Fairfax Financial Holdings Ltd. yesterday announced today that it has filed its interim report for the six months ended June 30, 2006 and its restated consolidated financial statements and related disclosures pursuant to the restatement previously announced on July 27, 2006.

As a result of the restatement, shareholders’ equity decreased US$235.3 million as at Mar. 31, 2006, within the estimated range of US$225 to US$240 million announced on July 27, 2006.

As a result of corrections reflected in the restatement, Fairfax’s net earnings for the three and six months ended June 30, 2006 were slightly higher at US$229.2 million and US$427.6 million respectively than the US$223.6 million and US$421.7 million for those periods respectively announced on July 27, 2006.

Fairfax has completed the restatement of its previously reported consolidated financial statements as at and for the years ended Dec. 31, 2001 through 2005 and all related disclosures, as well as its unaudited consolidated financial statements as at and for the three months ended March 31, 2006 and 2005.

The company has filed audited restated consolidated financial statements comprising the consolidated balance sheets as at Dec. 31, 2005 and 2004, the restated consolidated statements of earnings, shareholders’equity and cash flows for each of the years in the three year period ended Dec. 31, 2005 and all related disclosures, as well as unaudited consolidated financial statements as at and for the six months ended June 30, 2006 and 2005.

These unaudited consolidated financial statements reflect the restatement of the unaudited consolidated financial statements as at and for the six months ended June 30, 2005 and the three months ended March 31, 2006 and June 30, 2005.

The restatement of the company’s consolidated financial statements resulted from management’s identification of various non-cash accounting errors arising primarily in 2001 and prior. The restatement followed an internal review of the company’s consolidated financial statements and accounting records that was undertaken in contemplation of the commutation of the Swiss Re Cover (which was ultimately completed on August 3, 2006) and that identified an overstatement of the consolidated net assets of the company and errors in accounting for the periodic consolidated earnings. The effects of the restatement are reflected in the company’s audited restated consolidated 2005 financial statements and accompanying notes and disclosures, and in the unaudited consolidated financial statements and accompanying notes contained in the company’s interim report for the six months ended June 30, 2006.

On July 27, 2006, Fairfax announced that it had estimated that the impact of the restatement would be a decrease in shareholders’ equity as at March 31, 2006 in a range of US$225 million to US$240 million. The total cumulative impact of the finalized restatement through March 31, 2006 is to decrease shareholders’ equity as at March 31, 2006 by US$235.3 million. The US$235.3 million total cumulative impact on shareholders’equity comprises a decrease in the currency translation account (“‘CTA”‘) in the amount of US$123.7 million, a decrease in retained earnings in the amount of US$99.5 million, a decrease in share capital (by way of an increase in treasury stock) of US$17.2 million, and an increase in common stock of US$5.1 million. Of the US$99.5 million cumulative decrease in retained earnings, the net effect of the restatement on earnings for each period is to increase net earnings for the three months ended March 31, 2006 by US$26.3 million, decrease the 2005 net loss by US$51.3 million, decrease the 2004 net loss by US$72.9 million, increase 2003 net earnings by US$18.6 million, decrease 2002 net earnings by US$10.1 million, increase the 2001 net loss by US$182.7 million, and decrease the net earnings of 2000 and prior years by US$75.8 million.


Fairfax’s Chief Executive Officer, Prem Watsa, reiterated his comment of July 27, 2006, stating, “Our operating and investment performance continues to be strong. The restatement has not impacted Fairfax’s cash flows or the fundamental strength of our business. Cash and marketable securities at the holding company at quarter-end exceeded US$500 million, the regulatory capital at our operating subsidiaries remains strong and, with the commutation of the Swiss Re Cover, we do not expect to have any cash costs at the holding company to fund European runoff through 2007. That said, we take very seriously our obligation to provide accurate financial results, and our management team, having identified the accounting errors, acted diligently to correct the errors and disclose our restated results.”