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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.        )

 

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

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
Park Tower, 15^th 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, 15^th 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.

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              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.

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July 19, 2017

ITEMS OF BUSINESS:

➢

Approve and adopt the Swiss Merger Agreement and the merger of Allied World with and into Fairfax (Switzerland).



➢

Approve the 2017 compensation for executives as required under Swiss law.



➢

Approve the 2017 compensation for directors as required under Swiss law.

 

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              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:

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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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SWISS MERGER AGREEMENT

A-1

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PROSPECTUS

B-1

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

Offer to Exchange
Each Registered Share of

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.

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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:

•

Fairfax’s Annual Report on Form 40-F for the fiscal year ended December 31, 2016, filed on March 13, 2017;



•

Fairfax’s Reports on Form 6-K furnished on March 15, 2017, March 27, 2017 and April 28, 2017 (except Exhibit 99.1);



•

Allied World’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed on February 28, 2017 and as amended on April 27, 2017;



•

Allied World’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed on April 26, 2017; and



•

Allied World’s Current Reports on Form 8-K filed on January 19, 2017, February 1, 2017 (Acc. No: 0001104659-17-005513), March 3, 2017, March 10, 2017 and March 22, 2017.

        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, 15^th 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:

•

“CHF” and “Swiss Franc” each refer to the lawful currency of the Swiss Confederation;



•

“CAD$” and “Canadian dollar” each refer to the Canadian dollar; and



•

“$” and “US dollar” each refer to the US dollar.

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HELPFUL INFORMATION

Certain Defined Terms

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

•

“Acceptance Time” refers to the date on which FFH Switzerland first accepts tendered Allied World shares for exchange.



•

“Allied World” refers to Allied World Assurance Company Holdings, AG, a corporation limited by shares incorporated under the laws of Switzerland.



•

“Allied World shares” refers to the registered ordinary shares of Allied World, par value CHF 4.10.



•

“Articles Amendment” refers to the amendment of Allied World’s articles of association to permit a holder of 10 percent or more of the Allied World shares to register its Allied World shares on Allied World’s shareholder register with full voting rights for all shares held by such holder (or any of its affiliates or controlled persons as defined in Article 14 of Allied World’s articles of association).



•

“Board Modification” refers to the election by Allied World shareholders of the individuals designated by Fairfax to the board of directors of Allied World in accordance with the terms of the Merger Agreement.



•

“business day” means any day other than a Saturday, Sunday or other day on which the banking institutions in New York, Toronto or the canton of Zug, Switzerland are obligated by law or executive order to be closed.



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“Canada Sub” refers to 1102952 B.C. Unlimited Liability Company, an unlimited liability company incorporated under the laws of the province of British Columbia, Canada, and a directly wholly owned subsidiary of Fairfax.



•

“Cash Consideration” refers to the $23.00 in cash, without interest, being offered for each Allied World share.



•

“Cash Election” refers to Fairfax’s option to increase on a dollar-for-dollar basis the amount of Cash Consideration from $5.00 to an amount not to exceed $35.00, which will correspondingly serve to reduce the Fixed Value Stock Consideration. On March 10, 2017, Fairfax exercised the Cash Election and increased the Cash Consideration to $23.00.



•

“Expiration Time” refers to the time the Offer will expire, currently expected to be 11:59 p.m., New York City time, on June 30, 2017, unless extended.



•

“Fairfax” refers to Fairfax Financial Holdings Limited, a corporation incorporated under the laws of Canada.



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“Fairfax Group” refers to Fairfax together with its subsidiaries, which, for the avoidance of doubt, will include Allied World upon completion of the Offer.



•

“Fairfax shares” and “subordinate voting shares” refer to the fully paid and nonassessable subordinate voting shares of Fairfax.



•

“Fairfax (Switzerland)” refers to Fairfax (Switzerland) GmbH, a limited liability company incorporated under the laws of Switzerland and a direct wholly owned subsidiary of FFH Switzerland and an indirect wholly owned subsidiary of Fairfax.

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•

“FFH Switzerland” refers to Fairfax Financial Holdings (Switzerland) GmbH, a limited liability company incorporated under the laws of Switzerland and an indirect wholly owned subsidiary of Fairfax.



•

“Fixed Exchange Stock Consideration” means the portion of the stock consideration in Fairfax shares having a value of $14.00 based on the closing price of Fairfax shares as of December 16, 2016, payable at a fixed exchange ratio of 0.030392, being offered to shareholders of Allied World for each Allied World share held.



•

“Fixed Value Stock Consideration” means the portion of the stock consideration in Fairfax shares 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 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). 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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“IFRS” refers to International Financial Reporting Standards, as issued by the International Accounting Standards Board.



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“Merger” refers to the squeeze-out merger under Swiss law to be consummated by Fairfax, through Fairfax (Switzerland), following the completion of the Offer, pursuant to the Swiss Merger Agreement.



•

“Merger Agreement” refers to the Agreement and Plan of Merger by and between Fairfax and Allied World, dated December 18, 2016, as the same may be amended from time to time.



•

“Merger Consideration” refers to an amount in cash and Fairfax shares equal to the Offer Consideration.



•

“Minimum Tender Condition” refers to the condition to the completion of the Offer that there will have been validly tendered in accordance with the terms of the Offer (other than Allied World shares tendered by guaranteed delivery where actual delivery has not occurred), prior to the Expiration Time (as it may be extended pursuant to the terms of the Merger Agreement) and not withdrawn, a number of Allied World shares that, together with any Allied World shares then directly or indirectly owned by Fairfax, FFH Switzerland or Fairfax (Switzerland), represents at least 90 percent of all outstanding Allied World shares (excluding Allied World shares held by Allied World).



•

“Offer” refers to the exchange offer to acquire all of the outstanding Allied World shares pursuant to the Merger Agreement and on the terms and conditions set out in this prospectus.



•

“Offer Consideration” refers to, collectively: (i) the Cash Consideration; (ii) the Fixed Exchange Stock Consideration; and (iii) the Fixed Value Stock Consideration.



•

“Special Dividend” refers to a special cash dividend of $5.00 per share, without interest, to be paid by Allied World as soon as possible after the Acceptance Time to holders of Allied World shares as of immediately prior to the Acceptance Time, and which is being paid outside of the Offer but is conditioned upon completion of the Offer.

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•

“Swiss Merger Agreement” refers to the merger agreement to be entered into by Allied World, FFH Switzerland and Fairfax (Switzerland) giving effect (subject to registration with the competent commercial register) to and governing the Merger.



•

“Transactions” refers, collectively, to the Offer, the Merger and the Special Dividend.



•

“US GAAP” refers to those accounting principles generally accepted in the United States.

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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.

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.

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.

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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.

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.

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.

The obligations of the Co-Investors to fund the portion of the Cash Consideration described above are subject only to customary conditions, being satisfaction or waiver (to the extent permitted under the Merger Agreement) of the conditions to the Transaction, the absence of any governmental order or law restraining, prohibiting or making illegal such funding, the accuracy of certain representations and warranties and compliance with covenants of Fairfax, and delivery of customary closing documentation.

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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Fairfax reserves the right to waive, in whole or in part, subject to certain exceptions, any condition to the Offer. Fairfax may waive the Minimum Tender Condition down to 66²/3 percent of all outstanding Allied World shares (excluding Allied World shares held by Allied World) only if the other conditions to the Offer have been satisfied or (if permitted under the Merger Agreement) waived. 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). Fairfax will comply with Rule 14d-4(d)(2) under the Exchange Act in connection with material changes to the terms of the Offer.

The Offer is not subject to any financing condition.

See “The Offer—Conditions to the Offer” for additional information.

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:

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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.

Allied World’s board of directors has also unanimously (subject to its ability to effect a recommendation withdrawal in accordance with the terms of the Merger Agreement):

•

resolved to recommend that the shareholders of Allied World approve the Articles Amendment, the Board Modification (unless waived by Fairfax), the Special Dividend and the forgoing of the $0.26 quarterly dividend payable in the first quarter of 2017;



•

resolved to recommend that the shareholders of Allied World accept the Offer and tender their Allied World shares into the Offer; and



•

resolved to recommend that the shareholders of Allied World approve the Merger.

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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.

For a discussion of Allied World’s directors’ and executive officers’ interests in the Transactions that may differ from and be in addition to your interests as a shareholder, see the section “Interests of Allied World, FFH Switzerland and Fairfax and their Directors and Officers.”

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.

Treatment of Allied World Options at the Acceptance Time

At the Acceptance Time, each Allied World Option granted by Allied World under any Allied World share option or other equity-related award plan, agreement or program (collectively, the “Allied World Share Plans”) 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 sum obtained by adding the cash consideration in the Offer, the Special Dividend and an amount in cash equal to the product obtained by multiplying the number of Fairfax shares issuable as stock consideration in the Offer and the volume weighted average price per Fairfax share on the TSX for the 20 consecutive trading days immediately preceding the trading day before the Acceptance Time, converted into US dollars using the average Bank of Canada USD/CAD exchange rate over such 20-day period (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

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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.

Treatment of Allied World RSUs and Other Stock-Based Awards at the Acceptance Time

At the Acceptance Time, each Allied World restricted share and each Allied World RSU granted by Allied World under an Allied World Share Plan (each an “Allied World Restricted Award”) and each award of any kind granted, held, outstanding or payable under the Allied World Share Plans, other than Allied World Options and Allied World Restricted Awards (each an “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 Allied World Restricted Award and each Other Allied World Award subject to performance vesting conditions (each, a “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 shall 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 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.

Allied World Employee Stock Purchase Plan

Prior to the Acceptance Time, subsequent offering periods under Allied World’s employee stock purchase plan (“Allied World ESPP”) will be suspended and terminated following the Acceptance Time. Allied World shares purchased under the Allied World ESPP will be treated as Allied World shares 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 U.S. Internal Revenue Code of 1986, as amended (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 deducting and withholding was made.

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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.

If one or more conditions to the Offer set out in the Merger Agreement and described in this prospectus under “The Offer—Conditions to the Offer” is not satisfied or, to the extent permitted under the Merger Agreement, waived, FFH Switzerland will extend the period of time for which the Offer is open for successive periods of 10 business days each or such other number of business days as Fairfax and Allied World may agree in order to permit the satisfaction of the conditions to the Offer, until all the conditions set out in “The Offer—Conditions to the Offer” have been satisfied or waived, provided that 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 will extend the Offer for any period required by any rule, regulation, interpretation or position of the SEC or its staff or the NYSE applicable to the Offer or any period required by law.

In the event that the Offer is extended for any reason, the Offer will remain open for acceptance until the expiration of the relevant extension period. Any extension of the Offer period will be announced by Fairfax and/or FFH Switzerland by the issuance of 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.

During any extension, any Allied World shares validly tendered and not properly withdrawn will remain subject to purchase in the Offer, subject to the right of each Allied World shareholder to withdraw the Allied World shares that such holder has previously tendered. See “How do I withdraw previously tendered Allied World shares” below.

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.

Subject to the requirements of the U.S. tender offer rules (including U.S. tender offer rules that require that any material changes to an Offer be promptly disseminated to shareholders in a manner reasonably designed to inform them of such change) and without limiting the manner in which Fairfax and/or FFH Switzerland may choose to make any public announcement, it will have no obligation to communicate any public announcement other than as described above.

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.

In accordance with the U.S. tender offer rules, any extension of the Offer period will be announced by no later than 9:00 a.m. New York City time on the next U.S. business day after the previously scheduled Expiration Time. Fairfax and/or FFH Switzerland will announce the final results of the Offer, including whether all of the conditions to the Offer have been satisfied or waived and whether Fairfax will cause FFH Switzerland to accept the tendered Allied World shares for exchange, as promptly as practicable following the scheduled Expiration Time.

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.

If you tendered your Allied World shares by means of the book-entry confirmation facilities of DTC, you may withdraw your Allied World shares by instructing your financial intermediary, broker, dealer, commercial bank, trust company or other entity through which you hold your Allied World shares to cause the DTC participant through which your Allied World shares were tendered to deliver a notice of withdrawal to the exchange agent through the book-entry confirmation facilities of DTC before the Expiration Time or before FFH Switzerland accepts the Allied World shares for exchange.

See “The Offer—Withdrawal Rights” for more information about the procedures for withdrawing your previously tendered Allied World shares.

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.

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. 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.

Following the completion of the Offer, provided 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

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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 the Merger under Swiss law 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 the Merger Consideration.

Upon completion of the Merger, Allied World will cease to exist and all Allied World shares will be cancelled.

For a description of Fairfax’s plans and proposals for Allied World, the potential effects of the Offer and the associated risks, see “Plans and Proposals for Allied World” and “Risk Factors—Risks related to the Offer—The Offer may adversely affect the liquidity and value of non-tendered Allied World shares.”

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.

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

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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 their Allied World shares, and the liquidity and value of any Allied World shares that remain outstanding could be negatively affected.

Following the completion of the Offer, any remaining, non-tendering Allied World shareholder will be a minority shareholder of Allied World with a limited ability, if any, to influence the outcome on any matters that are or may be subject to shareholder approval, including the election of directors, the issuance of shares or other equity securities, the payment of dividends and the acquisition or disposition of substantial assets.

See “Plans and Proposals for Allied World” and “Risk Factors—Risks related to the Offer—The Offer may adversely affect the liquidity and value of non-tendered Allied World shares.”

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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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.

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.

Under no circumstances will Fairfax or FFH Switzerland pay, or otherwise agree to be responsible for the payment of, interest or other fees, expenses or other costs of holders Allied World shares if the Offer is not completed.

In addition, if the Offer is not completed, the Special Dividend will not be paid and the $0.26 dividend for the first quarter of 2017 will be reinstated.

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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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 passive foreign investment company (“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 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.

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:

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

Shareholders, Banks and Brokers
Call Toll Free:

(800) 248-7690

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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:

•

the extent of coverage under insurance policies;



•

whether or not particular claims are subject to an aggregate limit;



•

whether multiple policies issued to the same insured will be triggered by a particular claim;



•

the number of occurrences involved in particular claims; and



•

new theories of insured and insurer liability.

        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