Fairfax Financial Holdings Limited (TSX: FFH)(NYSE: FFH) announces that it had a net loss of $60.4 million in the first quarter of 2009 ($3.55 per share and per diluted share) compared to net earnings of $631.8 million in the first quarter of 2008 ($34.72 per share, $33.78 per diluted share). The company's insurance and reinsurance operations generated increased underwriting profit and interest and dividend income in the first quarter of 2009 compared to the first quarter of 2008. The year-over-year decline in earnings primarily arose due to the significant net investment gains ($1,072.5 million) earned in the first quarter of 2008 compared to net losses on investments in the first quarter of 2009 (net losses of $153.0 million, principally due to the inclusion of $213.0 million of other than temporary impairments recorded on certain common stock and bond investments).

"We are pleased that, in a difficult environment, we have maintained our disciplined underwriting standards, and our insurance and reinsurance operations have produced a consolidated combined ratio of 98.7% in the first quarter," said Prem Watsa, Chairman and Chief Executive Officer. "As to our investments, our increased focus on high quality common stocks reflects our view that these should provide excellent returns over the long term, though the volatility of the markets may result in lumpy quarters and even years. Principally as a result of the lower market value of our investments at March 31, our book value declined by $23 per share during the first quarter. Yet if our investments were valued as of the end of last week (at April 24), then our book value, based on that factor alone, would have increased since March 31 in excess of $30 per share."

Highlights in the first quarter included the following:

- The combined ratio of the company's insurance and reinsurance operations in the first quarter of 2009 was 98.7% on a consolidated basis, and on an individual company basis was as follows: Northbridge - 101.8%, Crum & Forster - 99.8%, Fairfax Asia - 92.2%, OdysseyRe - 96.5% and Reinsurance - Other - 99.6%. Underwriting profit earned by the company's insurance and reinsurance operations in the first quarter of 2009 improved to $15.1 million from $2.8 million in the first quarter of 2008.

- Interest and dividend income of $171.1 million in the first quarter of 2009 declined 5.0% from $180.1 million in the first quarter of 2008, but increased 17.2% on a quarter-over-quarter basis from $146.0 million in the fourth quarter of 2008. The year-over-year decrease was primarily attributable to the significant decline in short term interest rates and a $0.4 billion decrease in the average investment portfolio in the first quarter of 2009 compared to the first quarter of 2008, partially offset by the inclusion of Advent and Polish Re in the first quarter of 2009 and the impact on portfolio yield in 2009 of the purchases in the fourth quarter of 2008 and the first quarter of 2009 of higher yielding municipal and other tax exempt debt securities and corporate bonds using the proceeds of sale of lower yielding government bonds. Interest income as reported is unadjusted for the positive tax effect on yields of the company's significant holdings of tax- advantaged debt securities (holdings of $4,362.0 million at March 31, 2009 compared to $191.4 million at March 31, 2008), and as a result interest income after tax increased significantly in the first quarter of 2009 compared to the first quarter of 2008.

- Operating income of the company's insurance and reinsurance operations (excluding net gains and losses on investments) in the first quarter of 2009 increased 17.4% to $154.6 million from $131.7 million in the first quarter of 2008, principally as a result of the above-described improved underwriting results and interest and dividend income.

- Net premiums written in the first quarter of 2009 increased 4.9% to $1,116.0 million from $1,063.7 million in the first quarter of 2008, reflecting the inclusion of Advent and Polish Re in the first quarter of 2009 (net premiums written of $173.0 million), partially offset by a decline of $120.7 million, or 11.3%, in net premiums written by the company's other insurance and reinsurance operations, reflecting the operating companies' disciplined response to competitive conditions in global insurance and reinsurance markets.

- The company held $861.6 million of cash, short term investments and marketable securities at the holding company level ($786.4 million net of short sale and derivative obligations) at March 31, 2009, compared to $1,564.2 million at December 31, 2008 ($1,555.0 million net of short sale and derivative obligations).