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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.        )

Filed by the Registrant ý

Filed by a Party other than the Registrant o

Check the appropriate box:

ý


Preliminary Proxy Statement

o


Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

o


Definitive Proxy Statement

o


Definitive Additional Materials

o


Soliciting Material under §240.14a-12

 

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

(Exact name of Registrant as Specified In Its Charter)

Not Applicable

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

o


No fee required.

o


Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1) Title of each class of securities to which transaction applies:
        
  (2) Aggregate number of securities to which transaction applies:
        
  (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
        
  (4) Proposed maximum aggregate value of transaction:
        
  (5) Total fee paid:
        

o


Fee paid previously with preliminary materials.

ý


Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 


(1)


Amount Previously Paid:
$488,354.41
  (2) Form, Schedule or Registration Statement No.:
Form F-4
  (3) Filing Party:
Fairfax Financial Holdings Limited
  (4) Date Filed:
February 15, 2017

PRELIMINARY PROXY STATEMENT — SUBJECT TO COMPLETION — DATED JULY 19, 2017

LOGO


ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
Park Tower, 15th floor, Gubelstrasse 24
6300 Zug, Switzerland

July 19, 2017

Dear Shareholder:

              We are pleased to invite you to attend the extraordinary general meeting of shareholders of Allied World Assurance Company Holdings, AG (“Allied World,” the “company,” “we,” “our” or “us”), a Swiss corporation, which will be held at Allied World’s corporate headquarters, Park Tower, 15th floor, Gubelstrasse 24, 6300 Zug, Switzerland, on August 16, 2017, at 2:00 p.m., local time (the “Special Shareholder Meeting”).

              The Special Shareholder Meeting is being called to vote on the items described below, including an item in connection with the recently completed exchange offer (the “Offer”) in which Fairfax Financial Holdings (Switzerland) GmbH (“FFH Switzerland”), a wholly-owned subsidiary of Fairfax Financial Holdings Limited, a corporation existing under the laws of Canada (“Fairfax”), acquired substantially all of the outstanding common shares, par value CHF 4.10 per share, of Allied World (“common shares”), pursuant to the terms, and subject to the conditions, of that certain Agreement and Plan of Merger, dated as of December 18, 2016, between Fairfax and Allied World. You may be receiving these materials because you did not validly tender your shares in the Offer. As of the Record Date (defined below), Fairfax (Switzerland) GmbH (“Fairfax (Switzerland)”), a limited liability company incorporated under the laws of Switzerland and a direct, wholly-owned subsidiary of FFH Switzerland, owned [          ]% of the outstanding Allied World common shares representing sufficient votes to approve each of the items described below.

              At the Special Shareholder Meeting, holders of our common shares will be asked to consider and vote on: (i) a proposal to approve and adopt the Swiss Merger Agreement (defined below) and the merger of Allied World with and into Fairfax (Switzerland) (defined below); (ii) a proposal to approve the 2017 compensation for executives as required under Swiss law and (iii) a proposal to approve the 2017 compensation for directors as required under Swiss law.

              The Board of Directors unanimously recommends that the shareholders of the company vote FOR each of the proposals described below.

              Your vote is very important. Whether or not you expect to attend in person, we urge you to submit a proxy to vote your shares as promptly as possible by signing and returning the enclosed proxy card in the postage-paid envelope provided, so that your shares may be represented and voted at the Special Shareholder Meeting. If your shares are held in an Allied World plan or in the name of a bank, brokerage firm or other nominee, please follow the instructions on the voting instruction card furnished by the plan trustee or administrator, or record holder, as appropriate.


              If you have any questions or need assistance in voting your shares, please contact our proxy solicitor, Georgeson LLC, at (800) 248-7690.

              Thank you for your continued support.

  Sincerely,

 


GRAPHIC

 


Scott A. Carmilani
Chairman of the Board of Directors
Allied World Assurance Company Holdings, AG

LOGO

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

NOTICE OF SPECIAL SHAREHOLDER MEETING

July 19, 2017

DATE: Wednesday, August 16, 2017
TIME: 2:00 p.m., local time
PLACE: Corporate headquarters: Park Tower, 15th floor, Gubelstrasse 24, 6300 Zug, Switzerland

ITEMS OF BUSINESS:

RECORD DATE: Only shareholders of record holding common shares, as shown on our transfer books, as of the close of business on July 18, 2017 are entitled to vote at the Special Shareholder Meeting.

MATERIALS TO REVIEW:


This document contains our Notice of Special Shareholder Meeting, Proxy Statement, Swiss Merger Agreement, a copy of the prospectus (defined below) and Swiss Merger Report.

PROXY VOTING:


It is important that your shares be represented and voted at the Special Shareholder Meeting. Please promptly sign, date and return the enclosed proxy card in the return envelope furnished for that purpose whether or not you plan to attend the meeting. If you later desire to revoke your proxy for any reason, you may do so in the manner described in the attached Proxy Statement.

 

  By Order of the Board of Directors,
  GRAPHIC
  Theodore Neos
Corporate Secretary

LOGO


PROXY STATEMENT


SPECIAL MEETING INFORMATION
Q:
Why am I receiving these materials?

A:
You are receiving these materials because you are a shareholder of Allied World Assurance Company Holdings, AG as of the Record Date (as defined below). The board of directors of Allied World (the “Board”) is soliciting the enclosed proxy to be voted at the Extraordinary General Meeting of the company’s shareholders to be held at 2:00 p.m., local time, on Wednesday, August 16, 2017 at the company’s corporate headquarters, Park Tower, 15th floor, Gubelstrasse 24, 6300 Zug, Switzerland (the “Special Shareholder Meeting”). This Proxy Statement summarizes the information you need to know in order to vote at the Special Shareholder Meeting.


You may be receiving these materials because you did not validly tender your shares in the Offer, which expired on July 5, 2017. Pursuant to the terms of the merger agreement between Fairfax and Allied World, a squeeze-out merger under Swiss law will be initiated upon which your shares will be cancelled against payment of the Merger Consideration (as defined below). See “Recent Developments: Merger Agreement with Fairfax” below for more information.


You are receiving a copy of the prospectus (defined below) as Annex B, which we are required to deliver to you under U.S. federal securities laws, because a portion of the consideration being offered in the proposed merger consists of Fairfax shares.


When the enclosed proxy card is properly executed and returned, the company’s registered voting shares (the “common shares”) it represents will be voted, subject to any direction to the contrary, at the

Special Shareholder Meeting FOR the matters specified in the Notice of Special Shareholder Meeting attached hereto and described more fully herein.


This Proxy Statement, the attached Notice of Special Shareholder Meeting and the enclosed proxy card are being first mailed to shareholders on or about July 19, 2017.


Except as the context otherwise requires, references in this Proxy Statement to “we,” “us,” “our” and the “company” refer to Allied World Assurance Company Holdings, AG and its direct and indirect subsidiaries on a consolidated basis. Also, in this Proxy Statement, “$” and “USD” refer to U.S. dollars, “CHF” refers to Swiss francs and “local time” means the time in Switzerland.
Q:
Who is entitled to vote?

A:
The Board has set July 18, 2017, as the record date for the Special Shareholder Meeting (the “Record Date”). Holders of our common shares as of the close of business on the Record Date will be entitled to vote at the Special Shareholder Meeting. As of [                   ], 2017, there were outstanding [                   ] common shares. Fairfax (Switzerland) owned [                   ] common shares (or [              ]% of the outstanding common shares) as of the Record Date.


Beneficial owners of our common shares and shareholders registered in our share register with common shares at the close of business on the Record Date are entitled to vote at the Special Shareholder Meeting. Shareholders not registered in our share register as of the Record Date will not be entitled to attend, vote or grant proxies to vote at the Special Shareholder Meeting. No shareholder will be

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entered in our share register as a shareholder with voting rights between the close of business on the Record Date and the opening of business on the day following the Special Shareholder Meeting. Continental Stock Transfer & Trust Company, as transfer agent, which maintains our share register, will, however, continue to register transfers of our registered shares in the share register in its capacity as transfer agent during this period.
Q:
What is the difference between holding shares as a shareholder of record and as a beneficial owner?

A:
Most of our shareholders hold their shares through a bank, brokerage firm or other nominee rather than directly in their own name. As summarized below, there are some differences between shares held of record and those owned beneficially.


Shareholder of Record


If your common shares are registered directly in your name in our share register operated by our transfer agent, Continental Stock Transfer & Trust Company, you are considered the shareholder of record with respect to those shares and these proxy materials are being sent to you directly by us. As the shareholder of record, you have the right to grant your voting proxy directly to the independent proxy mentioned in the proxy card (see “How do I appoint and vote via the independent proxy if I am a shareholder of record?” below), grant your voting proxy to any other person (who does not need to be a shareholder) or vote in person at the Special Shareholder Meeting.


Beneficial Owner


If your common shares are held by a bank, brokerage firm or other nominee, you are considered the beneficial owner of shares

held in street name, and these proxy materials are being forwarded to you by your bank, brokerage firm or other nominee who is considered, with respect to those shares, the shareholder of record. As the beneficial owner, you have the right to direct your bank, broker or other nominee on how to vote your common shares and are also invited to attend the Special Shareholder Meeting. However, since you are not the shareholder of record, you may only vote these common shares in person at the Special Shareholder Meeting if you follow the instructions described below under the heading “How do I vote?” Your bank, brokerage firm or other nominee has enclosed a voting instruction card for you to use in directing your bank, broker or other nominee as to how to vote your common shares, which may contain instructions for voting by telephone or electronically.
Q:
How many votes are required to transact business at the Special Shareholder Meeting?

A:
A quorum is required to transact business at the Special Shareholder Meeting. The quorum required at the Special Shareholder Meeting is two or more persons present in person and representing in person or by proxy throughout the meeting more than 50% of the total issued and outstanding common shares registered in our share register.
Q:
What will I be voting on, what vote is required and how will abstentions and “broker non-votes” be counted?

A:
The following chart describes the proposals to be considered at the meeting, the vote required to adopt each proposal and the manner in which the votes will be counted:

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Proposal
Vote Required
Effect of Abstentions
Effect of “Broker Non-Votes”

 


 


 


 


 
1 Approve and adopt the Swiss Merger Agreement and the merger of Allied World with and into Fairfax (Switzerland) 90% of all shares(1) Vote against Vote against

2


Approve the 2017 compensation for executives as required under Swiss law


Majority of votes cast(2)


Vote not counted


Vote not counted

3


Approve the 2017 compensation for directors as required under Swiss law


Majority of votes cast(2)


Vote not counted


Vote not counted
(1)
The approval of this proposal requires the approval of at least 90% of company shares entitled to vote.

(2)
The approval of this proposal requires the approval of the simple majority of the votes cast at the Special Shareholder Meeting.
    ·
    Abstentions and “broker non-votes” will be counted toward the presence of a quorum at the Special Shareholder Meeting.

    ·
    “Broker non-votes” are shares held by banks or brokers for which voting instructions have not been received from the beneficial owners or the persons entitled to vote those shares and for which the bank or broker does not have discretionary voting power under rules applicable to broker-dealers. If you own shares through a bank or brokerage firm and you do not instruct your bank or broker how to vote, your bank or broker will not have discretion to vote on any of the proposals in this Proxy Statement as they are “non-routine” matters.
Q:
What are the voting recommendations of the Board?

A:
Your Board unanimously recommends that you vote FOR each of the proposals in this Proxy Statement.
Q:
How does the voting take place at the Special Shareholder Meeting?

A:
A vote will be taken on all matters properly brought before the Special Shareholder Meeting. Each shareholder present who elects to vote in person and each person holding a valid proxy is entitled to one vote for each common share owned or represented.
Q:
How many votes do I have?

A:
Holders of our common shares are entitled to one vote per share on each matter to be

voted upon by the shareholders at the Special Shareholder Meeting.
Q:
How do I vote?

A:
The manner in which your shares may be voted depends on how your shares are held. If you own shares of record, meaning that your common shares are represented by certificates or book entries in your name so that you appear as a shareholder of record in the company’s share register maintained by our transfer agent, Continental Stock Transfer & Trust Company, a proxy card for voting those shares will be included with this Proxy Statement. You may direct how your shares are to be voted by completing, signing and returning the proxy card in the enclosed envelope. You may also vote your common shares in person at the Special Shareholder Meeting.

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If you own shares through a bank, brokerage firm or other nominee you may instead receive from your bank, brokerage firm or nominee a voting instruction form with this Proxy Statement that you may use to instruct them as to how your shares are to be voted. As with a proxy card, you may direct how your shares are to be voted by completing, signing and returning the voting instruction form in the envelope provided. Many banks, brokerage firms and other nominees have arranged for internet or telephonic voting of shares and provide instructions for using those services on the voting instruction form. If you want to vote your shares in person at the meeting, you must obtain a proxy from your bank, broker or nominee giving you the right to vote your common shares at the Special Shareholder Meeting.


We have requested that banks, brokers and other nominees forward solicitation materials to the beneficial owners of common shares and will reimburse the banks, brokers and other nominees for their reasonable out-of-pocket expenses for forwarding the materials.
Q:
Who will count the vote?

A:
A representative from Baker McKenzie Zurich, a law firm, will act as the inspector of elections and will be responsible for tabulating the votes cast by proxy (which will have been certified by our independent transfer agent) or in person at the Special Shareholder Meeting. Under Swiss law, we are responsible for determining whether or not a quorum is present and the final voting results.
Q:
What does it mean if I receive more than one set of the Proxy Statement and proxy card?

A:
Generally, it means that you hold shares registered in more than one account. You should complete, sign and return each proxy card you receive to ensure that all of your shares are voted.
Q:
What happens if I sign and return my proxy card but do not indicate how to vote my shares?

A:
If no instructions are provided in an executed proxy card, the common shares represented by the proxy will be voted at the Special Shareholder Meeting in accordance with the Board’s recommendation for each proposal. As to any other business that may properly come before the Special Shareholder Meeting, you may provide general instructions, as indicated on the proxy card, as to how such other business is to be voted. If you provide no instruction, the common shares represented by the proxy will be voted in accordance with the Board’s recommendation as to such business.
Q:
How do I appoint and vote via the independent proxy if I am a shareholder of record?

A:
If you are a shareholder of record as of the Record Date, under Swiss law you may authorize the independent proxy, Buis Buergi AG, Muehlebachstrasse 8, P.O. Box 672, CH-8024 Zurich, Switzerland, e-mail at proxy@bblegal.ch, with full rights of substitution, to vote your common shares on your behalf. If you authorize the independent proxy to vote your shares without giving instructions (or without giving clear instructions), your shares will be voted in accordance with the recommendations of the Board with regard to the items listed in the notice of meeting. If new agenda items (other than those in the notice of meeting) or new proposals or motions with respect to those agenda items set forth in the notice of meeting are being put forth before the Special Shareholder Meeting, you may provide general instructions, as indicated on the proxy card, as to how such other business is to be voted. If you provide no instruction, the common shares represented by the proxy will be voted in accordance with the Board’s recommendation as to such business. Proxy cards authorizing the independent proxy to vote your shares must be sent directly to the independent proxy,

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arriving no later than 6:00 a.m., local time, on [                   ], 2017. If sending by e-mail to the independent proxy, you must attach the executed proxy card in order for your vote to be counted.
Q:
Can I change my vote after I have mailed my signed proxy card or otherwise instructed how my shares are to be voted?

A:
Yes. You may change your vote:

·
By providing the Corporate Secretary with written notice of revocation, by voting in person at the Special Shareholder Meeting or by executing a later-dated proxy card; provided, however, that the action is taken in sufficient time to permit the necessary examination and tabulation of the subsequent proxy or revocation before the vote is taken;

·
If you have granted your proxy to the independent proxy, by providing Buis Buergi AG with written notice of revocation, by voting in person at the Special Shareholder Meeting or by executing a later-dated independent proxy card. Revocation of, or changes to, proxies issued to the independent proxy must be received by the independent proxy by 6:00 a.m., local time, on [                   ], 2017 either by mail to Buis Buergi AG, Muehlebachstrasse 8, P.O. Box 672, CH-8024 Zurich, Switzerland or by e-mail at proxy@bblegal.ch; or
    ·
    If you own shares through a bank, brokerage firm or other nominee, by obtaining a proxy from your bank, broker or nominee giving you the right to vote your common shares at the Special Shareholder Meeting.

    Attendance at the Special Shareholder Meeting by a shareholder who has executed and delivered a proxy card to the independent proxy shall not in and of itself constitute a revocation of such proxy. Only your vote at the Special Shareholder Meeting will revoke your proxy.

Q:
Who pays the costs of soliciting proxies?

A:
We will bear the cost of the solicitation of proxies. Solicitation will be made by mail, and may be made by our directors, officers and employees, personally or by telephone, facsimile or other electronic means, for which our directors, officers and employees will not receive any additional compensation. Proxy cards and materials also will be distributed to beneficial owners of common shares through banks, brokers, custodians, nominees and other parties, and the company expects to reimburse such parties for their reasonable charges and expenses. Georgeson LLC has been retained to assist us in the solicitation of proxies at a fee not expected to exceed $25,000, plus out-of-pocket expenses.

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Organizational Matters Required by Swiss Law

Admission to the Special Shareholder Meeting

              Shareholders who are registered in our share register on the Record Date will receive the Proxy Statement and proxy card from Continental Stock Transfer & Trust Company, our transfer agent. Beneficial owners of shares will receive instructions from their bank, brokerage firm or other nominee acting as shareholder of record to indicate how they wish their shares to be voted. Beneficial owners who wish to vote in person at the Special Shareholder Meeting must obtain a power of attorney from their bank, brokerage firm or other nominee that authorizes them to vote the shares held by them on their behalf. In addition, you must bring to the Special Shareholder Meeting an account statement or letter from your bank, brokerage firm or other nominee indicating that you are the owner of the common shares. Shareholders of record registered in our share register are entitled to participate in and vote at the Special Shareholder Meeting. Each share is entitled to one vote. Please see the questions and answers provided under “— Special Meeting Information” for further information.

Granting a Proxy

              If you are a shareholder of record, please see “— How do I vote?” and “— How do I appoint and vote via the independent proxy if I am a shareholder of record?” above in the Proxy Statement for more information on appointing an independent proxy.

              Registered shareholders who have appointed the independent proxy as a proxy may not vote in person at the Special Shareholder Meeting or send a proxy of their choice to the meeting unless they revoke or change their proxies. Revocations to the independent proxy must be received by him by no later than 6:00 a.m., local time, on August 16, 2017 either by mail to Buis Buergi AG, Muehlebachstrasse 8, P.O. Box 672, CH-8024 Zurich, Switzerland or by e-mail at proxy@bblegal.ch.

              As indicated on the proxy card, with regard to the items listed on the agenda and without any explicit instructions to the contrary, the independent proxy will vote according to the recommendations of the Board. If new agenda items (other than those on the agenda) or new proposals or motions regarding agenda items set out in the invitation to the Special Shareholder Meeting are being put forth before the meeting, the independent proxy will vote in accordance with the position of the Board in the absence of other specific instructions.

              Beneficial owners who have not obtained a power of attorney from their bank, brokerage firm or other nominee are not entitled to participate in or vote at the Special Shareholder Meeting.

Admission Office

              The admission office opens on the day of the Special Shareholder Meeting at 1:30 p.m. local time. Shareholders of record attending the meeting are kindly asked to present their proxy card as proof of admission at the entrance.

Adjournments

              The Board or chairman of the Board may postpone the Special Shareholder Meeting with sufficient factual reason, provided that notice of postponement is given to the shareholders in the same form as the invitation before the time for such meeting. A new notice is then required to hold the postponed meeting.

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Recent Developments: Merger Agreement with Fairfax

              On December 18, 2016, Allied World entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Fairfax, pursuant to which, upon the terms and subject to the conditions set forth therein, Allied World will be acquired by Fairfax (the “Acquisition”). The Acquisition has been unanimously approved by the boards of directors of both companies.

              On May 8, 2017, Fairfax, through its indirect, wholly-owned subsidiary, FFH Switzerland, and its direct, wholly-owned subsidiary, 1102952 B.C. Unlimited Liability Company, an unlimited liability company organized under the laws of the Province of British Columbia, Canada (“Canada Sub”), made the offer to acquire all of the outstanding Allied World common shares upon the terms and subject to the conditions set out in the prospectus dated May 8, 2017 (as amended, the “prospectus”), which is part of the Registration Statement on Form F-4 initially filed by Fairfax with the U.S. Securities and Exchange Commission (the “SEC”) on February 15, 2017, as amended by Amendment No. 1 to the Form F-4 filed by Fairfax with the SEC on April 7, 2017, Amendment No. 2 to the Form F-4 filed by Fairfax with the SEC on May 3, 2017, and Amendment No. 3 to the Form F-4 filed by Fairfax with the SEC on May 8, 2017, and in the related letter of transmittal (as amended, the “letter of transmittal”) filed as Exhibit (a)(4) to the Tender Offer Statement filed by Fairfax with the SEC on Schedule TO (as amended, the “Schedule TO”) on May 8, 2017. On May 8, 2017, Allied World filed its Solicitation/Recommendation Statement on Schedule 14D-9 (as amended, together with any exhibits and annexes attached thereto, the “Schedule 14D-9”).

              The Offer was originally scheduled to expire at 11:59 p.m., New York City time, on June 30, 2017 and was extended until 5:00 p.m., New York City time, on July 5, 2017, at which time the Offer expired. Fairfax was advised by Continental Stock Transfer & Trust Company, the exchange agent for the Offer, that, as of the expiration time of the Offer, a total of 84,184,397 Allied World common shares (including 6,319,913 shares tendered by guaranteed delivery) were validly tendered in, and not withdrawn from, the Offer, representing approximately 96.1% of the Allied World common shares outstanding. All conditions to the Offer having been satisfied, after the expiration time, Fairfax accepted for payment, and promptly paid for, all Allied World common shares validly tendered in, and not withdrawn from, the Offer, in accordance with the U.S. tender offer rules.

              Pursuant to the Offer, Allied World shareholders received a combination of cash and stock consideration for their Allied World common shares. For each Allied World common share held, Allied World shareholders who validly tendered in the Offer received (i) cash consideration of $23.00, without interest (the “Cash Consideration”) and (ii) 0.057937 of a fully paid and nonassessable subordinate voting share of Fairfax (“Fairfax shares” and together with the Cash Consideration, collectively, the “Offer Consideration”).

              In addition, Allied World paid a special cash dividend of $5.00 per share, without interest, on July [     ], 2017 to holders of Allied World common shares as of immediately prior to the date on which FFH Switzerland accepted tendered Allied World common shares for exchange (the “Acceptance Time”), which was paid outside of the Offer but was conditioned upon completion of the Offer (the “Special Dividend”). The $23.00 per share Cash Consideration payable under the Offer, together with the $5.00 per share Special Dividend, resulted in Allied World shareholders receiving a total of $28.00 in cash and 0.057937 of a Fairfax share per Allied World common share upon completion of the Offer. For details of how Allied World stock options or other stock-based awards were treated in the Offer, see the section of the prospectus entitled “The Merger Agreement — Treatment of Allied World Options and Other Stock-Based Awards”.

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              As of the date of this Proxy Statement, as a result of the closing of the Offer, Fairfax indirectly owns or controls [    ·    ]% of all outstanding Allied World common shares.

              Promptly following the closing of the Offer, Allied World, FFH Switzerland and Fairfax (Switzerland) entered into a merger agreement, dated as of July [    ·    ], 2017 (the “Swiss Merger Agreement”), which is attached as Annex A hereto. Pursuant to the Merger Agreement, Allied World has agreed to submit a proposal to Allied World’s shareholders to approve the Swiss Merger Agreement and the merger contemplated thereby, pursuant to which Allied World will merge with and into Fairfax (Switzerland), with Fairfax (Switzerland) as the surviving entity (the “Merger”). See the section of this Proxy Statement entitled “Proposal 1 — Approve and Adopt the Swiss Merger Agreement and the Merger of Allied World with and into Fairfax (Switzerland)” for more information on the Merger.

              The foregoing summary of the Offer and the Merger is qualified in its entirety by the more detailed descriptions and explanations contained in the Swiss Merger Agreement (attached as Annex A), the prospectus (attached as Annex B) and the Swiss Merger Report (attached as Annex C). Allied World shareholders are urged to carefully read this Proxy Statement, the Swiss Merger Agreement, the Swiss Merger Report and the prospectus in order to more fully understand the terms and conditions of the Merger.

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PROPOSAL 1
APPROVE AND ADOPT THE SWISS MERGER AGREEMENT
AND THE MERGER OF ALLIED WORLD WITH AND INTO FAIRFAX (SWITZERLAND)

              Allied World shareholders are being asked to approve and adopt the Swiss Merger Agreement attached as Annex A hereto and the Merger contemplated thereby.

              Fairfax and Allied World intend that, in accordance with the laws of Switzerland and the Swiss Merger Agreement, Fairfax (Switzerland) and Allied World will consummate the Merger, whereby Allied World will merge with and into Fairfax (Switzerland), with Fairfax (Switzerland) as the surviving entity. At such time, your Allied World common shares will be cancelled and, in accordance with the Swiss Merger Act, converted into the right to receive an amount of cash and Fairfax shares equal to the Offer Consideration (the “Merger Consideration”), and each Allied World common share owned by Allied World, Fairfax, or any direct or indirect subsidiary of Allied World or Fairfax will be automatically cancelled without any conversion thereof, in each case, on the terms and subject to the conditions set out in the Swiss Merger Agreement. The Merger will be effective at the time of the registration of the Merger in the Commercial Register of the Canton of Zug.

              After careful consideration and based on consultations with its legal and financial advisers, the Board: (i) approved the Swiss Merger Agreement and authorized and approved the Merger; (ii) determined that the form, terms and provisions of the Swiss Merger Agreement, the performance by Allied World of its obligations thereunder and the consummation by Allied World of the transactions contemplated thereby, including the Merger, are advisable and fair to and in the best interests of Allied World; and (iii) resolved to recommend that the shareholders of Allied World approve the Swiss Merger Agreement and the Merger.

              Your Board unanimously recommends a vote FOR the approval and adoption of the Swiss Merger Agreement and the Merger. Please note that as of the Record Date, Fairfax (Switzerland) owned [          ]% of the outstanding Allied World common shares representing sufficient votes to approve this proposal.

              Certain of the information set forth below is contained in the prospectus, dated May 8, 2017 (as amended, the “prospectus”), which is attached as Annex B hereto.

Approvals Under Swiss Law

              Please see the section of the prospectus entitled “Plans and Proposals for Allied World — The Merger under Swiss Law”, which describes Swiss law considerations and required approvals in connection with the Merger.

Information and Consultation

              The quotaholders, shareholders, employees and creditors of Allied World and Fairfax (Switzerland) (as applicable) will be informed and, to the extent required, consulted in accordance with the requirements of the Swiss Merger Act about the execution of the Swiss Merger Agreement and the Merger and, within this framework, documents will be submitted for inspection.

              As announced by publication in the Swiss Official Gazette of Commerce No. [    ·    ] on July [     ], 2017, the Swiss Merger Agreement and the Swiss merger report, each dated July [    ·    ], 2017 (the “Swiss Merger Report”), and the audit expert report pursuant to article 15 of the Swiss Merger Act

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dated July [    ·    ], 2017 prepared by PricewaterhouseCoopers AG, Zurich, were made available for inspection at Allied World’s principal executive offices at Park Tower, 15th Floor, Gubelstrasse 24, 6300 Zug, Switzerland, and at Fairfax (Switzerland)’s and FFH Switzerland’s registered offices both at c/o LacMont AG, Hofstrasse 1a, 6300 Zug, Switzerland, as well as at Fairfax’s principal executive offices at 95 Wellington Street West, Suite 800, Toronto, Ontario, Canada. In addition, the audited statutory financial statements of Allied World and Fairfax for the financial years ended December 31, 2016, 2015 and 2014; the audited statutory interim financial statements of Allied World as of March 31, 2017; the opening balance sheets of FFH Switzerland and Fairfax (Switzerland) as of February 14, 2017 and February 23, 2017, respectively; the audited interim balance sheet of Fairfax (Switzerland) as of [    ·    ], 2017; this Proxy Statement; the prospectus; and the articles of association of Fairfax were made available for inspection as well. All of these documents were made available and still are available for inspection for a period of at least 30 days ending on August 13, 2017.

Applicable Law and Jurisdiction

              The Swiss Merger Agreement (and any claims or disputes arising out of or related thereto) are in all respects governed by, and construed in accordance with, the laws of Switzerland, including all matters of construction, validity and performance, in each case without reference to any conflict of laws rules that might lead to the application of the laws of any other jurisdiction.

The Swiss Merger Report

              On July [    ·    ], 2017, Fairfax, Allied World, FFH Switzerland and Fairfax (Switzerland) adopted the Swiss Merger Report in connection with the Merger. The Swiss Merger Report provides, among other things, a summary of the principal terms and conditions of the Swiss Merger Agreement, along with a summary of the rationale and consequences of the Merger and the consideration being provided to Allied World shareholders. This summary does not purport to be a complete description of the Swiss Merger Report, a copy of which is attached as Annex C to this Proxy Statement. Allied World shareholders are urged to read the Swiss Merger Report in its entirety. In the event of any discrepancy between the Swiss Merger Report and this summary, the Swiss Merger Report will control.

Risk Factors and Other Information

              For a summary of the prospectus, see the section of the prospectus entitled “Summary”.

              For contact information and a general description of the nature of the parties’ respective businesses, see the section of the prospectus entitled “Summary — The Companies”.

              For a summary of the risks associated with the transactions, see the section of the prospectus entitled “Risk Factors”.

              For selected financial data of Fairfax and Allied World, see the sections of the prospectus entitled “Selected Historical Consolidated Financial Data of Fairfax” and “Selected Historical Consolidated Financial Data of Allied World”.

              For selected financial data of Fairfax and Allied World on a pro forma basis, see the sections of the prospectus entitled “Summary Unaudited Pro Forma Condensed Combined Financial Information” and “Unaudited Comparative Historical and Pro Forma Share Information”.

              For information on the market value of the Allied World common shares and the Fairfax shares, see the section of the prospectus entitled “Comparative Market Information”.

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              For a statement as to regulatory and other approvals, see the section of the prospectus entitled “The Offer — Conditions to the Offer”.

              For a statement as to Dissenters’ Rights, see the sections of the prospectus entitled “The Offer — Appraisal Rights” and “Comparison of Shareholders’ Rights — Appraisal Rights”.

              For a statement about tax consequences resulting from the transactions, see the section of the prospectus entitled “Material Tax Consequences”.

Terms of the Transactions

              For a summary of the terms of the Offer and the Merger, see the sections of the prospectus entitled “The Merger Agreement” and “Background to and Reasons for the Transactions — Allied World’s Reasons for the Offer and the Merger; Recommendation of Allied World’s Board of Directors”.

              For a description of the reasons for the transactions, see “Background to and Reasons for the Transactions — Allied World’s Reasons for the Offer and the Merger; Recommendation of Allied World’s Board of Directors”.

              For a summary of the differences in the rights of securityholders and corporate law, see the section of the prospectus entitled “Description of Fairfax Shares and Articles of Incorporation” and “Comparison of Shareholders’ Rights”.

              For information on accounting treatment, see the section of the prospectus entitled “The Offer — Accounting Treatment”.

              For information on tax consequences, see the section of the prospectus entitled “Material Tax Consequences”.

              For a summary of material reports, opinions or appraisals relating to the transactions, see the section of the prospectus entitled “Background to and Reasons for the Transactions — Opinion of Allied World’s Financial Advisor”.

Pro Forma Financial Information

              See the sections of the prospectus entitled “Summary Unaudited Pro Forma Condensed Combined Financial Information”, “Unaudited Comparative Historical and Pro Forma Share Information”, “Unaudited Pro Forma Condensed Combined Financial Information”, “Background to and Reasons for the Transactions — Opinion of Allied World’s Financial Advisor” and “Presentation of Certain Financial and Other Information”.

Material Contracts with the Company Being Acquired

              See the sections of the prospectus entitled “Related Party Transactions”, “Interests of Allied World, FFH Switzerland and Fairfax and their Directors and Officers — Interests of Allied World’s Directors and Executive Officers in the Offer”, and “Interests of Allied World, FFH Switzerland and Fairfax and their Directors and Officers — Interests of Fairfax, FFH Switzerland and their Directors and Executive Officers in the Offer”.

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Interests of Named Experts and Counsel

              See the sections of the prospectus entitled “Background to and Reasons for the Transactions — Background to the Transactions” and “Background to and Reasons for the Transactions — Opinion of Allied World’s Financial Advisor”.

Disclosure on Indemnification

              See the section of the prospectus entitled “Information Not Required In Prospectus — Indemnification of Directors and Officers”.

Statement Regarding Conflicts of Interest

              For information on conflicts of interests in connection with the transactions, please see Item 3 of the Schedule 14D-9 and the section of the prospectus entitled “Related Party Transactions”.

Management and Employees after the Transactions

              Fairfax has agreed that during the 12-month period following the closing of the transactions, it will not (and will cause its subsidiaries not to) reduce the base salary (or hourly wage) or certain incentive compensation opportunities of any Allied World employee. With respect to any Allied World employee whose employment is terminated by Fairfax, Allied World or any of their respective subsidiaries from and after the Acceptance Time and on or before the first anniversary of the Acceptance Time, Fairfax will provide such employee with the payments and benefits as described in the disclosure letter delivered by Allied World to Fairfax simultaneously with the execution of the Merger Agreement.

Interests of Allied World’s Directors and Executive Officers

              Allied World’s directors and executive officers have interests in the transactions that are different from, or in addition to, those of other shareholders of Allied World generally. These interests are described in the section of the prospectus entitled “Interests of Allied World, FFH Switzerland and Fairfax and Their Directors and Officers — Interests of Allied World’s Directors and Executive Officers in the Offer”.

Consideration Offered to Allied World Shareholders in Connection with the Merger

              In connection with the Merger, Fairfax will provide non-tendering Allied World shareholders (except for Allied World, Fairfax, FFH Switzerland and Fairfax (Switzerland), which will not receive any compensation for any Allied World common shares directly or indirectly held by them) with the Merger Consideration, which may have a different value from the consideration that they would have received had they tendered their Allied World common shares in the Offer, because, among other factors:

·

the value of the Fairfax shares at the time of completion of the Merger may be different than at the time of the completion of the Offer; and

·

the Merger Consideration payable in the Merger would be subject to appraisal rights and may therefore be subject to court review.

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Fractional Shares

              No fractional Fairfax shares will be issued to Allied World shareholders. See the section of the prospectus entitled “The Offer — Fractional Shares” for more information.

Settlement

              The Merger Consideration will be paid to Allied World shareholders as soon possible following the implementation of the Merger. See the section of the prospectus entitled “The Offer — Settlement of the Offer” for more information.

Certain Allied World Prospective Financial Information

              Allied World does not, as a matter of course, make public long-term forecasts as to future performance or other prospective financial information beyond the current fiscal year, and Allied World is especially wary of making forecasts or projections for extended periods due to the unpredictability of the underlying assumptions and estimates. However, as part of the due diligence review of Allied World in connection with the transactions, Allied World’s management prepared certain non-public, internal financial forecasts regarding Allied World’s projected future operations for fiscal years 2017 through 2021 and provided such financial forecasts to Fairfax’s management. These forecasts were also considered by the Allied World Board for purposes of evaluating the transactions. For more information on such forecasts, see the section of the prospectus entitled “Background to and Reasons for the Transactions — Certain Allied World Prospective Financial Information”.

Material Tax Considerations of the Merger

              For information on the U.S. federal income tax consequences of the receipt of the Merger Consideration, which will have the same U.S. federal income tax treatment as receipt of the Offer Consideration, see the section of the prospectus entitled “Material Tax Consequences — Material U.S. Federal Income Tax Considerations”. You should consult your own tax advisor on the tax consequences to you resulting from the Merger.

              For information on the Swiss tax consequences of the Merger, see the section of the prospectus entitled “Material Tax Consequences — Material Swiss Tax Considerations for Allied World Shareholder in Connection with the Offer” and the Swiss Merger Report. You should consult your own tax advisor on the tax consequences to you resulting from the Merger.

Appraisal Rights

              In connection with the Merger, Allied World shareholders can exercise appraisal rights under article 105 of the Swiss Merger Act by filing a suit against the surviving company with the competent Swiss civil court at the registered office of the surviving company or of Allied World. The suit must be filed by Allied World shareholders within two months after the Merger resolution has been published in the Swiss Official Gazette of Commerce. Allied World shareholders who tendered all of their Allied World common shares in the Offer, and who do not hold Allied World common shares thereafter, will not be able to file a suit to exercise appraisal rights. If such a suit is filed by non-tendering Allied World shareholders, the court will determine whether the Merger Consideration was inadequate and the amount of compensation due to the relevant Allied World shareholder, if any, and such court’s determination will benefit all remaining Allied World shareholders. The filing of an appraisal suit will not prevent completion of the Merger.

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Effects of the Merger on Allied World

              As a result of the Merger, Allied World will merge with and into Fairfax (Switzerland). Fairfax (Switzerland) will be the surviving entity in the Merger. All of Allied World’s assets and liabilities will be transferred to Fairfax (Switzerland) by operation of law with effect from the registration of the Merger in the Commercial Register of the Canton of Zug, Switzerland, and Allied World will be dissolved without liquidation and deleted from the Commercial Register.

Stock Exchange Delisting and Deregistration

              On July 6, 2017, we notified the New York Stock Exchange (the “NYSE”) of our intention to delist the Allied World common shares from the NYSE, and on July 17, 2017, we filed a Form 25 Notification of Removal from Listing and/or Registration with the SEC. The Allied World common shares will be delisted effective July 27, 2017. For more information on delisting and deregistration of the Allied World common shares, see the section of the prospectus entitled “Plans and Proposals for Allied World — Delisting and Deregistration”.

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PROPOSAL 2
APPROVE THE 2017 COMPENSATION FOR EXECUTIVES
AS REQUIRED UNDER SWISS LAW

              Pursuant to Swiss law, we are required to hold binding shareholder say-on-pay votes for executive compensation either prospectively or retrospectively. Accordingly, the proposal described in this Proposal 2 gives shareholders the opportunity to approve the maximum aggregate amount of compensation that can be paid to our executive officers for 2017. The executive officers currently include the following nine senior executives: Messrs. Scott A. Carmilani, John R. Bender, Thomas A. Bradley, Wesley D. Dupont, Frank N. D’Orazio, Marshall J. Grossack, Louis P. Iglesias, Julian James and John J. McElroy.

              The general principles of the company’s executive compensation programs are described in Article 20b of our Articles of Association. A more detailed description of our executive compensation programs currently in effect and the actual amounts paid to our named executive officers for 2016 are described in our proxy statement for our 2017 Annual Shareholder Meeting, which was filed with the SEC on May 26, 2017 (the “2017 Annual Meeting Proxy Statement”) under the section entitled “Executive Compensation — Compensation Discussion and Analysis” (the “CD&A”). As described more fully in the CD&A, the Compensation Committee of the Board has established a compensation philosophy and related practices and follows a disciplined process in implementing our executive compensation programs and in making individual executive compensation determinations. Please read the Articles of Association and the CD&A to understand our executive compensation philosophy and process when considering this proposal.

              For 2017, the company is proposing that shareholders approve the maximum aggregate compensation that can be paid to our executive officers in an amount not to exceed $43.0 million. This amount is the maximum amount that the company can pay to our executive officers (other than additional amounts that may be payable to persons who newly assume executive officer functions after the Special Shareholder Meeting) and has been calculated using conservative assumptions in order to provide the Board and the company’s management flexibility to reward superior performance across all businesses and to address unforeseen circumstances that might arise during 2017. The table below provides the amounts approved at the Annual Shareholder Meeting in 2016 for compensation in 2016, the actual amounts of compensation that were paid during 2016 and our estimates for maximum

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compensation levels for 2017. The comments provide insight into the assumptions we have used to make these estimates.

      2016 Approved
Compensation
  2016 Actual
Compensation(1)
  2017 Maximum
Compensation
for Approval
    Comments    
 
      ($ in millions)   ($ in millions)   ($ in millions)      
                     
  Base Salaries $5.4 $5.3 $5.5

2016 and 2017 base salaries reflect actual salaries for our executive officers.

  Annual Cash Bonus   $11.2   $7.0   $11.3  

Cash bonuses for 2016 were received in February 2017 and cash bonuses for 2017 will be received in February 2018.

 
                 

2017 amount assumes maximum funding of the cash bonus pool at 200% upon achievement of superior performance.

 
  Long-Term Compensation $13.5 $10.1 $10.1

Includes deferred cash awards.

  Other Compensation   $5.3   $5.0   $12.2  

2017 amount includes the remaining three installments of a special contribution under our Second Amended and Restated Supplemental Executive Retirement Plan(2), as well as other benefits and perquisites that are described in more detail under the “Retirement, Health and Welfare Benefits” section of the CD&A and the Summary Compensation Table included in the 2017 Annual Meeting Proxy Statement.

 
  Uplift $3.6 N/A $3.9

A 10% increase has been added to the 2017 Maximum Compensation for Approval column to provide flexibility in the case of extraordinary circumstances or upon the achievement of superior performance.

  Total Compensation   $39.0   $27.4   $43.0  

Shareholders are being requested to approve the $43.0 million of total compensation for 2017.

 
(1)
All 2016 actual amounts include Mr. John J. Gauthier who retired from his position as Executive Vice President & Chief Investment Officer effective as of January 31, 2017.

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(2)
We have established the Allied World Assurance Company (U.S.) Inc. Second Amended and Restated Supplemental Executive Retirement Plan (the “SERP”) for our employees who are U.S. citizens and who reside in the United States. We contribute under the SERP up to 10% of a participant’s annual base salary in excess of the then-effective maximum amount of annual compensation that could be taken into account under a qualified plan under the U.S. Internal Revenue Code of 1986, as established by the Internal Revenue Service from time to time, with an annual base salary cap of $600,000.


Effective as of January 1, 2016, we amended the SERP so that, subject to shareholder approval as discussed below, certain executives will be entitled to receive a one-time contribution (the “Contribution”) from us. The Contribution is in addition to the ordinary contributions made by us under the SERP and is subject to forfeiture in the event the executive’s employment is terminated prior to January 1, 2020 by us with cause or by the executive without good reason as follows: 100% was to be forfeited if such termination occurred prior to January 1, 2017, 75% will be forfeited if such termination occurs on or after January 1, 2017 and prior to January 1, 2018, 50% will be forfeited if such termination occurs on or after January 1, 2018 and prior to January 1, 2019 and 25% will be forfeited if such termination occurs on or after January 1, 2019 and prior to January 1, 2020.


The Contribution was originally scheduled to be subject to shareholder approval in four equal installments at the 2016, 2017, 2018 and 2019 annual shareholder meetings of the company, and at the company’s 2016 Annual Shareholder Meeting, shareholders approved the company’s executive compensation proposal, which included the first installment of the Contribution. However, in connection with the Fairfax transaction, the company’s shareholders are being asked to approve the remaining second, third and fourth installments of the Contribution at the Special Shareholder Meeting as part of the maximum aggregate amount of compensation that can be paid to our executive officers for 2017.


Please refer to the 2017 Annual Meeting Proxy Statement for additional information regarding the SERP and the Contribution.

              We do not anticipate that the aggregate amount paid to our executive officers in 2017 will be at the maximum amount requested. Actual compensation paid to our executive officers in 2016 was $27.4 million. Actual 2017 compensation will be dependent on our performance for the year.

              If the shareholders do not approve this proposal, the Board may call an extraordinary general meeting of shareholders for reconsideration of this proposal.

              Your Board unanimously recommends a vote FOR the approval of the maximum aggregate compensation that can be paid, granted or promised to our executive officers in 2017 in an amount not to exceed $43.0 million. Please note that as of the Record Date, Fairfax (Switzerland) owned [              ]% of the outstanding Allied World common shares representing sufficient votes to approve this proposal.

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PROPOSAL 3
APPROVE THE 2017 COMPENSATION FOR DIRECTORS
AS REQUIRED UNDER SWISS LAW

              Pursuant to Swiss law, we are required to hold binding shareholder say-on-pay votes for director compensation either prospectively or retrospectively. Accordingly, the proposal described in this Proposal 3 gives shareholders the opportunity to approve the aggregate amount of compensation that can be paid to our non-management directors in 2017.

              The general principles of the company’s director compensation programs are described in Article 20b of our Articles of Association. A more detailed description of our director compensation programs currently in effect and the actual amounts paid to our non-management directors for 2016 are described in the 2017 Annual Meeting Proxy Statement. The company does not currently have, and does not plan to implement, a retirement benefit scheme for non-management directors.

              For 2017, the company is proposing that shareholders approve the maximum aggregate compensation that can be paid to our non-management directors in an amount not to exceed $2.6 million. This amount is the maximum amount that the company can pay to our non-management directors and has been calculated using conservative assumptions. The table below provides the amounts approved at the Annual Shareholder Meeting in 2016 for compensation in 2016, the actual amounts of compensation that were paid during 2016 and our estimates for maximum compensation

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levels for 2017. The comments provide insight into the assumptions we have used to make these estimates.

      2016 Approved Compensation   2016 Actual Compensation(1)   2017 Maximum Compensation for Approval(1)     Comments    
 
      ($ in millions)   ($ in millions)   ($ in millions)      
                     
  Retainer Fees $0.90 $0.90 $0.90

Includes (i) the annual cash retainer paid to each non-management director and (ii) the Lead Independent Director fee, committee chair fees and the fee paid to each member of the Audit Committee (other than the chairperson).

  Attendance Fees   $0.43   $0.48   $0.41  

Includes $3,000 for each Board meeting attended and $2,000 for each committee meeting attended. Assumes six meetings in 2017.

 
  Deferred Cash Awards $0.63 $0.63 $0.63

Each non-management director received a deferred cash award of $90,000 in 2017.

  Other Compensation   $0.08   $0.05   $0.07  

Other compensation includes charitable matching grant contributions of $10,000 per year per director.

 
  Uplift $0.61 N/A $0.59

A 30% increase has been added to the 2017 “Maximum Compensation for Approval” column to provide flexibility in the case of extraordinary circumstances or if additional Board or committee meetings are necessary.

  Total Compensation   $2.65   $2.06   $2.60  

Shareholders are being requested to approve the $2.60 million of total compensation for 2017.

 
(1)
All 2016 actual amounts reflect eight non-management directors, including Mr. James F. Duffy who retired from the Board effective April 19, 2016, and all 2017 maximum amounts reflect seven non-management directors.

              We do not anticipate that the aggregate amount paid to our directors in 2017 will be at the maximum amount requested. Actual 2017 compensation may vary in the event that extraordinary circumstances require the Board and its committees to meet more frequently. For 2017, amounts paid to our directors will be awarded under the same director compensation programs and under substantially the same terms as those in effect in 2016.

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              If the shareholders do not approve this proposal, the Board may call an extraordinary general meeting of shareholders for reconsideration of this proposal.

              Your Board unanimously recommends a vote FOR the approval of the maximum aggregate compensation that can be paid, granted or promised to our directors in 2017 in an amount not to exceed $2.6 million. Please note that as of the Record Date, Fairfax (Switzerland) owned [              ]% of the outstanding Allied World common shares representing sufficient votes to approve this proposal.

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PRINCIPAL SHAREHOLDERS

              The table below sets forth information as of [                        ], 2017 regarding the beneficial ownership of our common shares by:

·

each person known by us to beneficially own more than 5% of our outstanding common shares,

·

each of our directors,

·

our Chief Executive Officer (“CEO”), our Chief Financial Officer (“CFO”) and our three other most highly compensated officers who were serving as executive officers at the end of our 2016 fiscal year (collectively, our “named executive officers” or “NEOs”), and

·

all of our directors and executive officers as a group.

Name and Address of Beneficial Owner

Beneficial Owner of Common
Shares(1)
 
Number of
Common Shares

Percentage of
Common Shares

Fairfax (Switzerland) GmbH(2)
c/o LacMont AG, Hofstrasse 1a, 6300 Zug, Switzerland


[              ]

[          ]%

[Champlain Investment Partners, LLC(3)
180 Battery Street, Burlington, VT 05401]




[              ]



[          ]%

[FMR LLC(4)
245 Summer Street, Boston, MA 02210]


[              ]

[          ]%

[The Vanguard Group, Inc.(5)
100 Vanguard Blvd., Malvern, PA 19355]




[              ]



[          ]%

Barbara T. Alexander


0

0.0%

Scott A. Carmilani



0



0.0%

Bart Friedman


0

0.0%

Patricia L. Guinn



0



0.0%

Fiona E. Luck


0

0.0%

Patrick de Saint-Aignan



0



0.0%

Eric S. Schwartz


0

0.0%

Samuel J. Weinhoff



0



0.0%

Thomas A. Bradley


0

0.0%

Wesley D. Dupont



0



0.0%

Frank N. D’Orazio


0

0.0%

Louis P. Iglesias



0



0.0%

All directors and executive officers as a group (17 persons)


0

0.0%

(1)
Pursuant to the regulations promulgated by the SEC, our common shares are deemed to be “beneficially owned” by a person if such person directly or indirectly has or shares the power to vote or dispose of our common shares, whether or not such person has any pecuniary interest in our common shares, or the right to acquire the power to vote or dispose of our common shares within

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    60 days of [                        ], 2017, including any right to acquire through the exercise of any option, warrant or right. As of [                        ], 2017, we had [                        ] common shares issued and outstanding. All amounts listed represent sole voting and dispositive power unless otherwise indicated.

(2)
[Based on information reported on Schedule 13D, as filed by Fairfax (Switzerland) with the SEC on [                        ], 2017, Fairfax (Switzerland) has the following powers with respect to the common shares: (a) sole voting power: [                        ]; (b) shared voting power: [                        ]; (c) sole dispositive power: [                        ]; and (d) shared dispositive power: [                        ].]

(3)
[Based on information reported on Schedule 13G, as filed by Champlain Investment Partners, LLC (“Champlain”) with the SEC on February 14, 2017, Champlain has the following powers with respect to the common shares: (a) sole voting power: 3,737,465; (b) shared voting power: 0; (c) sole dispositive power: 4,713,355; and (d) shared dispositive power: 0.]

(4)
[Based on information reported on Schedule 13G/A, as filed by FMR LLC (“FMR”) and Abigail P. Johnson with the SEC on February 14, 2017, FMR and Ms. Johnson are the beneficial owners of 6,216,016 of our common shares. According to this Schedule 13G/A, FMR has sole voting power over 46,522 common shares and sole dispositive power over 6,216,016 of our common shares and has no shared voting power and no shared dispositive power over any of these shares.]

(5)
[Based on information reported on Schedule 13G/A, as filed by The Vanguard Group, Inc. (“Vanguard”) with the SEC on February 9, 2017, Vanguard has the following powers with respect to the common shares: (a) sole voting power: 51,915; (b) shared voting power: 10,106; (c) sole dispositive power: 6,486,133; and (d) shared dispositive power: 57,550.]

OTHER MATTERS

              Your Board does not know of any matters that may be presented at the Special Shareholder Meeting other than those specifically set forth in the Notice of Special Shareholder Meeting attached hereto. If matters other than those set forth in the Notice of Special Shareholder Meeting come before the meeting, the persons named in the accompanying form of proxy and acting thereunder will vote in their discretion with respect to such matters.

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ANNEX A

SWISS MERGER AGREEMENT

A-1


ANNEX B

PROSPECTUS

B-1


Table of Contents


Filed Pursuant to Rule 424(b)(3)
Registration No. 333-216074

LOGO

Offer to Exchange
Each Registered Share of

LOGO

For
Subordinate Voting Shares of Fairfax Financial Holdings Limited and $23.00 Cash

by
Fairfax Financial Holdings (Switzerland) GmbH,
a direct wholly owned subsidiary of 1102952 B.C. Unlimited Liability Company,
a direct wholly owned subsidiary of
Fairfax Financial Holdings Limited

             Fairfax Financial Holdings Limited, a corporation incorporated under the laws of Canada (“Fairfax”), through Fairfax Financial Holdings (Switzerland) GmbH (“FFH Switzerland”), a limited liability company incorporated under the laws of Switzerland and a direct wholly owned subsidiary of 1102952 B.C. Unlimited Liability Company (“Canada Sub”), an unlimited liability company organized under the laws of the province of British Columbia, Canada, and a direct wholly owned subsidiary of Fairfax, is offering to acquire all of the outstanding registered ordinary shares, par value CHF 4.10 per share (the “Allied World shares”), of Allied World Assurance Company Holdings, AG, a corporation limited by shares incorporated under the laws of Switzerland (“Allied World”), upon the terms and subject to the conditions set out in this prospectus and in the related letter of transmittal, which terms and conditions are referred to in this prospectus together, as each may be amended or supplemented from time to time, as the “Offer.”

             Pursuant to the Agreement and Plan of Merger, dated December 18, 2016, between Fairfax and Allied World (as amended and supplemented by joinders executed by FFH Switzerland, Fairfax (Switzerland) (as defined below) and Canada Sub, the “Merger Agreement”), Allied World shareholders are being offered a combination of cash and stock consideration for their Allied World shares. For each Allied World share held, Allied World shareholders are being offered (i) cash consideration of $23.00, without interest (the “Cash Consideration”), (ii) fully paid and nonassessable subordinate voting shares of Fairfax (“Fairfax shares” or “subordinate voting shares”) having a value of $14.00 based on the closing price of the Fairfax shares on December 16, 2016, being 0.030392 of a Fairfax share (the “Fixed Exchange Stock Consideration”) and (iii) additional stock consideration equal to the quotient of (x) $12.00 and (y) the volume weighted average price of Fairfax shares on the Toronto Stock Exchange (the “TSX”) for the 20 consecutive trading days immediately preceding the trading day before the date on which FFH Switzerland first accepts tendered Allied World shares for exchange (the “Acceptance Time”), converted from Canadian dollars to US dollars using the average Bank of Canada USD/CAD exchange rate over such 20-day period, rounded to the nearest one-hundredth of one cent (provided that this volume weighted average price is greater than $435.65 and less than $485.65 per Fairfax share) (the “Fixed Value Stock Consideration” and, together with the Cash Consideration and the Fixed Exchange Stock Consideration, the “Offer Consideration”). If this volume weighted average price of Fairfax shares during this period is greater than or equal to $485.65 per Fairfax share, the Fixed Value Stock Consideration will be fixed at an exchange ratio of 0.024709 of a Fairfax share for each Allied World share. If this volume weighted average price of Fairfax shares during this period is less than or equal to $435.65 per Fairfax share, the Fixed Value Stock Consideration will be fixed at an exchange ratio of 0.027545 of a Fairfax share for each Allied World share.

             In addition, Allied World will pay a special cash dividend of $5.00 per share, without interest, as soon as possible after the Acceptance Time to holders of Allied World shares as of immediately prior to the Acceptance Time, which is being paid outside of the Offer but is conditioned upon completion of the Offer (the “Special Dividend”). The $23.00 per share Cash Consideration payable under the Offer, together with the $5.00 per share Special Dividend, will result in Allied World shareholders being entitled to receive a total of $28.00 in cash per Allied World share upon completion of the Offer.

             If, following completion of the Offer, Fairfax has, directly or indirectly, acquired or controls at least 90 percent of all outstanding Allied World shares (excluding Allied World shares held by Allied World), no actions or proceedings are pending with respect to the exercisability of the voting rights associated with those Allied World shares and no other legal impediment to a squeeze-out merger under Swiss law exists, Fairfax will, indirectly through Fairfax (Switzerland) GmbH, a limited liability company incorporated under the laws of Switzerland (“Fairfax (Switzerland)”) and a direct wholly owned subsidiary of FFH Switzerland, initiate a squeeze-out merger under Swiss law (the “Merger” and, together with the Offer and the Special Dividend, the “Transactions”), pursuant to a merger agreement to be entered into by Allied World, FFH Switzerland and Fairfax (Switzerland) (the “Swiss Merger Agreement”), whereby any remaining Allied World shareholders (except for Allied World, Fairfax, FFH Switzerland and Fairfax (Switzerland), which will not receive any compensation for any Allied World shares directly or indirectly held by them) will receive cash and Fairfax shares equal to the Offer Consideration in exchange for such Allied World shares (the “Merger Consideration”).

             As at May 2, 2017, the latest practicable date prior to the date of this prospectus, the total value of the consideration Allied World shareholders will receive in connection with the Offer and the Special Dividend was $53.69, comprised of consideration being offered by Fairfax in the Offer of $48.69, based on the closing price of CAD$618.14 for the Fairfax shares on the TSX on that date (and assuming the volume weighted average price for the 20-day period prior to the Acceptance Time referenced above is equal to such amount) and an exchange rate of CAD$1.00 = $0.7289, as published by the Bank of Canada on that date, and the Special Dividend of $5.00, which will be paid by Allied World outside of the Offer but is conditioned upon completion of the Offer.

             ALLIED WORLD’S BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE MERGER AGREEMENT AND THE OFFER ARE ADVISABLE AND FAIR TO AND IN THE BEST INTERESTS OF ALLIED WORLD, HAS APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT ALLIED WORLD SHAREHOLDERS TENDER THEIR ALLIED WORLD SHARES INTO THE OFFER.

             The completion of the Offer is subject to certain conditions, including that at least 90 percent of all outstanding Allied World shares (excluding Allied World shares held by Allied World) are tendered in the Offer. Fairfax and FFH Switzerland may not, without the prior written consent of Allied World, amend, modify or waive the minimum tender condition below 90 percent (unless all other conditions to the Offer have been satisfied or, to the extent legally permitted, waived, in which case Fairfax may elect to waive the minimum tender condition down to 662/3 percent). A detailed description of the terms and conditions of the Offer appears under “The Offer—Terms of the Offer” and “The Offer—Conditions to the Offer” in this prospectus.

             THE OFFER WILL COMMENCE ON MAY 8, 2017. THE OFFER, AND YOUR RIGHT TO WITHDRAW ALLIED WORLD SHARES YOU TENDER IN THE OFFER, WILL EXPIRE AT 11:59 P.M. NEW YORK CITY TIME ON JUNE 30, 2017, UNLESS THE EXPIRATION TIME OF THE OFFER IS EXTENDED. SHARES TENDERED PURSUANT TO THE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION OF THE OFFER, BUT NOT DURING ANY SUBSEQUENT OFFERING PERIOD.

             The Allied World shares are listed on the New York Stock Exchange (the “NYSE”). The Fairfax shares are listed on the TSX. The TSX has conditionally approved for listing the Fairfax shares to be issued as partial consideration to Allied World shareholders. Listing will be subject to Fairfax satisfying customary listing conditions of the TSX.

             FOR A DISCUSSION OF RISK FACTORS THAT YOU SHOULD CAREFULLY CONSIDER IN EVALUATING THE OFFER AND THE OTHER TRANSACTIONS, SEE “RISK FACTORS” BEGINNING ON PAGE 42 OF THIS PROSPECTUS.

             THIS PROSPECTUS CONTAINS DETAILED INFORMATION CONCERNING THE OFFER FOR ALLIED WORLD SHARES AND THE PROPOSED ACQUISITION OF ALLIED WORLD. FAIRFAX RECOMMENDS THAT YOU READ THIS PROSPECTUS CAREFULLY.

             THIS PROSPECTUS IS NOT AN OFFER TO SELL SECURITIES AND IS NOT A SOLICITATION OF AN OFFER TO BUY SECURITIES, NOR SHALL THERE BE ANY SALE OR PURCHASE OF SECURITIES PURSUANT HERETO, IN ANY JURISDICTION IN WHICH SUCH OFFER, SALE OR SOLICITATION IS NOT PERMITTED OR WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE LAWS OF ANY SUCH JURISDICTION.

             NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED IN CONNECTION WITH THE OFFER OR THE OTHER TRANSACTIONS OR HAS PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE IN THE UNITED STATES.



   

The date of this prospectus is May 9, 2017.


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IMPORTANT INFORMATION

        This prospectus is not an offer to sell securities and is not a solicitation of an offer to buy securities, nor shall there be any sale or purchase of securities pursuant hereto, in any jurisdiction in which such offer, solicitation or sale is not permitted or would be unlawful prior to registration or qualification under the laws of any such jurisdiction. If you are in any doubt as to your eligibility to participate in the Offer, you should contact your professional advisor immediately.


ABOUT THIS DOCUMENT

        This document, which forms part of a registration statement on Form F-4 filed with the Securities and Exchange Commission (the “SEC”) by Fairfax, constitutes a prospectus of Fairfax under Section 5 of the Securities Act of 1933, as amended (the “Securities Act”), with respect to the Fairfax shares to be delivered to Allied World shareholders pursuant to the Transactions.

        Fairfax and Allied World have not authorized anyone to give information or make any representations about the Transactions, Fairfax or Allied World that is different from, or in addition to, that contained in this prospectus or in any of the materials incorporated by reference in this prospectus. Fairfax and Allied World take no responsibility for, and can provide no assurance as to the reliability of, any information that others may give you.

        The information contained or incorporated in this prospectus is accurate only as of the date of this prospectus or the applicable incorporated document unless the information specifically indicates that another date applies, and neither the mailing of this prospectus to shareholders nor the issue of Fairfax shares in the Offer should create any implication to the contrary.


Incorporation of Certain Information by Reference

        The SEC allows Fairfax to “incorporate by reference” into this prospectus the following documents and all annual reports on Form 40-F and all current reports on Form 6-K that Fairfax subsequently files with the SEC and all annual reports on Form 10-K, all quarterly reports on Form 10-Q and all current reports on Form 8-K that Allied World subsequently files with the SEC (other than, in each case, documents or information deemed to have been furnished and not filed in accordance with the SEC rules) pursuant to Section 13(a), 13(c) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), until the completion of the Transactions:

        Any statement contained in a document incorporated or deemed to be incorporated by reference herein will be modified or superseded for purposes of this prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so

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modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this prospectus.

        Fairfax will provide without charge to each person, including any beneficial owner, to whom this prospectus is delivered, upon his or her written or oral request, a copy of any or all documents referred to above which have been or may be incorporated by reference into this prospectus, excluding exhibits to those documents unless they are specifically incorporated by reference into those documents. You may obtain copies of those documents by sending your request in writing to Fairfax at the following address: Fairfax Financial Holdings Limited, 95 Wellington Street West, Suite 800, Toronto, Ontario, Canada, M5J 2N7 or by telephoning Fairfax at 1 (416) 367-4941, and to Allied World at the following address: Allied World Assurance Company Holdings, AG, Gubelstrasse 24, Park Tower, 15th Floor, 6300 Zug, Switzerland or by telephoning Allied World at +41 41 768 1080.

        In order to receive timely delivery of these documents, Allied World shareholders must make such a request no later than five U.S. business days before the then-scheduled Expiration Time of the Offer. The Expiration Time of the Offer is currently 11:59 p.m., New York City time on June 30, 2017, but the actual deadline may change if the Offer is extended.


CURRENCIES

        In this prospectus, unless otherwise specified or the context otherwise requires:

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IMPORTANT INFORMATION

    i  

ABOUT THIS DOCUMENT

   
i
 

CURRENCIES

   
ii
 

HELPFUL INFORMATION

   
1
 

QUESTIONS AND ANSWERS ABOUT THE OFFER

   
4
 

SUMMARY

   
18
 

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF FAIRFAX

   
30
 

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF ALLIED WORLD

   
33
 

SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

   
36
 

UNAUDITED COMPARATIVE HISTORICAL AND PRO FORMA SHARE INFORMATION

   
39
 

COMPARATIVE MARKET INFORMATION

   
41
 

RISK FACTORS

   
42
 

PRESENTATION OF CERTAIN FINANCIAL AND OTHER INFORMATION

   
66
 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

   
71
 

BACKGROUND TO AND REASONS FOR THE TRANSACTIONS

   
73
 

PLANS AND PROPOSALS FOR ALLIED WORLD

   
103
 

THE OFFER

   
108
 

THE MERGER AGREEMENT

   
120
 

INFORMATION ABOUT FFH SWITZERLAND AND CANADA SUB

   
140
 

MANAGEMENT OF FAIRFAX

   
141
 

REMUNERATION OF FAIRFAX’S DIRECTORS AND SENIOR MANAGEMENT

   
146
 

RELATED PARTY TRANSACTIONS

   
155
 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS OF FAIRFAX

   
156
 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS OF ALLIED WORLD

   
158
 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

   
160
 

MATERIAL TAX CONSEQUENCES

   
171
 

DESCRIPTION OF FAIRFAX SHARES AND ARTICLES OF INCORPORATION

   
181
 

COMPARISON OF SHAREHOLDERS’ RIGHTS

   
193
 

INTERESTS OF ALLIED WORLD, FFH SWITZERLAND AND FAIRFAX AND THEIR DIRECTORS AND OFFICERS

   
221
 

COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

   
228
 

LEGAL MATTERS

   
230
 

EXPERTS

   
231
 

WHERE YOU CAN FIND ADDITIONAL INFORMATION

   
232
 

SERVICE OF PROCESS AND ENFORCEABILITY OF CIVIL LIABILITIES UNDER U.S. SECURITIES LAWS

   
233
 

ANNEX A—AGREEMENT AND PLAN OF MERGER

   
A-1
 

ANNEX B—FAIRNESS OPINION OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED

   
B-1
 

ANNEX C—FORM OF COMPANY SHAREHOLDER VOTING AGREEMENT

   
C-1
 

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HELPFUL INFORMATION

Certain Defined Terms

        Unless otherwise specified or if the context so requires, in this prospectus:

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QUESTIONS AND ANSWERS ABOUT THE OFFER

        The following are some of the questions that you, as an Allied World shareholder, may have regarding the Offer along with answers to those questions. These questions and answers, as well as the following summary, are not meant to be a substitute for the information contained or incorporated by reference in the remainder of this prospectus or the annexes to this prospectus, and this information is qualified in its entirety by the more detailed descriptions and explanations contained therein. Fairfax urges you to carefully read this prospectus, including any documents incorporated by references, and its annexes in their entirety prior to making any decision as whether to tender your Allied World shares in the Offer.

Q.
Who is making the Offer?

A.
Fairfax is making the Offer to purchase all of the outstanding Allied World shares through its indirect wholly owned subsidiary, FFH Switzerland, which in turn is wholly owned by Fairfax’s direct wholly owned subsidiary, Canada Sub. Pursuant to the Merger Agreement, Fairfax has agreed to cause all members of its group, including FFH Switzerland and Canada Sub, to comply with all of Fairfax’s obligations in connection with the Offer.

Q.
Who is Fairfax?

A.
Fairfax is a holding company which, through its subsidiaries (Fairfax together with its subsidiaries, the “Fairfax Group,” which, for the avoidance of doubt, will include Allied World upon completion of the Offer), is engaged in property and casualty insurance and reinsurance and investment management. Fairfax’s registered and head office is located at 95 Wellington Street West, Suite 800, Toronto, Ontario, Canada, M5J 2N7. As at December 31, 2016, Fairfax had 34 employees at the holding company and its subsidiaries had in aggregate approximately 31,000 full-time employees.

Q.
Who is FFH Switzerland?

A.
FFH Switzerland is an indirect wholly owned subsidiary of Fairfax. All quotas of FFH Switzerland are owned by Canada Sub, which is a direct wholly owned subsidiary of Fairfax. FFH Switzerland’s registered office is located at c/o LacMont AG, Hofstrasse 1a, 6300 Zug, Switzerland. FFH Switzerland was formed for the purpose of the Transactions and has not conducted, and does not expect to conduct, any business other than in connection with its organization and the consummation of the Transactions.

Q.
Who is Fairfax (Switzerland)?

A.
Fairfax (Switzerland) is an indirect wholly owned subsidiary of Fairfax. All quotas of Fairfax (Switzerland) are owned by FFH Switzerland. Fairfax (Switzerland)’s registered office is located at c/o LacMont AG, Hofstrasse 1a, 6300 Zug, Switzerland. Fairfax (Switzerland) was formed for the purpose of the Transactions and has not conducted, and does not expect to conduct, any business other than in connection with its organization and the consummation of the Transactions.

Q.
Who is Canada Sub?

A.
Canada Sub is a direct wholly owned subsidiary of Fairfax. All shares of Canada Sub are owned by Fairfax. Canada Sub’s registered office is located at 1600-925 West Georgia Street, Vancouver, British Columbia, Canada. Canada Sub was formed for the purpose of the Transactions and has not conducted, and does not expect to conduct, any business other than in connection with its organization and the consummation of the Transactions.

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Q.
Why is Fairfax seeking to acquire all of the outstanding Allied World shares?

A.
Fairfax, through FFH Switzerland, is offering to acquire all of the outstanding Allied World shares in order to acquire 100 percent of the issued share capital of Allied World. Fairfax believes that Allied World’s growing international reach is highly complementary to Fairfax’s existing worldwide operations, and that the Transactions will provide a number of strategic opportunities, including diversification of the Fairfax Group’s risk portfolio.

Q.
What consideration is being offered for my Allied World shares?

A.
Allied World shareholders are being offered a combination of cash and stock consideration for their Allied World shares. For each Allied World share held, Allied World shareholders are being offered (i) cash consideration of $23.00, without interest (the “Cash Consideration”), (ii) Fairfax shares having a value of $14.00 based on the closing price of the Fairfax shares on December 16, 2016, being 0.030392 of a Fairfax share (the “Fixed Exchange Stock Consideration”) and (iii) additional stock consideration equal to the quotient of (x) $12.00 and (y) the volume weighted average price of Fairfax shares on the TSX for the 20 consecutive trading days immediately preceding the trading day before the date on which FFH Switzerland first accepts tendered Allied World shares for exchange (the “Acceptance Time”), converted from Canadian dollars to US dollars using the average Bank of Canada USD/CAD exchange rate over such 20-day period, rounded to the nearest one-hundredth of one cent (provided that this volume weighted average price is greater than $435.65 and less than $485.65 per Fairfax share) (the “Fixed Value Stock Consideration” and, together with the Cash Consideration and the Fixed Exchange Stock Consideration, the “Offer Consideration”). If this volume weighted average price of Fairfax shares during this period is greater than or equal to $485.65 per Fairfax share, the Fixed Value Stock Consideration will be fixed at an exchange ratio of 0.024709 of a Fairfax share for each Allied World share. If this volume weighted average price of Fairfax shares during this period is less than or equal to $435.65 per Fairfax share, the Fixed Value Stock Consideration will be fixed at an exchange ratio of 0.027545 of a Fairfax share for each Allied World share.

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Q.
What will I receive if I accept the Offer?

A.
Allied World shareholders who validly tender and do not withdraw their Allied World shares prior to the Expiration Time (as defined below), or during any Subsequent Offering Period (as defined below), will receive the Offer Consideration plus the Special Dividend.
Q.
How will the Cash Consideration component of the Offer Consideration be financed?

A.
The Cash Consideration component of the Offer Consideration (approximately $2.0 billion) will be financed through Fairfax’s existing cash resources, the cash proceeds from the potential sale of non-core businesses that Fairfax has no ability to control long-term (which Fairfax expects would include the sale of minority equity, joint venture and/or partnership interests of less than 35% in publicly listed or privately owned businesses held within the Fairfax Group) and the indirect sale of approximately 33% of the Allied World shares to OMERS, the pension plan for Ontario’s municipal employees, Alberta Investment Management Corporation, CN Canadian Master Trust Fund and Lake Merritt LLC (collectively, the “Co-Investors”), none of which Co-Investors are affiliates of Fairfax. The Co-Investors will receive, as promptly as possible following the closing of the Offer, equity interests in FFH Switzerland, which will continue as the direct parent of Allied World following the successful completion of the Transactions.
Q.
What are the most significant conditions to the Offer?

A.
The Offer is subject to a number of conditions, including there being validly tendered in accordance with the terms of the Offer prior to the Expiration Time, a number of Allied World shares (that have not been validly withdrawn) that, together with any Allied World shares then directly or indirectly owned by Fairfax, FFH Switzerland and Fairfax (Switzerland), represents at least 90 percent or more of all outstanding Allied World shares (excluding Allied World shares held by Allied World) (which we refer to as the “Minimum Tender Condition”), antitrust and other regulatory approvals having been obtained, the conditional approval for listing on the TSX of the new Fairfax shares to be issued in the Transactions (which has been obtained), the Articles Amendment and the Board Modification having been effected and the Special Dividend having been approved and declared by Allied World’s shareholders. At a special meeting of Allied World shareholders held on March 22, 2017, Allied World shareholders approved the Articles Amendment and the Special Dividend.

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Q.
Is Fairfax’s financial condition relevant to my decision to tender into the Offer?

A.
Yes. Allied World’s shares validly tendered and accepted for payment in the Offer will be exchanged for cash and Fairfax shares. You should consider Fairfax’s financial condition before you decide to become a holder of Fairfax’s shares by tendering your Allied World shares in the Offer.

Q.
Does Fairfax’s board of directors support the Offer?

A.
Yes. Fairfax’s board of directors has unanimously:

determined that it is in the best interests of Fairfax to enter into the Merger Agreement and consummate the Transactions, including the issuance of Fairfax shares in the Transactions; and

approved the Merger Agreement and authorized and approved the issuance of Fairfax shares in the Transactions.

Q.
Does Allied World’s board of directors support the Offer?

A.
Yes. Allied World’s board of directors has unanimously:

approved the Merger Agreement and authorized and approved the Offer and the Special Dividend; and

determined that the form, terms and provisions of the Merger Agreement, the performance by Allied World of its obligations thereunder and the consummation by Allied World of the transactions contemplated thereby, including the Merger, are advisable and fair to and in the best interests of Allied World.

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Q.
Can the interests of the Allied World directors and executive officers differ from Allied World shareholders generally?

A.
Yes. Allied World’s directors and executive officers may have interests in the Offer and the other Transactions that are different from, or in addition to, those of Allied World’s shareholders generally. These interests include, among others, certain directors or executive officers continuing as managing officers of Fairfax (Switzerland) following the closing of the Transactions; continued indemnification and insurance for directors and executive officers with respect to claims arising out of or from services provided to Allied World; accelerated vesting of certain Allied World restricted share units (“Allied World RSUs”) and performance-based restricted share units (“Allied World PRSUs”), and payments to executive officers upon the closing of the Transactions pursuant to the Allied World Assurance Company (U.S.) Inc. Second Amended and Restated Supplemental Executive Retirement Plan (the “SERP”) or continuation of compensation and benefits for a predetermined notice period in accordance with the terms of their existing employment agreements in the event a notice of termination is delivered by Allied World (or Fairfax) following the closing of the Transactions.
Q.
Will Allied World’s directors and executive officers participate in the Offer?

A.
Yes. The directors and executive officers of Allied World, who control approximately 3.0 percent of the outstanding Allied World shares, entered into a voting agreement with Fairfax and Allied World, dated December 18, 2016, pursuant to which they have agreed to tender their Allied World shares in the Offer (the “Allied World Shareholder Voting Agreement”). Pursuant to the Allied World Shareholder Voting Agreement, the directors and executive officers of Allied World also agreed to irrevocably grant and appoint Fairfax, and any designee of Fairfax, as their proxy to vote their Allied World shares in favor of the Articles Amendment, Board Modification (unless waived by Fairfax) and the Special Dividend at one or more meetings of the Allied World shareholders called for such purpose.

Q.
What will happen to my outstanding Allied World Stock-Based Awards in the Offer?

A.
The Offer does not extend to Allied World stock options (“Allied World Options”) or other stock-based awards.

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Q.
How do I accept the Offer?

A.
Allied World shareholders whose shares are registered in the share register of Allied World, referred to as registered holders, must return a properly completed and duly executed letter of transmittal. If you hold your Allied World shares through a financial intermediary, broker, dealer, commercial bank, trust company or other entity, you should instruct your financial intermediary, broker, dealer, commercial bank, trust company or other entity through which you hold your Allied World shares to tender your Allied World shares to the exchange agent by means of delivery through the book-entry confirmation facilities of The Depository Trust Company (“DTC”), before the expiration of the Offer.

Q.
When does the Offer expire, and under what circumstances will the Offer be extended?

A.
The Offer will expire at 11:59 p.m., New York City time, on June 30, 2017 (the “Expiration Time”), unless the Offer is extended in accordance with U.S. tender offer rules and the terms of the Merger Agreement, as set out herein.
Q.
Will there be a subsequent offering period?

A.
Pursuant to the Merger Agreement, following the expiration of the Offer, FFH Switzerland may elect to provide one or more subsequent offering periods (each, a “Subsequent Offering Period”) in accordance with U.S. tender offer rules and other applicable law. If FFH Switzerland elects to provide for a Subsequent Offering Period, the Subsequent Offering Period will be conducted on the same terms as the Offer, but the Allied World shares properly tendered during the Subsequent Offering Period will not be permitted to be withdrawn and will be accepted without any minimum tender condition.

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Q.
How will I know if the Offer is extended?

A.
Fairfax and/or FFH Switzerland will announce any extension of the Offer by issuing a press release by no later than 9:00 a.m. New York City time on the next U.S. business day following the previously scheduled Expiration Time.
Q.
When will I be notified of the results of the Offer?

A.
Unless the Offer period is extended, Fairfax and/or FFH Switzerland will make a public announcement no later than 9:00 a.m. New York City time on the next U.S. business day following the previously scheduled Expiration Time, stating whether (i) the conditions to the Offer have been satisfied or waived or (ii) the Offer is terminated, as a result of any of the conditions to the Offer not having been satisfied or waived.
Q.
If I do not tender my Allied World shares prior to the Expiration Time, will I have another opportunity to tender my Allied World shares into the Offer?

A.
No. Upon the expiration of the Offer, including any extension thereof, Fairfax will cause FFH Switzerland to accept for exchange and will exchange all Allied World shares validly tendered and not properly withdrawn pursuant to the terms of the Offer. Pursuant to the Merger Agreement, following the expiration of the Offer, FFH Switzerland may elect to provide one or more Subsequent Offering Periods in accordance with U.S. tender offer rules and other applicable law. However, there is no guarantee that FFH Switzerland will elect to provide a Subsequent Offering Period. Therefore, Allied World shareholders who wish to tender their Allied World shares into the Offer and receive the Offer Consideration must tender their Allied World shares prior to the Expiration Time. Following the completion of the Offer, any remaining, non-tendering Allied World shareholder will be a minority shareholder of Allied World. See “If I decide not to tender, what will happen to my Allied World shares?” below and “Risk Factors—Risks related to the Offer—The Offer may adversely affect the liquidity and value of non-tendered Allied World shares” and “Risk Factors—Risks related to the Offer—If Fairfax initiates a squeeze-out merger under Swiss law, remaining Allied World shareholders will have their shares exchanged for the Merger Consideration.”

Q.
If I do not tender my Allied World shares prior to the Expiration Time, will I still be able to receive the Special Dividend?

A.
Yes. If the Offer is completed, the Special Dividend will be payable to all holders of outstanding Allied World shares as of immediately prior to the Acceptance Time. If the Offer is not completed, the Special Dividend will not be paid to any Allied World shareholders.

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Q.
After I tender my Allied World shares, may I change my mind and withdraw them?

A.
Yes. You may withdraw your Allied World shares at any time before the Expiration Time and at any time after the Expiration Time until FFH Switzerland accepts the Allied World shares for exchange. In addition, unless we have accepted your Allied World shares for exchange as provided herein, you may also withdraw your Allied World shares at any time after July 7, 2017. Once FFH Switzerland accepts Allied World shares for exchange pursuant to the Offer, all withdrawal rights will terminate and you will not be able to withdraw any tendered Allied World shares. During any Subsequent Offering Period, if any, Allied World shareholders will not be able to withdraw their Allied World shares once they are tendered.

Q.
How do I withdraw previously tendered Allied World shares?

A.
If you tendered your Allied World shares by delivering a letter of transmittal to Continental Stock Transfer & Trust Company, the exchange agent for the Offer, you may withdraw your Allied World shares by delivering to the exchange agent a properly completed and duly executed notice of withdrawal, guaranteed by an eligible guarantor institution (if the letter of transmittal requires a signature guarantee) before the Expiration Time or before FFH Switzerland accepts the Allied World shares for exchange.
Q.
Do I need to do anything if I want to retain my Allied World shares?

A.
No. If you want to retain your Allied World shares, you do not need to take any action.

Q.
If I decide not to tender into the Offer, what will happen to my Allied World shares?

A.
If you decide not to tender into the Offer, you will continue to own your Allied World shares in their current form. However, if the Offer is completed, the amount of publicly held Allied World shares may be so few that there may no longer be an active trading market for Allied World shares. The absence of an active trading market, and corresponding lack of analyst coverage, could reduce the liquidity and, consequently, the market value of your Allied World shares.

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Q.
What is the Minimum Tender Condition and can it be waived?

A.
The Minimum Tender Condition is 90 percent of all outstanding Allied World shares (excluding Allied World shares held by Allied World). Fairfax may only waive the Minimum Tender Condition with the prior written approval of Allied World, unless all other conditions to the Offer have been satisfied or waived, in which circumstances Fairfax may elect to waive the Minimum Tender Condition down to 662/3 percent of all outstanding Allied World shares (excluding Allied World shares held by Allied World) and consummate the Offer. If Fairfax waives the Minimum Tender Condition down to 662/3%, or waives another condition of the Offer, Fairfax will extend the Offer, if required by applicable law, for a period sufficient to allow you to consider the amended terms of the Offer (typically no less than five business days).

Q.
How will the acceptance levels impact Fairfax’s plans for Allied World and tendering and non-tendering Allied World shareholders?

A.
If, following completion of the Offer, Fairfax has, directly or indirectly, acquired or controls at least 90 percent of all outstanding Allied World shares (excluding Allied World shares held by Allied World), no actions or proceedings are pending with respect to the exercisability of the voting rights associated with those Allied World shares and no other legal impediment to a squeeze-out merger under Swiss law exists, Fairfax will, indirectly through Fairfax (Switzerland), initiate a squeeze-out merger under Swiss law whereby any remaining Allied World shareholders will have their Allied World shares cancelled and, except for Allied World, Fairfax, FFH Switzerland and Fairfax (Switzerland), which will not receive any compensation for any Allied World shares directly or indirectly held by them, receive the Merger Consideration.

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Q.
If my Allied World shares are acquired in the Offer, how will my rights as an Allied World shareholder change?

A.
The rights of Allied World shareholders are governed by Swiss law and Allied World’s articles of association. If your Allied World shares are acquired in the Offer, you will become a holder of Fairfax shares. Your rights as a holder of Fairfax shares will be governed by Canadian law and by Fairfax’s articles of incorporation. For a discussion of the differences in such rights of holders, see “Comparison of Shareholders’ Rights.”

Q.
Do I have appraisal rights under the Offer with respect to the Allied World shares?

A.
No. Allied World shareholders are not entitled under Swiss law or otherwise to appraisal rights with respect to the Offer. However, if following the completion of the Offer, Fairfax has acquired or controls, directly or indirectly, at least 90 percent of all outstanding Allied World shares (excluding Allied World shares held by Allied World), no actions or proceedings are pending with respect to the exercisability of the voting rights associated with those Allied World shares, and no other legal impediment to a squeeze-out merger under Swiss law exists, Fairfax will, indirectly through Fairfax (Switzerland), initiate a squeeze-out merger under Swiss law. In connection with such Merger, Allied World shareholders can exercise appraisal rights under Article 105 of the Swiss Merger Act by filing a suit against the surviving company with the competent Swiss civil court at the registered office of the surviving company or of Allied World. The suit must be filed by Allied World shareholders within two months after the Merger resolution has been published in the Swiss Official Gazette of Commerce. Allied World shareholders who tender all of their Allied World shares in the Offer, and who do not acquire Allied World shares thereafter, will not be able to file a suit to exercise appraisal rights. If such a suit is filed by non-tendering Allied World shareholders, the court will determine whether the compensation established in the Merger was adequate and the amount of compensation due to the relevant Allied World shareholder, if any,

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Q.
What happens if the Offer is not completed?

A.
If the Offer is not completed:

and you tendered your Allied World shares by delivering a letter of transmittal, your Allied World shares will be returned to you promptly following the announcement that the Offer has not been completed; or

you tendered your Allied World shares by book-entry transfer, your Allied World shares will be credited to an account maintained at the original book-entry transfer facility to which the Allied World shares were tendered.
Q.
What percentage of Fairfax shares will be owned by the former Allied World shareholders after the Offer is completed?

A.
If all of the issued and outstanding Allied World shares are validly tendered and exchanged pursuant to the terms of the Offer (assuming an exchange ratio for the Fixed Value Stock Consideration of 0.026635, which corresponds to the closing price of Fairfax shares on the TSX as of May 2, 2017), the former Allied World shareholders, other than Allied World, will own approximately 17.8 percent of the Fairfax shares representing approximately 10.4 percent of the total voting rights, and holders of existing Fairfax shares, other than Fairfax, will own approximately 82.2 percent of the Fairfax shares representing approximately 47.8 percent of the total voting rights.

Q.
Will I have to pay any transaction fees or brokerage commissions?

A.
You will not have to pay any transaction fees or brokerage commissions if:

your Allied World shares are registered in your name and you tender them to the exchange agent; or

you instruct your financial intermediary, broker, dealer, commercial bank, trust company or other entity to tender your Allied World shares, subject to the policies of such financial intermediary, broker, dealer, commercial bank, trust company or other entity.

Q.
What are the U.S. federal income tax consequences of the Offer for Allied World shareholders?

A.
Fairfax and Allied World intend that the Transactions qualify as a tax-deferred reorganization within the meaning of Section 368(a) of the Code (such tax-deferred reorganization, a “Reorganization”). However, as described more fully in “Material Tax Consequences—Material U.S. Federal Income Tax Considerations—U.S. Federal Income Tax Consequences of the Transactions”, the U.S. federal income tax treatment of the Transactions is not clear, as qualification of the Transactions as a Reorganization depends on whether the stock component of the Offer Consideration constitutes at least 40% of the aggregate fair market value of the Offer Consideration, whether the Squeeze-Out Merger occurs and certain other considerations. Accordingly, whether the Transactions qualify as a Reorganization depends on the application of

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Q.
What is the market value of the Allied World shares as of a recent date?

A.
As of May 2, 2017, the latest practicable date before the date of this prospectus, the closing price of the Allied World shares reported on the NYSE was $52.94 per Allied World share.

Q.
Where can I find more information about Fairfax and Allied World?

A.
You can find more information about Fairfax and Allied World by reading this prospectus and from various sources described in this prospectus under “Where You Can Find Additional Information.”

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Q.
Who can answer my questions?

A.
If you have any questions about the Offer, or if you need to request additional copies of this prospectus or other documents, you should contact the information agent at the following address and telephone number:

LOGO

1290 Avenue of the Americas, 9th Floor
New York, NY 10104


Shareholders, Banks and Brokers
Call Toll Free:

(800) 248-7690

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SUMMARY

        The following summary highlights material information contained or incorporated by reference in this prospectus. It does not contain all of the information that may be important to you. In particular, you should read the documents attached to this prospectus which are made part of this prospectus and the documents incorporated by reference into this prospectus. This summary and the balance of this prospectus contain forward-looking statements about events that are not certain to occur as described, or at all, and you should not place undue reliance on those statements. Please carefully read the section “Cautionary Statement Regarding Forward-Looking Statements.” You are urged to read carefully this entire document (including the annexes) and other documents that are referred to or incorporated by reference in this prospectus in order to fully understand the transactions contemplated by the Merger Agreement. See “Where You Can Find Additional Information.” Most items in this summary include a page reference directing you to a more complete description of those items.

The Companies

FFH Switzerland (see page 140)

        FFH Switzerland is an indirect wholly owned subsidiary of Fairfax. All outstanding quotas of FFH Switzerland are owned by Canada Sub, a direct wholly owned subsidiary of Fairfax. FFH Switzerland’s registered office is located at c/o LacMont AG, Hofstrasse 1a, 6300 Zug, Switzerland. FFH Switzerland was formed for the purpose of the Transactions and has not conducted, and does not expect to conduct, any business other than in connection with its organization and the consummation of the Transactions.

Fairfax (Switzerland)

        Fairfax (Switzerland) is an indirect wholly owned subsidiary of Fairfax. All outstanding quotas of Fairfax (Switzerland) are owned by FFH Switzerland. Fairfax (Switzerland)’s registered office is located at c/o LacMont AG, Hofstrasse 1a, 6300 Zug, Switzerland. Fairfax (Switzerland) was formed for the purpose of the Transactions and has not conducted, and does not expect to conduct, any business other than in connection with its organization and the consummation of the Transactions.

Canada Sub (see page 140)

        Canada Sub is a direct wholly owned subsidiary of Fairfax. Canada Sub’s registered office is located at 1600-925 West Georgia Street, Vancouver, British Columbia, Canada. Canada Sub was formed for the purpose of the Transactions and has not conducted, and does not expect to conduct, any business other than in connection with its organization and the consummation of the Transactions.

Fairfax

        Fairfax is a holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and investment management. Fairfax is incorporated under the Canada Business Corporations Act. Fairfax operates through a decentralized operating structure, with autonomous management teams applying a focused underwriting strategy to its markets. The Fairfax Group seeks to differentiate itself by combining disciplined underwriting with the investment of its assets on a total return basis, which it believes provides above-average returns over the long-term. The Fairfax Group provides a full range of property and casualty products, maintaining a diversified portfolio of risks across classes of business, geographic regions, and types of insureds. Fairfax has been under current management since September 1985. Fairfax’s principal executive offices are located at

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Suite 800, 95 Wellington Street West, Toronto, Ontario, Canada. Fairfax’s telephone number is (416) 367-4941.

        The Fairfax shares are traded on the TSX under the symbol “FFH.”

Allied World

        Allied World is a Swiss-based holding company headquartered in Switzerland, whose subsidiaries provide innovative property, casualty and specialty insurance and reinsurance solutions to clients worldwide. Allied World was formed in Bermuda in 2001 and has continued to maintain significant insurance and reinsurance operations there following its redomestication to Switzerland in 2010.

        Allied World has its registered office and principal executive office located at Gubelstrasse 24, Park Tower, 15th Floor, 6300 Zug, Switzerland. Its telephone number at that address is +41-41-768-1080.

        Additional information about Allied World is contained in its public filings, which are incorporated by reference herein. See “Where You Can Find Additional Information” on page 232.

        Allied World shares are traded on the NYSE under the symbol “AWH.”

Risk Factors (see page 42)

        In deciding whether to tender your Allied World shares in the Offer, you should carefully consider the risks described under “Risk Factors.”

Background to and Reasons for the Transactions (see page 73)

Fairfax’s Reasons for the Transactions (see page 82)

        For more information regarding the factors considered by the Fairfax board of directors in reaching its decision to approve the Merger Agreement and the transactions contemplated by the Merger Agreement, see “Background to and Reasons for the Transactions—Fairfax’s Reasons for the Transactions.”

Allied World’s Reasons for the Transactions (see page 88)

        For more information regarding the factors considered by the Allied World board of directors in reaching its decision to make the recommendation to the Allied World shareholders that they tender their Allied World shares in the Offer, see “Background to and Reasons for the Transactions—Allied World’s Reasons for the Transactions.”

Opinion of Allied World’s Financial Advisor (see page 91)

        In connection with the Offer and the Merger, Merrill Lynch, Pierce, Fenner & Smith Incorporated (“BofA Merrill Lynch”), Allied World’s financial advisor, delivered to Allied World’s board of directors a written opinion, dated December 18, 2016, as to the fairness, from a financial point of view and as of the date of the opinion, of the Offer Consideration and the Merger Consideration to be received by Allied World shareholders in the Offer and the Merger (after giving effect to the Special Dividend). The full text of the written opinion, dated December 18, 2016, of BofA Merrill Lynch, which describes, among other things, the assumptions made, procedures followed, factors considered and limitations on the review undertaken, is attached as Annex B to this prospectus and is incorporated by reference herein in its entirety. BofA Merrill Lynch provided its opinion to Allied World’s board of directors

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(in its capacity as such) for the benefit and use of Allied World’s board of directors in connection with and for purposes of its evaluation of the Offer and the Merger from a financial point of view. BofA Merrill Lynch’s opinion does not address any other aspect of the Offer and the Merger and no opinion or view was expressed as to the relative merits of the Transactions (including the Special Dividend) in comparison to other strategies or transactions that might be available to Allied World or in which Allied World might engage or as to the underlying business decision of Allied World to proceed with or effect the Transactions (including the Special Dividend). BofA Merrill Lynch’s opinion does not address any other aspect of the Offer and the Merger and does not constitute a recommendation to any Allied World shareholder as to whether any such Allied World shareholder should tender its Allied World shares in the Offer, or as to how any Allied World shareholder should vote or act in connection with the Merger or any related matter.

Plans and Proposals for Allied World (see page 103)

        If, following completion of the Offer, Fairfax has, directly or indirectly, acquired or controls at least 90 percent of all outstanding Allied World shares (excluding Allied World shares held by Allied World), no actions or proceedings are pending with respect to the exercisability of the voting rights associated with those Allied World shares and no other legal impediment to a squeeze-out merger under Swiss law exists, Fairfax will, indirectly through Fairfax (Switzerland), initiate a squeeze-out merger under Swiss law whereby any remaining Allied World shareholders will have their Allied World shares cancelled and, except for Allied World, Fairfax, FFH Switzerland and Fairfax (Switzerland), which will not receive any compensation for any Allied World shares directly or indirectly held by them, receive the Merger Consideration.

        The SEC has adopted Rule 13e-3 under the Exchange Act, which is applicable to certain “going private” transactions, and which may under certain circumstances be applicable to the Merger or any other transaction or series of transactions that occur after completion of the Offer by which Fairfax attempts to acquire the remaining outstanding Allied World shares unless an exemption applies. Fairfax believes that Rule 13e-3 will not be applicable to the Merger because it is anticipated that the Merger will be effected within one year following the consummation of the Offer and, in the Merger, Allied World shareholders will receive the Merger Consideration, which is the same as the Offer Consideration. If an exemption does not apply, such transaction or series of transactions would be subject to US federal securities law (including Rule 13e-3) and Fairfax would be required to file a Schedule 13E-3 with the SEC that would describe, among other things, the reasons for the “going private” transaction, the relationship of the parties involved, the source(s) of financing, the process used to determine the valuation or price paid to minority shareholders and detailed disclosures as to the fairness of any such transaction to minority shareholders.

        In the event that the Acceptance Time occurs but, as of immediately prior to the Acceptance Time, the number of Allied World shares validly tendered in the Offer and not withdrawn, together with any Allied World Shares then directly or indirectly owned by Fairfax or FFH Switzerland, represents less than 90% of all outstanding Allied World shares (excluding Allied World shares held by Allied World), Fairfax has agreed to use its reasonable best efforts to consummate the Merger within two years of the Acceptance Time. However, it is possible that Fairfax may not be able to acquire 100 percent (or at least 90 percent) of all outstanding Allied World shares (excluding Allied World shares held by Allied World) in a timely manner, or at all. In addition, any acquisition that takes place after the completion of the Offer may be the subject of litigation, and a court may delay the acquisition or prohibit the acquisition from occurring on the terms described in this prospectus, or at all. Accordingly, non-tendering Allied World shareholders may not receive any consideration for such Allied World shares, and the liquidity and value of any Allied World shares that remain outstanding could be negatively affected.

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        See “Plans and Proposals for Allied World.”

Delisting and Deregistration (see page 106)

        Following the completion of the Offer, to the extent permitted under applicable law and stock exchange regulations, Fairfax intends to delist the Allied World shares from the NYSE. Delisting from the NYSE will adversely affect the liquidity of the Allied World shares and may reduce the value as a result. Following delisting of the Allied World shares from the NYSE and provided that the criteria for deregistration are met, Fairfax intends to cause Allied World to make a filing with the SEC requesting that Allied World’s reporting obligations under the Exchange Act be terminated. Deregistration would substantially reduce the information required to be furnished by Allied World to its shareholders and to the SEC and would make certain provisions of the Exchange Act no longer applicable to Allied World.

The Offer (see page 108)

        Fairfax, through FFH Switzerland, is offering to acquire all of the outstanding Allied World shares (excluding Allied World shares held by Allied World) pursuant to an offer to exchange made to all Allied World shareholders.

        Allied World shareholders are being offered a combination of cash and stock consideration for their Allied World shares. For each Allied World share held, Allied World shareholders are being offered (i) cash consideration of $23.00, without interest (the “Cash Consideration”), (ii) Fairfax shares having a value of $14.00 based on the closing price of the Fairfax shares on December 16, 2016, being 0.030392 of a Fairfax share (the “Fixed Exchange Stock Consideration”) and (iii) additional stock consideration equal to the quotient of (x) $12.00 and (y) the volume weighted average price of Fairfax shares on the TSX for the 20 consecutive trading days immediately preceding the trading day before the date on which FFH Switzerland first accepts tendered Allied World shares for exchange (the “Acceptance Time”), converted from Canadian dollars to US dollars using the average Bank of Canada USD/CAD exchange rate over such 20-day period, rounded to the nearest one-hundredth of one cent (provided that this volume weighted average price is greater than $435.65 and less than $485.65 per Fairfax share) (the “Fixed Value Stock Consideration” and, together with the Cash Consideration and the Fixed Exchange Stock Consideration, the “Offer Consideration”). If this volume weighted average price of Fairfax shares during this period is greater than or equal to $485.65 per Fairfax share, the Fixed Value Stock Consideration will be fixed at an exchange ratio of 0.024709 of a Fairfax share for each Allied World share. If this volume weighted average price of Fairfax shares during this period is less than or equal to $435.65 per Fairfax share, the Fixed Value Stock Consideration will be fixed at an exchange ratio of 0.027545 of a Fairfax share for each Allied World share.

        In addition, Allied World will pay a special cash dividend of $5.00 per share, without interest, as soon as possible after the Acceptance Time to holders of Allied World shares as of immediately prior to the Acceptance Time, which is being paid outside of the Offer but is conditioned upon completion of the Offer (the “Special Dividend”). The $23.00 per share Cash Consideration payable under the Offer, together with the $5.00 per share Special Dividend, will result in Allied World shareholders being entitled to receive a total of $28.00 in cash per Allied World share upon completion of the Offer.

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        The aggregate consideration of $54.00 per Allied World share, based on the closing price per Fairfax share of CAD$614.45 on December 16, 2016 on the TSX, represented a premium of 18 percent to the closing price of $45.77 per Allied World share on December 16, 2016, being the last business day preceding the announcement of the Offer.

        The exchange ratio in relation to the Fixed Value Stock Consideration portion of the Offer Consideration is not fixed, and may fluctuate depending on the market price of Fairfax shares and the currency exchange rate. Therefore, the number of Fairfax shares that holders of Allied World shares will receive upon completion of the Offer will depend on the market value of the Fairfax shares and the exchange rate of Canadian dollars to US dollars for the 20 consecutive trading days immediately preceding the trading day before the Acceptance Time. Promptly following the closing of the TSX two trading days immediately preceding the Acceptance Time, the exchange ratio for the Fixed Value Stock Consideration will be determined, and Fairfax will issue a press release stating this exchange ratio and the total number of Fairfax shares to be issued to holders of Allied World shares who validly tender and do not withdraw their Allied World shares pursuant to the Offer.

Timing of the Offer (see page 108)

        The Offer will commence on May 8, 2017 and will expire at 11:59 p.m., New York City time, on June 30, 2017. If one or more of the conditions to the Offer are not satisfied or, to the extent legally permitted, waived, FFH Switzerland will extend the period of time for which the Offer is open for successive periods of 10 business days (or such other number of business days as Fairfax and Allied World agree) until all the conditions to the Offer have been satisfied or waived. However, neither Fairfax nor FFH Switzerland will be required to extend the Offer beyond August 18, 2017, except in limited circumstances, as provided for in the Merger Agreement.

        FFH Switzerland may, following the expiration of the Offer, elect to provide one or more Subsequent Offering Periods of at least three business days in length following the Expiration Time and acceptance for exchange of Allied World shares tendered in the Offer. A Subsequent Offering Period would be an additional period of time, following the first exchange of Allied World shares in the Offer, during which Allied World shareholders could tender Allied World shares not tendered in the Offer.

Withdrawal Rights (see page 110)

        Allied World shareholders may withdraw their Allied World shares at any time before the Expiration Time and at any time before FFH Switzerland accepts Allied World shares for exchange pursuant to the Offer. In addition, unless we have accepted your Allied World shares for exchange as provided herein, you may also withdraw your Allied World shares at any time after July 7, 2017. Allied World shareholders will not be entitled to withdraw any Allied World shares tendered in any Subsequent Offering Period.

Conditions to the Offer (see page 111)

        The Offer is subject to the following conditions. Neither Fairfax nor FFH Switzerland will be obliged to purchase any Allied World shares validly tendered (or defectively tendered and such defect is waived by FFH Switzerland) in the Offer and not properly withdrawn if the following conditions have not been satisfied, or to the extent legally permitted, waived (some of which have been satisfied, as noted below).

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        The conditions to the Offer are for the sole benefit of Fairfax and FFH Switzerland and, to the extent legally permitted and subject to the terms of the Merger Agreement, may be waived by Fairfax or FFH Switzerland (either in whole or in part), at any time and from time to time prior to the Expiration Time or any extension thereof, in the sole and absolute discretion of Fairfax and FFH Switzerland. Notice of any such waiver will be given in the manner prescribed by applicable law. However, Fairfax and FFH Switzerland may not, without the prior written consent of Allied World, amend, modify or waive the Minimum Tender Condition below 90 percent of all outstanding Allied World shares (excluding Allied World shares held by Allied World) unless all other conditions to the Offer have been satisfied, or will be satisfied on the closing of the Merger, or waived, to the extent such waiver is permitted under the Merger Agreement, in which case Fairfax may elect to waive the Minimum Tender Condition down to 662/3 percent of all outstanding Allied World shares (excluding Allied World shares held by Allied World) as described above. In addition, Fairfax cannot waive the conditions described above under items (ii) through (x) (except item (vi)) above without the prior written consent of Allied World in its sole and absolute discretion. If Fairfax waives the Minimum Tender Condition down to 662/3%, or waives another condition of the Offer, Fairfax will extend the Offer, if required by applicable law, for a period sufficient to allow you to consider the amended terms of the Offer (typically five business days). Fairfax will comply with Rule 14d-4(d)(2) under the Exchange Act in connection with material changes to the terms of the Offer.

Settlement of the Offer (see page 116)

        If the conditions to the Offer have been satisfied or, to the extent legally permitted, waived, the consideration payable to tendering Allied World shareholders whose Allied World shares are accepted for exchange will be calculated by the exchange agent. Fairfax shares will be issued, and cash will be paid, to tendering Allied World shareholders promptly following the Acceptance Time.

Treatment of Allied World Options and Other Stock-Based Awards (see page 121)

        The Offer does not extend to Allied World Options or other stock-based awards. However, if the Offer is consummated, holders of Allied World Options or other stock-based awards will receive the consideration described below.

        At the Acceptance Time, each Allied World Option granted by Allied World under any Allied World Share Plan that is outstanding and unexercised immediately before or as of the Acceptance Time, whether or not exercisable and whether or not vested, will be cancelled and automatically converted into the right to receive an amount in cash equal to the product of the excess, if any, of the Equity Award Consideration over the exercise price per share of Allied World shares subject to such Allied World Option and the total number of Allied World shares subject to such Allied World Option. For each Allied World Option, if the applicable exercise price per share of Allied World shares equals or exceeds the Equity Award Consideration, such Allied World Option will be cancelled without payment of any consideration, and all rights with respect to such Allied World Option will terminate as of the Acceptance Time.

        At the Acceptance Time, each Allied World Restricted Award and each Other Allied World Award subject to time vesting conditions will, without any further action on the part of the holder, become fully vested immediately prior to the Acceptance Time. Each Performance Award will, without any further action on the part of the holder, become fully vested immediately prior to the Acceptance Time, subject to the following rules: for each Performance Award for which the applicable performance period is completed as of immediately prior to the Acceptance Time, the number of Performance Awards that will vest as of immediately prior to the Acceptance Time will be based on actual performance; and, for each Performance Award for which the applicable performance period is not completed as of immediately prior to the Acceptance Time, notwithstanding anything to the contrary in

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any agreement, plan or arrangement covering such Performance Award, the number of Performance Awards that will vest as of immediately prior to the Acceptance Time will be based on the target of the applicable Performance Award (as reasonably determined by the compensation committee of the Allied World board of directors prior to the Acceptance Time). Each Performance Award that does not vest under the circumstances set out in the previous sentence will be cancelled and terminated without consideration immediately prior to the Acceptance Time.

        Each Allied World Restricted Award and Other Allied World Award that vests in accordance with the Merger Agreement will, without any further action on the part of the holder, be cancelled as of the Acceptance Time and automatically converted into the right to receive an amount in cash equal to the product obtained by multiplying the Equity Award Consideration and the total number of Allied World shares subject to such Allied World Restricted Award or Other Allied World Award, as applicable, or, to the extent that an Other Allied World Award is denominated in cash, rather than in Allied World shares, the cash amount payable pursuant to such Other Allied World Award, as determined in accordance with the Merger Agreement.

        Prior to the Acceptance Time, subsequent offering periods under the Allied World ESPP will be suspended and terminated following the Acceptance Time. Each Allied World share purchased under the Allied World ESPP will be treated as an Allied World share for all purposes of the Merger Agreement, including with respect to the Offer.

        Fairfax or one of its subsidiaries will pay to holders of Allied World Options, Allied World Restricted Awards and Other Allied World Awards the cash amounts due, less such amounts required to be withheld or deducted under the Code or any provision of state, local or foreign law with respect to the vesting of the award or making of such payment, on the first payroll date following the Acceptance Time. To the extent amounts are withheld or deducted, such withheld amounts will be treated for the purposes of the Merger Agreement as having been paid to the holders of Allied World Options, Allied World Restricted Awards and Other Allied World Awards in respect of which such deduction and withholding was made.

Regulatory Matters (see page 117)

        The Offer is conditional on the receipt of approval from insurance regulatory and competition authorities of certain jurisdictions and of antitrust clearance from the regulatory authorities of certain jurisdictions. In particular, the Offer is subject to approval by insurance regulatory authorities in the United States (including in Arkansas, Delaware and New Hampshire), as well as in Australia, Ireland and the United Kingdom, as well as by Lloyd’s. Further, antitrust consents or confirmations were sought from, among others, the FTC, the Antitrust Division of the U.S. Department of Justice and antitrust authorities in certain other jurisdictions. On January 17, 2017, Fairfax filed notification and report forms with the FTC and the Antitrust Division of the U.S. Department of Justice under the HSR Act. On January 27, 2017, the request for early termination of the waiting period was granted by the FTC and the Antitrust Division of the U.S. Department of Justice.

Accounting Treatment (see page 117)

        The acquisition of the Allied World shares will be accounted for using the acquisition method under International Financial Reporting Standards, as issued by the International Accounting Standards Board (“IFRS”).

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Appraisal Rights (see page 117)

        Allied World shareholders are not entitled under Swiss law or otherwise to appraisal rights with respect to the Offer. However, if, following the completion of the Offer, Fairfax has acquired or controls, directly or indirectly, at least 90 percent of all outstanding Allied World shares (excluding Allied World shares held by Allied World), no actions or proceedings are pending with respect to the exercisability of the voting rights associated with those Allied World shares, and no other legal impediment to a squeeze-out merger under Swiss law exists, Fairfax will, indirectly through Fairfax (Switzerland), initiate a squeeze-out merger under Swiss law. In connection with the Merger, Allied World shareholders will be able to exercise appraisal rights under Article 105 of the Swiss Merger Act by filing a suit against the surviving company with the competent Swiss civil court at the registered office of the surviving company or of Allied World. The suit must be filed by Allied World shareholders within two months after the Merger resolution has been published in the Swiss Official Gazette of Commerce. Allied World shareholders who tender all of their Allied World shares in the Offer, and who do not acquire Allied World shares thereafter, will not be able to file a suit to exercise appraisal rights. If such a suit is filed by non-tendering Allied World shareholders, the court will determine whether the compensation established in the Merger was inadequate and the amount of compensation due to the relevant Allied World shareholder, if any, and such court’s determination will benefit all remaining Allied World shareholders. The filing of an appraisal suit will not prevent completion of the Merger.

Material U.S. Federal Income Tax Consequences (see page 171)

        Fairfax and Allied World intend that the Transactions qualify as a Reorganization. However, as described more fully in “Material Tax Consequences—Material U.S. Federal Income Tax Considerations—U.S. Federal Income Tax Consequences of the Transactions”, the U.S. federal income tax treatment of the Transactions is not clear, as qualification of the Transactions as a Reorganization depends on whether the stock component of the Offer Consideration constitutes at least 40% of the aggregate fair market value of the Offer Consideration, whether the Squeeze-Out Merger occurs and certain other considerations. Accordingly, whether the Transactions qualify as a Reorganization depends on the application of complex U.S. federal income tax laws and certain facts which cannot be determined until after the Transactions are completed, and the qualification of the Transactions as a Reorganization cannot be assured.

        Furthermore, a significant portion of the Offer Consideration is in the form of cash. Accordingly, even if the Transactions qualify as a Reorganization, and subject to the PFIC rules discussed under “Material Tax Consequences—Material U.S. Federal Income Tax Considerations—PFIC Considerations”, a U.S. Holder (as defined in “Material Tax Consequences—Material U.S. Federal Income Tax Consequences”) that exchanges its Allied World shares for the Offer Consideration will recognize gain in an amount equal to the lesser of (i) the amount of any cash received by such U.S. Holder pursuant to the Offer (excluding cash received in lieu of fractional shares) and (ii) the amount of gain realized by such U.S. Holder in such exchange. The amount of a U.S. Holder’s realized gain will equal the excess of (i) the sum of (a) the fair market value of the Fairfax shares received (including any fractional Fairfax shares for which cash is received) and (b) the amount of cash consideration received pursuant to the Offer (other than cash received in lieu of fractional Fairfax shares) over (ii) the U.S. Holder’s adjusted tax basis in the Allied World shares exchanged. Because a significant portion of the Offer Consideration is in the form of cash, it is likely that most U.S. Holders will recognize all of their gain realized in the exchange. Furthermore, if the Transactions qualify as a Reorganization, a U.S. Holder will not recognize any loss realized in the exchange. If the Transactions do not qualify as a Reorganization, then a U.S. Holder generally will recognize all the gain or loss such holder realized in the exchange instead of deferring a portion of such holder’s realized gain as a result of the receipt of the stock consideration component of the Offer Consideration as outlined below

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under the heading “Material Tax Consequences—Material U.S. Federal Income Tax Considerations—Tax-Deferred Reorganization Treatment”. Cash received in lieu of a fractional Fairfax share will be treated as a payment in exchange for the fractional Fairfax share, resulting in a U.S. Holder’s recognition of gain or loss in an amount equal to the difference between the amount of cash received for the fractional Fairfax share and the U.S. Holder’s adjusted tax basis attributable to the fractional Fairfax share. The aggregate adjusted tax basis of a U.S. Holder in Fairfax shares received pursuant to the Offer will equal such U.S. Holder’s aggregate adjusted tax basis in its Allied World shares exchanged therefor, increased by the amount of gain recognized and decreased by the amount of cash received by such U.S. Holder pursuant to the Offer. If a U.S. Holder acquired Allied World shares at different times or different prices, gain realized in accordance with the preceding rules will be determined separately with respect to each block of shares.

        For more information on the U.S. federal income tax consequences of the Offer, see “Material Tax Consequences—Material U.S. Federal Income Tax Considerations.” You should consult your own tax advisor on the tax consequences to you of tendering your Allied World shares in the Offer.

Comparison of Shareholders’ Rights (see page 193)

        Allied World shareholders receiving Fairfax shares will have different rights once they become Fairfax shareholders than they do as holders of Allied World shares. The rights of a holder of Fairfax shares will be governed by Canadian law and by Fairfax’s articles of incorporation. For a discussion of the differences in such rights of holders, see “Comparison of Shareholders’ Rights.”

Interests of Allied World’s Directors and Executive Officers (see page 221)

        In considering the recommendation of Allied World’s board of directors that you tender your Allied World shares in the Offer, you should be aware that all or some of Allied World’s directors and executive officers may have interests in the Offer and the other transactions contemplated by the Merger Agreement (including the Merger) that are different from, or in addition to, those of Allied World shareholders generally. These interests include, but are not limited to, the treatment of Allied World RSUs or Allied World PRSUs held by Allied World directors and executive officers, payments to executive officers upon the closing of the Transactions pursuant to the SERP or continuation of compensation and benefits for a predetermined notice period in accordance with the terms of their existing employment agreements in the event a notice of termination is delivered by Allied World (or Fairfax) following the closing of the Transactions. The members of Allied World’s board of directors were aware of and considered these interests, among other matters, in evaluating and negotiating the Merger Agreement and the Offer, and in making their recommendation to shareholders. For more information on these interests, see “Interests of Allied World, FFH Switzerland and Fairfax and their Directors and Officers.”

Interests of Fairfax, FFH Switzerland and their Directors and Executive Officers (see page 226)

        The interests of Fairfax, FFH Switzerland and, to the best knowledge of Fairfax and FFH Switzerland, any of their current directors and executive officers, in the Offer are set out in “Interests of Allied World, FFH Switzerland and Fairfax and their Directors and Officers.” In addition, the ownership of each of Fairfax’s directors and executive officers in Fairfax shares is set out in “Security Ownership of Certain Beneficial Holders of Fairfax.”

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Additional Information (see page 232)

        If you have any questions about the Offer, or if you need to request additional copies of this prospectus or other documents, you should contact the information agent at the following address and telephone number:

Georgeson LLC
1290 Avenue of the Americas, 9th Floor
New York, NY 10104
Shareholders, Banks and Brokers
Call Toll Free:
(800) 248-7690

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SELECTED HISTORICAL
CONSOLIDATED FINANCIAL DATA OF FAIRFAX

        The following table summarizes selected historical consolidated financial information of Fairfax and is derived from the historical consolidated financial statements of Fairfax that were prepared in accordance with IFRS for the fiscal years ended December 31, 2016, 2015, 2014, 2013 and 2012. The information as at and for each of the years in the five-year period ended December 31, 2016 has been derived from the audited consolidated financial statements of Fairfax, the notes thereto, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, as filed with the SEC. The following table also summarizes selected historical consolidated financial information of Fairfax as at and for the three months ended March 31, 2017 and 2016, which has been derived from the unaudited interim consolidated financial statements of Fairfax and the notes thereto as furnished to the SEC on Form 6-K. Such unaudited interim consolidated financial statements include, in the opinion of Fairfax’s management, all normal recurring adjustments considered necessary for a fair presentation of the results of operations and financial condition of Fairfax. Historical results are not necessarily indicative of any results to be expected in the future.

        The information set out below is only a summary that you should read together with (i) the audited consolidated financial statements of Fairfax and the notes thereto, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in Fairfax’s Annual Report on Form 40-F for the fiscal year ended December 31, 2016, and (ii) the unaudited interim consolidated financial statements of Fairfax and the notes thereto, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in exhibits to Fairfax’s Form 6-K furnished to the SEC for the three months ended March 31, 2017, each of which is incorporated by reference into this prospectus. The selected historical financial information of Fairfax for the fiscal years ended December 31, 2014, 2013 and 2012, have been derived from Fairfax’s audited consolidated financial statements for such years, which have not been incorporated by reference into this prospectus. The selected historical financial information of Fairfax as at March 31, 2016 has been derived from Fairfax’s unaudited interim consolidated financial statements for the three months ended March 31, 2016, which have not been incorporated by reference into this prospectus. See the section “Where You Can Find Additional Information.”

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  Three months ended March 31,   Year ended December 31,  
Selected Consolidated Statement of Earnings Data
  2017   2016   2016   2015   2014   2013   2012  
 
  ($ millions, except share and per share amounts)
 

Revenue

                                           

Gross premiums written

  $ 2,609.2   $ 2,344.0   $ 9,534.3   $ 8,655.8   $ 7,459.9   $ 7,227.1   $ 7,398.3  

Net premiums written

  $ 2,275.0   $ 2,030.3   $ 8,088.4   $ 7,520.5   $ 6,301.8   $ 6,036.2   $ 6,194.1  

Gross premiums earned

  $ 2,322.5   $ 2,074.6   $ 9,209.7   $ 8,581.7   $ 7,358.2   $ 7,294.0   $ 7,294.8  

Premiums ceded to reinsurers

    (337.6 )   (298.2 )   (1,347.5 )   (1,210.7 )   (1,142.0 )   (1,216.7 )   (1,209.9 )

Net premiums earned

  $ 1,984.9   $ 1,776.4   $ 7,862.2   $ 7,371.0   $ 6,216.2   $ 6,077.3   $ 6,084.9  

Interest and dividends

    128.1     152.8     555.2     512.2     403.8     376.9     409.3  

Share of profit of associates

    27.1     9.9     24.2     172.9     105.7     96.7     15.0  

Net gains (losses) on investments

    (18.4 )   (159.6 )   (1,203.6 )   (259.2 )   1,736.2     (1,564.0 )   642.6  

Other revenue

    615.9     407.0     2,061.6     1,783.5     1,556.0     958.0     871.0  

  $ 2,737.6   $ 2,186.5   $ 9,299.6   $ 9,580.4   $ 10,017.9   $ 5,944.9   $ 8,022.8  

Expenses

                                           

Losses on claims, gross

  $ 1,397.7   $ 1,224.6   $ 5,682.9   $ 5,098.4   $ 4,427.4   $ 4,615.6   $ 5,265.5  

Losses on claims ceded to reinsurers

    (232.4 )   (205.8 )   (964.3 )   (712.0 )   (633.1 )   (945.3 )   (1,022.9 )

Losses on claims, net

  $ 1,165.3   $ 1,018.8   $ 4,718.6   $ 4,386.4   $ 3,794.3   $ 3,670.3   $ 4,242.6  

Operating expenses

    427.4     388.4     1,597.7     1,470.1     1,227.2     1,185.0     1,132.1  

Commissions, net

    390.8     318.0     1,336.4     1,177.3     959.9     969.2     920.0  

Interest expense

    70.6     55.2     242.8     219.0     206.3     211.2     208.2  

Other expenses

    583.3     402.0     1,958.4     1,703.1     1,492.3     910.3     870.9  

  $ 2,637.4   $ 2,182.4   $ 9,853.9   $ 8,955.9   $ 7,680.0   $ 6,946.0   $ 7,373.8  

Earnings (loss) before income taxes

  $ 100.2   $ 4.1   $ (554.3 ) $ 624.5   $ 2,337.9   $ (1,001.1 ) $ 649.0  

Provision for (recovery of) income taxes

    24.9     20.8     (159.6 )   (17.5 )   673.3     (436.6 )   114.0  

Net earnings (loss)

  $ 75.3   $ (16.7 ) $ (394.7 ) $ 642.0   $ 1,664.6   $ (564.5 ) $ 535.0  

Attributable to:

                                           

Shareholders of Fairfax

  $ 82.6   $ (51.0 ) $ (512.5 ) $ 567.7   $ 1,633.2   $ (573.4 ) $ 526.9  

Non-controlling interests

    (7.3 )   34.3     117.8     74.3     31.4     8.9     8.1  

  $ 75.3   $ (16.7 ) $ (394.7 ) $ 642.0   $ 1,664.6   $ (564.5 ) $ 535.0  

Net earnings (loss) per share

  $ 3.11   $ (2.76 ) $ (24.18 ) $ 23.67   $ 74.43   $ (31.15 ) $ 22.95  

Net earnings (loss) per diluted share

  $ 3.03   $ (2.76 ) $ (24.18 ) $ 23.15   $ 73.01   $ (31.15 ) $ 22.68  

Cash dividends paid per share

  $ 10.00   $ 10.00   $ 10.00   $ 10.00   $ 10.00   $ 10.00   $ 10.00  

Shares outstanding (000) (weighted average)

    23,079     22,530     23,017     22,070     21,186     20,360     20,327  

Interest and preferred share dividend distribution coverage(1)

    2.0x     0.8x     N/A     2.9x     9.0x     N/A     3.0x  

(1)
The ratio of earnings to fixed charges is referred to by Fairfax as “Interest and preferred share dividend distribution coverage” and is calculated as the sum of earnings (loss) before income taxes and interest expense divided by the sum of interest expense and preferred share dividend distributions adjusted to a pre-tax equivalent at Fairfax’s Canadian statutory income tax rate. Earnings before income taxes and interest expense for the three months ended March 31, 2016, and for the years ended December 31, 2016 and 2013, would have had to be higher by $11.0, $614.2 and $1,083.8, respectively, in order for the ratio to have been 1.0x in each of those periods.

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  As at March 31,   As at December 31,  
Selected Consolidated Balance Sheet Data
  2017   2016   2016   2015   2014   2013   2012  
 
  ($ millions)
 

Assets

                                           

Holding company cash and investments

  $ 958.8   $ 1,587.6   $ 1,371.6   $ 1,276.5   $ 1,244.3   $ 1,296.7   $ 1,169.2  

Insurance contract receivables

    2,994.9     2,878.7     2,917.5     2,546.5     1,931.7     2,017.0     1,945.4  

Portfolio investments

    27,558.0     28,617.9     27,293.4     27,832.5     25,109.2     23,833.3     25,163.2  

Deferred premium acquisition costs

    720.8     584.7     693.1     532.7     497.6     462.4     463.1  

Recoverable from reinsurers

    4,039.3     4,006.2     4,010.3     3,890.9     3,982.1     4,974.7     5,290.8  

Deferred income taxes

    772.8     567.1     732.6     463.9     460.4     1,015.0     607.6  

Goodwill and intangible assets

    3,979.9     3,310.9     3,847.5     3,214.9     1,558.3     1,311.8     1,321.2  

Other assets

    2,767.9     1,892.2     2,518.4     1,771.1     1,347.6     1,088.1     984.9  

Total assets

  $ 43,792.4   $ 43,445.3   $ 43,384.4   $ 41,529.0   $ 36,131.2   $ 35,999.0   $ 36,945.4  

Liabilities

                                           

Accounts payable and accrued liabilities

  $ 2,962.5   $ 2,538.8   $ 2,888.6   $ 2,555.9   $ 2,029.1   $ 1,840.6   $ 1,877.7  

Income taxes payable

    52.2     171.8     35.4     85.8     118.3     80.1     70.5  

Short sale and derivative obligations

    122.2     626.6     234.3     92.9     160.8     268.4     238.2  

Funds withheld payable to reinsurers

    405.4     383.8     416.2     322.8     461.5     461.2     439.7  

Insurance contract liabilities

    23,335.6     23,558.7     23,222.2     23,101.2     20,438.7     21,893.7     22,376.2  

Borrowings—holding company and insurance and reinsurance companies

    3,902.3     3,467.9     3,908.0     3,067.5     3,042.4     2,949.8     2,996.0  

Borrowings—non-insurance companies

    776.8     320.2     859.6     284.0     136.6     44.7     52.6  

Total liabilities

  $ 31,557.0   $ 31,067.8   $ 31,564.3   $ 29,510.1   $ 26,387.4   $ 27,538.5   $ 28,050.9  

Equity

                                           

Total equity

  $ 12,235.4   $ 12,377.5   $ 11,820.1   $ 12,018.9   $ 9,743.8   $ 8,460.5   $ 8,894.5  

Total liabilities and equity

  $ 43,792.4   $ 43,445.3   $ 43,384.4   $ 41,529.0   $ 36,131.2   $ 35,999.0   $ 36,945.4  

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SELECTED HISTORICAL
CONSOLIDATED FINANCIAL DATA OF ALLIED WORLD

        The following table sets forth selected historical consolidated financial data of Allied World under those accounting principles generally accepted in the United States (“US GAAP”). This data is derived from Allied World’s Consolidated Financial Statements as of and for the years ended December 31, 2016, 2015, 2014, 2013 and 2012, the related Management’s Discussion and Analysis of Financial Condition and Results of Operations for each annual period, and the unaudited quarterly financial statements as of and for the three months ended March 31, 2017 and 2016, which in the opinion of Allied World’s management include all adjustments necessary for a fair statement of the results for the unaudited interim periods. This selected financial data should be read in conjunction with Allied World’s Consolidated Financial Statements and related Notes included elsewhere in Allied World’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, and Allied World’s quarterly report on Form 10-Q for the quarter ended March 31, 2017, each of which is incorporated by reference in this prospectus.

        The information set out below is only a summary that you should read together with (i) the audited consolidated financial statements of Allied World and the notes thereto, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in Allied World’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, and (ii) the unaudited quarterly financial statements of Allied World and the notes thereto, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations on Form 10-Q filed with the SEC for the quarter ended March 31, 2017, each of which is incorporated by reference into this prospectus. The selected historical financial information of Allied World as at December 31, 2014, 2013 and 2012, have been derived from Allied World’s audited consolidated financial statements for such years, which have not been incorporated by reference into this prospectus. The selected historical financial information of Allied World as of March 31, 2016 has been derived from Allied World’s unaudited quarterly financial statements for the three months ended March 31, 2016, which have not been incorporated by reference into this prospectus. See the section “Where You Can Find Additional Information.”

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        Allied World’s consolidated financial statements are presented in accordance with US GAAP. For additional information, see Allied World’s financial statements and the accompanying notes incorporated by reference into this prospectus.

 
  Three Months Ended
March 31,
  Year Ended December 31,  
 
  2017   2016   2016   2015   2014   2013   2012  
 
  ($ millions except share and per share amounts)
 

Summary Statement of Operations Data:

                                           

Gross premiums written

  $ 860.9   $ 863.5   $ 3,065.8   $ 3,093.0   $ 2,935.4   $ 2,738.7   $ 2,329.3  

Net premiums written

  $ 676.1   $ 704.0   $ 2,255.8   $ 2,448.0   $ 2,322.0   $ 2,120.5   $ 1,837.8  

Net premiums earned

  $ 544.9   $ 580.1   $ 2,344.1   $ 2,488.4   $ 2,182.7   $ 2,005.9   $ 1,748.9  

Net investment income

    52.3     53.3     217.8     182.1     176.9     157.6     167.1  

Net realized investment gains (losses)

    40.7     18.9     2.1     (127.6 )   89.0     59.5     306.4  

Other income

    1.3     0.6     12.4     3.5     2.1          

Total revenues

  $ 639.2   $ 652.9   $ 2,576.4   $ 2,546.4   $ 2,450.7   $ 2,223.0   $ 2,222.4  

Net losses and loss expenses

    359.0     372.4     1,501.8     1,586.3     1,199.2     1,123.2     1,139.3  

Total expenses

    561.4     577.7     2,330.2     2,456.7     1,929.9     1,795.2     1,711.0  

Income before income taxes

  $ 77.8   $ 75.2   $ 246.2   $ 89.7   $ 520.8   $ 427.8   $ 511.4  

Income tax (benefit) expense

    (2.5 )   1.1     (9.1 )   5.8     30.5     9.8     18.4  

Net income

  $ 80.3   $ 74.1   $ 255.3   $ 83.9   $ 490.3   $ 418.0   $ 493.0  

Per Share Data:

                                           

Basic earnings per share(1)

  $ 0.92   $ 0.82   $ 2.89   $ 0.91   $ 5.03   $ 4.08   $ 4.56  

Diluted earnings per share(1)

  $ 0.90   $ 0.81   $ 2.84   $ 0.89   $ 4.92   $ 3.98   $ 4.43  

Dividends paid per share(1)

  $   $ 0.26   $ 1.040   $ 1.230   $ 0.784   $ 0.458   $ 0.625  

Shares outstanding (000) (weighted average)

    87,291     90,255     88,276     92,530     97,538     102,465     108,171  

 

 
  Three Months Ended
March 31,
  Year Ended December 31,  
 
  2017   2016   2016   2015   2014   2013   2012  

Selected Ratios:

                                           

Loss and loss expense ratio

    65.9%     64.2%     64.1%     63.7%     54.9%     56.0%     65.1%  

Acquisition cost ratio

    14.1%     15.2%     14.5%     15.1%     13.5%     12.6%     11.8%  

General and administrative expense ratio

    19.1%     16.6%     17.6%     16.3%     16.8%     17.6%     17.6%  

Expense ratio

    33.2%     31.8%     32.1%     31.4%     30.3%     30.2%     29.4%  

Combined ratio

    99.1%     96.0%     96.2%     95.1%     85.2%     86.2%     94.5%  

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  As at March 31,   As at December 31,  
 
  2017   2016   2016   2015   2014   2013   2012  
 
  ($ millions)
 

Summary Balance Sheet Data:

                                           

Cash and cash equivalents

  $ 1,284.9   $ 772.0   $ 720.9   $ 608.0   $ 589.3   $ 531.9   $ 681.9  

Investments

    7,694.9     8,710.4     7,942.3     8,571.2     7,868.7     7,712.0     7,933.9  

Reinsurance recoverable

    1,725.6     1,512.0     1,625.0     1,480.0     1,340.3     1,234.5     1,141.1  

Total assets(2)

    13,427.5     13,728.0     13,179.0     13,511.9     12,418.8     11,942.3     12,025.7  

Reserve for losses and loss expenses

    6,762.7     6,575.1     6,639.2     6,456.2     5,881.2     5,766.5     5,645.5  

Unearned premiums

    1,813.2     1,796.9     1,688.1     1,683.3     1,555.3     1,396.3     1,218.0  

Total debt(2)

    817.0     1,316.6     816.2     1,315.9     815.3     795.0     794.0  

Total shareholders’ equity

    3,638.3     3,535.4     3,551.8     3,532.5     3,778.2     3,519.8     3,326.3  

(1)
On May 1, 2014, the Allied World shareholders approved a 3-for-1 stock split of Allied World shares. All historical per share amounts reflect the effect of the stock split.

(2)
The total assets and total debt presented above have been adjusted to reflect the adoption of Accounting Standards Update 2015-03, “Interest-Imputation of Interest” (Subtopic 835-30: Simplifying the Presentation of Debt Issuance Costs) (ASU 2015-03). ASU 2015-03 amends existing guidance on the presentation of debt issuance costs in the balance sheets to be recorded as a direct deduction from the carrying amount of the debt liability, consistent with debt discounts. Under existing US GAAP, capitalized debt issuance costs were capitalized as an asset. As a result of the adoption of ASU 2015-03, debt issuance costs previously included in total assets have been reclassed as a reduction to total debt. The amounts reclassed as of December 31, 2014, 2013 and 2012 were $2.7 million, $3.5 million and $4.2 million, respectively.

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SUMMARY UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION

        The following unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting for business combinations under IFRS, with Fairfax being the accounting and legal acquirer, and is intended to illustrate the effect of the Transactions, assuming 100 percent of Allied World shares are exchanged in the Transactions. Fairfax and Allied World intend that the Transactions qualify as a Reorganization for U.S. federal income tax purposes. For Canadian tax purposes, Fairfax, FFH Switzerland, Fairfax (Switzerland) and Allied World intend that the Merger qualify as a foreign merger within the meaning of Subsection 87(8.1) of the Income Tax Act (Canada) (the “Tax Act”).

        The tables below set out unaudited pro forma condensed combined financial information for Fairfax that has been adjusted to reflect the effect of the Transactions on the balance sheet of Fairfax as at March 31, 2017 as if the Transactions had occurred at that date, and to reflect the effect of the Transactions on the consolidated statements of earnings of Fairfax for the three months ended March 31, 2017 and for the year ended December 31, 2016 as if the Transactions had occurred on January 1, 2016, and assuming all Allied World shares have been exchanged in the Transactions. The information presented below should be read in conjunction with the information contained in the sections under “Risk Factors”, “Cautionary Statement Regarding Forward-Looking Statements”, “Selected Historical Consolidated Financial Data of Fairfax”, “Selected Historical Consolidated Financial Data of Allied World”, “Unaudited Pro Forma Condensed Combined Financial Information”, and the consolidated financial statements of Fairfax and Allied World and the accompanying notes incorporated by reference in this prospectus.

        The Allied World financial information has been reconciled to Fairfax’s IFRS accounting policies solely for purposes of the preparation of the unaudited pro forma condensed combined financial information presented herein.

        The unaudited pro forma condensed combined financial information has been presented in accordance with SEC Regulation S-X Article 11 for illustrative purposes only and reflects estimates made by Fairfax’s management that it considers reasonable. It does not purport to represent what Fairfax’s actual results of operations or financial condition would have been had the Transactions occurred on the dates indicated, nor is it necessarily indicative of future results of operations or financial condition. In addition to the matters noted above, the unaudited pro forma condensed combined financial information does not reflect the effect of any cost or revenue synergies associated with the Transactions.

        The unaudited pro forma condensed combined financial information and related pro forma adjustments are preliminary and are based upon available information and certain assumptions described in the notes to the unaudited pro forma condensed combined financial information that Fairfax’s management believes are reasonable under the circumstances. See “Unaudited Pro Forma Condensed Combined Financial Information” and the related notes to the unaudited pro forma condensed combined financial information, which describes the pro forma adjustments. Detailed valuations have not yet been obtained and, accordingly, the fair value adjustments reflect preliminary estimates made by Fairfax’s management and are subject to change once detailed analyses are performed and as additional information becomes available. These adjustments may be material. Since the Transactions have not been completed, Fairfax’s access to information to make such estimates is limited and therefore certain market-based assumptions were used where data was unavailable. However, Fairfax’s management believes the fair values recognized are reasonable estimates and assumptions based on currently available information. A final determination of the fair value of assets acquired and liabilities assumed will be based on the actual assets and liabilities of Allied World that exist as of the closing date of the Transactions and, therefore, cannot be finalized prior to the

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completion of the Transactions. In addition, the evaluation of the consideration to be paid by Fairfax upon the completion of the Transactions will be partly determined based on the closing price of Fairfax shares on the closing dates of the Transactions.

        See “Unaudited Pro Forma Condensed Combined Financial Information” for an explanation of the basis of preparation of this data.

Summary Unaudited Pro Forma Condensed Combined Statements of Earnings for the three months ended March 31, 2017 and for the year ended December 31, 2016

 
  Three Months Ended
March 31, 2017
  Year ended
December 31, 2016
 

Revenue

             

Gross premiums written

  $ 3,470.1   $ 12,600.1  

Net premiums written

    2,951.1     10,344.2  

Gross premiums earned

    3,060.3     12,269.4  

Premiums ceded to reinsurers

    (530.5 )   (2,063.1 )

Net premiums earned

    2,529.8     10,206.3  

Interest and dividends

    179.4     759.3  

Share of profit of associates

    28.1     37.9  

Net gains (losses) on investments

    20.9     (1,197.4 )

Other revenue

    617.2     2,074.0  

  $ 3,375.4   $ 11,880.1  

Expenses

   
 
   
 
 

Losses on claims, gross

  $ 1,931.9   $ 7,601.5  

Losses on claims ceded to reinsurers

    (407.6 )   (1,381.1 )

Losses on claims, net

    1,524.3     6,220.4  

Operating expenses

    533.8     2,019.9  

Commissions, net

    467.9     1,676.2  

Interest expense

    81.0     306.5  

Other expenses

    590.4     1,965.2  

  $ 3,197.4   $ 12,188.2  

Earnings (loss) before income taxes

    178.0     (308.1 )

Provision for (recovery of) income taxes

    22.4     (168.7 )

Net earnings (loss)

  $ 155.6   $ (139.4 )

Attributable to:

   
 
   
 
 

Shareholders of Fairfax Group

  $ 136.5   $ (341.0 )

Non-controlling interests

    19.1     201.6  

  $ 155.6   $ (139.4 )

Net earnings (loss) per share

  $ 4.49   $ (13.63 )

Net earnings (loss) per diluted share

  $ 4.39   $ (13.63 )

Shares outstanding (000) (weighted average)

    28,017     27,955  

Shares outstanding (000) (weighted average)—diluted

    28,642     27,955  

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Summary Unaudited Pro Forma Condensed Combined Balance Sheet as at March 31, 2017

 
  As at March 31,
2017
 

Assets

       

Holding company cash and investments

  $ 358.9  

Insurance contract receivables

    4,154.2  

Portfolio investments

    36,167.5  

Deferred premium acquisition costs

    720.8  

Recoverable from reinsurers

    6,363.5  

Deferred income taxes

    827.0  

Goodwill and intangible assets

    5,713.1  

Other assets

    2,988.5  

Total assets

  $ 57,293.5  

Liabilities

   
 
 

Accounts payable and accrued liabilities

  $ 3,138.9  

Income taxes payable

    56.2  

Short sale and derivative obligations

    125.7  

Funds withheld payable to reinsurers

    608.3  

Insurance contract liabilities

    31,762.6  

Borrowings—holding company and insurance and reinsurance companies

    4,755.0  

Borrowings—non-insurance companies

    776.8  

Total liabilities

  $ 41,223.5  

Equity

   
 
 

Common shareholders’ equity

  $ 10,561.1  

Preferred stock

    1,335.5  

Shareholders’ equity attributable to shareholders of Fairfax Group

    11,896.6  

Non-controlling interests

    4,173.4  

Total equity

    16,070.0  

Total liabilities and equity

  $ 57,293.5  

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UNAUDITED COMPARATIVE HISTORICAL AND PRO FORMA SHARE INFORMATION

        The following table includes per share information for Fairfax and Allied World on a historical basis, on an unaudited pro forma combined basis for the Fairfax Group and equivalent information per Allied World share, assuming 100 percent of the Allied World shares are exchanged for Fairfax shares and cash at an exchange ratio of 0.056442 Fairfax shares and cash of $23.00 for each Allied World share, in addition to the Special Dividend to be paid by Allied World of $5.00 cash per share.

        The information set out below should be read in conjunction with the unaudited interim consolidated financial statements and related notes of Fairfax for the three months ended March 31, 2017, the audited consolidated financial statements and related notes of Fairfax for the year ended December 31, 2016, the unaudited condensed consolidated financial statements and related notes of Allied World for the three months ended March 31, 2017, and the audited consolidated financial statements and related notes of Allied World for the year ended December 31, 2016, which are incorporated by reference in this prospectus, and financial information contained in the section “Unaudited Pro Forma Condensed Combined Financial Information.” See “Where You Can Find Additional Information.”

        The following unaudited pro forma per share information has been prepared in accordance with the rules and regulations of the SEC, and is presented for informational purposes only. You should not rely on the unaudited pro forma combined amounts as being necessarily indicative of the results of operations that would have been reported by Fairfax had the Transactions been in effect during the year ended December 31, 2016, the three months ended March 31, 2017, or that may be reported in the future. The unaudited pro forma combined per share information, although helpful in illustrating the financial characteristics of Fairfax under one set of assumptions, does not reflect the benefits of any cost savings, opportunities to earn additional revenue or other factors that may result as a consequence of the Transactions, or the impact of the remaining transaction-related costs for Fairfax and Allied World. These transaction-related costs have been accounted for in the unaudited pro forma condensed combined balance sheet as at March 31, 2017, but not in the unaudited pro forma condensed combined statements of earnings for the three months ended March 31, 2017 and for the year ended December 31, 2016. Accordingly, the unaudited pro forma information does not attempt to predict or suggest future results. See “Unaudited Pro Forma Condensed Combined Financial Information” for a more complete discussion.

        Information presented in the tables below reflects the following:

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  As at and for the
three months ended
March 31, 2017
  As at and for the
year ended
December 31, 2016
 

Fairfax—Historical

             

Historical per common share:

             

Basic earnings (loss)

  $ 3.11   $ (24.18 )

Diluted earnings (loss)

  $ 3.03   $ (24.18 )

Dividend(1)

  $ 10.00   $ 10.00  

Book value

  $ 361.02   $ 367.40  

Allied World—Historical

   
 
   
 
 

Historical per registered share:

             

Basic earnings

  $ 0.92   $ 2.89  

Diluted earnings

  $ 0.90   $ 2.84  

Dividend(1)

  $   $ 1.04  

Book value

  $ 41.59   $ 40.78  

Unaudited Pro Forma Combined—Historical

   
 
   
 
 

Unaudited pro forma combined per Fairfax common share:

             

Basic earnings (loss)

  $ 4.49   $ (13.63 )

Diluted earnings (loss)

  $ 4.39   $ (13.63 )

Dividend(2)

  $ 10.00   $ 10.00  

Book value(3)

  $ 377.16     N/A  

Unaudited Pro Forma Allied World Equivalent(4) —Historical

   
 
   
 
 

Unaudited pro forma Allied World equivalent per registered share:

             

Basic earnings (loss)

  $ 0.25   $ (0.77 )

Diluted earnings (loss)

  $ 0.25   $ (0.77 )

Dividend

  $ 0.56   $ 0.56  

Book value

  $ 21.29     N/A  

Notes:

(1)
Fairfax’s dividend per common share for the three months ended March 31, 2017 and for the year ended December 31, 2016 represents an annual dividend of $10.00 per share paid in the month of January in each of 2017 and 2016. Allied World’s dividend per registered share for the year ended December 31, 2016 represents a final dividend of $0.26 per share and total interim dividends of $0.78 per share.

(2)
Unaudited pro forma combined dividend per common share reflects Fairfax’s historical dividend per common share for the three months ended March 31, 2017 and for the year ended December 31, 2016.

(3)
Unaudited pro forma combined book value as at March 31, 2017 is calculated by dividing pro forma combined common shareholders’ equity of $10,561.1 million by the pro forma number of Fairfax common shares effectively outstanding of 28,001,825, including 4,937,754 new Fairfax shares to be issued as part of the Transactions.

(4)
Unaudited pro forma Allied World equivalent figures are derived by multiplying the respective unaudited pro forma combined historical per share amounts by the assumed share exchange ratio of 0.056442 Fairfax shares per Allied World share to illustrate those unaudited pro forma combined historical amounts on a pre-exchange per share basis.

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COMPARATIVE MARKET INFORMATION

        The Fairfax shares are listed on the TSX under the symbol “FFH.” The Allied World shares are listed on the NYSE under the symbol “AWH.”

        The table below sets out the closing price per share of Fairfax shares on the TSX and of Allied World shares on the NYSE on (a) December 16, 2016, the last full trading day prior to the public announcement of the signing of the Merger Agreement, and (b) May 2, 2017, the last practicable trading day prior to the date of this prospectus. The table below also presents the implied equivalent value per share for Allied World shares in US dollars.

        The implied equivalent value of an Allied World share was calculated as the sum of (1) the Cash Consideration (being $23.00), (2) the Fixed Exchange Stock Consideration (being the product of the closing market price per Fairfax share on the applicable date multiplied by 0.030392 translating that amount into US dollars), (3) the Fixed Value Stock Consideration (being $12.00), and (4) the Special Dividend of $5.00.

 
  Fairfax shares   Allied World shares   Implied equivalent
value per share
 
 
  (CAD$)
  ($)
  ($)
 

Date:

                   

December 16, 2016

    614.45     45.77     54.00  

May 2, 2017

    618.14     52.94     53.69  

        In calculating the implied equivalent value per Allied World share, amounts in Canadian dollars have been translated into US dollars at a rate of $0.7497 per Canadian dollar, the noon exchange rate published by the Bank of Canada on December 16, 2016, and $0.7289 per Canadian dollar, the exchange rate published by the Bank of Canada on May 2, 2017.

        The market prices of Fairfax shares and Allied World shares are likely to fluctuate prior to the Expiration Time and cannot be predicted. Fairfax urges you to obtain current market information regarding Fairfax shares and Allied World shares.

        See “Comparative Per Share Market Price and Dividend Information” for further information about historical market prices of these securities.

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RISK FACTORS

        In addition to general investment risks and other information included or incorporated by reference in this prospectus, including the matters described in “Cautionary Statement Regarding Forward-Looking Statements,” you should carefully consider the risks described in the documents incorporated by reference in this prospectus, including those in Fairfax’s Annual Report on Form 40-F for the year ended December 31, 2016, and Allied World’s Annual Report on Form 10-K for the year ended December 31, 2016, and the following risks before deciding whether to tender your shares in the Offer. Any of the following risks could materially adversely affect the Fairfax Group’s business, financial condition or results of operations. Additional risks and uncertainties not currently known to the Fairfax Group or that the Fairfax Group currently does not consider to be material may also materially and adversely affect the Fairfax Group’s business, financial condition or results of operations.

Risks related to the Businesses of the Fairfax Group

If the Fairfax Group’s actual claims exceed its claim reserves, the financial condition and results of operations of the Fairfax Group could be adversely affected.

        The Fairfax Group maintains reserves to cover estimated ultimate unpaid liability for losses and loss adjustment expenses with respect to reported and unreported claims incurred as of the end of each accounting period. The success of the Fairfax Group is dependent upon the ability to accurately assess the risks associated with the businesses that the Fairfax Group reinsures or insures. If the Fairfax Group fails to accurately assess the risks assumed, it may fail to establish appropriate premium rates and its reserves may be inadequate to cover its losses, which could have a material adverse effect on the financial condition of the Fairfax Group and reduce its net earnings.

        Reserves do not represent an exact calculation of liability, but instead represent estimates at a given point in time involving actuarial and statistical projections of the Fairfax Group’s expectations of the ultimate settlement and administration costs of claims incurred. Establishing an appropriate level of claim reserves is an inherently uncertain process. The Fairfax Group utilizes both proprietary and commercially available actuarial models, as well as historical insurance industry loss development patterns, to assist in the establishment of appropriate claim reserves.

        In contrast to casualty losses, which frequently can be determined only through lengthy and unpredictable litigation, property losses tend to be reported promptly and usually are settled within a shorter period of time. Nevertheless, for both casualty and property losses, actual claims and claim expenses ultimately paid may deviate, perhaps substantially, from the reserve estimates reflected in the financial statements of Fairfax and Allied World. Variables in the reserve estimation process can be affected by both internal and external events, such as changes in claims handling procedures, economic and social inflation, legal trends and legislative changes. Many of these items are not directly quantifiable, particularly on a prospective basis.

        If the Fairfax Group’s claim reserves are determined to be inadequate, it will be required to increase claim reserves with a corresponding reduction in its net earnings in the period in which the deficiency is rectified. It is possible that claims in respect of events that have occurred could exceed the Fairfax Group’s claim reserves and have a material adverse effect on its results of operations in a particular period and/or its financial condition.

        Even though most insurance contracts have policy limits, the nature of property and casualty insurance and reinsurance is such that losses can exceed policy limits for a variety of reasons and could significantly exceed the premiums received on the underlying policies. When this occurs, the financial results of the Fairfax Group are adversely affected.

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Unpredictable catastrophic events could reduce our net earnings.

        The Fairfax Group’s insurance and reinsurance operations expose the business to claims arising out of catastrophes. The Fairfax Group has experienced, and will in the future experience, catastrophe losses which may materially reduce its profitability or harm its financial condition. Catastrophes can be caused by various events, including natural events such as hurricanes, windstorms, earthquakes, tornadoes, hailstorms, severe winter weather and fires, and unnatural events such as terrorist attacks and riots. The incidence and severity of catastrophes are inherently unpredictable.

        The extent of losses from a catastrophe is a function of both the total amount of insured exposure in the area affected by the event and the severity of the event. Most catastrophes are restricted to small geographic areas; however, hurricanes, windstorms and earthquakes may produce significant damage in large, heavily populated areas. Catastrophes can cause losses in a variety of property and casualty lines, including losses relating to business interruptions occurring in the same geographic area as the catastrophic event or in the other geographic areas. It is possible that a catastrophic event or multiple catastrophic events could have a material adverse effect upon the Fairfax Group’s financial condition, profitability or cash flows.

        Claims resulting from natural or man-made catastrophic events could cause substantial volatility in the Fairfax Group’s financial results for any fiscal quarter or year and could materially reduce the Fairfax Group’s profitability or harm its financial condition. The Fairfax Group’s ability to write new business could also be affected. Fairfax believes that increases in the value and geographic concentration of insured property, higher construction costs due to labor and raw material shortages following a significant catastrophe event, and climate change could increase the severity of claims from catastrophic events in the future.

The Fairfax Group’s portfolio holdings are subject to fluctuations in the market which could negatively affect their value. If the Fairfax Group is unable to realize its investment objectives, the Fairfax Group’s business, financial condition or results of operations may be adversely affected.

        Investment returns are an important part of the Fairfax Group’s overall profitability and its operating results depend in part on the performance of its investment portfolio. The Fairfax Group holds bonds and other debt instruments, common stocks, preferred stocks, equity-related securities and derivative securities in its portfolio.

        Accordingly, fluctuations in the fixed income or equity markets could impair the Fairfax Group’s financial condition, profitability or cash flows of the Fairfax Group. The Fairfax Group derives its investment income from interest and dividends, together with net gains or losses on investments. The portion derived from net gains or losses on investments generally fluctuates from year to year. However, net gains on investments are typically a less predictable source of investment income than interest and dividends, particularly in the short term.

        The return on the Fairfax Group’s portfolio and the risks associated with its investments are also affected by asset mix, which can change materially depending on market conditions. Investments in cash or short term investments generally produce a lower return than other investments. The market value of bonds, other debt instruments and preferred stocks fluctuates with changes in interest rates and credit quality, and is exposed to liquidity risks. The market value of common stocks and equity-related securities is exposed to fluctuations in the stock market and to liquidity risk. Equities, equity-related securities and derivative securities are volatile or extremely volatile, with the result that their market value and their liquidity may vary dramatically either up or down in short periods, and their ultimate value will therefore only be known upon their disposition or settlement.

        The uncertainty around the ultimate amount and the timing of the Fairfax Group’s claim payments may force it to liquidate securities, which may cause it to incur losses. If the Fairfax Group’s structures

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its investments improperly relative to its liabilities, it may be forced to liquidate investments prior to maturity at a significant loss to cover such liabilities. Realized and unrealized investment losses resulting from a decline in value could significantly decrease the Fairfax Group’s net earnings.

        The ability to achieve the Fairfax Group’s investment objectives is affected by general economic conditions that are beyond its control. General economic conditions can adversely affect the markets for interest-rate-sensitive securities, including the extent and timing of investor participation in such markets, the level and volatility of interest rates and, consequently, the value of fixed income securities. Interest rates are highly sensitive to many factors, including governmental monetary policies, domestic and international economic and political conditions and other factors beyond the control of the Fairfax Group. General economic conditions, stock market conditions and many other factors can also adversely affect the equities markets and, consequently, the value of the equity securities owned by the Fairfax Group. In addition, defaults by third parties who fail to pay or perform on their obligations could reduce the Fairfax Group’s investment income and net gains on investment or result in investment losses. The Fairfax Group may not be able to realize its investment objectives, which could reduce its net earnings significantly and adversely affect its business, financial condition or results of operations.

The cycles of the insurance and reinsurance industries and general economic conditions may cause fluctuations in the operating results of the Fairfax Group.

        Historically, the Fairfax Group has experienced fluctuations in operating results due to competition, frequency of occurrence or severity of catastrophic events, levels of capacity, general economic conditions and other factors. Demand for insurance and reinsurance is influenced significantly by underwriting results of primary insurers and prevailing general economic conditions. Factors such as changes in the level of employment, wages, consumer spending, business investment and government spending, the volatility and strength of the global capital markets and inflation or deflation all affect the business and economic environment and, ultimately, the demand for insurance and reinsurance products, and therefore may affect the Fairfax Group’s net earnings, financial position or cash flows.

        The property and casualty insurance business historically has been characterized by periods of intense price competition due to excess underwriting capacity, as well as periods when shortages of underwriting capacity have permitted attractive premium levels. The Fairfax Group expects to continue to experience the effects of this cyclicality, which, during down periods, could significantly reduce the amount of premium the Fairfax Group writes and could harm its financial condition, profitability or cash flows.

        In the reinsurance industry, the supply of reinsurance is related to prevailing prices and levels of surplus capacity that, in turn, may fluctuate in response to changes in rates of return being realized. It is possible that premium rates or other terms and conditions of trade could vary in the future, that the present level of demand will not continue because insurers, including the larger insurers created by industry consolidation, may require less reinsurance or that the present level of supply of reinsurance could increase as a result of capital provided by recent or future market entrants or by existing reinsurers. If any of these events transpire, the profitability of the Fairfax Group’s reinsurance business could be adversely affected.

The Fairfax Group’s business could be harmed because of its potential exposure to asbestos, environmental and other latent claims.

        The Fairfax Group has established loss reserves for asbestos and environmental and other latent claims. There is a high degree of uncertainty with respect to future exposure from such claims because of: significant issues surrounding the liabilities of the insurers, including the Fairfax Group; risks

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inherent in major litigation, including more aggressive environmental and asbestos-related litigation against insurers, including the Fairfax Group; and diverging legal interpretations and judgments in different jurisdictions. These uncertainties include, among other things:

        Insurers generally, including the Fairfax Group, experienced an increase in the number of asbestos-related claims from 2001 through 2003 likely due to, among other things, the introduction by several U.S. states of tort reform statutes that impact asbestos litigation and resulted in plaintiffs rushing to file claims before the effective date of new legislation. The increase in such claims also led to an increase in the number of entities seeking bankruptcy protection as a result of asbestos-related liabilities.

        As a result of tort reform, both legislative and judicial, there has been a decrease in mass asbestos plaintiff screening efforts over the past few years and a decline in the number of unimpaired plaintiffs filing claims. The majority of claims now being filed and litigated continues to relate to mesothelioma, lung cancer or impaired asbestosis cases. This reduction in new filings has focused the litigants on the more seriously injured plaintiffs. While initially there was a concern that such a focus would exponentially increase the settlement value of asbestos cases involving malignancies, this has not been the case. Expense has increased somewhat as a result of this trend, however, primarily due to the fact that the malignancy cases are often more heavily litigated than the non-malignancy cases.

        Similarly, as a result of various regulatory efforts aimed at environmental remediation, companies in the insurance industry, including the Fairfax Group, continue to be involved in litigation involving policy coverage and liability issues with respect to environmental claims. In addition to regulatory pressures, the results of court decisions affecting the industry’s coverage positions continue to be inconsistent and have expanded coverage beyond its original intent. Accordingly, the ultimate responsibility and liability for environmental remediation costs remains uncertain. In addition to asbestos and environmental pollution, the Fairfax Group faces exposure to other types of mass tort or health hazard claims, including claims related to exposure to potentially harmful products or substances, such as breast implants, pharmaceutical products, chemical products, lead-based pigments, tobacco, hepatitis C, head trauma and in utero exposure to diethylstilbestrol (“DES”). Tobacco, although a significant potential risk to the Fairfax Group, has not presented significant actual exposure to date. Although still a risk due to occasional unfavorable court decisions, lead pigment has had some favorable underlying litigation developments resulting in this hazard presenting less of a risk to the Fairfax Group. The Fairfax Group is monitoring claims alleging breast cancer as a result of in utero exposure to DES, a synthetic estrogen supplement prescribed to prevent miscarriages or premature births. Historically, DES exposure cases involved alleged injuries to the reproductive tract. More recently filed cases are now alleging a link between DES exposure and breast cancer. As a result of its historical underwriting profile and its focus on excess liability coverage for Fortune 500-type entities, the Fairfax Group’s runoff business faces the bulk of these potential exposures within the Fairfax Group. Establishing claim and claim adjustment expense reserves for mass tort claims is subject to uncertainties because of many factors, including expanded theories of liability and disputes concerning medical causation with respect to certain diseases.

        Given the factors described above, it is not presently possible to quantify with a high degree of certainty the ultimate exposure or range of exposure represented by asbestos, environmental and other latent claims and related litigation. The Fairfax Group has established reserves that represent its best

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estimate of ultimate claims and claim adjustment expenses based upon known facts and current law. However, these claims and related litigation, particularly if current trends continue, could result in liability exceeding these reserves by an amount that could be material to the Fairfax Group’s financial condition, profitability or cash flows in future periods.

The Fairfax Group cannot assure you that its reinsurers and certain insureds will pay it on a timely
basis or at all.

        Most insurance and reinsurance companies reduce their exposure to any individual claim by reinsuring amounts in excess of their maximum desired retention. Reinsurance is an arrangement in which an insurer, called the cedant, transfers insurance risk to another insurer, called the reinsurer, which accepts the risk in return for a premium payment. Although reinsurance makes the assuming reinsurer liable to the Fairfax Group to the extent of the risk ceded, the Fairfax Group, as cedant, is not relieved of its primary liability to its insureds. The Fairfax Group cannot assure you that its reinsurers will pay their respective reinsurance claims on a timely basis or at all. As well, the Fairfax Group bears credit risk with respect to its reinsurers (including retrocessionaires), both with respect to receivables reflected on its balance sheet as well as to contingent liabilities with respect to reinsurance protection on future claims. If reinsurers are unwilling or unable to pay the Fairfax Group amounts due under reinsurance contracts, the Fairfax Group will incur unexpected losses and the Fairfax Group’s results of operations, financial position or cash flows will be adversely affected.

The Fairfax Group is exposed to credit risk in the event its insureds, insurance producers or reinsurance intermediaries fail to remit premiums that are owed to it or failure by its insureds to reimburse it for deductibles that are paid by the Fairfax Group on their behalf.

        The Fairfax Group writes certain insurance policies, such as large deductible policies (policies where the insured retains a specific amount of any potential loss), in which the insured must reimburse the Fairfax Group for certain losses. Accordingly, the Fairfax Group bears credit risk on these policies and cannot assure you that its insureds will pay it on a timely basis or at all. In the ordinary course of business the Fairfax Group is sometimes unable to collect all amounts billed to insureds, generally due to disputes on audit of retrospectively rated policies and, in some cases, due to insureds having filed for bankruptcy protection. In addition, if an insured files for bankruptcy, the Fairfax Group may be unable to recover on assets such insured may have pledged as collateral. The Fairfax Group reserves for uncollectible amounts in the period the collection issues become known. The inability to collect amounts due to the Fairfax Group reduces its net earnings and cash flow, and the ability of its insurance and reinsurance subsidiaries to pay dividends or make other distributions.

        In accordance with industry practice, customers of the Fairfax Group often pay the premiums for their policies to brokers for payment over to the Fairfax Group. These premiums are considered paid when received by the broker and, thereafter, the customer is no longer liable to the Fairfax Group for those amounts, whether or not the Fairfax Group has actually received the premiums from the broker. Consequently, the Fairfax Group assumes a degree of credit risk associated with reliance on brokers in connection with the settlement of insurance balances.

        Further, as is customary in the reinsurance industry, the Fairfax Group’s reinsurance companies frequently pay amounts owing in respect of claims under their policies to reinsurance brokers, for payment over to the ceding insurers. In the event that a broker fails to make such a payment, depending on the jurisdiction, the Fairfax Group’s reinsurance comp