Fairfax Financial Holdings looking to ensure future ratings upgrades

By Jennifer Lanning Drey

Portland, Ore., Feb. 19 - Fairfax Financial Holdings Ltd. will do what it takes to maintain a strong financial position in order to ensure that its ratings agencies continue to upgrade the company, Prem Watsa, chief executive officer of Fairfax Financial, said Friday during the company's fourth-quarter earnings conference call.

The company would like to see its debt rating raised to the A level, he said.

Fairfax Financial ended the fourth quarter with $1.25 billion of cash, short-term investments and marketable securities at the holding company level. The year-end debt-to-capital ratio was 23%.

"Our company has never been stronger," Watsa said.

Holding company debt increased during 2009 to $1.41 billion, as a result of the issuance of C$400 million of unsecured senior notes in the third quarter.

Fairfax Financial announced Thursday that it has entered into a merger agreement under which it will acquire all outstanding shares of Zenith National Insurance Corp. in a $1.4 billion deal that Watsa said would be financed with a combination of holding company cash and subsidiary dividends. The company also plans to raise $200 million through an equity issue prior to the closing.

During the call, Watsa said the equity raise would ensure stable ratings.

Fairfax Financial will continue to have about $1 billion of cash and marketable securities at the holding company level following the closing of the transaction, he said.

Fairfax Financial reported net earnings of $79.4 million in the fourth quarter, compared to net earnings of $346.8 million in the same period of 2008.

Fairfax is a Toronto-based provider of property and casualty insurance and reinsurance and investment management services.

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