6.0 33.6 214.9 
Share of profit (loss) of associates4.5 3.3 11.3 0.7 6.8 9.2 2.4 (2.5)35.7 4.1 47.7 62.1 — 149.6 
Other
Revenue— — — — — — — — — — 1,392.6 — — 1,392.6 
Expenses— — — — — — — — — — (1,430.6)— 1.5 (1,429.1)
— — — — — — — — — — (38.0)— 1.5 (36.5)
Operating income (loss)30.6 67.0 43.9 32.7 11.8 66.7 8.1 19.3 280.1 (14.2)8.2 68.1 35.1 377.3 
Net gains (losses) on investments(23.9)(65.5)(55.7)(6.1)(15.8)(10.3)87.2 (22.4)(112.5)(15.2)14.4 16.6 — (96.7)
Loss on repurchase of borrowings— — — — — — — — — — — (23.7)— (23.7)
Interest expense(0.4)(1.8)(1.2)(1.0)(4.4)(7.2)(0.1)(0.4)(16.5)(1.9)(51.9)(52.0)0.8 (121.5)
Corporate overhead and other(1.1)0.4 (5.3)(2.2)(2.3)(16.3)(2.3)0.6 (28.5)— — (1.1)(35.9)(65.5)
Pre-tax income (loss)5.2 0.1 (18.3)23.4 (10.7)32.9 92.9 (2.9)122.6 (31.3)(29.3)7.9 — 69.9 
Income taxes4.5 
Net earnings74.4 
Attributable to:
Shareholders of Fairfax68.6 
Non-controlling interests5.8 
74.4 
(1)    Underwriting expenses for segment reporting were comprised as shown below for the quarter ended September 30, 2019. Accident year underwriting expenses exclude the impact of net favourable or adverse prior year claims reserve development.


Insurance and Reinsurance
Northbridge Odyssey GroupCrum & ForsterZenith NationalBritAllied WorldFairfax
Asia
Other Ongoing operations
Loss & LAE - accident year215.6 647.1 358.2 105.5 245.5 420.3 37.4 168.6 2,198.2 
Commissions54.9 158.1 91.4 20.3 111.9 62.7 7.2 50.6 557.1 
Premium acquisition costs and other underwriting expenses53.0 75.1 101.9 52.7 54.9 99.4 13.4 60.5 510.9 
Underwriting expenses - accident year323.5 880.3 551.5 178.5 412.3 582.4 58.0 279.7 3,266.2 
Net (favourable) adverse claims reserve development0.5 (45.5)(2.2)(16.5)(8.2)(0.3)(7.6)(14.4)(94.2)
Underwriting expenses - calendar year324.0 834.8 549.3 162.0 404.1 582.1 50.4 265.3 3,172.0 
34


Nine months ended September 30, 2020
Insurance and Reinsurance
NorthbridgeOdyssey GroupCrum & ForsterZenith NationalBritAllied WorldFairfax
Asia
Other
Ongoing
operations
Run-off 
Non-insurance companies
Corporate
and Other
Eliminations
and
adjustments
Consolidated
Gross premiums written
External1,230.3 3,066.1 2,271.2 528.2 1,871.4 3,485.7 329.5 1,292.7 14,075.1 146.5 — — — 14,221.6 
Intercompany5.2 110.5 21.7 — 13.5 38.6 1.4 98.6 289.5 — — — (289.5)— 
1,235.5 3,176.6 2,292.9 528.2 1,884.9 3,524.3 330.9 1,391.3 14,364.6 146.5 — — (289.5)14,221.6 
Net premiums written1,091.2 2,769.0 1,888.4 516.3 1,353.4 2,318.7 164.5 889.1 10,990.6 146.5 — — — 11,137.1 
Net premiums earned
External1,047.7 2,631.1 1,802.6 473.3 1,238.3 2,025.0 171.3 774.4 10,163.7 129.4 — — — 10,293.1 
Intercompany(8.0)17.1 (26.2)(2.1)0.8 (38.9)(6.5)65.3 1.5 (1.5)— — — — 
1,039.7 2,648.2 1,776.4 471.2 1,239.1 1,986.1 164.8 839.7 10,165.2 127.9 — — — 10,293.1 
Underwriting expenses(2)
(971.2)(2,628.1)(1,750.7)(431.6)(1,357.6)(1,890.1)(163.9)(829.8)(10,023.0)(182.6)— — — (10,205.6)
Underwriting profit (loss)68.5 20.1 25.7 39.6 (118.5)96.0 0.9 9.9 142.2 (54.7)— — — 87.5 
Interest income46.9 134.8 71.7 19.3 53.1 104.7 10.7 40.0 481.2 23.8 18.2 46.5 (6.9)562.8 
Dividends5.0 5.9 2.1 1.2 2.5 16.2 5.7 3.2 41.8 3.6 15.0 0.7 — 61.1 
Investment expenses(8.0)(22.4)(10.5)(5.1)(8.9)(22.0)(0.8)(5.0)(82.7)(7.3)24.2 (1.5)48.1 (19.2)
Interest and dividends43.9 118.3 63.3 15.4 46.7 98.9 15.6 38.2 440.3 20.1 57.4 45.7 41.2 604.7 
Share of profit (loss) of associates(8.5)33.1 (18.5)(11.1)(0.6)23.8 13.6 (13.5)18.3 (13.0)(87.8)(95.0)— (177.5)
Other
Revenue— — — — — — — — — — 3,327.3 — (25.2)3,302.1 
Expenses— — — — — — — — — — (3,410.6)— 6.8 (3,403.8)
— — — — — — — — — — (83.3)— (18.4)(101.7)
Operating income (loss)103.9 171.5 70.5 43.9 (72.4)218.7 30.1 34.6 600.8 (47.6)(113.7)(49.3)22.8 413.0 
Net gains (losses) on investments(1)
(35.4)(282.3)(248.9)(84.4)(9.8)29.2 (10.4)(81.8)(723.8)(157.2)(149.8)108.1 — (922.7)
Gain (loss) on deconsolidation of insurance subsidiary— (30.5)(25.8)— — — — — (56.3)(9.0)— 182.4 — 117.1 
Interest expense(1.0)(4.9)(3.6)(2.8)(13.9)(22.8)(0.3)(1.2)(50.5)(2.1)(131.5)(174.8)0.1 (358.8)
Corporate overhead and other(4.2)(2.6)(18.5)(7.3)(8.0)(57.8)(7.2)(0.3)(105.9)— — (87.7)(48.1)(241.7)
Pre-tax income (loss)63.3 (148.8)(226.3)(50.6)(104.1)167.3 12.2 (48.7)(335.7)(215.9)(395.0)(21.3)(25.2)(993.1)
Income taxes72.1 
Net loss(921.0)
Attributable to:
Shareholders of Fairfax(690.7)
Non-controlling interests(230.3)
(921.0)
(1)    Includes an aggregate non-cash loss of $164.0 principally at Odyssey Group, Allied World, Zenith and Brit pursuant to Fairfax Africa being classified as held for sale as described in note 15.
(2)    Underwriting expenses for segment reporting were comprised as shown below for the nine months ended September 30, 2020. Accident year underwriting expenses exclude the impact of net favourable or adverse prior year claims reserve development.


Insurance and Reinsurance
NorthbridgeOdyssey GroupCrum & ForsterZenith NationalBritAllied WorldFairfax
Asia
Other Ongoing operations
Loss & LAE - accident year649.31,971.41,127.4298.9876.11,424.2 111.1512.46,970.8 
Commissions179.2511.1302.554.4321.3186.5 24.9163.11,743.0 
Premium acquisition costs and other underwriting expenses158.0236.7324.9140.7202.6304.7 40.9176.11,584.6 
Underwriting expenses - accident year986.52,719.21,754.8494.01,400.01,915.4 176.9851.610,298.4 
Net favourable claims reserve development(15.3)(91.1)(4.1)(62.4)(42.4)(25.3)(13.0)(21.8)(275.4)
Underwriting expenses - calendar year971.22,628.11,750.7431.61,357.61,890.1 163.9829.810,023.0 



35


Nine months ended September 30, 2019
Insurance and Reinsurance
NorthbridgeOdyssey GroupCrum & ForsterZenith NationalBritAllied WorldFairfax
Asia 
OtherOngoing
operations
Run-off Non-insurance companiesCorporate
and Other
Eliminations
and
adjustments
Consolidated
Gross premiums written
External1,108.2 2,743.6 2,081.9 588.6 1,699.0 2,905.1 328.9 1,226.2 12,681.5 592.1 — — — 13,273.6 
Intercompany3.8 49.8 18.9 — 42.0 39.8 0.1 65.9 220.3 0.8 — — (221.1)— 
1,112.0 2,793.4 2,100.8 588.6 1,741.0 2,944.9 329.0 1,292.1 12,901.8 592.9 — — (221.1)13,273.6 
Net premiums written975.1 2,510.1 1,738.3 579.5 1,239.1 1,997.5 161.2 850.0 10,050.8 563.3 — — — 10,614.1 
Net premiums earned
External916.7 2,349.3 1,615.5 551.1 1,167.6 1,802.8 153.8 727.1 9,283.9 663.4 — — — 9,947.3 
Intercompany(5.5)14.2 (26.0)(1.7)27.7 (6.5)(8.7)44.9 38.4 (38.4)— — — — 
911.2 2,363.5 1,589.5 549.4 1,195.3 1,796.3 145.1 772.0 9,322.3 625.0 — — — 9,947.3 
Underwriting expenses(1)
(899.5)(2,275.2)(1,553.5)(457.7)(1,182.4)(1,773.3)(142.0)(768.0)(9,051.6)(720.0)— — — (9,771.6)
Underwriting profit (loss)11.7 88.3 36.0 91.7 12.9 23.0 3.1 4.0 270.7 (95.0)— — — 175.7 
Interest income47.5 138.2 69.6 27.8 61.9 125.2 12.2 50.4 532.8 48.5 19.4 27.3 (7.0)621.0 
Dividends8.7 14.7 6.6 3.3 2.6 14.0 6.9 3.4 60.2 7.8 7.3 1.5 — 76.8 
Investment expenses(8.7)(22.9)(10.9)(5.6)(8.5)(25.1)(2.5)(7.3)(91.5)(11.1)(30.2)(1.9)109.3 (25.4)
Interest and dividends47.5 130.0 65.3 25.5 56.0 114.1 16.6 46.5 501.5 45.2 (3.5)26.9 102.3 672.4 
Share of profit (loss) of associates(2.1)55.9 23.8 (7.8)0.5 20.4 2.3 (8.4)84.6 4.8 141.2 184.5 — 415.1 
Other
Revenue— — — — — — — — — — 3,889.2 — — 3,889.2 
Expenses— — — — — — — — — — (3,863.0)— 6.2 (3,856.8)
— — — — — — — — — — 26.2 — 6.2 32.4 
Operating income (loss)57.1 274.2 125.1 109.4 69.4 157.5 22.0 42.1 856.8 (45.0)163.9 211.4 108.5 1,295.6 
Net gains (losses) on investments(42.7)154.1 118.1 11.5 47.1 147.5 255.6 53.7 744.9 139.9 78.6 112.4 — 1,075.8 
Loss on repurchase of borrowings— — — — — — — — — — — (23.7)— (23.7)
Interest expense(1.2)(5.8)(3.9)(2.9)(14.6)(21.8)(0.3)(1.3)(51.8)(5.6)(134.7)(163.7)0.8 (355.0)
Corporate overhead and other(3.7)(6.6)(15.9)(6.2)(6.9)(46.8)(7.7)(0.7)(94.5)— — 4.7 (109.3)(199.1)
Pre-tax income9.5 415.9 223.4 111.8 95.0 236.4 269.6 93.8 1,455.4 89.3 107.8 141.1 — 1,793.6 
Income taxes(325.1)
Net earnings1,468.5 
Attributable to:
Shareholders of Fairfax1,332.1 
Non-controlling interests136.4 
1,468.5 
(1)    Underwriting expenses for segment reporting were comprised as shown below for the nine months ended September 30, 2019. Accident year underwriting expenses exclude the impact of net favourable or adverse prior year claims reserve development.



Insurance and Reinsurance
Northbridge Odyssey GroupCrum & ForsterZenith NationalBritAllied WorldFairfax
Asia
Other Ongoing operations
Loss & LAE - accident year632.0 1,669.4 1,006.9 317.7 697.2 1,196.8 103.1 485.7 6,108.8 
Commissions150.6 466.7 251.0 59.5 326.0 194.9 18.3 137.5 1,604.5 
Premium acquisition costs and other underwriting expenses148.8 224.7 300.3 155.9 169.3 302.3 41.6 180.4 1,523.3 
Underwriting expenses - accident year931.4 2,360.8 1,558.2 533.1 1,192.5 1,694.0 163.0 803.6 9,236.6 
Net (favourable) adverse claims reserve development(31.9)(85.6)(4.7)(75.4)(10.1)79.3 (21.0)(35.6)(185.0)
Underwriting expenses - calendar year899.5 2,275.2 1,553.5 457.7 1,182.4 1,773.3 142.0 768.0 9,051.6