Standard & Poor’s Ratings Services boosted its outlook on Fairfax Financial Holdings Ltd. from stable to positive today. S&P also affirmed its ratings on the financial services holding company.

The new positive outlook is due to Fairfax and its operating companies having shown substantial improvement in almost all of the major rating factors S&P says, and this is expected to continue.

The ratings are based on improving competitive position, strong consolidated capitalization, and improved financial flexibility. “Offsetting these positives are reserves, which though not an immediate concern, have frequently been strengthened and might require some further modest charges; some very poor acquisitions and sizeable reserve charges for which Fairfax has utilized finite reinsurance; and debt to support operating company obligations, resulting in high debt leverage,” the rating agency adds.

“In the future, an upgrade may be warranted based on year-end 2005 financial statements should earnings improvements continue and no longer be dependant on realized capital gains and net investment income,” it notes. “In contrast, should reserves deteriorate above expectations, if holding company funds are not maintained near $350 million, or if earnings do not continue to improve as the market softens, the positive outlook might be revised to stable.”