Morningstar DBRS Confirms Credit Ratings on Fairfax India at BBB, Stable Trends

DBRS Limited (Morningstar DBRS) confirmed Fairfax India Holdings Corporation's (Fairfax India or the Company) Issuer Rating at BBB. Morningstar DBRS also confirmed the Unsecured Senior Notes credit rating of the Company at BBB. All trends are Stable.

KEY CREDIT RATING CONSIDERATIONS
Fairfax India's credit ratings reflect Morningstar DBRS' expectation of support for the Company from its controlling shareholder, Fairfax Financial Holdings Limited (Fairfax). The level of parental support from Fairfax is deemed to be high, which is reflected in the significant economic ownership and effective influence through voting rights; the Fairfax name, which links Fairfax to Fairfax India; and the Company's reliance on other Fairfax subsidiaries for investment management and other services. Together, these characteristics provide significant motivation for Fairfax to support the Company, if needed. The two-notch differential between the credit ratings on Fairfax India and Fairfax considers that the Company is a noninsurance subsidiary based in Toronto, while its underlying assets are predominantly located and operated in India (rated BBB (low) with a Positive trend).

CREDIT RATING DRIVERS
Based on our expectation of support from the ultimate parent, the ratings of Fairfax India would be upgraded if there were an upgrade in the rating of Fairfax, provided the sovereign rating of India remains above investment grade.

Conversely, the rating of Fairfax India would be downgraded, if there were a downgrade of Fairfax, a reduction in the perceived support from Fairfax, or a downgrade of the sovereign rating of India to below investment grade.

CREDIT RATING RATIONALE
The credit ratings of Fairfax India reflect Morningstar DBRS' assessment of the expected support from the Company's controlling shareholder, Fairfax, which reported total assets of $96.6 billion on its balance sheet as at the nine months ended September 30, 2024. Fairfax India is a publicly traded investment holding company focused on investing in diverse sectors, including public and private businesses primarily operating in or dependent on India. Fairfax also holds a significant amount of cash and liquid investments (approximately $2 Billion as at 9M 2024) at the holding company level that may be used to assist its subsidiaries. Although there is no explicit support from the controlling shareholder, Morningstar DBRS' assessment considers the position of Fairfax India within Fairfax's overall group structure. Fairfax's aggregate control represented a 95.2% voting interest and a 43.3% equity interest in Fairfax India. The Company maintains an investment advisory agreement with Fairfax and Hamblin Watsa Investment Counsel Ltd., a wholly owned subsidiary of Fairfax. The agreement covers the provision of advice for all investment transactions and portfolio administration services. Fairbridge Capital Private Limited, a wholly owned India-based investment advisor of Fairfax, acts as a subadvisor to Fairfax India in the sourcing and assessment of investment opportunities.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS

Environmental (E) Factors
ESG Considerations had a relevant effect on the credit analysis.

The following Environmental factor had a relevant effect on the credit analysis:
Passed-through environmental credit considerations are relevant to the credit ratings or trends assigned to Fairfax India but did not affect the assigned credit ratings or trends. Passed-through environmental credit considerations are indirect in nature, primarily through Fairfax's property and casualty insurance business, which has some exposure to natural catastrophe losses.

Credit rating actions on Fairfax are likely to have an impact on this credit rating. ESG factors that have a significant or relevant effect on the credit analysis of Fairfax are discussed separately at, https://dbrs.morningstar.com/issuers/134.

There were no Social or Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024) https://dbrs.morningstar.com/research/437781.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is the Global Methodology for Rating Insurance Companies and Insurance Organizations (September 10, 2024) https://dbrs.morningstar.com/research/439195. In addition Morningstar DBRS uses the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024) https://dbrs.morningstar.com/research/437781 in its consideration of ESG factors.

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found on the issuer page at https://dbrs.morningstar.com.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' trends and credit ratings are under regular surveillance.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com.

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