AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Colonnade Insurance S.A. (Colonnade) (Luxembourg), a member of the Fairfax Financial Holdings Limited (Fairfax) [TSX: FFH] group of companies. The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Colonnade’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

Colonnade benefits from the explicit and implicit support provided by Fairfax. Examples of explicit support include the provision of investment support and occasional capital contributions. Fairfax’s commitment to Colonnade’s strong balance sheet assessment was evident in multiple capital contributions over its early operating history, though in recent years, capital generation has been through investment returns and profitable underwriting. Going forward, AM Best expects that Colonnade will continue to support its business needs through organic capital generation, as it implements growth plans and continues to invest in company infrastructure.

Colonnade’s premium volume grew over 20% year over year driven by continued growth of the core book of business, bolstered by rate improvement. There is an expectation that the growth in premiums will continue over the next couple of years.

Colonnade’s adequate operating performance has been driven by its very favorable loss performance, which is offset somewhat by a higher expense ratio. As Colonnade continues to mature, investments in underwriting efficiencies are expected to continue to contribute to greater profitability. Colonnade has generated an underwriting profit consistently in recent years.

The company’s neutral business profile reflects its concentration in Central and Eastern Europe, with the three largest countries – Poland, Hungary and the Czech Republic – representing approximately 75% of the premium written. Concentration risk is offset by the dispersion of the remaining 25% of its business in three other central European countries and Colonnade’s diverse product offering.

AM Best considers the company’s risk management capability to be in line with its risk profile, and it is supported by Colonnade’s focus on maintaining geographic and by-line diversified business, conservative reserving and per-risk reinsurance limits, supporting the assessment of appropriate. The company benefits from a comprehensive and well-documented ERM program and continues to grow more independent in its risk management functions, while continuing to benefit from the risk management expertise of its ultimate parent.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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Patrick Cyphers Financial Analyst +1 908 882 1719 patrick.cyphers@ambest.com Gregory Dickerson Director +1 908 882 1737 gregory.dickerson@ambest.com Christopher Sharkey Associate Director, Public Relations +1 908 882 2310 christopher.sharkey@ambest.com Al Slavin Senior Public Relations Specialist +1 908 882 2318 al.slavin@ambest.com

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