ANNUAL INFORMATION FORM
FOR THE YEAR ENDED DECEMBER 31, 2017
March 9, 2018
Fairfax Financial Holdings Limited
95 Wellington Street West, Suite 800
Toronto, Ontario, Canada M5J 2N7
FAIRFAX FINANCIAL HOLDINGS LIMITED — 2017 ANNUAL INFORMATION FORM
TABLE OF CONTENTS AND INFORMATION INCORPORATED BY REFERENCE
| | Page Reference | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| | Annual Information Form | 2017 Annual Report(1) | Management Proxy Circular(2) | |||||||
CORPORATE STRUCTURE | 3 | |||||||||
DESCRIPTION OF THE BUSINESS | 5 | 2-3, 39-121, 123-202 | ||||||||
GENERAL DEVELOPMENT OF THE BUSINESS | 6 | 4-27, 76-81, 88-94 | ||||||||
RISK FACTORS | 7 | 94-111, 189-200 | ||||||||
DIVIDENDS | 7 | |||||||||
CAPITAL STRUCTURE | 8 | |||||||||
MARKET FOR SECURITIES | 11 | |||||||||
DIRECTORS AND OFFICERS | 15 | |||||||||
LEGAL PROCEEDINGS | 17 | 86-87 | ||||||||
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS | 17 | |||||||||
TRANSFER AGENTS AND REGISTRARS | 17 | |||||||||
MATERIAL CONTRACTS | 18 | |||||||||
INTERESTS OF EXPERTS | 18 | |||||||||
AUDIT COMMITTEE | 18 | 18 | ||||||||
ADDITIONAL INFORMATION | 19 | |||||||||
Except as otherwise noted, all information given is at, or for the fiscal year ended, December 31, 2017. As the majority of our operations are in the United States or conducted in U.S. dollars, we report our consolidated financial statements in U.S. dollars. All comparative financial information, financial data and other monetary data in this Annual Information Form are reported in U.S. dollars unless otherwise noted.
Copies of this Annual Information Form, as well as copies of the 2017 Annual Report and the Management Proxy Circular (parts of which are incorporated herein by reference), may be obtained from our Corporate Secretary at 95 Wellington Street West, Suite 800, Toronto, Ontario, M5J 2N7. These documents may also be found on our website at www.fairfax.ca or on SEDAR at www.sedar.com. See "Additional Information".
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CORPORATE STRUCTURE
Name, Address and Incorporation
Fairfax Financial Holdings Limited ("Fairfax") is a holding company which, through its subsidiaries, is primarily engaged in property and casualty insurance and reinsurance and investment management. Fairfax was incorporated under theCanada Corporations Act on March 13, 1951 and continued under theCanada Business Corporations Act in 1976. Our original name of Markel Service of Canada Limited was subsequently changed to Markel Financial Holdings Limited and, in May 1987, to our current name of Fairfax Financial Holdings Limited. Our registered and head office is located at 95 Wellington Street West, Suite 800, Toronto, Ontario M5J 2N7.
Intercorporate Relationships
The following is a list of our principal subsidiaries. Indented companies are subsidiaries of the non-indented company which precedes them. All subsidiaries were wholly-owned, directly or through another subsidiary, as of December 31, 2017 unless otherwise noted.
Name | Jurisdiction of Incorporation | |
|---|---|---|
Canadian insurance subsidiaries | ||
Northbridge Financial Corporation | Canada | |
Federated Insurance Company of Canada | Canada | |
Northbridge General Insurance Corporation | Canada | |
Northbridge Personal Insurance Corporation | Canada | |
U.S. insurance subsidiaries | ||
Crum & Forster Holdings Corp. | Delaware | |
United States Fire Insurance Company | Delaware | |
First Mercury Insurance Company | Delaware | |
The North River Insurance Company | New Jersey | |
Seneca Insurance Company, Inc | New York | |
Zenith National Insurance Corp. | Delaware | |
Zenith Insurance Company | California | |
Asian insurance and reinsurance subsidiaries | ||
Falcon Insurance Company (Hong Kong) Limited | Hong Kong | |
Fairfirst Insurance Limited (78.00% owned) | Sri Lanka | |
PT Asuransi Multi Artha Guna Tbk (80.00% owned) | Indonesia | |
The Pacific Insurance Berhad (85.00% owned) | Malaysia | |
Other insurance subsidiaries | ||
Bryte Insurance Company Ltd | South Africa | |
Fairfax Brasil Seguros Corporativos S.A. | Brazil | |
Fairfax Latin America Ltd. | Canada | |
SBS Seguros Colombia S.A. | Colombia | |
Southbridge Compañía de Seguros Generales S.A. | Chile | |
La Meridional Compañía Argentina de Seguros S.A. (99.99% owned) | Argentina |
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Name | Jurisdiction of Incorporation | |
|---|---|---|
Reinsurance and insurance subsidiaries | ||
Advent Capital (Holdings) LTD | England and Wales | |
Brit Limited (72.51% owned) | England and Wales | |
Brit Insurance Holdings Limited | England and Wales | |
Brit Reinsurance (Bermuda) Limited | Bermuda | |
Brit Syndicates Limited | England and Wales | |
Colonnade Insurance S.A. | Luxembourg | |
CRC Reinsurance Limited | Barbados | |
Fairfax Financial Holdings (Switzerland) GmbH (67.40% owned) | Switzerland | |
Allied World Assurance Company Holdings, GmbH | Switzerland | |
Allied World Assurance Company, AG | Switzerland | |
Allied World Assurance Company, Ltd | Bermuda | |
Allied World Assurance Company (Europe) dac | Ireland | |
Allied World National Assurance Company | New Hampshire | |
Allied World Insurance Company | New Hampshire | |
Allied World Specialty Insurance Company | Delaware | |
Odyssey Re Holdings Corp. | Delaware | |
Odyssey Reinsurance Company | Connecticut | |
Odyssey Re Europe Holdings S.A.S. | France | |
Newline Holdings UK Limited | United Kingdom | |
Newline Corporate Name Limited | United Kingdom | |
Newline Insurance Company Limited | United Kingdom | |
Hudson Insurance Company | Delaware | |
Pethealth Inc. | Canada | |
Polskie Towarzystwo Reasekuracji Spólka Akcyjna | Poland | |
Wentworth Insurance Company Ltd. | Barbados | |
Runoff subsidiaries | ||
RiverStone Insurance Limited | United Kingdom | |
RiverStone Insurance (UK) Limited | United Kingdom | |
RiverStone Managing Agency Limited | United Kingdom | |
TIG Insurance Company | California | |
Investment management subsidiary | ||
Hamblin Watsa Investment Counsel Ltd. | Canada |
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Name | Jurisdiction of Incorporation | |
|---|---|---|
Other non-insurance and non-reinsurance subsidiaries | ||
Boat Rocker Media Inc. (58.21% owned) | Ontario | |
Cara Operations Limited(a) | Ontario | |
Fairfax Africa Holdings Corporation(b) | Canada | |
Fairfax India Holdings Corporation(c) | Canada | |
National Collateral Management Services Limited (89.53% owned) | India | |
FAIRVentures Inc. | Canada | |
Golf Town Limited(d) | Canada | |
Grivalia Properties Real Estate Investment Company S.A. (52.66% owned) | Greece | |
Keg Restaurants Ltd. (51.00% owned) | Ontario | |
Peak Achievement Athletics Inc.(e) | Canada | |
Praktiker Hellas Commercial Societe Anonyme | Greece | |
Rouge Media Group Inc. (65.00% owned) | Canada | |
Rouge Media, Inc. (65.00% owned) | Delaware | |
Sporting Life Inc. (75.00% owned) | Ontario | |
Tommy & Lefebvre Inc. | Ontario | |
Thomas Cook (India) Limited (67.61% owned) | India | |
Sterling Holiday Resorts Limited | India | |
Quess Corp Limited (49.02% owned) | India | |
MFXchange Holdings Inc | Ontario | |
William Ashley China Corporation | Canada |
DESCRIPTION OF THE BUSINESS
Overview
Fairfax is a holding company which, through its subsidiaries, is primarily engaged in property and casualty insurance and reinsurance and investment management. Fairfax's corporate objective is to achieve a high rate of return on invested capital and build long-term shareholder value. We seek to differentiate ourselves by combining disciplined underwriting with the investment of our assets on a total return basis.
The financial performance of a property and casualty company is determined by two principal factors: (i) the operating results of the insurance operations, which is determined by the level of premiums collected in relation to claims and operating costs, and (ii) the returns generated by the investment portfolios of the insurers.
Our insurance and reinsurance companies operate on a decentralized basis, with autonomous management teams applying a focused underwriting strategy to their markets. Our subsidiaries provide a full range of property and casualty products, maintaining a diversified portfolio of risks across all classes of business, geographic regions, and types of insureds.
Our investments are centrally managed for all the Fairfax group of companies by Hamblin Watsa Investment Counsel Ltd. ("Hamblin Watsa"), a wholly-owned subsidiary of Fairfax. Hamblin Watsa emphasizes a conservative value investment philosophy, seeking to invest assets on a total return basis, which includes realized and unrealized gains over the long-term.
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Since 2011, we have acquired companies that are in industries other than insurance and re-insurance where the companies met our investment criteria. Such companies are run on a decentralized basis with autonomous management and represent a small portion of Fairfax's consolidated operations.
For a full description of our business see our corporate profile, the notes to our audited consolidated financial statements and management's discussion and analysis of financial conditions and results of operations, all in our 2017 Annual Report.
Competition
The property and casualty insurance industry and the reinsurance industry are both highly competitive, and we believe that they will remain highly competitive in the foreseeable future. Competition in our industry is based on many factors, including premiums charged and other terms and conditions offered, products and services provided, commission structure, financial ratings assigned by independent rating agencies, speed of claims payment, reputation, selling effort, perceived financial strength and the experience of the insurer or reinsurer in the line of insurance or reinsurance to be written. We compete, and will continue to compete, with major U.S. and non-U.S. insurers and reinsurers, as well as certain underwriting syndicates, some of which have greater financial, marketing and management resources than we do. We also are aware that other financial institutions, such as banks, are now able to offer services similar to those offered by our insurance subsidiaries. In addition, in recent years we have seen the creation of alternative products from capital market participants that are intended to compete with reinsurance products.
Cycles of Insurance
Demand for insurance and reinsurance is influenced significantly by the 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.
The property and casualty insurance business historically has been characterized by periods of intense price competition due to excess underwriting capacity, known as a soft insurance market, when companies may underprice business to gain market share. Such inadequate pricing reduces underwriting margins. When excess capital is removed from the industry, it leads to periods when shortages of underwriting capacity have permitted attractive premium levels. This is known as a hard insurance market. We expect to continue to experience the effects of this cyclicality.
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 the larger insurers 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.
Employees
As at December 31, 2017, Fairfax (the holding company) had 40 employees and our subsidiaries had in aggregate approximately 38,000 full-time employees.
GENERAL DEVELOPMENT OF THE BUSINESS
Over the past three completed financial years our total assets have increased from $27.8 billion as at December 31, 2015 to $64.1 billion as at December 31, 2017. Common shareholders' equity was $8.9 billion, $8.5 billion and $12.5 billion as at December 31, 2015, 2016 and 2017 respectively. For the year ended December 31, 2015, Fairfax had revenue of $9.6 billion and net earnings attributable to shareholders of Fairfax of $568 million. For the year ended December 31, 2016, Fairfax had revenue of $9.3 billion and net loss attributable to shareholders of Fairfax of $512.5 million. For the year ended December 31, 2017, Fairfax had revenue of $16.2 billion and net earnings attributable to shareholders of Fairfax of $1.7 billion.
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For a description of the recent developments of our company, see our Chairman's letter to shareholders in our 2017 Annual Report. For a description of our acquisitions and divestitures over the last three years, see Note 23 (Acquisitions and Divestitures) to our audited consolidated financial statements in our 2017 Annual Report. We have filed a Form 51-102F4 — Business Acquisition Report with respect to one of our acquisitions referenced in Note 23 (Acquisitions and Divestitures) to our audited consolidated financial statements in our 2017 Annual Report. For a description of our capital transactions, see Note 16 (Total Equity) to our annual consolidated financial statements in our 2017 Annual Report. For a description of our debt profile, see Note 15 (Borrowings) to our audited consolidated financial statements in our 2017 Annual Report.
RISK FACTORS
We have identified certain risks and uncertainties to which our business, operations and financial conditions are subject, which are described under "Issues and Risks" on pages 189-200 of our 2017 Annual Report. Additional risks and uncertainties not known to us or that we currently believe are not reasonably likely to materially affect us may also impair our business, results of operations and financial condition. An explanation of our risk management approach can be found in Note 24 (Financial Risk Management) to our 2017 Annual Report.
DIVIDENDS
We have declared the following dividends since 2015 on our subordinate voting shares and multiple voting shares (collectively, the "Equity Shares"):
The dividends were payable in U.S. dollars. Future dividends on our Equity Shares, if any, are expected to be paid in U.S. currency.
Dividends of CDN$1.1445 per Series C preferred share were paid to holders of our Series C preferred shares during each of 2015, 2016 and 2017.
Dividends of CDN$0.93768, CDN$0.90972 and CDN$0.9262 per Series D preferred share were paid to holders of our Series D preferred shares during each of 2015, 2016 and 2017, respectively.
Dividends of CDN$0.842515, CDN$0.72752 and CDN$0.72752 per Series E preferred share were paid to holders of our Series E preferred shares during each of 2015, 2016 and 2017, respectively.
Dividends of CDN$0.49975, CDN$0.66222 and CDN$0.67939 per Series F preferred share were paid to holders of our Series F preferred shares during each of 2015, 2016 and 2017, respectively.
Dividends of CDN$1.144875, CDN$0.8295 and CDN$0.8295 per Series G preferred share were paid to holders of our Series G preferred shares during each of 2015, 2016 and 2017, respectively.
Dividends of CDN$0.18300, CDN$0.76222 and CDN$0.77911 per Series H preferred share were paid to holders of our Series H preferred shares during each of 2015, 2016 and 2017, respectively.
Dividends of CDN$1.25, CDN$0.927 and CDN$0.927 per Series I preferred share were paid to holders of our Series I preferred shares during each of 2015, 2016 and 2017, respectively.
Dividend payments on our Series J preferred shares commenced during 2016. Dividends of CDN$0.8360 and CDN$0.85141 were paid to holders of our Series J preferred shares during 2016 and 2017, respectively.
Dividends of CDN$1.25, CDN$1.25 and CDN$1.188314 per Series K preferred share were paid to holders of our Series K preferred shares during each of 2015, 2016 and 2017, respectively.
Dividends of CDN$0.98091, CDN$1.1875 and CDN$1.1875 per Series M preferred share were paid to holders of our Series M preferred shares during each of 2015, 2016 and 2017, respectively.
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The declaration and payment of dividends are at the sole discretion of our board of directors and depend on, among other things, our financial condition, general business conditions, legal restrictions regarding the payment of dividends by us and other factors which the board of directors may in the future consider to be relevant. As a holding company with no direct operations, we rely on cash dividends and other payments from our subsidiaries and our own cash balances to pay dividends to our shareholders.
CAPITAL STRUCTURE
General Description
For a general description of our capital structure please see "Description of Subordinate Voting Shares and Preferred Shares" at pages 52-64 of our short form base shelf prospectus dated October 19, 2017 filed with the Canadian securities regulatory authorities and incorporated herein by reference.
On February 1, 2010 we issued 8,000,000 Series E preferred shares. On February 26, 2010 we issued 563,381 subordinate voting shares. On July 28, 2010 we issued 10,000,000 Series G preferred shares. On October 5, 2010 we issued 12,000,000 Series I preferred shares. On March 21, 2012 we issued 9,500,000 Series K preferred shares. On November 15, 2013, we issued 1,000,000 subordinate voting shares. On December 31, 2014, holders representing 3,983,616 Series C preferred shares exercised their right to convert their Series C preferred shares into Series D preferred shares, on a one-for-one basis, with the result that 3,983,616 Series D preferred shares were issued. On March 3, 2015 we issued 1,150,000 subordinate voting shares and 9,200,000 Series M preferred shares. On March 31, 2015, holders representing 3,572,044 Series E preferred shares exercised their right to convert their Series E preferred shares into Series F preferred shares, on a one-for-one basis, with the result that 3,572,044 Series F preferred shares were issued. On April 10, 2015, in connection with the initial public offering of Cara, we issued an aggregate of 19,294 subordinate voting shares, on a private placement basis. On September 30, 2015, holders representing 2,567,048 Series G preferred shares exercised their right to convert their Series G preferred shares into Series H preferred shares, on a one-for-one basis, with the result that 2,567,048 Series H preferred shares were issued. On December 31, 2015, holders representing 1,534,447 Series I preferred shares exercised their right to convert their Series I preferred shares into Series J preferred shares, on a one-for-one basis, with the result that 1,534,447 Series J preferred shares were issued. On March 2, 2016 we issued 1,000,000 subordinate voting shares. In the third quarter of 2017, we issued an aggregate of 5,075,894 subordinate voting shares in connection with the acquisition of Allied World Assurance Company Holdings, AG (which was subsequently renamed Allied World Assurance Company Holdings, GmbH). For a general description of each series of our preferred shares see our prospectus supplements referenced below, each of which has been filed with the Canadian securities regulatory authorities and is incorporated herein by reference:
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Our short form base shelf prospectus and supplementary prospectuses are available on SEDAR at www.sedar.com.
Ratings
Long Term Debt
As of the date hereof, our senior, unsecured long term debt has been assigned a rating of BBB- with a stable outlook by Standard & Poor's Ratings Services ("S&P"). Moody's Investors Service ("Moody's") has assigned a Baa3 rating with a stable outlook on our senior unsecured long term debt. DBRS Limited ("DBRS") has assigned a BBB "(high)" rating with a stable outlook on our senior unsecured long term debt. A.M. Best ("A.M. Best") has assigned a rating of bbb with a stable outlook on our senior unsecured long term debt.
S&P's credit ratings are on a long term debt rating scale that ranges from AAA to D, which represents the range from highest to lowest quality of such securities rated. A rating of BBB- by S&P is the fourth highest of ten categories and indicates that the obligation exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. The addition of a plus (+) or minus (-) designation after a rating indicates the relative standing within a particular rating category.
Moody's credit ratings are on a long-term debt rating scale that ranges from Aaa to C, which represents the range from highest to lowest quality of such securities rated. A rating of Baa by Moody's is the fourth highest of nine categories and is assigned to debt securities that may possess certain speculative elements and are subject to moderate credit risk. The addition of a 1, 2 or 3 modifier after a rating indicates the relative standing within a particular rating category. The modifier 1 indicates that the issue ranks in the higher end of its generic rating category, the modifier 2 indicates a mid-range ranking and the modifier 3 indicates that the issue ranks in the lower end of its generic rating category.
The DBRS credit ratings are on a long-term debt rating scale that ranges from AAA to D, which represents the range from highest to lowest quality of such securities rated. A rating of BBB is in the fourth highest category of ten categories and is assigned to debt that is considered to be of adequate credit quality. The capacity for payment of financial obligations is considered acceptable, but the entity may be vulnerable to future events. All rating categories other than AAA and D also contain subcategories "(high)" and "(low)". The absence of either a "(high)" or "(low)" designation indicates the rating is in the middle of the category.
A.M. Best credit ratings are on a long-term debt rating scale that ranges from aaa to c, which represents the range from highest to lowest quality of such securities rated. A rating of bbb is the fourth highest category of nine categories and is assigned to debt that is considered to be of adequate credit quality, however, the issue is more susceptible to changes in economic or other conditions. The assignment of a plus (+) or minus (-) designation after a rating indicates whether the credit quality is near the top or bottom of a category.
Preferred Shares
Our preferred shares have been assigned the following ratings:
Series of Preferred Shares | S&P Rating | DBRS Rating | Moody's Rating | AM Best | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Series C preferred shares | P-3 | Pfd-3 (high) | Ba2 (hyb | ) | bb+ | ||||||||
Series D preferred shares | P-3 | Pfd-3 (high) | Ba2 (hyb | ) | bb+ | ||||||||
Series E preferred shares | P-3 | Pfd-3 (high) | Ba2 (hyb | ) | bb+ | ||||||||
Series F preferred shares | P-3 | Pfd-3 (high) | Ba2 (hyb | ) | bb+ | ||||||||
Series G preferred shares | P-3 | Pfd-3 (high) | Ba2 (hyb | ) | bb+ | ||||||||
Series H preferred shares | P-3 | Pfd-3 (high) | Ba2 (hyb | ) | bb+ | ||||||||
Series I preferred shares | P-3 | Pfd-3 (high) | Ba2 (hyb | ) | bb+ | ||||||||
Series J preferred shares | P-3 | Pfd-3 (high) | Ba2 (hyb | ) | bb+ | ||||||||
Series K preferred shares | P-3 | Pfd-3 (high) | Ba2 (hyb | ) | bb+ | ||||||||
Series M preferred shares | P-3 | Pfd-3 (high) | Ba2 (hyb | ) | bb+ | ||||||||
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S&P's preferred share rating scale is a current assessment of the creditworthiness of an obligor with respect to a specified preferred share obligation issued in the Canadian market, relative to preferred shares issued by other issuers in the Canadian market. There is a direct correspondence between the specific ratings assigned on the Canadian preferred share scale and the various rating levels on the global debt rating scale. The rating scale ranges from P-1(High) to D, which represents the range from highest to lowest quality of such securities rated. A rating of P-3 by S&P is the third highest of eight categories and indicates that the obligation is less vulnerable to nonpayment than other speculative issues. The ratings from P-1 to P-3 may be modified by "high", "mid" and "low" grades which indicate relative standing within the major rating categories.
The DBRS preferred share rating scale is meant to give an indication of the risk that a borrower will not fulfill its full obligations in a timely manner. The "Pfd-3" rating is in the third highest category available from DBRS for preferred shares. According to the DBRS rating system, securities rated Pfd-3 are of adequate credit quality. "High" or "low" grades are used to indicate the relative standing within a rating category. The absence of either a "high" or "low" designation indicates the rating is in the "middle" of the category.
The "Ba" rating is the fifth highest of the nine categories used by Moody's for hybrid securities. The modifier "2" indicates that the obligation ranks in the middle of the "Ba" rating category. The "hyb" indicator signals the potential for ratings volatility due to less predictable exogenous (and often non-credit linked) factors such as regulatory and/or government intervention coupled with a hybrid's equity-like features.
The "bb+" rating is the fifth highest category used by A.M. Best for hybrid securities and is assigned to issues with fair credit characteristics. The assignment of a plus (+) or minus (-) designation after a rating indicates whether the credit quality is near the top or bottom of a category.
These credit ratings are intended to provide investors with an independent measure of credit quality of any issue of securities. The credit ratings accorded to our debt and preferred shares by the rating agencies are not recommendations to purchase, hold or sell any security in as much as such ratings do not comment as to market price or suitability for a particular investor. Any rating may not remain in effect for any given period of time or may be revised or withdrawn entirely by a rating agency in the future if in its judgment circumstances so warrant, and if any such rating is so revised or withdrawn, Fairfax is under no obligation to update this disclosure. We have paid customary rating fees to S&P, Moody's, DBRS and A.M. Best in connection with the above-mentioned ratings. In addition, we have made customary payments in respect of certain other services provided to us by S&P and A.M. Best during the last two years.
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MARKET FOR SECURITIES
Trading Price and Volume
Our subordinate voting shares are listed for trading on the Toronto Stock Exchange (the "TSX") and trade in Canadian dollars under the symbol "FFH" and in U.S. dollars under the symbol "FFH.U". Our Series C preferred shares are listed on the TSX under the symbol "FFH.PR.C", our Series D preferred shares are listed on the TSX under the symbol "FFH.PR.D", our Series E preferred shares are listed on the TSX under the symbol "FFH.PR.E", our Series F preferred shares are listed on the TSX under the symbol "FFH.PR.F", our Series G preferred shares are listed on the TSX under the symbol "FFH.PR.G", our Series H preferred shares are listed on the TSX under the symbol "FFH.PR.H", our Series I preferred shares are listed on the TSX under the symbol "FFH.PR.I", our Series J preferred shares are listed on the TSX under the symbol "FFH.PR.J", our Series K preferred shares are listed on the TSX under the symbol "FFH.PR.K", and our Series M preferred shares are listed on the TSX under the symbol "FFH.PR.M". The following table sets out the market price range in CDN$ and aggregate trading volume of our subordinate voting shares and preferred shares on the TSX for the periods indicated:
Subordinate Voting Shares
Month | High | Low | Close | Trading Volume | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
January, 2017 | 663.63 | 601.00 | 608.00 | 1,224,809 | |||||||||
February, 2017 | 633.43 | 598.00 | 598.00 | 991,793 | |||||||||
March, 2017 | 633.99 | 603.00 | 605.20 | 943,001 | |||||||||
April, 2017 | 628.42 | 605.00 | 624.00 | 683,978 | |||||||||
May, 2017 | 623.99 | 589.00 | 592.69 | 923,114 | |||||||||
June, 2017 | 601.73 | 547.95 | 562.01 | 1,821,450 | |||||||||
July, 2017 | 598.20 | 552.01 | 594.51 | 2,445,576 | |||||||||
August, 2017 | 652.89 | 588.44 | 649.08 | 1,119,666 | |||||||||
September, 2017 | 651.62 | 592.11 | 649.33 | 1,273,486 | |||||||||
October, 2017 | 682.28 | 639.00 | 679.41 | 909,195 | |||||||||
November, 2017 | 708.99 | 667.78 | 708.99 | 840,123 | |||||||||
December, 2017 | 704.00 | 658.87 | 669.34 | 657,552 | |||||||||
Series C Preferred Shares
Month | High | Low | Close | Trading Volume | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
January, 2017 | 21.54 | 20.19 | 21.42 | 134,423 | |||||||||
February, 2017 | 22.49 | 21.50 | 21.50 | 296,405 | |||||||||
March, 2017 | 22.86 | 21.40 | 22.51 | 172,826 | |||||||||
April, 2017 | 22.72 | 21.25 | 22.15 | 106,232 | |||||||||
May, 2017 | 22.11 | 21.54 | 21.92 | 98,916 | |||||||||
June, 2017 | 22.67 | 21.38 | 22.67 | 115,125 | |||||||||
July, 2017 | 23.08 | 22.55 | 22.85 | 121,670 | |||||||||
August, 2017 | 22.93 | 22.05 | 22.71 | 117,179 | |||||||||
September, 2017 | 23.08 | 22.50 | 22.91 | 151,113 | |||||||||
October, 2017 | 23.68 | 22.95 | 23.52 | 139,109 | |||||||||
November, 2017 | 24.19 | 23.41 | 23.97 | 113,736 | |||||||||
December, 2017 | 24.08 | 23.30 | 23.89 | 118,648 | |||||||||
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Series D Preferred Shares
Month | High | Low | Close | Trading Volume | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
January, 2017 | 19.86 | 18.83 | 19.86 | 43,485 | |||||||||
February, 2017 | 21.12 | 19.86 | 20.19 | 58,357 | |||||||||
March, 2017 | 21.41 | 20.02 | 21.41 | 64,120 | |||||||||
April, 2017 | 21.73 | 20.92 | 21.00 | 30,869 | |||||||||
May, 2017 | 21.14 | 20.75 | 21.14 | 31,348 | |||||||||
June, 2017 | 21.65 | 20.74 | 21.65 | 57,848 | |||||||||
July, 2017 | 22.50 | 21.65 | 22.36 | 57,251 | |||||||||
August, 2017 | 22.55 | 21.84 | 22.15 | 55,407 | |||||||||
September, 2017 | 22.73 | 22.14 | 22.70 | 34,904 | |||||||||
October, 2017 | 23.25 | 22.59 | 23.20 | 40,576 | |||||||||
November, 2017 | 23.60 | 22.91 | 23.30 | 61,274 | |||||||||
December, 2017 | 23.76 | 23.05 | 23.20 | 32,533 | |||||||||
Series E Preferred Shares
Month | High | Low | Close | Trading Volume | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
January, 2017 | 15.60 | 14.69 | 15.60 | 94,907 | |||||||||
February, 2017 | 16.82 | 15.63 | 16.10 | 98,075 | |||||||||
March, 2017 | 16.80 | 15.99 | 16.66 | 102,485 | |||||||||
April, 2017 | 17.16 | 16.41 | 16.51 | 85,012 | |||||||||
May, 2017 | 16.50 | 15.90 | 16.24 | 81,966 | |||||||||
June, 2017 | 16.98 | 15.82 | 16.86 | 96,146 | |||||||||
July, 2017 | 17.86 | 16.89 | 17.55 | 95,407 | |||||||||
August, 2017 | 17.67 | 16.81 | 17.34 | 27,051 | |||||||||
September, 2017 | 18.01 | 17.31 | 18.01 | 83,685 | |||||||||
October, 2017 | 18.25 | 17.72 | 18.25 | 67,144 | |||||||||
November, 2017 | 18.74 | 18.10 | 18.71 | 204,059 | |||||||||
December, 2017 | 18.76 | 17.81 | 18.13 | 36,730 | |||||||||
Series F Preferred Shares
Month | High | Low | Close | Trading Volume | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
January, 2017 | 14.72 | 13.85 | 14.65 | 88,506 | |||||||||
February, 2017 | 15.44 | 14.62 | 15.10 | 200,284 | |||||||||
March, 2017 | 15.71 | 15.00 | 15.65 | 70,764 | |||||||||
April, 2017 | 16.10 | 15.56 | 15.61 | 58,436 | |||||||||
May, 2017 | 15.74 | 15.22 | 15.68 | 61,405 | |||||||||
June, 2017 | 16.16 | 15.31 | 16.05 | 71,822 | |||||||||
July, 2017 | 17.27 | 16.08 | 17.27 | 36,920 | |||||||||
August, 2017 | 17.31 | 16.66 | 17.10 | 48,145 | |||||||||
September, 2017 | 17.35 | 17.01 | 17.35 | 21,170 | |||||||||
October, 2017 | 17.60 | 17.00 | 17.40 | 53,912 | |||||||||
November, 2017 | 18.32 | 17.40 | 18.00 | 178,487 | |||||||||
December, 2017 | 18.10 | 17.54 | 17.85 | 47,930 | |||||||||
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Series G Preferred Shares
Month | High | Low | Close | Trading Volume | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
January, 2017 | 17.60 | 16.47 | 17.60 | 185,034 | |||||||||
February, 2017 | 19.22 | 17.60 | 18.17 | 200,221 | |||||||||
March, 2017 | 19.15 | 18.20 | 18.95 | 181,008 | |||||||||
April, 2017 | 19.05 | 17.73 | 17.76 | 131,713 | |||||||||
May, 2017 | 17.91 | 16.75 | 17.75 | 217,663 | |||||||||
June, 2017 | 18.84 | 17.22 | 18.80 | 176,022 | |||||||||
July, 2017 | 19.42 | 18.70 | 19.10 | 116,351 | |||||||||
August, 2017 | 19.25 | 18.41 | 18.90 | 98,268 | |||||||||
September, 2017 | 19.60 | 18.80 | 19.55 | 330,252 | |||||||||
October, 2017 | 20.26 | 19.51 | 20.09 | 117,531 | |||||||||
November, 2017 | 20.50 | 19.99 | 20.48 | 193,868 | |||||||||
December, 2017 | 20.53 | 19.30 | 19.83 | 140,803 | |||||||||
Series H Preferred Shares
Month | High | Low | Close | Trading Volume | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
January, 2017 | 16.90 | 15.80 | 16.61 | 224,243 | |||||||||
February, 2017 | 17.92 | 16.62 | 17.75 | 141,192 | |||||||||
March, 2017 | 19.15 | 17.48 | 19.05 | 54,979 | |||||||||
April, 2017 | 19.32 | 18.00 | 18.22 | 44,088 | |||||||||
May, 2017 | 18.31 | 17.84 | 17.97 | 28,399 | |||||||||
June, 2017 | 18.25 | 17.55 | 18.10 | 27,751 | |||||||||
July, 2017 | 19.25 | 18.15 | 19.12 | 28,076 | |||||||||
August, 2017 | 19.25 | 18.61 | 19.00 | 21,255 | |||||||||
September, 2017 | 19.60 | 19.00 | 19.55 | 24,667 | |||||||||
October, 2017 | 20.13 | 19.29 | 20.13 | 130,739 | |||||||||
November, 2017 | 20.24 | 19.82 | 20.10 | 31,489 | |||||||||
December, 2017 | 20.40 | 19.50 | 19.80 | 21,442 | |||||||||
Series I Preferred Shares
Month | High | Low | Close | Trading Volume | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
January, 2017 | 19.45 | 18.49 | 19.28 | 176,362 | |||||||||
February, 2017 | 20.20 | 19.18 | 19.19 | 259,944 | |||||||||
March, 2017 | 20.10 | 19.16 | 20.10 | 209,710 | |||||||||
April, 2017 | 20.60 | 19.34 | 19.42 | 229,402 | |||||||||
May, 2017 | 19.61 | 19.07 | 19.51 | 177,975 | |||||||||
June, 2017 | 20.24 | 18.99 | 20.12 | 172,681 | |||||||||
July, 2017 | 20.63 | 20.10 | 20.35 | 95,568 | |||||||||
August, 2017 | 20.48 | 19.51 | 20.14 | 58,428 | |||||||||
September, 2017 | 20.55 | 19.96 | 20.55 | 108,435 | |||||||||
October, 2017 | 21.40 | 20.47 | 21.32 | 115,682 | |||||||||
November, 2017 | 22.20 | 20.99 | 21.42 | 124,830 | |||||||||
December, 2017 | 21.46 | 20.16 | 20.82 | 162,572 | |||||||||
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Series J Preferred Shares
Month | High | Low | Close | Trading Volume | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
January, 2017 | 18.06 | 16.74 | 18.05 | 22,503 | |||||||||
February, 2017 | 18.51 | 18.04 | 18.20 | 35,984 | |||||||||
March, 2017 | 18.97 | 17.91 | 18.97 | 33,279 | |||||||||
April, 2017 | 19.50 | 18.81 | 19.10 | 16,460 | |||||||||
May, 2017 | 19.07 | 18.54 | 18.78 | 25,197 | |||||||||
June, 2017 | 19.20 | 18.68 | 19.10 | 16,646 | |||||||||
July, 2017 | 20.25 | 19.20 | 20.10 | 23,420 | |||||||||
August, 2017 | 20.12 | 19.60 | 19.80 | 17,689 | |||||||||
September, 2017 | 20.35 | 19.85 | 20.35 | 22,121 | |||||||||
October, 2017 | 21.65 | 20.28 | 20.75 | 25,800 | |||||||||
November, 2017 | 21.02 | 20.61 | 20.96 | 27,450 | |||||||||
December, 2017 | 20.91 | 20.00 | 20.25 | 21,073 | |||||||||
Series K Preferred Shares
Month | High | Low | Close | Trading Volume | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
January, 2017 | 22.46 | 21.45 | 22.30 | 726,292 | |||||||||
February, 2017 | 23.14 | 22.15 | 22.15 | 320,620 | |||||||||
March, 2017 | 23.05 | 22.17 | 22.67 | 254,253 | |||||||||
April, 2017 | 23.50 | 22.60 | 22.75 | 146,855 | |||||||||
May, 2017 | 23.35 | 22.52 | 22.84 | 193,359 | |||||||||
June, 2017 | 23.41 | 22.60 | 23.25 | 308,188 | |||||||||
July, 2017 | 23.63 | 23.10 | 23.35 | 127,399 | |||||||||
August, 2017 | 23.39 | 22.50 | 23.17 | 177,344 | |||||||||
September, 2017 | 23.53 | 22.99 | 23.53 | 168,205 | |||||||||
October, 2017 | 23.90 | 23.46 | 23.86 | 103,076 | |||||||||
November, 2017 | 24.38 | 23.75 | 24.30 | 103,490 | |||||||||
December, 2017 | 24.35 | 23.45 | 23.97 | 146,382 | |||||||||
Series M Preferred Shares
Month | High | Low | Close | Trading Volume | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
January, 2017 | 24.39 | 23.29 | 24.15 | 208,155 | |||||||||
February, 2017 | 24.83 | 23.78 | 23.78 | 243,083 | |||||||||
March, 2017 | 24.80 | 23.81 | 24.46 | 212,492 | |||||||||
April, 2017 | 24.71 | 23.85 | 24.00 | 179,250 | |||||||||
May, 2017 | 24.19 | 23.44 | 24.10 | 195,343 | |||||||||
June, 2017 | 24.50 | 23.73 | 24.47 | 193,987 | |||||||||
July, 2017 | 24.85 | 24.26 | 24.65 | 71,997 | |||||||||
August, 2017 | 24.73 | 23.60 | 24.39 | 90,585 | |||||||||
September, 2017 | 24.80 | 24.31 | 24.80 | 204,595 | |||||||||
October, 2017 | 25.00 | 24.72 | 24.87 | 156,022 | |||||||||
November, 2017 | 25.10 | 24.80 | 25.10 | 185,511 | |||||||||
December, 2017 | 25.12 | 24.41 | 25.02 | 141,138 | |||||||||
Prior Sales
On December 4, 2017, we completed the sale of CDN$650 million aggregate principal amount of 4.25% Senior Notes due 2027 at an issue price of CDN$99.992 per CDN$100 principal amount of Senior Notes.
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DIRECTORS AND OFFICERS
Name, Occupation and Security Holding
Directors
Each director holds office until the next annual meeting of shareholders or until a successor is elected or appointed.
Name and municipality of residence | Principal occupation during the last five years | Date first elected | ||||
|---|---|---|---|---|---|---|
| Anthony F. Griffiths(a)(b)(c)(d) Toronto, Ontario | Independent Business Consultant and Corporate Director | 2002 | ||||
| Robert J. Gunn(a)(c) Toronto, Ontario | Independent Business Consultant and Corporate Director | 2007 | ||||
| Alan D. Horn(a) Toronto, Ontario | President and Chief Executive Officer, Rogers Telecommunications Limited. From 2006 to December 2017, Chairman of Rogers Communications Inc. | 2008 | ||||
| Lauren C. Templeton(a) Lookout Mountain, Tennessee, U.S.A. | Founder and President, Templeton and Phillips Capital Management, LLC | 2017 | ||||
| John R.V. Palmer(b) Toronto, Ontario | Chairman of the Toronto Leadership Centre | 2012 | ||||
| Timothy R. Price(a)(b) Toronto, Ontario | Chairman of Brookfield Funds, a division of Brookfield Asset Management Inc. | 2010 | ||||
| Brandon W. Sweitzer(b)(c) New Canaan, Connecticut, U.S.A. | Dean, School of Risk Management, St. John's University | 2004 | ||||
| Karen L. Jurjevich Toronto, Ontario | Principal, Branksome Hall and CEO, Branksome Hall Global | 2017 | ||||
| Benjamin P. Watsa Toronto, Ontario | President, Marval Capital Ltd. From 2006 to October 2017, Partner and Portfolio Manager, Lissom Investment Management Inc. | 2015 | ||||
| V. Prem Watsa Toronto, Ontario | Chairman and Chief Executive Officer, Fairfax; Vice President, Hamblin Watsa Investment Counsel Ltd. | 1985 | ||||
| Notes: | ||||||
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Officers
Name and municipality of residence | Principal occupation during the last five years (office is with Fairfax, unless otherwise specified) | Office held | ||
|---|---|---|---|---|
| David Bonham Mississauga, Ontario | Vice President and Chief Financial Officer | Vice President and Chief Financial Officer | ||
| Peter Clarke Richmond Hill, Ontario | Vice President and Chief Risk Officer | Vice President and Chief Risk Officer | ||
| Jean Cloutier Toronto, Ontario | Vice President, International Operations | Vice President, International Operations | ||
| Bradley Martin Toronto, Ontario | Vice President, Strategic Investments | Vice President, Strategic Investments | ||
| Paul Rivett Toronto, Ontario | President; Vice President, Structured Investments and Managing Director, Hamblin Watsa Investment Counsel Ltd. From 2012 to July 2013, Vice President, Operations of Fairfax. From 2007 to February 2018, Vice President and Chief Operating Officer of Hamblin Watsa Investment Counsel Ltd. | President | ||
| Eric Salsberg Toronto, Ontario | Vice President, Corporate Affairs and Corporate Secretary. | Vice President, Corporate Affairs and Corporate Secretary | ||
| Ronald Schokking Lakefield, Ontario | Vice President and Treasurer | Vice President and Treasurer | ||
| John Varnell Caledon, Ontario | Vice President, Corporate Development. Vice President, Corporate Affairs, Fairfax India Holdings Corporation. | Vice President, Corporate Development | ||
| V. Prem Watsa Toronto, Ontario | Chairman and Chief Executive Officer; Vice President, Hamblin Watsa Investment Counsel Ltd. | Chairman and Chief Executive Officer |
Directors and Officers — Ownership of Securities
As at December 31, 2017, to our knowledge, the directors and officers of Fairfax beneficially owned, directly or indirectly, or exercised control or direction over, approximately 446,318 of our subordinate voting shares (1.7%) and 1,548,000 of our multiple voting shares (100%). As at such date, V. Prem Watsa, our Chairman and Chief Executive Officer, controlled shares representing 42.5% of the total votes attached to all classes of our shares (100% of the total votes attached to the multiple voting shares and 1.2% of the total votes attached to the subordinate voting shares). As of December 31, 2017, to our knowledge, the directors and officers of Fairfax beneficially owned, directly or indirectly, or exercised control or direction over, approximately 408,540 of the subordinate voting shares (0.3%) of Fairfax India. As of December 31, 2017, to our knowledge, the directors and officers of Fairfax beneficially owned, directly or indirectly, or exercised control or direction over, approximately 105,000 of the subordinate voting shares (0.5%) of Fairfax Africa. As of December 31, 2017, to our knowledge, the directors and officers of Fairfax beneficially owned, directly or indirectly, or exercised control or direction over, approximately 31,280 of subordinate voting shares (0.1%) of Cara.
Cease Trade Orders, Bankruptcies, Penalties or Sanctions
Mr. Griffiths was a Director of PreMD Inc. from 1995 to February 2010, and, in connection with the voluntary delisting of that company's shares from the TSX, cease trade orders were issued in April 2009 requiring all trading in and all acquisitions of securities of that company to cease permanently due to that
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company's failure to file continuous disclosure materials required by Ontario securities law. The cease trade orders are still in effect.
Mr. Griffiths and Mr. Rivett were Directors of Resolute Forest Products Inc. (formerly AbitibiBowater Inc.) when that company and certain of its U.S. and Canadian subsidiaries filed for protection in Canada under theCompanies' Creditors Arrangement Act (Canada) ("CCAA") and for relief under Chapter 11 of theUnited States Bankruptcy Code ("USBC") in the United States in April 2009. On December 9, 2010, that company emerged from creditor protection under the CCAA in Canada and Chapter 11 of the USBC in the United States.
Mr. Griffiths was a Director of Jaguar Mining Inc. from May 2004 to June 2013. On December 23, 2013, that company commenced proceedings under the CCAA to complete a recapitalization and financing transaction. Trading of that company's common shares was suspended on December 23, 2013 and those shares were delisted from the TSX on February 10, 2014. On February 7, 2014, the affected unsecured creditors of that company and the Ontario Superior Court of Justice approved that company's plan of compromise and arrangement pursuant to the CCAA which was implemented effective April 22, 2014.
Conflicts of Interest
Each of V. Prem Watsa, Alan D. Horn and Anthony F. Griffiths, each a Director (and, in the case of Mr. Watsa, a Director of Hamblin Watsa) and a Director of Fairfax India, will be required to disclose the nature and extent of his interest in, and is not entitled to vote on, any resolution to approve, any material contract or transaction or any proposed material contract or transaction between Fairfax and Fairfax India (or, in the case of Mr. Watsa, between Fairfax and Hamblin Watsa) or any of their affiliates or any other entity in which Messrs. Watsa, Horn or Griffiths, respectively, has an interest (unless the contract or transaction relates to his remuneration or an indemnity on liability insurance).
Each of V. Prem Watsa and Paul C. Rivett, a Director and the President of Fairfax, respectively, each a Director and an Officer of Hamblin Watsa, and each a Director of Fairfax Africa, and Quinn McLean, Managing Director, Middle East and Africa of Hamblin Watsa and a Director of Fairfax Africa, will be required to disclose the nature and extent of his interest in, and is not entitled to vote on, any resolution to approve, any material contract or transaction or any proposed material contract or transaction between Fairfax and Fairfax Africa or between Fairfax and Hamblin Watsa, or any of their affiliates, or any other entity in which Messrs. Watsa, Rivett or McLean has an interest (unless the contract or transaction relates to his remuneration or an indemnity on liability insurance).
LEGAL PROCEEDINGS
A description of the legal proceedings to which we are a party to during 2017 is included in Note 20 (Contingencies and Commitments) in our 2017 Annual Report.
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
During the three-year period ending December 31, 2017 and during the current financial year up to the date hereof, none of our directors, executive officers, 10 percent shareholders or any of their associates or affiliates had a material interest in any transaction that has materially affected or will materially affect Fairfax on a consolidated basis.
TRANSFER AGENTS AND REGISTRARS
The transfer agent and registrar for our subordinate voting shares in Canada is Computershare Trust Company of Canada, 100 University Avenue, 8th Floor, Toronto, Ontario M5J 2Y1, and in the United States is Computershare Trust Company, N.A., 250 Royall Street, Canton, Massachusetts, 02021. The transfer agent and registrar for our Series C preferred shares, Series D preferred shares, Series E preferred shares, Series F preferred shares, Series G preferred shares, Series H preferred shares, Series I preferred shares, Series J preferred shares, Series K preferred shares and Series M preferred shares is Computershare Trust Company of Canada, 100 University Avenue, 8th Floor, Toronto, Ontario M5J 2Y1.
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MATERIAL CONTRACTS
There are no contracts which are material to Fairfax, on a consolidated basis.
INTERESTS OF EXPERTS
Our independent registered public accounting firm is PricewaterhouseCoopers LLP, Chartered Professional Accountants, Licensed Public Accountants who has issued an independent auditor's report dated March 9, 2018 in respect of Fairfax's consolidated financial statements as at December 31, 2017 and 2016 and for the two years ended December 31, 2017 and on the effectiveness of Fairfax's internal control over financial reporting as at December 31, 2017. PricewaterhouseCoopers LLP has advised that they are independent with respect to Fairfax within the meaning of the Rules of Professional Conduct of the Chartered Professional Accountants of Ontario and the rules of the US Securities and Exchange Commission and the requirements of the Public Company Accounting Oversight Board Rule 3520,Auditor Independence.
AUDIT COMMITTEE
A copy of our Audit Committee Charter is attached as Schedule A. The members of our Audit Committee are Alan D. Horn (Chair), Anthony F. Griffiths, Robert J. Gunn, Timothy R. Price and Lauren C. Templeton. All of the members of our Audit Committee are independent and financially literate pursuant to the meanings of such terms in Multilateral Instrument 52-110 — Audit Committees. Additional information concerning our Audit Committee, including the education and experience of each Audit Committee member and the procedures that we have adopted for the engagement of non-audit services, can be found in our Management Proxy Circular dated March 9, 2018 under the heading "Audit Committee".
Accountant fees payable for the years ended December 31, 2017 and December 31, 2016 to our external auditor, PricewaterhouseCoopers LLP, and its affiliates by us and our subsidiaries were CDN$34.8 million and CDN$29.6 million, respectively. The fees payable to PricewaterhouseCoopers LLP in 2017 and 2016 are detailed below.
| | Year ended December 31, 2017 | Year ended December 31, 2016 | |||||
|---|---|---|---|---|---|---|---|
| | (CDN $ millions) | (CDN $ millions) | |||||
Audit fees | $ | 31.7 | $ | 25.9 | |||
Audit-related fees | 0.8 | 0.9 | |||||
Tax fees | 1.2 | 1.8 | |||||
All other fees | 1.1 | 1.0 | |||||
Total | $ | 34.8 | $ | 29.6 | |||
The nature of each category of fees is described below.
Audit Fees
Audit fees were paid for professional services rendered for the audits of our consolidated financial statements and the effectiveness of internal control over financial reporting of Fairfax and statutory and subsidiary audits, issuance of comfort letters, consents and assistance with review of documents filed with regulatory authorities.
Audit-Related Fees
Audit-related fees were paid for assurance and related services related to employee pension and benefit plan audits, accounting consultations, and assurance services that are not required by statute or regulation and special actuarial reviews.
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Tax Fees
Tax fees were paid for services related to tax compliance, tax advice and tax planning professional services. These services consisted primarily of tax compliance including the review of original and amended tax returns, assistance with questions regarding tax audits and tax planning and advisory services relating to common forms of domestic and international taxation (e.g., income tax, capital tax and Value Added Tax).
All Other Fees
Fees disclosed in the table above under the item "all other fees" were paid for services other than the audit fees, audit-related fees and tax fees described above. These services consisted primarily of consulting fees related to internal reorganizations, due diligence, assistance with respect to regulatory compliance matters and French translation of our continuous disclosure documents.
ADDITIONAL INFORMATION
Additional information about our company may be found on SEDAR at www.sedar.com.
Additional information, including directors' and officers' remuneration and indebtedness, principal holders of our securities and options to purchase securities is contained in our Management Proxy Circular dated March 9, 2018. Additional financial information is provided in our audited consolidated financial statements and management's discussion and analysis of financial conditions and results of operations for the year ended December 31, 2017 and in pages 2-3 and 4-27 of our 2017 Annual Report.
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Schedule A
FAIRFAX FINANCIAL HOLDINGS LIMITED
AUDIT COMMITTEE CHARTER
Approved by the Board of Directors on February 17, 2005, except
the Addition of Paragraph 21 of Section 4 was
Approved by the Board of Directors on May 30, 2014
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FAIRFAX FINANCIAL HOLDINGS LIMITED
AUDIT COMMITTEE CHARTER
1. Statement of Purpose
The Audit Committee of Fairfax Financial Holdings Limited has been established by the Board for the purposes of overseeing the accounting and financial reporting processes of Fairfax, including the audit of the financial statements of Fairfax.
The Committee is responsible for assisting with the Board's oversight of (1) the quality and integrity of Fairfax's financial statements and related disclosure, (2) Fairfax's compliance with legal and regulatory requirements, (3) the independent auditor's qualifications, performance and independence and (4) the integrity of the internal controls at Fairfax (including at its publicly traded subsidiaries).
2. Committee Membership
Members
The Committee will consist of as many members of the Board as the Board may determine but in any event, not less than three members. Members of the Committee will be appointed by the Board, taking into account any recommendation that may be made by the Governance and Nominating Committee. Any member of the Committee may be removed and replaced at any time by the Board, and will automatically cease to be a member if he or she ceases to meet the qualifications set out below. The Board will fill vacancies on the Committee by appointment from among qualified members of the Board, taking into account any recommendation that may be made by the Governance and Nominating Committee. If a vacancy exists, the remaining members of the Committee may exercise all of its powers so long as there is a quorum and subject to any legal requirements regarding the minimum number of members of the Committee.
Chair
The Board will designate one of the members of the Committee to be the Chair of the Committee, taking into account any recommendation that may be made by the Governance and Nominating Committee.
Qualifications
All of the members of the Committee must be independent and financially literate, as determined in accordance with the rules of applicable stock exchanges and securities regulatory authorities, with at least one of the members having financial expertise, as determined in accordance with those rules. Members must also have suitable experience and must be familiar with the financial reporting practices of public companies.
Ex Officio Members and Management Attendance
The Committee may invite, at its discretion, members of management to attend a meeting of the Committee. Any member of management will attend a Committee meeting if invited by the Committee. The Lead Director, if not already a member of the Committee, will be entitled to attend each meeting of the Committee as an observer.
3. Committee Operations
Frequency of Meetings
The Chair, in consultation with the other members of the Committee, will determine the schedule and frequency of meetings of the Committee, provided that the Committee will meet at least once per quarter.
Agenda and Reporting to the Board
The Chair will establish the agenda for meetings in consultation with the other members of the Committee, the Chairman of the Board and the Lead Director. To the maximum extent possible, the agenda and meeting
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materials will be circulated to the members in advance to ensure sufficient time for study prior to the meeting. The Committee will report to the Board at the next meeting of the Board following each Committee meeting.
Secretary
The Corporate Secretary of Fairfax will, subject to any contrary direction of the Committee, act as secretary of the Committee.
Minutes
The secretary of the Committee will keep regular minutes of Committee proceedings and will circulate them to all Committee members, the Chairman of the Board and the Lead Director (and to any other director that requests that they be sent to him or her) on a timely basis.
Quorum
A quorum at any meeting will be a simple majority.
Procedure
The procedure at meetings will be determined by the Committee.
Transaction of Business
The powers of the Committee may be exercised at a meeting where a quorum is present or by resolution in writing signed by all members of the Committee.
Absence of Chair
In the absence of the Chair, the Committee may appoint one of its other members to act as Chair of that meeting.
Exercise of Power Between Meetings
Between meetings, and subject to any applicable law, the Chair of the Committee, or any member of the Committee designated for this purpose, may, if required in the circumstance, exercise any power delegated by the Committee. The Chair or other designated member will promptly report to the other Committee members in any case in which this interim power is exercised.
4. Committee Duties and Responsibilities
The Committee is responsible for performing the duties set out below and any other duties that may be assigned to it by the Board and performing any other functions that may be necessary or appropriate for the performance of its duties.
Independent Auditor's Qualifications and Independence
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authority to pre-approve those permitted non-audit services provided that any such pre-approval must be presented to the Committee at its next meeting and that the Committee may not delegate pre-approval of any non-audit internal control related services. The Committee may also adopt specific policies and procedures relating to pre-approval of permitted non-audit services to satisfy the pre-approval requirement provided that the procedures are detailed as to the specific service, the Committee is informed of each non-audit service and the procedures do not include the delegation of the Committee's responsibilities to management or pre-approval of non-audit internal control related services. The Committee will review with the lead audit partner whether any of the audit team members receive any discretionary compensation from the audit firm with respect to non-audit services performed by the independent auditor.
Financial Statements and Financial Review
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Additional Oversight
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committees of the boards of directors of Fairfax's insurance subsidiaries under state laws and regulations applicable to such insurers in their states or provinces of domicile were such insurers not part of Fairfax, and if any such subsidiary or its designated audit committee notifies the Committee of such required performance, then regardless of the materiality of the subject matter involved at the consolidated Fairfax level, the Committee will perform such additional review and oversight responsibilities.
5. Access to Advisors
The Committee may, in its sole discretion, retain counsel, auditors or other advisors in connection with the execution of its duties and responsibilities and may determine the fees of any advisors so retained. Fairfax will provide the Committee with appropriate funding for payment of compensation to such counsel, auditors or other advisors and for ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.
6. The Committee Chair
In addition to the responsibilities of the Chair described above, the Chair has the primary responsibility for monitoring developments with respect to financial reporting in general, and reporting to the Committee on any significant developments.
7. Committee Evaluation
The performance of the Committee will be evaluated by the Governance and Nominating Committee as part of its annual evaluation of the Board committees.
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