Moody’s Investors Service has revised its rating outlook for Fairfax Financial Holdings Ltd. and its subsidiary Odyssey Re Holdings Corp. to negative from stable.

The move follows the announcement that Odyssey is delaying the filing of its annual report along with its previously announced restatement of its financial results for the years 2001 through 2004, and the nine months ended September 30, 2005. And, Fairfax Financial will also delay the filing of its annual statement.

Moody’s says that the delay for Odyssey is primarily due to a review of finite reinsurance contracts at Odyssey Re that resulted in changing the accounting treatment for 10 reinsurance contracts purchased between 1998 and 2004 by Odyssey Re. Odyssey Re estimated that the restatement would reduce shareholders’ equity by approximately $8 million.

According to Moody’s, the negative outlooks reflect the filing delays. “Specific concerns include the potential for additional financial restatements as well as the ongoing regulatory investigations,” it says.

Assuming that the reports are filed within 30 days and Moody’s confirms that the company’s financial and operational characteristics remain appropriate for its rating level, the outlook will likely return to stable. However, further significant negative revelations could lead to a review for possible downgrade of the ratings, it adds.

The ratings of Odyssey Re are based on expectations that: the company will maintain discipline in the reinsurance market, reducing premium volume in the event of pricing weakness, adjusted financial leverage will moderate in the medium term, gross underwriting leverage will remain within the mid-single digits, cash coverage of interest and stockholder dividends would remain at 3x or better, adverse reserve development will remain less than 5% of total loss reserves, and investigations into its finite transactions will not result in a material negative impact on common equity.

Fairfax’s rating is based on the expectation that: holding company cash remains at or above approximately $400 million, pre-tax coverage for interest, hybrid fixed payments, and preferred share dividends remains above 1x for 2005, financial leverage continues to improve moderately, only moderate adverse reserve development after reinsurance, the net reinsurance recoverables to common equity ratio is below 2.0x, and investigations into finite transactions do not result in a material negative impact on its common equity.