Odyssey Re Holdings Corp. Annual Report 2020

FY2020 Annual Report · Odyssey Re Holdings Corp.

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Report of Independent Auditors

To the Board of Directors of Odyssey Group Holdings, Inc.:

We have audited the accompanying consolidated financial statements of Odyssey Group Holdings, Inc.
and its subsidiaries, which comprise the consolidated balance sheets as of December 31, 2020 and 2019,
and the related consolidated statements of operations, comprehensive income, shareholders equity and
cash flows for each of the three years in the period ended December 31, 2020.

Management's Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with accounting principles generally accepted in the United States of America;
this includes the design, implementation, and maintenance of internal control relevant to the preparation
and fair presentation of consolidated financial statements that are free from material misstatement,
whether due to fraud or error.

Auditors Responsibility

Our responsibility is to express an opinion on the consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the consolidated financial statements. The procedures selected depend on our judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to
fraud or error. In making those risk assessments, we consider internal control relevant to the Company's
preparation and fair presentation of the consolidated financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit
also includes evaluating the appropriateness of accounting policies used and the reasonableness of
significant accounting estimates made by management, as well as evaluating the overall presentation of
the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of Odyssey Group Holdings, Inc. and its subsidiaries as of December 31,
2020 and 2019, and the results of their operations and their cash flows for the three years in the period
ended December 31, 2020 in accordance with accounting principles generally accepted in the United
States of America.

PricewaterhouseCoopers LLP, 300 Madison Avenue, New York, NY 10017
T: (646) 471 3000, F: (646) 471 8320, www.pwc.com/us

Other Matters

Accounting principles generally accepted in the United States of America require that the information
about incurred and paid claims development that precedes the current reporting period and the historical
claims payout percentages included in Note 6 from page 38 to 44 be presented to supplement the basic
financial statements. Such information is the responsibility of management and, although not a part of the
basic financial statements, is required by the Financial Accounting Board (FASB) who considers it to be
an essential part of financial reporting for placing the basic financial statements in an appropriate
operational, economic, or historical context. We have applied certain limited procedures to the required
supplementary information in accordance with auditing standards generally accepted in the United States
of America, which consisted of inquiries of management about the methods of preparing the information
and comparing the information for consistency with management's responses to our inquiries, the basic
financial statements, and other knowledge we obtained during our audit of the basic financial statements.
We do not express an opinion or provide any assurance on the information because the limited
procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

New York, New York
March 1, 2021

ODYSSEY GROUP HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

December 31,

2020

2019

(In thousands, except share and per
share amounts)

Investments and cash:

ASSETS

Fixed income securities, available for sale, at fair value (amortized cost $15,748

and $15,902, respectively)....................................................................................... $

15,941

16,503

Fixed income securities, held for trading, at fair value (amortized cost $3,170,518
and $3,329,206, respectively)..................................................................................

Preferred stocks, held for trading, at fair value (cost $16,396 and $16,273,

3,415,732

3,362,775

respectively) ............................................................................................................

18,798

17,082

Equity securities:

Common stocks, at fair value (cost $889,757 and $1,729,805, respectively) ......
Common stocks, at equity....................................................................................
Short-term investments, held for trading, at fair value (amortized cost $2,334,190
and $1,912,842, respectively)..................................................................................
Cash and cash equivalents .........................................................................................
Cash and cash equivalents held as collateral .............................................................
Other invested assets .................................................................................................
Total investments and cash..................................................................................
Accrued investment income.............................................................................................
Premiums receivable ........................................................................................................
Reinsurance recoverable on paid losses ..........................................................................
Reinsurance recoverable on unpaid losses ......................................................................
Prepaid reinsurance premiums ........................................................................................
Funds held by reinsureds .................................................................................................
Deferred acquisition costs................................................................................................
Federal and foreign income taxes receivable...................................................................
Other assets......................................................................................................................

Total assets........................................................................................................... $

LIABILITIES

Unpaid losses and loss adjustment expenses .................................................................. $
Unearned premiums ........................................................................................................
Reinsurance balances payable .........................................................................................
Funds held under reinsurance contracts..........................................................................
Debt obligations ...............................................................................................................
Other liabilities .................................................................................................................
Total liabilities ......................................................................................................

Commitments and Contingencies (Note 11)

740,088
1,472,718

2,334,201
919,712
155,496
1,779,237
10,851,923
41,452
1,468,667
166,661
1,047,812
282,708
207,262
299,661
228,710
258,213
14,853,069

6,844,631
1,681,350
396,419
135,761
89,984
930,835
10,078,980

1,649,983
580,280

1,913,820
866,712
21,910
1,465,675
9,894,740
40,186
1,286,325
85,256
894,255
158,857
188,738
260,222
213,467
219,528
13,241,574

6,080,670
1,338,051
248,757
91,475
89,942
802,779
8,651,674

SHAREHOLDERS' EQUITY
Non-controlling interest - preferred shares of subsidiaries .............................................
Common shares, $10.00 par value; 60,000 shares authorized; 51,752 and 51,752

shares issued and outstanding, respectively .................................................................
Additional paid-in capital .................................................................................................
Accumulated other comprehensive loss, net of deferred income taxes..........................
Retained earnings.............................................................................................................
Total shareholders’ equity ...................................................................................
Total liabilities and shareholders’ equity ............................................................. $

29,299

518
1,936,893
(129,497)
2,936,876
4,774,089
14,853,069

518
1,962,263
(80,560)
2,678,380
4,589,900
13,241,574

See accompanying notes to consolidated financial statements.

ODYSSEY GROUP HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31,
2019

2018

2020

REVENUES
Gross premiums written ................................................................... $ 4,446,677
657,126
Ceded premiums written ..................................................................
3,789,551
Net premiums written .................................................................
(202,911)
Increase in net unearned premiums.................................................
3,586,640
Net premiums earned .................................................................
Net investment income ....................................................................
168,393
Net realized investment gains (losses):

(In thousands)

$ 3,815,959
422,190
3,393,769
(214,616)
3,179,153
245,773

$ 3,328,628
430,808
2,897,820
(142,391)
2,755,429
209,226

Realized investment gains (losses) ..............................................
Other-than-temporary impairment losses ..................................
Total net realized investment (losses) gains ..........................
Total revenues .............................................................................

26,639
(34,480)
(7,841)
3,747,192

211,327
—
211,327
3,636,253

(117,106)
(299)
(117,405)
2,847,250

EXPENSES
Losses and loss adjustment expenses...............................................
Acquisition costs ...............................................................................
Other underwriting expenses ...........................................................
Other expenses, net..........................................................................
Interest expense ...............................................................................
Total expenses.............................................................................
Income before income tax ................................................................

2,424,562
693,498
318,983
7,196
6,410
3,450,649
296,543

2,154,031
629,859
305,396
6,013
7,814
3,103,113
533,140

1,715,745
588,740
275,868
15,811
4,132
2,600,296
246,954

Federal and foreign income tax (benefit) provision:

Current ........................................................................................
Deferred ......................................................................................
Total federal and foreign income tax provision .....................

Net income........................................................................................ $

(20,502)
56,938
36,436
260,107

106,812
20,937
127,749
405,391

51,071
(27,892)
23,179
223,775

See accompanying notes to consolidated financial statements.

ODYSSEY GROUP HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years Ended December 31,
2019

2018

2020

(In thousands)

Net income........................................................................................ $

260,107

405,391

223,775

OTHER COMPREHENSIVE (LOSS) INCOME, BEFORE TAX
Unrealized net (depreciation) appreciation on securities arising

during the year ..............................................................................

(66,407)

55,502

(64,946)

Reclassification adjustment for net realized investment losses

(gains) included in net income .......................................................
Foreign currency translation adjustments ........................................
Change in benefit plan liabilities.......................................................
Other comprehensive loss, before tax ........................................

17,566
(14,898)
1,810
(61,929)

(71,544)
40,447
(40,433)
(16,028)

(17,956)
(62,689)
11,411
(134,180)

TAX BENEFIT (PROVISION)
Unrealized net depreciation (appreciation) on securities arising

during the year ..............................................................................

13,933

(11,729)

13,690

Reclassification adjustment for net realized investment (losses)

gains included in net income.........................................................
Foreign currency translation adjustments ........................................
Change in benefit plan liabilities.......................................................
Total tax benefit ..........................................................................
Other comprehensive loss, net of tax ....................................

Comprehensive income .................................................... $

(3,689)
3,128
(380)
12,992
(48,937)
211,170

15,024
(8,494)
8,491
3,292
(12,736)
392,655

3,771
13,164
(2,396)
28,229
(105,951)
117,824

See accompanying notes to consolidated financial statements.

ODYSSEY GROUP HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY

NON-CONTROLLING INTEREST - PREFERRED SHARES OF

SUBSIDIARIES

Balance, beginning and end of year.................................................. $
COMMON SHARES (par value)
Balance, beginning of year................................................................
Common shares capital contributions...........................................
Balance, beginning and end of year..................................................
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of year................................................................
Common shares capital contributions...........................................
Net change due to stock option exercises and

restricted share awards ............................................................
Balance, end of year .........................................................................
ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

NET OF DEFERRED INCOME TAXES

Balance, beginning of year................................................................
Unrealized - cumulative effect of adoption of

accounting changes........................................................................
Adjusted beginning balance..............................................................
Unrealized depreciation on securities, net of reclassification

adjustments .............................................................................
Foreign currency translation adjustments ...................................
Change in benefit plan liabilities ..................................................
Balance, end of year .........................................................................
RETAINED EARNINGS
Balance, beginning of year................................................................
Retained earnings - cumulative effect of adoption of

accounting changes........................................................................
Adjusted beginning balance..............................................................
Net income ...................................................................................
Dividends to preferred shareholder and non-controlling

Years Ended December 31,
2019

2018

2020

(In thousands, except common share amounts)

29,299

518
—
518

492
26
518

492
—
492

1,962,263
—

1,725,992
225,480

1,738,968
—

(25,370)
1,936,893

10,791
1,962,263

(12,976)
1,725,992

(80,560)

(68,729)

37,222

—
(80,560)

(38,597)
(11,770)
1,430
(129,497)

905
(67,824)

(12,747)
31,953
(31,942)
(80,560)

—
37,222

(65,441)
(49,525)
9,015
(68,729)

2,678,380

2,328,716

2,206,552

—
2,678,380
260,107

(4,116)
2,324,600
405,391

—
2,206,552
223,775

interest......................................................................................
Dividends to common shareholder ..............................................
Balance, end of year .........................................................................

(1,611)
—
2,936,876
TOTAL SHAREHOLDERS' EQUITY ......................................... $ 4,774,089

(1,611)
(50,000)
2,678,380
$ 4,589,900

(1,611)
(100,000)
2,328,716
$ 4,015,770

COMMON SHARES OUTSTANDING
Balance, beginning of year................................................................
Shares issued ................................................................................
Balance, end of year .........................................................................

51,752
—
51,752

49,170
2,582
51,752

49,170
—
49,170

See accompanying notes to consolidated financial statements.

ODYSSEY GROUP HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

CASH FLOWS FROM OPERATING ACTIVITIES
Net income ............................................................................................................................. $
Adjustments to reconcile net income to net cash provided by operating activities:

Increase in premiums receivable and funds held, net of reinsurance .............................
Increase in unearned premiums and prepaid reinsurance premiums, net .....................
Increase in unpaid losses and loss adjustment expenses, net of reinsurance.................
(Increase) decrease in current and deferred federal and foreign income taxes, net ......
Increase in deferred acquisition costs .............................................................................
Change in other assets and other liabilities, net..............................................................
Net realized investment losses (gains) ............................................................................
Bond discount amortization, net .....................................................................................
Amortization of compensation plans...............................................................................
Net cash provided by operating activities.................................................................

CASH FLOWS FROM INVESTING ACTIVITIES
Maturities of fixed income securities, available for sale ........................................................
Sales of fixed income securities, available for sale.................................................................
Purchases of fixed income securities, available for sale.........................................................
Sales of equity securities, available for sale ...........................................................................
Purchases of equity securities, available for sale ...................................................................
Net settlements of other invested assets...............................................................................
Purchases of other invested assets ........................................................................................
Sales of trading securities.......................................................................................................
Purchases of trading securities...............................................................................................
Net purchases of fixed assets .................................................................................................
Net cash used in investing activities .........................................................................

Years Ended December 31,
2019

2018

2020

(In thousands)

260,107

405,391

223,775

(64,545)
201,449
478,761
(1,455)
(39,211)
107,438
7,841
(8,810)
16,939
958,514

100

39,138
(76,608)
71,821
(392,292)
6,419,324
(6,815,806)
(15,600)
(769,923)

(165,974)
219,148
375,281
23,947
(29,909)
18,346
(211,327)
(15,442)
17,023
636,484

22,782
4,125

57,025
(5,030)
525,991
(654,997)
4,392,909
(4,835,657)
(12,785)
(505,637)

(302,471)
139,269
292,180
(60,301)
(28,766)
129,620
117,405
(27,041)
17,234
500,904

530,941
43,750
(13,983)
5,771
(29,584)
244,245
(486,805)
5,063,733
(6,854,273)
(15,323)
(1,511,528)

CASH FLOWS FROM FINANCING ACTIVITIES
Purchases of restricted shares................................................................................................
Dividends paid to preferred shareholder ...............................................................................
Dividends paid to common shareholder ................................................................................
Net cash used in financing activities .........................................................................

(41,955)
(1,611)

(43,566)

(6,950)
(1,611)
(45,424)
(53,985)

(29,492)
(1,611)
(50,001)
(81,104)

Effect of exchange rate changes on cash and cash equivalents .............................................

41,561

(2,640)

(34,431)

Increase (decrease) in cash and cash equivalents ..................................................................
Cash and cash equivalents, beginning of year........................................................................

Cash and cash equivalents, end of year........................................................................... $

186,586
888,622
1,075,208

Supplemental disclosures of cash flow information:

Interest paid..................................................................................................................... $
Income taxes paid............................................................................................................ $

2,857
37,588

74,222
814,400
888,622

4,381
104,271

$
$

Non-cash activity:

Dividends paid to common shareholder.......................................................................... $
Receipt of securities for issuance of common shares...................................................... $

$
$

4,576
225,506

(1,126,159)
1,940,559
814,400

4,068
83,367

49,999

$
$

See accompanying notes to consolidated financial statements.

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization

Odyssey Group Holdings, Inc., a Delaware corporation (together with its subsidiaries, the Company, or
OGHI on a stand-alone basis), is an underwriter of reinsurance, providing a full range of property and casualty
products on a worldwide basis, and of specialty insurance, primarily in the United States and through the Lloyds of
London (Lloyds) marketplace. OGHI owns all of the common shares of Odyssey Reinsurance Company (ORC),
its principal operating subsidiary, which is domiciled in the state of Connecticut. ORC directly or indirectly owns all
of the common shares of the following subsidiaries:

•

Hudson Insurance Company (Hudson) and its subsidiaries:

•

Hilltop Specialty Insurance Company (Hilltop), formerly known as Hudson Specialty Insurance
Company;

Hudson Excess Insurance Company (Hudson Excess);

Greystone Insurance Company (Greystone);

Newline Holdings U.K. Limited and its subsidiaries (collectively, Newline):

•

Newline Underwriting Management Limited, which manages Newline Syndicate (1218), a member of
Lloyds;

Newline Insurance Company Limited (NICL);

•

Newline Europe Holdings GmbH

•

Newline Europe Versicherung AG (NV); and

Newline Corporate Name Limited (NCNL), which provides capital for and receives distributed
earnings from Newline Syndicate (1218);

Odyssey Re Europe Holdings S.A.S. (OREH):

•

Odyssey Re Europe S.A. (ORESA).

Fairfax Financial Holdings Limited (Fairfax), a publicly traded financial services holding company based in
Canada, ultimately owns 100% of the common shares of OGHI and 100% of the non-controlling interest - preferred
shares of OGHIs subsidiaries. OGHIs direct 100% owner is Odyssey US Holdings Inc. (OUSHI), all of the common
shares of which are ultimately owned by Fairfax.

Dividends and returns of capital from the Company are expected to be the source of funds for servicing

OUSHIs debt obligations owed to various Fairfax entities.

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies

(a) Basis of Presentation. The accompanying consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of America (GAAP). The
consolidated financial statements include the accounts of the Company and its subsidiaries.
Intercompany
transactions have been eliminated.

The preparation of consolidated financial statements in conformity with GAAP requires the Company to
make estimates and assumptions that could differ materially from actual results affecting the reported amounts of
assets, liabilities, revenues and expenses and disclosures of contingent assets and liabilities. The Company
considers its accounting policies that are most dependent on the application of estimates and assumptions as
critical accounting estimates, which are defined as estimates that are both: i) important to the portrayal of the
Companys financial condition and results of operations and ii) require the Company to exercise significant
judgment. These estimates, by necessity, are based on assumptions about numerous factors.

The Company reviews its critical accounting estimates and assumptions on a quarterly basis, including: the
valuation of the reserves for unpaid losses and loss adjustment expenses; analysis of the recoverability of deferred
income tax assets; and valuation of the investment portfolio, including a review for other-than-temporary declines
in estimated fair value and the pricing of level 3 securities.

(b) Investments. The majority of the Companys investments in fixed income securities and common stocks
are categorized as held for trading and are recorded at their estimated fair value based on quoted market prices
(see Note 3). Most investments in common stocks of affiliates are carried at the Companys proportionate share of
the equity of those affiliates. Short-term investments, which are classified as held for trading and which have a
maturity of one year or less from the date of purchase, are carried at fair value. The Company considers all highly
liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Cash
equivalents include certificates of deposits totaling $10.8 million and $10.6 million as of December 31, 2020 and
2019, respectively. Investments in limited partnerships, investment funds, mortgage loans, affiliate loans and real
estate have been reported in other invested assets. Other invested assets also include accounts relating to the
Companys unqualified benefit plans and derivative securities, all of which are carried at fair value. The Company
routinely evaluates the carrying value of its investments in common stocks of affiliates and in partnerships and
investment funds. In the case of limited partnerships and investment funds, the carrying value is generally
established on the basis of the net valuation criteria as determined by the managers of the investments. Such
valuations could differ significantly from the values that would have been available had markets existed for the
securities. Investment transactions are recorded on their trade date, with balances pending settlement reflected in
the consolidated balance sheets as a component of other assets or other liabilities.

Investment income, which is reported net of applicable investment expenses, is recorded as earned. Realized
investment gains or losses are determined on the basis of average cost. The Company records, in investment
income, its proportionate share of income or loss, including realized gains or losses, for those securities for which
the equity method of accounting is utilized, which include most common stocks of affiliates, limited partnerships
and investment funds. Due to the timing of when financial information is reported by equity investees and
received by the Company, results attributable to these investments are generally reported by the Company on a
one month or one quarter lag. Unrealized appreciation and depreciation related to trading securities is recorded as
realized investment gains or losses in the consolidated statements of operations.

The net amount of unrealized appreciation or depreciation on the Companys available for sale investments,
net of applicable deferred income taxes, is reflected in shareholders equity in accumulated other comprehensive
income. A decline in the fair value of an available for sale investment below its cost or amortized cost that is
deemed other-than-temporary is recorded as a realized investment loss in the consolidated statements of
operations, resulting in a new cost or amortized cost basis for the investment. Other-than-temporary declines in
the carrying values of investments recorded in accordance with the equity method of accounting are recorded in
net investment income in the consolidated statements of operations.

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(c) Revenue Recognition. Reinsurance assumed premiums written and related costs are based upon reports
received from ceding companies. When reinsurance assumed premiums written have not been reported by the
ceding company they are estimated, at the individual contract level, based on historical patterns and experience
from the ceding company and judgment of the Company. Subsequent adjustments to premiums written, based on
actual results or revised estimates from the ceding company, are recorded in the period in which they become
known. Reinsurance assumed premiums written related to proportional treaty business are established on a basis
that is consistent with the coverage periods under the terms of the underlying insurance contracts. Reinsurance
assumed premiums written related to excess of loss and facultative reinsurance business are recorded over the
coverage term of the contracts, which is generally one year. Unearned premium reserves are established for the
portion of reinsurance assumed premiums written that are to be recognized over the remaining contract period.
Unearned premium reserves related to proportional treaty contracts are computed based on reports received
from ceding companies, which show premiums written but not yet earned. Premium adjustments made over the
life of the contract are recognized as earned premiums based on the applicable contract period. Insurance
premiums written are based upon the effective date of the underlying policy and are generally earned on a pro
rata basis over the policy period, which is usually one year. A reserve for uncollectible premiums is established
when deemed necessary. The Company has established a reserve for potentially uncollectible premium receivable
balances of $11.0 million and $10.9 million as of December 31, 2020 and 2019, respectively, which has been netted
against premiums receivable.

The cost of reinsurance purchased by the Company (reinsurance premiums ceded) is reported as prepaid
reinsurance premiums and amortized over the contract period in proportion to the amount of reinsurance
protection provided. The ultimate amount of premiums, including adjustments, is recognized as premiums ceded,
and amortized over the applicable contract period. Premiums earned are reported net of reinsurance ceded
premiums earned in the consolidated statements of operations. Amounts paid by the Company for retroactive
reinsurance that meet the conditions for reinsurance accounting are reported as reinsurance receivables to the
extent those amounts do not exceed the associated liabilities.
If the liabilities exceed the amounts paid,
reinsurance receivables are increased to reflect the difference, and the resulting gain is deferred and amortized
over the estimated settlement period. If the amounts paid for retroactive reinsurance exceed the liabilities, the
related liabilities are increased or the reinsurance receivable is reduced, or both, at the time the reinsurance
contract is effective, and the excess is charged to net income. Changes in the estimated amount of liabilities
relating to the underlying reinsured contracts are recognized in net income in the period of the changes. Assumed
and ceded reinstatement premiums represent additional premiums related to reinsurance coverages, principally
catastrophe excess of loss contracts, which are paid when the incurred loss limits have been utilized under the
reinsurance contract and such limits are reinstated. Premiums written and earned premiums related to a loss
event are estimated and accrued as earned. The accrual is adjusted based upon any change to the ultimate losses
incurred under the contract.

Leasing revenue is generally recognized ratably over the term of the leases. All of the Companys leasing
revenue are generated from operating leases. Assets held for leases consist of land and buildings with estimated
useful lives of 30 to 39 years and are valued at $291.9 million.

(d) Deferred Acquisition Costs. Acquisition costs, which are reported net of costs recovered under ceded
contracts, consist of commissions and brokerage expenses incurred on insurance and reinsurance business written,
and premium taxes on direct insurance written, and are deferred and amortized over the period in which the
related premiums are earned. Commission adjustments are accrued based on changes in premiums and losses
recorded by the Company in the period in which they become known. Deferred acquisition costs are limited to
their estimated realizable value based on the related unearned premium, which considers anticipated losses and
loss adjustment expenses and estimated remaining costs of servicing the business, all based on historical
experience. The realizable value of the Companys deferred acquisition costs is determined without consideration
of investment income.

Included in acquisition costs in the consolidated statements of operations are amortized deferred acquisition
costs of $675.5 million, $613.6 million and $569.8 million for the years ended December 31, 2020, 2019 and 2018,
respectively.

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(e) Goodwill and Intangible Assets. The Company accounts for goodwill and intangible assets as permitted or
required by GAAP. A purchase price paid that is in excess of net assets arising from a business combination is
recorded as an asset (goodwill) and is not amortized. Intangible assets with finite lives are amortized over the
estimated useful life of the asset. Intangible assets with indefinite useful lives are not amortized. Goodwill and
intangible assets are analyzed for impairment on a quarterly basis to determine if the carrying amount may not be
recoverable. If the goodwill or intangible asset is impaired, it is written down to its realizable value with a
corresponding expense reflected in the consolidated statements of operations. For the years ended December 31,
2020, 2019 and 2018 the Company did not impair any goodwill or intangible assets.

The following table reflects the carrying amount of goodwill, intangible assets with indefinite lives and

intangible assets with finite lives as of December 31, 2020 and 2019 (in thousands):

Goodwill

Indefinite Lives

Finite Lives

Intangible Assets

Balance, January 1, 2019 ..................................................... $
Acquired during 2019.....................................................
Amortization during 2019 ..............................................
Balance, December 31, 2019...............................................
Amortization during 2020 ..............................................
Balance, December 31, 2020............................................... $

52,268 $
—
—
52,268
—
52,268 $

5,813 $

—
—
5,813
—
5,813 $

11,555 $
12,768
(4,453)
19,870
(4,818)
15,052 $

Total
69,636
12,768
(4,453)
77,951
(4,818)
73,133

The Company amortized $2.6 million during the year ended December 31, 2018 related to its intangible

assets with finite lives.

The following table provides the estimated amortization expense related to intangible assets for the

succeeding years (in thousands):

Amortization of intangible assets ..................... $ 4,818 $ 4,421 $ 3,062 $ 1,867 $

850 $

Years Ended December 31,

2021

2022

2023

2024

2025

2026 and
thereafter
5

f) Unpaid losses and loss adjustment expenses. Unpaid loss and loss adjustment expenses represent reserves
for the estimated amounts that the Company is obligated to pay for reported and unreported claims and related
loss adjustment expenses incurred under its contracts of insurance and reinsurance. The estimates are based on
assumptions related to the ultimate cost to settle such claims. The inherent uncertainties of estimating reserves
are greater for reinsurance contracts than for direct insurance policies due to the diversity of development
patterns among different types of reinsurance contracts and the necessary reliance on ceding companies for
information regarding reported claims. As a result, there can be no assurance that the ultimate liability will not
exceed amounts reserved, with a resulting adverse effect on the Company.

The reserves for unpaid losses and loss adjustment expenses are based on the Companys evaluations of
reported claims and individual case estimates received from ceding companies for reinsurance business or the
estimates advised by the Companys claims adjusters for insurance business. The Company utilizes generally
accepted actuarial methodologies to determine reserves for losses and loss adjustment expenses on the basis of
historical experience and other estimates. The reserves are reviewed continually during the year and changes in
estimates for losses and loss adjustment expenses are reflected as expenses in the consolidated statements of
operations in the period that the changes are made. Reinsurance recoverables on unpaid losses and loss
adjustment expenses are reported as assets. A reserve for uncollectible reinsurance recoverables is established
based on an evaluation of each reinsurer or retrocessionaire and historical experience. The Company uses tabular
reserving for workers compensation indemnity loss reserves, which are considered to be fixed and determinable,
and discounts such reserves using an interest rate of 3.5% and the Life Table for Total Population: United States,
2009.

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(g) Deposit Assets and Liabilities. The Company may enter into assumed and ceded reinsurance contracts
that contain certain loss limiting provisions and, as a result, do not meet the risk transfer provisions of GAAP.
These contracts are deemed as either transferring only significant timing risk or only significant underwriting risk or
transferring neither significant timing nor underwriting risk and are accounted for using the deposit accounting
method, under which revenues and expenses from reinsurance contracts are not recognized as written premium
and incurred losses. Instead, the profits or losses from these contracts are recognized net, as other income or
other expense, over the contract or contractual settlement periods.

For such contracts, the Company initially records the amount of consideration paid as a deposit asset or
received as a deposit liability. Revenue or expense is recognized over the term of the contract, with any deferred
amount recorded as a component of assets or liabilities until such time it is earned. The ultimate asset or liability
under these contracts is estimated, and the asset or liability initially established, which represents the
consideration transferred, is increased or decreased over the term of the contract. The change during the period is
recorded in the Companys consolidated statements of operations, with increases and decreases in the ultimate
asset or liability shown in other expense, net. As of December 31, 2020 and 2019, the Company had reflected $1.6
million and $3.1 million in other assets and $0.2 million and $0.3 million in other liabilities, respectively, related to
deposit contracts. In cases where cedants retain the consideration on a funds held basis, the Company records
those assets in other assets, and records the related investment income on the assets in the Companys
consolidated statements of operations as investment income.

(h) Income Taxes.

The Company records deferred income taxes to provide for the net tax effect of
temporary differences between the carrying values of assets and liabilities in the Companys consolidated financial
statements and their tax bases. Such differences relate principally to deferred acquisition costs, unearned
premiums, unpaid losses and loss adjustment expenses, investments and tax credits. Deferred tax assets are
reduced by a valuation allowance when the Company believes it is more likely than not that all or a portion of
deferred taxes will not be realized. The Company assessed the realization of its foreign tax credit carryovers
(FTC) and determined that it is more likely than not that all FTC carryovers related to foreign branch income will
not be utilized prior to their expiration. As a result, a valuation allowance of $28.1 million was recorded against the
FTC deferred tax asset as of December 31, 2020. The Company has elected to recognize accrued interest and
penalties associated with uncertain tax positions as part of the income tax provision.

(i) Derivatives. The Company utilizes derivative instruments to manage against potential adverse changes in
the value of its assets and liabilities. Derivatives include total return swaps, interest rate swaps, forward currency
contracts, U.S. Treasury bond forward contracts, CPI-linked derivative contracts, credit default swaps, call options,
put options, warrants and other equity and credit derivatives. In addition, the Company holds options on certain
securities within its fixed income portfolio that allow the Company to extend the maturity date on fixed income
securities or convert fixed income securities to equity securities. The Company categorizes these investments as
trading securities, and changes in fair value are recorded as realized investment gains or losses in the consolidated
statements of operations. All derivative instruments are recognized as either assets or liabilities on the
consolidated balance sheets and are measured at their fair value. Gains or losses from changes in the derivative
values are reported based on how the derivative is used and whether it qualifies for hedge accounting. For
derivative instruments that do not qualify for hedge accounting, changes in fair value are included in realized
investment gains and losses in the consolidated statements of operations. Margin balances required by
counterparties in support of derivative positions are included in fixed income securities and short-term
investments.

(j) Foreign Currency. Foreign currency transaction gains or losses resulting from a change in exchange rates
between the currency in which a transaction is denominated, or the original currency, and the functional currency
are reflected in the consolidated statements of operations in the period in which they occur. The Company
translates the financial statements of its foreign subsidiaries and branches that have functional currencies other
than the U.S. dollar into U.S. dollars by translating balance sheet accounts at the balance sheet date exchange rate
and income statement accounts at the rate at which the transaction occurs or the average exchange rate for each
quarter. Translation gains or losses are recorded, net of deferred income taxes, as a component of accumulated
other comprehensive income.

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents the foreign exchange effects, net of the effects of foreign currency forward
contracts purchased as an economic hedge against foreign exchange rate volatility and of tax, on specific line items
in the Companys financial statements for the years ended December 31, 2020, 2019 and 2018 (in thousands):

2020

2019

2018

Statements of operations:
Realized investment (losses) gains:

Foreign currency forward contracts (losses) gains ...................... $
Other investment gains (losses) ..................................................
Non-Investment realized gains....................................................
Total realized investment gains (losses) ................................
Net investment income (loss)......................................................)
Other income, net .......................................................................
Income (loss) before income tax............................................
Total federal and foreign income tax provision (benefit)............
Net income (loss) ...................................................................

(17,553) $
10,931
14,942
8,320
375
—
8,695
1,827
6,868

(26,919) $
(38,289)
16,742
(48,466)
(378)
—
(48,844)
(10,257)
(38,587)

58,841
(24,139)
—
34,702
(4,214)
1,575
32,063
6,734
25,329

Other comprehensive (loss) income:

Other comprehensive (loss) income before income tax .............
Federal and foreign income tax (benefit) provision before

(14,898)

40,447

(62,689)

income tax ................................................................................
Other comprehensive (loss) income, net of tax................................

(3,128)
(11,770)

8,494
31,953

(13,164)
(49,525)

Total effects on comprehensive loss and

shareholders' equity............................................................ $

(4,902) $

(6,634) $

(24,196)

(k) Stock-Based Compensation Plans. The Company reflects awards of restricted common stock of Fairfax to
employees as a reduction to additional paid-in-capital when the shares are purchased. The award value is
amortized through compensation expense over the related vesting periods.

(l) Claims Payments. Payments of claims by the Company, as reinsurer, to a broker on behalf of a reinsured
company are recorded in the Companys financial statements as paid losses at the time the cash is disbursed and are
treated as paid to the reinsured. Premiums due to the Company from the reinsured are recorded as receivables from
the reinsured until the cash is received by the Company, either directly from the reinsured or from the broker.

(m) Funds Held Balances. Funds held under reinsurance contracts represents amounts due to reinsurers
arising from the Companys receipt of a deposit from a reinsurer, or the withholding of a portion of the premiums
due, in accordance with contractual terms, as a guarantee that the reinsurer will meet its loss and other obligations.
Interest generally accrues on withheld funds in accordance with contract terms. Funds held by reinsured represents
amount due from a ceding company that withholds, in accordance with the contractual terms, a portion of the
premium due the Company as a guarantee that the Company will meet its loss and other obligations.

(n) Fixed Assets. Fixed assets, with a net book value of $106.3 million and $95.9 million as of December 31,
2020 and 2019, respectively, are recorded at amortized cost and are included in other assets. Depreciation and
amortization are generally computed on a straight-line basis over the following estimated useful lives:

Leasehold improvements .................................................................................. 10 years or term of lease, if shorter
Electronic data processing equipment and furniture........................................ 5 years
Personal computers and software .................................................................... 3 years

Depreciation and amortization expense for the years ended December 31, 2020, 2019 and 2018 was $27.6

million, $26.9 million and $11.4 million, respectively.

(o) Contingent Liabilities. Amounts are accrued for the resolution of claims that have either been asserted or
are deemed probable of assertion if, in the opinion of the Company, it is both probable that a liability has been
incurred and the amount of the liability can be reasonably estimated. In many cases it is not possible to determine
whether a liability has been incurred or to estimate the ultimate or minimum amount of that liability until years

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

after the contingency arises, in which case no accrual is made until that time. As of December 31, 2020 and 2019,
no contingent liabilities have been recorded (see Note 11).

(p) Recent Accounting Pronouncements. The Financial Accounting Standards Board (FASB)

is the

organization responsible for establishing and improving GAAP.

In January 2016, the FASB issued Accounting Standards Update (ASU) 2016-01, Financial Instruments -
Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 generally requires that
equity investments (excluding those investments for which the equity method of accounting is utilized) be
measured at fair value with changes in fair value recognized in net income. Under existing GAAP, changes in fair
value of available-for-sale equity investments are recorded in other comprehensive income. The Company adopted
ASU 2016-01 effective January 1, 2019 and elected to utilize a cumulative effect adjustment to the opening
balance of retained earnings for the year of adoption. Accordingly, the Companys reporting for the comparative
periods prior to adoption continue to be presented in the financial statements in accordance with the previous
guidance where changes in fair value of available-for-sale equity investments were recorded in other
comprehensive income. The adoption of ASU 2016-01, as of January 1, 2019, resulted in a cumulative change
adjustment of $0.9 million between accumulated other comprehensive income and retained earnings, with no net
impact on the Companys shareholders equity.

In February 2016 and July 2018, the FASB issued ASU 2016-02 and ASU 2018-11, respectively, both entitled
Leases, requiring a lessee i) to recognize in the statement of financial position a liability to make lease payments
and a right-of-use asset representing its right to use the underlying asset for the lease term, and ii) to make
additional qualitative and quantitative disclosures about its leases. The Company adopted ASU 2016-02 effective
January 1, 2019 and elected to utilize a cumulative-effect adjustment to the opening balance of retained earnings
in the year of adoption.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, which provides for the
recognition and measurement at the reporting date of all expected credit losses for financial assets that are not
accounted for at fair value through net income, including investments in available-for-sale debt securities and
loans, premiums receivable and reinsurance recoverable. The updated guidance amends the current other-than-
temporary impairment model for available-for-sale debt securities by requiring the recognition of impairments
relating to credit losses through an allowance account and limits the amount of credit loss to the difference
between a securitys amortized cost basis and its fair value. This guidance also applies a new current expected
credit loss model for determining credit-related impairments for financial instruments measured at amortized cost.
In November 2019, the FASB issued ASU 2019-10, which deferred the effective date of ASU 2016-13 to 2023 (with
early adoption permitted), and ASU 2019-11, which amended and clarified certain guidance contained in ASU
2016-13. The Company is evaluating the effect this standard will have on its consolidated financial statements,
although such effect is not expected to be significant.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash,
which requires that the statement of cash flows explain the change during the period in the total of cash, cash
equivalents, and amounts described as restricted cash or restricted cash equivalents. The Company adopted ASU
2016-18 effective January 1, 2019 using a retrospective transition method to the prior periods presented on the
consolidated statements of cash flows. The adoption of ASU 2016-18 did not have a material impact on the
Companys financial statements.

In January 2017, the FASB issued 2017-04, Intangibles Goodwill and Other Simplifying the Test for
Goodwill Impairment, which eliminates the requirement to determine the implied value of goodwill in measuring
an impaired loss. The effective date of ASU 2017-07 for the Company is 2023, with early adoption permitted. The
Company is evaluating the effect this standard will have on its consolidated financial statements, although such
effect is not expected to be significant.

In March 2017, the FASB issued ASU 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic
310-20): Premium Amortization on Purchased Callable Debt Securities, which the Company adopted in 2020. ASU
2017-08 requires that the premium on callable debt securities be amortized through the earliest call date rather
than through the maturity date of the callable security. In October 2020, the FASB issued ASU 2020-08, which
clarified an entitys accounting responsibilities related to callable debt securities that have multiple call dates. The

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

adoption of ASU 2017-08 and ASU 2020-08 did not have a significant impact on the Companys financial
statements.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging, which simplifies and expands the
eligible hedging strategies for financial and nonfinancial risks and enhances the transparency of how hedging
results are presented and disclosed. ASU 2017-12 also provides partial relief on the timing of certain aspects of
hedge documentation and eliminates the requirement to recognize hedge ineffectiveness separately in earnings.
In November 2019, the FASB issued 2019-10, which amended the effective date of ASU 2017-12 to 2021. The
Company is currently evaluating the impact of the adoption of ASU 2017-12 and ASU 2019-10 on the Companys
consolidated financial statements but does not expect this guidance to have a material effect on the Companys
consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. ASU 2019-
12 provides the simplification of existing guidance for income taxes, including the removal of certain exceptions
related to the recognition of deferred tax liabilities on foreign subsidiaries and is effective for the Company in
2022. The Company is currently evaluating the impact of the adoption of ASU 2019-12 on the Companys
consolidated financial statements but does not expect this guidance to have a material effect on the Companys
consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on
Financial Reporting, which provides optional expedients and exceptions for applying GAAP to investments,
derivatives, or other transactions that reference the London Interbank Offered Rate (LIBOR) or another reference
rate that is expected to be discontinued because of reference rate reform. Along with the optional expedients, the
amendments include a general principle that permits an entity to consider contract modifications due to reference
reform to be an event that does not require contract remeasurement at the modification date or reassessment of
a previous accounting determination. This standard may be elected over time through December 31, 2022 as
reference rate reform activities occur. The Company is currently evaluating the impact of the new guidance on its
consolidated financial statements but does not expect this guidance to have a material effect on the Companys
consolidated financial statements.

In October 2020, the FASB issued ASU 2020-10, Codification Improvements, which provides disclosure
guidance and was issued because of previous guidance that allowed companies the option to disclose information
either on the face of financial statements or as a disclosure. ASU 2020-10 codifies the disclosure option so that it
appears in both Section 45, Other Presentation Matters, and Section 50, Disclosure. The Company is currently
evaluating the impact of the new guidance on its consolidated financial statements but does not expect this
guidance to have a material effect on the Companys consolidated financial statements.

The Company has determined that all recently issued guidance and pronouncements, other than those
directly referenced above, are either not applicable or are immaterial to the Companys consolidated financial
statements.

(q) Misclassification of Equity Method Investments. The Company has concluded that, as a result of i) the
December 19, 2019 removal of certain veto rights held by a Greek regulatory entity with a minority interest in
financial services provider Eurobank Ergasias Services & Holdings S.A. (Eurobank), in which the Company and
Fairfax hold significant equity interests, and ii) the acquisition of additional shares of Seaspan Corporation
(Seaspan) on December 17, 2019, Fairfax and the Company had obtained significant influence over Eurobank and
Seaspan as of those dates. As a result, the investments in common stock of Eurobank and Seaspan as of December
31, 2019 should have been recorded using the equity method of accounting. Both investments had been reported
at fair value.

The effect of the misclassifications were such that the December 31, 2019 investments at fair value were
overstated by $887.5 million, while investments in subsidiaries and affiliates were understated by $851.6 million.
Similarly, net realized gains on investments was overstated by $35.9 million, pre-tax, for the year ended December
31, 2019. The realized gain differences were corrected in the income statement in 2020, while the investment
classifications were properly reflected in the consolidated financial statements for the year ended December 31,
2020.

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company performed both a qualitative and quantitative assessment of the materiality of the
adjustments and concluded that the effects were not material to the Companys financial position or results of
operations within the 2019 annual financial statements or for the 2020 annual financial statements in which they
were adjusted.

(r) Subsequent Events. The Company has evaluated the significance of events occurring subsequent to
December 31, 2020 with respect to disclosing the nature and expected impact of such events as of March 1, 2021,
the date these consolidated financial statements were available to be issued.

3. Fair Value Measurements

The Company accounts for a significant portion of its financial instruments at fair value as permitted or

required by GAAP.

Fair Value Hierarchy

The assets and liabilities recorded at fair value in the consolidated balance sheets are measured and
classified in a three level hierarchy for disclosure purposes based on the observability of inputs available in the
marketplace used to measure fair values. The fair value hierarchy gives the highest priority to quoted prices in
active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).
When the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the
fair value measurement is categorized is based on the lowest level input that is significant to the fair value
measurement in its entirety. Gains and losses for assets and liabilities categorized within the Level 3 table below,
therefore, may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and
unobservable inputs (Level 3). Financial assets and liabilities recorded in the consolidated balance sheets are
categorized based on the inputs to the valuation techniques as follows:

Level 1: Level 1 financial instruments are financial assets and liabilities for which the values are based on
unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to
access. Market price data generally is obtained from exchange markets. The Company does not adjust the quoted
price for such instruments. The majority of the Companys Level 1 investments are common stocks that are
actively traded in a public market and short-term investments and cash equivalents, for which the cost basis
approximates fair value.

Level 2: Level 2 financial instruments are financial assets and liabilities for which the values are based on
quoted prices in markets that are not active, or model inputs that are observable either directly or indirectly for
substantially the full term of the asset or liability. Level 2 inputs include the following:

Quoted prices for similar assets or liabilities in active markets;

Quoted prices for identical or similar assets or liabilities in non-active markets;

Pricing models, the inputs for which are observable for substantially the full term of the asset or
liability; and

Pricing models, the inputs for which are derived principally from, or corroborated by, observable
market data through correlation or other means, for substantially the full term of the asset or liability.

Assets and liabilities measured at fair value on a recurring basis and classified as Level 2 include government
and corporate fixed income securities, which are priced using publicly traded over-the-counter prices and broker-
dealer quotes. Observable inputs such as benchmark yields, reported trades, broker-dealer quotes, issuer spreads
and bids are available for these investments. Also included in Level 2 are inactively traded convertible corporate
debentures that are valued using a pricing model that includes observable inputs such as credit spreads and
discount rates in the calculation.

Level 3: Level 3 financial instruments are financial assets and liabilities for which the values are based on
prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair
value measurement. These measurements include circumstances in which there is little, if any, market activity for
the asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the fair
In such cases, the level in the fair value hierarchy within which the fair value measurement is
value hierarchy.

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

categorized is based on the lowest level input that is significant to the fair value measurement in its entirety.
Therefore, these inputs reflect the Companys own assumptions about the methodology and valuation techniques
that a market participant would use in pricing the asset or liability.

For the years ended December 31, 2020, 2019 and 2018, no securities were transferred into or out of Level

During the years ended December 31, 2020, 2019 and 2018, the Company purchased $332.3 million, $19.7
million and $83.4 million, respectively, of investments that are classified as Level 3. As of December 31, 2020 and
2019, the Company held $492.4 million and $347.4 million, respectively, of investments that are classified as Level
3. Level 3 investments include CPI-linked derivative contracts, and certain loans, bonds, preferred stocks and
common stocks.

A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability
of valuation inputs may result in a reclassification for certain financial assets or liabilities. Reclassifications
impacting Level 3 of the fair value hierarchy are generally reported as transfers in or out of the Level 3 category as
of the beginning of the period in which the reclassifications occur. The Company has determined, after carefully
considering the impact of recent economic conditions and liquidity in the credit markets on the Companys
portfolio, that it should not re-classify any of its investments from Level 1 or Level 2 to Level 3 for the years ended
December 31, 2020, 2019 and 2018. There were no transfers of securities between Level 1 and Level 2 during the
years ended December 31, 2020, 2019 and 2018.

The Company is responsible for determining the fair value of its investment portfolio by utilizing market
driven fair value measurements obtained from active markets, where available, by considering other observable
and unobservable inputs and by employing valuation techniques that make use of current market data. For the
majority of the Companys investment portfolio, the Company uses quoted prices and other information from
independent pricing sources to determine fair values.

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables present the fair value hierarchy for those assets and liabilities measured at fair value on

a recurring basis as of December 31, 2020 and 2019 (in thousands):

Fair Value Measurements as of December 31, 2020

Reported
Fair Value

Level 1

Level 2

Level 3

Fixed income securities, available for sale:

United States government, government agencies

and authorities .....................................................
States, municipalities and political subdivisions .....
Total fixed income securities, available for

512 $

15,429

— $
—

512 $

15,429

sale ..................................................................

15,941

—

15,941

Fixed income securities, held for trading:

United States government, government agencies

and authorities .....................................................
States, municipalities and political subdivisions .....
Foreign governments ..............................................
Corporate ................................................................
Total fixed income securities, held for trading ..
Preferred stocks, held for trading.................................
Common stocks, at fair value .......................................
Short-term investments, held for trading.....................
Cash equivalents...........................................................
Derivatives ....................................................................
Other investments ........................................................
Total assets measured at fair value ...................

306,075
118,778
241,689
2,749,190
3,415,732
18,798
431,179
2,334,201
461,190
57,833
226,074

—
—
—
6,671
6,671
3,403
430,992
2,292,701
461,190
—
—

306,075
118,778
241,689
2,470,178
3,136,720
—
187
41,500
—
57,438
21,760

$ 6,960,948 $ 3,194,957 $ 3,273,546 $

—
—

—

—
—
—
272,341
272,341
15,395
—
—
—
395
204,314
492,445

Derivative liabilities ......................................................
Total liabilities measured at fair value...............

$
$

64,131 $
64,131 $

— $
— $

64,131 $
64,131 $

—
—

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair Value Measurements as of December 31, 2019

Reported
Fair Value

Level 1

Level 2

Level 3

Fixed income securities, available for sale:

United States government, government agencies

and authorities .....................................................
States, municipalities and political subdivisions .....
Total fixed income securities, available for

612 $

15,891

— $
—

612 $

15,891

sale ..................................................................

16,503

—

16,503

Fixed income securities, held for trading:

United States government, government agencies

and authorities .....................................................
States, municipalities and political subdivisions .....
Foreign governments ..............................................
Corporate ................................................................
Total fixed income securities, held for trading ..
Convertible preferred stocks, held for trading .............
Preferred stocks, held for trading.................................
Common stocks, at fair value .......................................
Short-term investments, held for trading.....................
Cash equivalents...........................................................
Derivatives ....................................................................
Other investments ........................................................
Total assets measured at fair value ...................

948,213
64,988
642,495
1,707,079
3,362,775
—
17,082
1,382,296
1,913,820
378,315
34,922
61,624

—
—
—
5,476
5,476
—
2,230
1,367,875
1,333,984
375,913
—
—

948,213
64,988
642,495
1,426,646
3,082,342
—
—
165
579,836
2,402
34,193
19,041

$ 7,167,337 $ 3,085,478 $ 3,734,482 $

—
—

—

—
—
—
274,957
274,957
—
14,852
14,256
—
—
729
42,583
347,377

Derivative liabilities ......................................................
Total liabilities measured at fair value...............

$
$

61,581 $
61,581 $

— $
— $

61,581 $
61,581 $

—
—

In accordance with ASU 2015-17, Fair Value Measurement (Topic 820): Disclosure for Investments in Certain
Entities That Calculate Net Asset Value (NAV) per Share (or Its Equivalent), investments that are measured at
fair value using the NAV per share (or its equivalent) as a practical expedient, have not been classified in the fair
value hierarchy. As of December 31, 2020 and 2019, $979.1 million and $923.4 million, respectively, of
investments reported as equity securities and other invested assets, based upon NAV, are not included within the
fair value hierarchy tables.

The following table provides a summary of changes in the fair value of Level 3 financial assets for the years

ended December 31, 2020 and 2019 (in thousands):

Fixed Income
Securities

Other Invested
Assets

Equity
Securities

Balance, January 1, 2019................................................................... $
Change in value related to securities sold....................................
Change in value related to securities held ...................................
Purchases / additions ...................................................................
Settlements / paydowns...............................................................
Balance, December 31, 2019 ............................................................
Change in value related to securities sold....................................
Change in value related to securities held ...................................
Purchases / additions ...................................................................
Settlements / paydowns...............................................................
Balance, December 31, 2020 ............................................................ $

382,312
(5,713)
(50,912)
19,715
(70,445)
274,957
(1,420)
86,219
167,011
(254,426)
272,341

43,545
—
(233)
—
—
43,312
(12,197)
8,305
165,289
—
204,709

44,164
1,276
(3,795)
—
(12,537)
29,108
(1,933)
543
—
(12,323)
15,395

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables present changes in value included in net income related to Level 3 assets for the years

ended December 31, 2020, 2019, and 2018 (in thousands):

Year ended December 31, 2020

Fixed income securities.............................................. $
Other invested assets.................................................
Equity securities .........................................................
Total changes in value included in net (loss)
income .................................................................. $

Year ended December 31, 2019

Net
Investment
Losses

Net
Realized Capital
Gains (Losses)

Currency
Translation

(1,529) $
—
—

86,328 $
(3,892)
(1,523)

— $
—
133

Total

84,799
(3,892)
(1,390)

(1,529) $

80,913 $

133 $

79,517

(1,863) $
—
—

(54,762) $
(233)
(2,603)

— $
—
84

(56,625)
(233)
(2,519)

(1,863) $

(57,598) $

84 $

(59,377)

Year ended December 31, 2018

Total changes in value included in net loss .......... $

(1,458) $
—
—
(1,458) $

(64,078) $
2,023
(6,630)
(68,685) $

(1,051) $
75
(128)
(1,104) $

(66,587)
2,098
(6,758)
(71,247)

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company uses valuation techniques to establish the fair value of Level 3 investments. The following
table provides information on the valuation techniques, significant unobservable inputs and ranges for each major
category of Level 3 assets measured at fair value on a recurring basis at December 31, 2020 and 2019 (in
thousands):

Valuation Technique/Asset Type
Market Approach

Fixed income securities, held for

As of December 31,
2019
2020

Significant Unobservable
Inputs

Range

2020

2019

trading .............................................. $ 253,839

$ 255,846

12,290

12,214

6,212

6,897

Preferred stocks, held for trading .......

12,895

12,352

2,500

Risk premium for
credit risk
Risk premium for
credit risk
Risk premium for
credit risk

Risk premium for
credit risk
Transaction price

CPI-linked derivatives (1) ....................

394

729

Broker quotes

Put options..........................................

— Broker quotes

4.3%

1.8%

5.4%

4.4%-5.1%

1.4%-1.9%

3.5%-4.2%

4.2%

3.6%-4.2%

—

Total valued using market

approach ....................................

288,131

290,538

Market Price to Book Value
Common stocks, at fair value (2) ........

—

14,256

Par Value
Other investments ..............................

204,314

42,583

Total - Level 3................................ $ 492,445

$ 347,377

Time lag in receiving
book value of
comparable companies

—

Risk premium for
credit risk
Underlying stock price

6.7%-13.3%

11.9%-13.6%

1.09

—

(1) Valued using broker-dealer quotes that use market observable inputs except for the inflation volatility input,

which is not market observable.

(2) The Company evaluates observable price-to-book multiples of peer companies and applies such to the most

recently available book value per share.

Fair Value Option

The fair value option (FVO) allows companies to irrevocably elect fair value as the initial and subsequent
measurement attribute for certain financial assets and liabilities. Changes in the fair value of assets and liabilities
for which the election is made are recognized in net income as they occur. The FVO election is permitted on an
instrument-by-instrument basis at initial recognition of an asset or liability or upon the occurrence of an event that
gives rise to a new basis of accounting for that instrument.

The Company owns Classes A, C, E, G, H, J, K and Q common shares of HWIC Asia Fund (HWIC Asia), which
is 100% owned by Fairfax and of which the Company owns 29.7% as of December 31, 2020. At the time of the
purchase of each class of shares, the Company elected the FVO for these investments, as HWIC Asia is a multi-class
investment company that reports its investments at fair value and provides a NAV on a monthly basis.

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company owns shares of HWIC QIAIF Value Opportunities Fund ("HWIC VOF"), shares in HWIC QIAIF
Property Fund I ("HWIC PFI") and shares in HWIC QIAIF Property Fund II (HWIC PF2), which are each 100% owned
by Fairfax and of which the Company owns 3.7%, 29.4% and 31.4%, respectively. At the time of purchase of the
HWIC VOF and the HWIC PFI investments, the Company elected the FVO for these investments, as they are
investment companies that report investments at fair value and provide a NAV on a monthly basis.

The carrying values of the Companys investment in the various HWIC Asia, HWIC VOF and HWIC PFI and
HWIC PF2 common share issues as of December 31, 2020 and 2019, which are included in common stocks at fair
value on the balance sheet, and the changes in fair value for each issue for the years then ended, are summarized
below (in thousands):

HWIC
Asia
Class A

HWIC
Asia
Class C

HWIC
Asia
Class E

HWIC
Asia
Class G

HWIC
Asia
Class H

HWIC
Asia
Class J

HWIC
Asia
Class K

HWIC
Asia
Class Q

HWIC
VOF

HWIC
PFI

HWIC
PF2

Total

Fair value as of

January 1, 2019 ................ $ 4,103
(Sales) purchases............
Change in fair value........
Currency translation

(952 )

$ 24,656
— (18,000 )
(1,477 )

adjustment ..................

—

Fair value as of

December 31, 2019..........
Purchases .......................
Change in fair value........
Currency translation

3,151
—
(318 )

5,179
—
2,573

adjustment ..................

—

Fair value as of

45
—
11

—

56
—
(2 )

—

$ 84,448
3,501
(11,026 )

$ 116,778
—
(44,108 )

$ 45,777
—
(5,200 )

$ 30,749
5,242
(9,065 )

$ 19,686
—
2,286

$ — $ — $ — $ 326,242
9,097
—
— (69,235 )

12,771
(7 )

5,583
303

—

444

430

476

—

1,583

76,923
—
(7,462 )

72,714
—
(4,853 )

41,021
—
2,009

27,019
2,827
(5,535 )

22,402
—
(2,385 )

5,982
—
(644 )

13,240

— 50,051
(60 )

221

— 267,687
52,878
(16,456 )

—

380

270

354

436

3,256

4,800

December 31, 2020.......... $ 2,833

$ 7,752

$ 69,461

$ 67,889

$ 43,410

$ 24,387

$ 20,287

$ 5,692

$ 13,897

$ 53,247 $ 308,909

HWIC Asias fair value decreased by $42.3 million for the year ended December 31, 2018.

The Company did not elect the FVO for its other affiliated investments, as these affiliated investments were

ultimately 100% owned by Fairfax and its subsidiaries, and fair values were deemed to be not readily obtainable.

As of December 31, 2020 and 2019, respectively, the Company has not elected the FVO for any of its

liabilities.

4. Investments and Cash

A summary of the Companys available for sale investment portfolio as of December 31, 2020 and 2019, is as

follows (in thousands):

2020
Fixed income securities:

United States government, government

Cost or
Amortized
Cost

Gross
Unrealized
Appreciation

Gross
Unrealized
Depreciation

Fair Value

agencies and authorities....................................... $

441

— $

512

States, municipalities and political

subdivisions ..........................................................

Total fixed income securities ............................. $

15,307
15,748

122
193

—
— $

15,429
15,941

2019
Fixed income securities:

United States government, government

Cost or
Amortized
Cost

Gross
Unrealized
Appreciation

Gross
Unrealized
Depreciation

Fair Value

agencies and authorities....................................... $

553

— $

612

States, municipalities and political

subdivisions ..........................................................

Total fixed income securities ............................. $

15,349
15,902

542
601

—
— $

15,891
16,503

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Common stocks accounted for under the equity method of accounting were carried at $1,472.7 million and
$580.3 million as of December 31, 2020 and 2019, respectively. Common stocks at equity had gross unrealized
appreciation of $13.7 million and $10.2 million and gross unrealized depreciation of $82.3 million and $30.4 million
as of December 31, 2020 and 2019, respectively. Other invested assets were carried at $1,779.2 million and
$1,465.7 million as of December 31, 2020 and 2019, respectively, reflecting no gross unrealized appreciation or
Depreciation.

A summary of the Companys held for trading and fair value option portfolios as of December 31, 2020 and

2019 is as follows (in thousands):

Fixed income securities:

United States government, government agencies

and authorities ...........................................................................................
States, municipalities and political subdivisions ...........................................
Foreign governments ....................................................................................
Corporate ......................................................................................................
Total fixed income securities ...................................................................
Preferred stocks..................................................................................................
Common stocks ..................................................................................................
Short-term investments .....................................................................................
Cash and cash equivalents..................................................................................
Cash and cash equivalents held as collateral......................................................
Total.........................................................................................................

2020
Fair Value

2019
Fair Value

306,075 $
118,778
241,689
2,749,190
3,415,732
18,798
740,088
2,334,201
919,712
155,496
7,584,027 $

948,213
64,988
642,495
1,707,079
3,362,775
17,082
1,649,983
1,913,820
866,712
21,910
7,832,282

(a)

Fixed Income Maturity Schedule

The amortized cost and fair value of fixed income securities as of December 31, 2020, by contractual

maturity, are shown below (in thousands):

Available for Sale

Held for Trading

At December 31, 2020

Cost or
Amortized
Cost

Due in one year or less............................... $
Due after one year through five years .......
Due after five years through ten years ......
Due after ten years ....................................

Fair Value
—
15,935
—
6
Total fixed income securities................ $ 15,748 $ 15,941

15,744
—
4

— $

% of Total
Fair Value

Cost or
Amortized
Cost

Fair Value

% of Total
Fair Value

100.0
0.0
0.0

0.0% $ 508,998 $ 496,259
2,309,444
2,092,761
374,832
351,508
235,197
217,251
100.0% $3,170,518 $3,415,732

14.5%
67.6
11.0
6.9
100.0%

Actual maturities may differ from the contractual maturities shown in the previous table due to the
existence of call options. In the case of securities containing call options, the actual maturity will be the same as
the contractual maturity if the issuer elects not to exercise its call option. Total securities subject to call options
represent approximately 55.8% of the total fair value.

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(b) Net Investment Income and Realized Investment Gains (Losses)

The following table sets forth the sources and components of net investment income for the years ended

December 31, 2020, 2019 and 2018 (in thousands):

Interest on fixed income securities................................................... $
Dividends on preferred stocks ..........................................................
Dividends on common stocks ...........................................................
Net income (loss) of common stocks, at equity...............................
Interest on cash and short-term investments ..................................
Net income from other invested assets............................................
Gross investment income............................................................
Less: investment expenses................................................................

Net investment income ............................................................... $

2020
110,359
814
6,976
8,865
21,562
80,672
229,248
60,855
168,393

2019
111,489
1,435
24,891
(35,331)
34,828
165,670
302,982
57,209
245,773

2018
112,428
1,495
16,396
21,300
26,816
65,666
244,101
34,875
209,226

The following table summarizes the Companys net realized investment gains and losses for the years ended

December 31, 2020, 2019 and 2018 (in thousands):

2020

2019

2018

Available for sale / equity method:

From sales.................................................................................... $
Other-than-temporary impairments ...........................................
Total available for sale ...........................................................

18,271
(34,480)
(16,209)

69,625
—
69,625

Held for trading:

From sales and settlements.........................................................
From mark to market adjustments..............................................
Total held for trading .............................................................

Total net realized investment (losses) gains..................... $

(403,596)
411,964
8,368
(7,841) $

(15,991)
157,693
141,702
211,327

12,106
(299)
11,807

49,431
(178,643)
(129,212)
(117,405)

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table sets forth the components of net realized investment gains and losses on the Companys
available for sale and equity method securities for the years ended December 31, 2020, 2019 and 2018 (in
thousands):

Fixed income securities:

Realized investment gains ........................................................... $
Realized investment losses..........................................................
Other-than-temporary impairments ...........................................
Net realized investment gains................................................

— $
—
—
—

1,054
—
—
1,054

18,805
(6,526)
(56)
12,223

2020

2019

2018

Equity securities:

Realized investment gains ...........................................................
Realized investment losses..........................................................
Other-than-temporary impairment.............................................s
Net realized investment gains (losses)...................................

5
—
—
5

—
—
—
—

Common stocks, at equity:

Realized investment gains ...........................................................
Realized investment losses..........................................................
Other-than-temporary impairments ...........................................
Net realized investment (losses) gains...................................

18,266
—
(34,480)
(16,214)

73,356
(4,785)
—
68,571

—
(173)
(243)
(416)

—
—
—
—

Total available for sale securities:

Net realized investment (losses) gains................................... $

18,271
—
(34,480)
(16,209) $

74,410
(4,785)
—
69,625

18,805
(6,699)
(299)
11,807

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The net realized investment gains or losses on disposal of held for trading securities in the table below
represent the total gains or losses from the purchase dates of the investments and have been reported in net
realized investment gains in the consolidated statements of operations. The change in fair value presented below
consists of two components: (i) the reversal of the gain or loss recognized in previous years on securities sold and
(ii) the change in fair value resulting from mark-to-market adjustments on contracts still outstanding.
The
following table sets forth the total net realized investment gains and losses on held for trading securities for the
years ended December 31, 2020, 2019 and 2018 (in thousands):

Fixed income securities:

Net realized investment gains (losses) on disposal ..................... $
Change in fair value .....................................................................
Net realized investment gains (losses)...................................

18,703
211,758
230,461

(62,683) $
53,378
(9,305)

(13,227)
(50,425)
(63,652)

2020

2019

2018

Preferred stock:

Net realized investment losses on disposal.................................
Change in fair value .....................................................................
Net realized investment gains (losses)...................................

—
1,582
1,582

(3,748)
8,079
4,331

—
(7,141)
(7,141)

Equity securities:

Net realized investment (losses) gains on disposal .....................
Change in fair value .....................................................................
Net realized investment (losses) gains...................................

(106,335)
26,500
(79,835)

14,027
158,433
172,460

62,577
(206,038)
(143,461)

Derivative securities:

Net realized investment (losses) gains on disposal/

settlement ................................................................................
Change in fair value .....................................................................
Net realized investment (losses) gains...................................

(394,623)
129,138
(265,485)

8,718
(83,138)
(74,420)

(32,456)
48,221
15,765

Other securities:

Net realized investment gains on disposal ..................................
Change in fair value .....................................................................
Net realized investment gains................................................

78,659
42,986
121,645

27,695
20,941
48,636

32,537
36,740
69,277

Total held for trading securities:

Net realized investment (losses) gains on disposal .....................
Change in fair value .....................................................................

Net realized investment gains (losses)................................... $

(403,596)
411,964
8,368

(15,991)
157,693
141,702

49,431
(178,643)
(129,212)

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(c)

Unrealized (Depreciation) Appreciation

The following table sets forth the changes in net unrealized (depreciation) appreciation of investments, and
the related tax effect, reflected in accumulated other comprehensive income for the years ended December 31,
2020, 2019 and 2018 (in thousands):

Fixed income securities..................................................................... $
Equity securities................................................................................
Other.................................................................................................

Decrease in unrealized net appreciation of

investments ..............................................................................
Deferred income tax benefit on disposal ....................................

Change in net unrealized depreciation of

investments included in other comprehensive

2020

2019

(407) $

(1,407) $

(48,308)
(126)

(48,841)
10,244

(14,694)
59

(16,042)
3,295

2018
(27,720)
(55,290)
108

(82,902)
17,461

(loss) income ................................................................. $

(38,597) $

(12,747) $

(65,441)

On a quarterly basis, the Company reviews its investment portfolio classified as available for sale for declines
in value and specifically evaluates securities with fair values that have declined to less than 80% of their cost or
amortized cost at the time of review. Declines in the fair value of investments that are determined to be
temporary are recorded as unrealized depreciation, net of tax, in accumulated other comprehensive income. If the
Company determines that a decline relating to credit issues is other-than-temporary, the cost or amortized cost
of the investment will be written down to the fair value, and a realized loss will be recorded in the Companys
consolidated statements of operations.
If the Company determines that a decline related to other factors (e.g.,
interest rates or market conditions) is other-than-temporary, the cost or amortized cost of the investment will
be written down to the fair value within other comprehensive income.

In assessing the value of the Companys debt and equity securities that are classified as available for sale and
possible impairments of such securities, the Company reviews (i) the issuers current financial position and
disclosures related thereto, (ii) general and specific market and industry developments, (iii) the timely payment by
the issuer of its principal, interest and other obligations, (iv) the outlook and expected financial performance of the
issuer, (v) current and historical valuation parameters for the issuer and similar companies, (vi) relevant forecasts,
analyses and recommendations by research analysts, rating agencies and investment advisors, and (vii) other
information the Company may consider relevant. Generally, a change in the market or interest rate environment
would not, of itself, result in an impairment of an investment. In addition, the Company considers its ability and
intent to hold the security to recovery when evaluating possible impairments.

The facts and circumstances involved in making a decision regarding an other-than-temporary impairment
are those that exist at that time. Should the facts and circumstances change such that an other-than-temporary
impairment is considered appropriate, the Company will recognize the impairment by reducing the cost, amortized
cost or carrying value of the investment to its fair value, and recording the loss in its consolidated statements of
operations. Upon the disposition of a security where an other-than-temporary impairment has been taken, the
Company will record a gain or loss based on the adjusted cost or carrying value of the investment.

The Company did not have any fixed income or common stocks, at fair value classified as available for sale,
that have been in a continuous unrealized depreciation position for more than 12 months or less than 12 months,
as of December 31, 2020 or 2019, respectively.

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company believes the gross unrealized depreciation for securities classified as available for sale is
temporary in nature and has not recorded a realized investment loss related to these securities. Given the size of
the Companys investment portfolio and capital position, the Company believes it is likely that it will not be
required to sell or liquidate these securities before the fair value recovers the gross unrealized depreciation.

(d)

Common Stocks, at Equity

The following table sets forth the components of common stocks, at equity, as of December 31, 2020 and

2019 (in thousands):

Goodwill and Other
included in
Carrying Value

Quoted
Market Value

Carrying Value

2020

2019

2020

Atlas Corporation ................................. $ 533,632 $
Eurobank Ergasias ................................
Fairfax India Holdings Corp...................
Recipe Unlimited Corporation..............
EXCO Resources, Inc. ............................
Dexterra Group Inc...............................
Helios Fairfax Partners Corporation. ....
Zenith National Insurance Corp............
Sigma Companies International Corp...
2018296 Alberta ULC............................
Peak Achievement Athletics Inc. ..........
AGT Food and Ingredients, Inc. ............
Sterling Roads Films .............................
Apple Bidco Limited..............................
Davos Brands LLC .................................
Toys "R" Us (Canada) Ltd......................

— $ 445,353
— 295,243
82,690
—
93,947
98,121
n/a
(6,569)
55,939
—
62,060
2,779
n/a
3,928
n/a
—
n/a
—
n/a
469
n/a
411
n/a
—
n/a
(944)
n/a
12,824
n/a
(812)
Total common stocks, at equity ..... $1,472,718 $ 580,280 $ 264,572 $ 110,207

2020
— $ (78,347) $
— 245,626
—
99,873
(6,569)
—
—
3,928
—
—
469
419
—
—
—
(827)

429,839
134,638
126,251
73,266
54,986
34,990
31,765
15,970
15,155
11,348
8,878
2,000
—
—
—

116,522
133,021
74,413
—
103,741
36,886
20,912
14,636
9,757
17,306
—
26,457
16,132
10,497

Relative
Economic
Ownership
2020

15.2%
11.3%
5.8%
12.9%
14.2%
17.0%
10.8%
6.1%
41.9%
27.3%
3.8%
7.8%
20.0%
0.0%
0.0%
28.2%

2019

—
—
110,082
108,735
n/a
n/a
69,389
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a

Zenith National Insurance Corp., Toys R Us (Canada) Ltd. and 2018296 Alberta ULC are wholly-owned
subsidiaries of Fairfax, while Fairfax is the controlling or largest shareholder of Eurobank (33.4%), Atlas (44.5%),
Fairfax India Holdings Corp. (31.9%), Recipe Limited Corporation (44.8%), Helios Fairfax Partners Corporation
(34.2%), Sigma Companies International Corp. (81.1%), AGT Food and Ingredients, Inc. (59.0%), EXCO Resources,
Inc. (44.3%), Peak Achievement Athletics Inc. (42.6%), Dexterra Group Inc (49.0%) and Sterling Road Films (20%).

The Company impaired Helios Fairfax Partners to its current market value on September 30, 2020 in the

amount of $34.5 million.

(e)

Other Invested Assets

The following table shows the components of other invested assets as of December 31, 2020 and 2019 (in

thousands):

Investment funds and partnerships, at fair value............................................... $
Investment funds and partnerships, at equity ...................................................
Real estate ..........................................................................................................
Affiliate loans......................................................................................................
Derivatives, at fair value .....................................................................................
Mortgage loans...................................................................................................
Benefit plan funds, at fair value..........................................................................
Other ..................................................................................................................

Total other invested assets ........................................................................... $

2020

670,144
70,370
300,150
204,314
57,833
454,666
21,760
—
1,779,237

2019

655,717
64,058
306,475
163,437
34,922
216,886
19,041
5,139
1,465,675

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Companys investment

funds and partnership investments may be subject

to restrictions on
redemptions or sales, which are determined by the governing documents thereof, and may limit the Companys
ability to liquidate these investments in the short term. Due to a time lag in reporting by a majority of investment
fund and partnership fund managers, valuations for these investments are recorded by the Company on a one
month or one quarter lag. For the years ended December 31, 2020, 2019 and 2018, the Company recognized net
investment income of $2.3 million, $98.1 million and $38.5 million, respectively, from its investment funds and
partnership investments. For the years ended December 31, 2020, 2019 and 2018, the Company recognized net
realized investment gains of $93.3 million, $35.0 million and $73.8 million, respectively, from its investment funds
and partnerships that are held as trading securities. With respect to the Companys $740.5 million in investments
in investment funds and partnerships, the Company has commitments that may require additional funding of up to
$136.1 million.

The Companys investments in real estate consists of land of $81.9 million and buildings of $231.7 million as
of December 31, 2020 and 2019, less accumulated depreciation of $13.4 million and $7.1 million as of December
31, 2020 and 2019, respectively.

The Companys investments in mortgage loans consist of loans collateralized by commercial property in

various locations in Canada, Great Britain, Ireland, California, Colorado and Hawaii, as of December 31, 2020.

(f)

Derivative Investments

The Company has utilized CPI-linked derivative contracts, total return swaps, forward currency contracts,
U.S. Treasury bond forward contracts and various other contracts, to manage against adverse changes in the
values of assets and liabilities. These products are typically not directly linked to specific assets or liabilities on the
consolidated balance sheets or a forecasted transaction. The following tables set forth the Companys derivative
positions, which are included in other invested assets or other liabilities in the consolidated balance sheets, as of
December 31, 2020 and 2019, respectively (in thousands):

Exposure/
Notional
Amount

As of December 31, 2020
CPI-linked derivative contracts............................................ $22,467,705 $ 118,599 $
Call option contracts............................................................
Forward currency contracts ................................................
Long total return swaps.......................................................
Put option contracts ............................................................
U.S. Treasury bond forward contracts.................................
Put option contracts – written ............................................
Total ...............................................................................

2,000,000
977,972
349,861
210,001
71,844
20,747

32,830
—
—
2,527
—
(1,411)

$ 152,545 $

Cost

Exposure/
Notional
Amount

As of December 31, 2019
CPI-linked derivative contracts............................................ $33,365,759 $ 221,407 $
Forward currency contracts ................................................
Option contracts..................................................................
Long total return swaps.......................................................
Short total return swaps......................................................
U.S. Treasury bond forward contracts.................................
Total ...............................................................................

2,437,500
701,822
224,175
129,836
89,400

40,349
—
—
—
—

$ 261,756 $

Cost

Fair Value
Asset

Fair Value
Liability

394 $

3,619
23,843
29,308
1
668
—
57,833 $

—
—
60,969
3,133
—
—
29
64,131

Fair Value
Asset

Fair Value
Liability

729 $

2,959
25,257
1,602
4,375
—
34,922 $

—
—
37,826
55
1,194
22,506
61,581

The Company held long position common stock total return swaps, with a total notional value of $349.9
million and $129.8 million as of December 31, 2020 and 2019, respectively, as replications of investments in
publicly-listed common stocks. The common stock total return swaps, which are carried at fair value, are recorded
in other invested assets or other liabilities based on the positive or negative value of the underlying contracts as of

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

the financial statement date. Changes in the fair value of common stock total return swaps are recorded as
realized investment gains or losses in the consolidated statements of operations in the period in which they occur.

As of December 31, 2019, the Company held short position common stock total return swaps with a notional
value of $89.4 million. The common stock total return swaps are recorded at fair value in other invested assets or
other liabilities based on the positive or negative value of the underlying contracts as of the financial statement
date. Changes in the fair value of the swaps are recorded as realized investment gains or losses in the consolidated
statements of operations in the period in which they occur. The Company closed all of its short position common
stock total return swap contracts during 2020.

To reduce its exposure to interest rate risk, the Company holds forward contracts to sell long dated U.S.
Treasury bonds. These contracts have an average term to maturity of less than one year and may be renewed at
market rates. The U.S. Treasury bond forward contracts are recorded at fair value in other invested assets or in
other liabilities based on the positive or negative value of the underlying contracts as of the financial statement
date, with the related changes in fair value recognized as realized investment gains or losses in the consolidated
statements of operations in the period in which they occur.

As an economic hedge against the potential adverse impact on the Company of decreasing price levels in the
economy, the Company has purchased derivative contracts referenced to consumer price indices (CPI) in various
geographic regions in which the Company operates. These contracts had a remaining average life of 2.2 years as of
December 31, 2020 and 2019. As the remaining life of a contract declines, the fair value of the contract (excluding
the impact of CPI changes) will generally decline. The initial premium paid for the contracts is recorded as a
derivative asset and subsequently adjusted for changes in the unrealized fair value of the contracts at each balance
sheet date. Changes in the unrealized fair value of the contracts are recorded as realized gains or losses on
investments in the Companys consolidated statements of operations with a corresponding adjustment to the
carrying value of the derivative asset.
In the event of a sale, expiration or early settlement of one of the
Companys CPI-linked derivative contracts, the Company would receive the fair value of that contract on the date
of the transaction. The Companys maximum potential cash loss is limited to the premiums already paid to enter
into the derivative contracts.

The Company has entered into forward currency contracts to manage its foreign currency exchange rate risk
on a macro basis. Under a forward currency contract, the Company and the counterparty are obligated to
purchase or sell an underlying currency at a specified price and time. Forward currency contracts are recorded at
fair value in other invested assets or other liabilities based on the positive or negative value of the underlying
contracts as of the financial statement date, with the related changes in fair value recognized as realized
investment gains or losses in the consolidated statements of operations in the period in which they occur.

The Company has investments in call options, which are contracts that grant the holder the right (but not the
obligation) to purchase a financial instrument at a specified price within a specific time period. Call options, which
are included in other invested assets, are recorded at fair value, with changes in the fair value recognized as
realized investment gains or losses in the consolidated statement of operations in the period in which they occur.

The Company had investments in warrants, which are contracts that grant the holder the right (but not the
obligation) to purchase an underlying financial instrument at a given price and time or at a series of prices and
times. Warrants, which were included in other invested assets, are recorded at fair value, with the related changes
in fair value recognized as realized investment gains or losses in the consolidated statements of operations in the
period in which they occur.

The Company has investments in written put options, which are contracts that grant the holder the right (but
not the obligation) to purchase a financial instrument at a specified price within a specific time period. Written put
options, which were included in other liabilities, are recorded at fair value, with the changes in the fair value
recognized as realized gains or losses in the consolidated statements of operations in the period in which they
occur.

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company had investments in put options, which are contracts that grant the holder the right (but not
the obligation) to sell a financial instrument at a specified price within a specific time period. Put options, which
were included in other invested assets, are recorded at fair value, with the changes in the fair value recognized as
realized gains or losses in the consolidated statements of operations in the period in which they occur.

Pursuant to the agreements governing various derivative contracts, the fair value of collateral deposited by
the Company with the contracts counterparties totaled $116.9 million and $44.9 million as of December 31, 2020
and 2019, respectively, while the fair value of collateral deposited by various counterparties for the benefit of the
Company was $25.1 million and $5.2 million as of December 31, 2020 and 2019, respectively.

Counterparties to the derivative instruments expose the Company to credit risk in the event of non-
performance. The Company believes this risk is low, given the diversification of the placement of the contracts
among various highly rated counterparties. The credit risk exposure is reflected in the fair value of the derivative
instruments.

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The net realized investment gains or losses on disposal of derivatives in the table below represent the total
gains or losses for the years ended December 31, 2020, 2019 and 2018 from the purchase dates of the investments
and have been reported in net realized investment gains in the consolidated statements of operations; the change
in fair value presented consists of two components: (i) the reversal of the gain or loss recognized in previous years
on securities sold and (ii) the change in fair value resulting from mark-to-market adjustments on contracts still
outstanding (in thousands):

CPI-linked derivative contracts:

Net realized investment losses on disposal ............................................ $
Change in fair value ................................................................................
Net realized investment losses .........................................................

(102,808) $
102,474
(334)

(8,371) $
5,985
(2,386)

—
(3,267)
(3,267)

2020

2019

2018

Forward currency contracts:

Net realized investment gains on disposal .............................................
Change in fair value ................................................................................
Net realized investment (losses) gains .............................................

U.S. Treasury bond forward contracts:

Net realized investment (losses) gains on disposal ................................
Change in fair value ................................................................................
Net realized investment (losses) gains .............................................

Long total return swaps:

Net realized investment losses on disposal ............................................
Change in fair value ................................................................................
Net realized investment gains (losses) .............................................

7,438
(24,991)
(17,553)

(18,437)
(879)
(19,316)

(10,040)
22,994
12,954

Short total return swaps:

Net realized investment (losses) gains on disposal ................................
Change in fair value ................................................................................
Net realized investment losses .........................................................

(254,189)
22,506
(231,683)

Warrants:

Net realized investment losses on disposal ............................................
Change in fair value ................................................................................
Net realized investment losses .........................................................

—
—
—

Put options:

Net realized investment losses on disposal ............................................
Change in fair value ................................................................................
Net realized investment losses .........................................................

(9,671)
(2,527)
(12,198)

Call options:

Put options - written

Net realized investment gains on disposal .............................................
Change in fair value ................................................................................
Net realized investment gains ..........................................................

(7,102)
8,179
1,077

186
1,382
1,568

17,576
(44,495)
(26,919)

(5,644)
2,155
(3,489)

(3,282)
18,517
15,235

15,479
(27,997)
(12,518)

—
—
—

(7,040)
—
(7,040)

—
(37,303)
(37,303)

—
—
—

8,636
50,205
58,841

388
6,297
6,685

(16,258)
(17,722)
(33,980)

(14,451)
6,130
(8,321)

(10,771)
6,665
(4,106)

—
—
—

—
(87)
(87)

—
—
—

Total derivatives:

Net realized investment (losses) gains on disposal ................................
Change in fair value ................................................................................

Net realized investment (losses) gains ............................................. $

(394,623)
129,138
(265,485) $

8,718
(83,138)
(74,420) $

(32,456)
48,221
15,765

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(g)

Assets on Deposit

The Company is required to maintain assets on deposit with various regulatory authorities to support its
insurance and reinsurance operations. These requirements are generally promulgated in the statutes and
regulations of the individual jurisdictions. The assets on deposit are available to settle insurance and reinsurance
liabilities. For certain reinsurance contracts, derivative contracts and affiliate guarantees, the Company utilizes
trust funds to collateralize its obligations or potential obligations to the ceding companies and counterparties. As
of December 31, 2020, restricted assets supporting these deposits and trust fund requirements totaled $1.3 billion,
as depicted in the following table (in thousands):

U.S. regulatory requirements............... $ 70,762 $
Foreign regulatory/Lloyd's

Requirements ...................................
Derivative collateral requirements ......
Reinsurance collateral requirements ...
Guarantee collateral requirements......

90,984
44,232
286,698
46,112

Restricted Assets Relating to:

Fixed
Income
Securities

Cash
Cash Equivalents
Short-term
Investments

Common
Stocks

Partnerships

Mortgage
Loans

— $

Total
70,762

268,368
72,649
179,861
2,468

23,555
—
207,829
—

—
—
36,403
—

382,907
116,881
724,460
48,580
36,403 $ 13,669 $1,343,590

—
—
13,669
—

Total................................................ $ 538,788 $

523,346 $ 231,384 $

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

5. Accumulated Other Comprehensive Income

The following table shows the components of the change in accumulated other comprehensive income, net

of deferred income taxes, for the years ended December 31, 2020, 2019 and 2018 (in thousands):

Beginning balance of unrealized net (depreciation) appreciation
on securities

prior to adjustments.................................................................... $
Adjustment for U.S. tax reform ...................................................
Adjustment for ASU 2016-01.......................................................
Beginning balance of unrealized net (depreciation) appreciation

2020

2019

2018

(13,381) $
—
—

5,205 $
—
(5,839)

58,115
12,531
—

on securities after adjustments...................................................

(13,381)

(634)

70,646

Ending balance of unrealized net (depreciation) appreciation on

securities...................................................................................
Current period change in unrealized net depreciation
on securities..............................................................................

Beginning balance of foreign currency translation adjustments
prior to adjustments....................................................................
Adjustment for U.S. tax reform ....................................................
Adjustment for ASU 2016-01........................................................
Beginning balance of foreign currency translation adjustments
after adjustments ........................................................................
Ending balance of foreign currency translation adjustments ...........

Current period change in foreign currency translation
adjustments .............................................................................
Beginning balance of benefit plan liabilities prior to adjustments ...
Adjustment for U.S. tax reform ....................................................
Beginning balance of benefit plan liabilities after adjustments........
Ending balance of benefit plan liabilities ..........................................
Current period change in benefit plan liabilities .........................
Other comprehensive loss ..................................................... $

(51,978)

(13,381)

5,205

(38,597)

(12,747)

(65,441)

2,781
—
—

(35,916)
—
6,744

11,197
2,412
—

2,781
(8,989)

(29,172)
2,781

13,609
(35,916)

(11,770)
(69,960)
—
(69,960)
(68,530)
1,430
(48,937) $

31,953
(38,018)
—
(38,018)
(69,960)
(31,942)
(12,736) $

(49,525)
(38,698)
(8,335)
(47,033)
(38,018)
9,015
(105,951)

Beginning balance of accumulated other comprehensive (loss)

income ........................................................................................ $
Beginning balance adjustment for ASU 2016-01 ..............................
Adjusted beginning balance..............................................................
Other comprehensive loss ................................................................

(80,560) $
—
(80,560)
(48,937)

(68,729) $
905
(67,824)
(12,736)

37,222
—
37,222
(105,951)

Ending balance of accumulated other comprehensive
loss ........................................................................................... $

(129,497) $

(80,560) $

(68,729)

In February 2018, the FASB issued ASU 2018-02, “Income Statement – Reporting Comprehensive Income
(Topic 220).” This ASU allows the effect of remeasuring deferred tax assets and liabilities related to the Tax Cuts
and Jobs Act of 2017 with respect to items with accumulated other comprehensive income to be reclassified to
retained earnings. The amount of the reclassification is the difference between the amount initially charged or
credited directly to other comprehensive income at the previously enacted U.S. federal corporate income tax rate
that remains in accumulated other comprehensive income and the amount that would have been charged or
credited using the newly enacted 21 percent rate. The Company implemented this ASU in its 2017 consolidated
financial statements; the effect of the reclassification was to increase accumulated other comprehensive income
and decrease retained earnings by $6.6 million.

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table shows the components of accumulated other comprehensive income and the related

deferred income taxes on each component, as of December 31, 2020 and 2019 (in thousands):

Gross:

Unrealized depreciation on securities........................................................... $
Foreign currency translation adjustments ....................................................
Benefit plan liabilities....................................................................................
Total accumulated other comprehensive loss,
gross of deferred income taxes .............................................................. $

(65,732) $
(11,378)
(86,748)

(16,891)
3,520
(88,558)

(163,858) $

(101,929)

2020

2019

Deferred taxes:

Unrealized appreciation on securities........................................................... $
Foreign currency translation adjustments ....................................................
Benefit plan liabilities....................................................................................
Total deferred taxes on accumulated
other comprehensive loss....................................................................... $

13,754 $
2,389
18,218

3,510
(739)
18,598

34,361 $

21,369

The following table shows the changes in the balances of each component of accumulated other

comprehensive income (loss), for the years ended December 31, 2020, 2019 and 2018 (in thousands):

Balance, January 1, 2018 ................................................................. $
Amounts arising during the period ............................................

70,646 $
(51,256)

Unrealized
Gains and
Losses on
Securities

Benefit Plan
Items

Foreign
Currency
Items
13,609 $ (47,033) $
6,204
(51,137)

Total
37,222
(96,189)

Reclassification adjustment included in
net (loss) income................................................................
Net other comprehensive (loss) income .........................................
Balance, December 31, 2018 ................................................
Unrealized - adjustment for ASU 2016-01.......................................
Adjusted balance, December 31, 2018 .................................
Amounts arising during the period ............................................

Reclassification adjustment included in
net (loss) income................................................................
Net other comprehensive (loss) income .........................................
Balance, December 31, 2019 ................................................
Amounts arising during the period ............................................

(14,185)
(65,441)
5,205
(5,839)
(634)
43,773

1,612
(49,525)
(35,916)
6,744
(29,172)
39,961

2,811
9,015
(38,018)
—
(38,018)
(34,108)

(9,762)
(105,951)
(68,729)
905
(67,824)
49,626

(56,520)
(12,747)
(13,381)
(52,474)

(8,008)
31,953
2,781
(12,842)

2,166
(31,942)
(69,960)
(41,558)

(62,362)
(12,736)
(80,560)
(106,874)

Reclassification adjustment included in
net income ..........................................................................
Plan amendment arising during the year...................................
Net other comprehensive (loss) income .........................................

13,877
—
(38,597)
Balance, December 31, 2020 ................................................ $ (51,978) $

1,072
—
(11,770)

19,658
4,709
38,279
38,279
(48,937)
1,430
(8,989) $ (68,530) $ (129,497)

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table shows the significant amounts reclassified out of each component of accumulated other

comprehensive income for the years ended of December 31, 2020, 2019 and 2018 (in thousands):

Details about Accumulated Other
Comprehensive Income Components

Unrealized net depreciation
(appreciation)
of securities:

Foreign currency translations:

Amount Reclassified from
Accumulated Other Comprehensive Income (a)
2019

2018

2020

Affected Line Item in the
Consolidated Statement of Operations
Where Net Income is Presented

17,566

$ (71,544) $

17,956 Net realized investment gains

(losses)

(3,689)

15,024

(3,771) Total federal and foreign

income tax (benefit) provision

13,877

$ (56,520) $

14,185 Net income (loss)

1,357

$ (10,137) $

(2,041) Net realized investment gains

(losses)

(285)

2,129

429 Total federal and foreign

income tax (benefit) provision

1,072

(8,008) $

(1,612) Net gain (loss)

Amortization of benefit plan items:

Net actuarial gain............................ $

5,961

2,742

(3,563) Other underwriting expenses (b)

Prior service costs (income) ............

—

5 Other underwriting expenses (b)

5,961

2,742

(3,558) Gain (loss) before federal and

(1,252)

(576)

foreign
income tax benefit
747 Total federal and foreign

income tax (benefit) provision

4,709

2,166

(2,811) Net gain (loss)

Total reclassifications ........................... $

19,658

$ (62,362) $

9,762

(a) Amounts in parentheses indicate decreases to the indicated line item of the consolidated statements of

operations.

(b) These accumulated other comprehensive income components are included in the computation of net periodic

benefit plan costs (see Note 14 for additional details).

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. Unpaid Losses and Loss Adjustment Expenses

Estimates of reserves for unpaid losses and loss adjustment expenses, which relate to loss events that have
occurred on or before the balance sheet date, are contingent on many assumptions that may or may not occur in
the future. The estimates reflect assumptions regarding initial expectations of losses and patterns of loss reporting,
both for claims with higher frequency and lower severity as well as for claims with lower frequency and higher
severity associated with individual large loss events, such as earthquakes, windstorms, and floods. The eventual
outcome of these loss events may be different from the assumptions underlying the Companys reserve estimates.
When the business environment and loss trends diverge from expected trends, the Company may have to adjust
its reserves accordingly, potentially resulting in adverse or favorable effects to the Companys financial results. The
Company believes that the recorded estimate represents the best estimate of unpaid losses and loss adjustment
expenses based on the information available as of December 31, 2020. The estimate is reviewed on a quarterly
basis and the ultimate liability may be greater or less than the amounts provided, for which any adjustments will
be reflected in the periods in which they become known.

The Companys estimate of ultimate loss is determined based on a review of the results of several commonly
accepted actuarial projection methodologies incorporating the quantitative and qualitative information described
above. The specific methodologies the Company utilizes in its loss reserve review process include, but may not be
limited to (i) incurred and paid loss development methods, (ii) incurred and paid Bornhuetter Ferguson (BF)
methods and (iii) loss ratio methods. The incurred and paid loss development methods utilize loss development
patterns derived from historical loss emergence trends usually based on cedant/insured claim information to
determine ultimate loss. These methods assume that the ratio of losses in one period to losses in an earlier period
will remain constant in the future. Loss ratio methods multiply expected loss ratios, derived from aggregated
analyses of internally developed pricing trends, by earned premium to determine ultimate loss. The incurred and
paid BF methods are a blend of the loss development and loss ratio methods. These methods utilize both loss
development patterns, as well as expected loss ratios, to determine ultimate loss. When using the BF methods, the
initial treaty year ultimate loss is based predominantly on expected loss ratios. As loss experience matures, the
estimate of ultimate loss using this methodology is based predominantly on loss development patterns. The
Company generally does not utilize methodologies that are dependent on claim counts reported, claim counts
settled or claim counts open. Due to the nature of the Companys business, this information is not routinely
provided for every treaty/program. Consequently, actuarial methods utilizing this information generally cannot be
relied upon by the Company in its loss reserve estimation process. As a result, for much of the Companys business,
the separate analysis of frequency and severity of loss activity underlying overall loss emergence trends is not
practical. Generally, the Company relies on BF and loss ratio methods for estimating ultimate loss liabilities for
more recent treaty years. These methodologies, at least in part, apply a loss ratio, determined from aggregated
analyses of internally developed pricing trends across reserve cells, to premium earned on that business.
Adjustments to premium estimates generate appropriate adjustments to ultimate loss estimates in the quarter in
which they occur, using the BF and loss ratio methods. To estimate losses for more mature treaty years, the
Company generally relies on the incurred loss development methodology, which does not rely on premium
estimates. In addition, the Company may use other methods to estimate liabilities for specific types of claims. For
property catastrophe losses, the Company may utilize vendor catastrophe models to estimate ultimate loss soon
after a loss occurs, where loss information is not yet reported to the Company from cedants/insureds. Incurred but
not reported reserves are determined by subtracting the total of paid loss and case reserves, including additional
case reserves, from ultimate loss.

The Company completes comprehensive loss reserve reviews, which include a reassessment of loss
development and expected loss ratio assumptions, on an annual basis. The Company completed this years annual
review in the fourth quarter of 2020. The results of these reviews are reflected in the period in which they are
completed. Quarterly, the Company compares actual
loss emergence to expectations established by the
comprehensive loss reserve review process. In the event that loss trends diverge from expected trends, the
Company may have to adjust its reserves for losses and loss adjustment expenses (LAE) accordingly. Any
adjustments will be reflected in the periods in which they become known, potentially resulting in adverse or
favorable effects to our financial results. The Company believes that the recorded estimate represents the best
estimate of unpaid losses and LAE based on the information available at December 31, 2020. The Companys most
significant assumptions underlying its estimate of losses and LAE reserves are as follows: (i) that historical loss
emergence trends are indicative of future loss development trends; (ii) that internally developed pricing trends
provide a reasonable basis for determining loss ratio expectations for recent underwriting years; and (iii) that no

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

provision is made for extraordinary future emergence of new classes of loss or types of loss that are not
sufficiently represented in its historical database or that are not yet quantifiable if not in its database.

U.S. Casualty Reinsurance

The following tables present i) incurred loss and allocated loss adjustment expenses (net of reinsurance), ii)
total incurred but not reported ("IBNR") liabilities plus expected development on reported loss and iii) cumulative
paid loss and allocated loss adjustment expenses (net of reinsurance) for the U.S. Casualty Reinsurance line of
business for the year ended and as of December 31, 2020 (in thousands):

Incurred Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
For the Years Ended December 31,

2013

2016
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)

2014

2019

2017

2018

2015

As of
December 31, 2020
Total of IBNR
Liabilities Plus
Expected
Development on
Reported Losses

2020

$ 173,475 $ 179,282 $ 185,531 $ 188,566 $ 185,102 $ 171,977 $ 160,416 $ 157,240
176,206
188,509
213,269
243,688
287,211
282,169
— 288,779

180,073
191,416
215,396
238,206
274,182
— 266,667
—

193,123
189,549
— 202,289
—
—
—
—

193,832
192,900
206,397
— 224,911
—
—
—

190,946
— 191,774
—
—
—
—
—

189,183
195,409
209,425
229,958
— 259,960
—
—

— 185,498
—
—
—
—
—
—

19,604
31,968
20,501
29,849
62,821
108,980
150,902
234,646

Accident
Year

2013
2014
2015
2016
2017
2018
2019
2020

Total incurred loss and loss adjustment expenses $1,837,071

Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
For the Years Ended December 31,

Accident
Year

2013
(unaudited)

2014
(unaudited)

2015
(unaudited)

2016
(unaudited)

2017
(unaudited)

2018
(unaudited)

2019
(unaudited)

2020

2013
2014
2015
2016
2017
2018
2019
2020

9,984
—
—
—
—
—
—
—

17,035
13,067
—
—
—
—
—
—

46,501
30,912
11,379
—
—
—
—
—

70,275
52,326
29,271
18,126
—
—
—
—

89,405
74,662
56,207
44,246
19,897
—
—
—

$ 102,698
92,160
79,217
68,903
42,168
30,483
—
—

$ 111,886
107,407
111,846
102,620
78,251
63,380
24,416
—

$ 121,338
122,213
135,032
136,165
121,772
108,248
69,092
19,824

Total paid loss and loss adjustment expenses
Total incurred loss and loss adjustment expenses
Outstanding liabilities for loss and allocated loss adjustment expenses for accident years prior to 2013

833,684
1,837,071
220,377

Liabilities for loss and allocated loss adjustment expenses, net of reinsurance

$1,223,764

Average Annual Percentage Payout of Incurred Loss and Allocated Loss Adjustment Expenses by Age,
Net of Reinsurance

In Year:

Average of
each year

8.0%

11.1%

13.3%

13.4%

12.6%

7.7%

4.1%

7.0%

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

U.S. Property Reinsurance

The following tables present i) incurred loss and allocated loss adjustment expenses (net of reinsurance), ii)
total IBNR liabilities plus expected development on reported loss and iii) cumulative paid loss and allocated loss
adjustment expenses (net of reinsurance) for the U.S. Property Reinsurance line of business for the year ended and
as of December 31, 2020 (in thousands):

Incurred Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
For the Years Ended December 31,

Accident
Year

2013

2014

2015

2016

2017

2018

(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)

2019
(unaudited)

2020

2013
2014
2015
2016
2017
2018
2019
2020

$ 228,723 $ 227,622 $ 215,655 $ 204,675 $ 197,291 $ 197,131 $ 196,885 $ 195,295
139,007
133,895
137,822
284,261
255,388
248,145
364,499

138,666
133,905
136,811
285,033
266,038
— 255,198
—
—

138,706
134,425
136,687
276,053
— 285,489
—
—

155,969
— 147,845
—
—
—
—
—

139,211
134,926
137,726
— 319,629
—
—
—

142,420
142,830
— 141,626
—
—
—
—

— 156,711
—
—
—
—
—
—

As of
December 31, 2020
Total of IBNR
Liabilities Plus
Expected
Development on
Reported Losses

364
307
523
1,107
1,257
5,978
16,983
195,550

Total incurred loss and loss adjustment expenses $1,758,312

Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
For the Years Ended December 31,

Accident
Year

2013
(unaudited)

2014
(unaudited)

2015
(unaudited)

2016
(unaudited)

2017
(unaudited)

2018
(unaudited)

2019
(unaudited)

2020

2013
2014
2015
2016
2017
2018
2019
2020

90,335
—
—
—
—
—
—
—

$ 149,768
53,489
—
—
—
—
—
—

$ 177,272
96,981
65,688
—
—
—
—
—

$ 188,655
124,648
100,692
48,509
—
—
—
—

$ 191,034
133,035
117,186
117,928
93,758
—
—
—

$ 191,628
135,316
125,750
122,070
237,341
67,361
—
—

$ 193,349
136,543
129,873
132,132
269,187
202,370
54,932
—

Total paid loss and loss adjustment expenses
Total incurred loss and loss adjustment expenses
Outstanding liabilities for loss and allocated loss adjustment expenses for accident years prior to 2013

$ 193,939
137,345
131,389
134,990
277,326
228,879
207,777
115,163

1,426,808
1,758,312
1,908

Liabilities for loss and allocated loss adjustment expenses, net of reinsurance

$ 333,412

Average Annual Percentage Payout of Incurred Loss and Allocated Loss Adjustment Expenses by Age,
Net of Reinsurance

In Year:

Average of
each year

33.5%

46.3%

10.9%

5.5%

1.3%

0.6%

0.8%

0.4%

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Non-U.S. Casualty Reinsurance

The following tables present i) incurred loss and allocated loss adjustment expenses (net of reinsurance), ii)
total IBNR liabilities plus expected development on reported loss and iii) cumulative paid loss and allocated loss
adjustment expenses (net of reinsurance) for the Non-U.S. Casualty Reinsurance line of business for the year
ended and as of December 31, 2020 (in thousands):

Incurred Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
For the Years Ended December 31,

Accident
Year

2013
(unaudited)

2014
(unaudited)

2015
(unaudited)

2016
(unaudited)

2017
(unaudited)

2018
(unaudited)

2019
(unaudited)

2020

As of
December 31, 2020
Total of IBNR
Liabilities Plus
Expected
Development on
Reported Losses

2013
2014
2015
2016
2017
2018
2019
2020

94,258 $
—
—
—
—
—
—
—

91,877 $
83,256
—
—
—
—
—
—

92,770 $
84,708
81,623
—
—
—
—
—

92,439 $
89,751
82,495
89,229
—
—
—
—

81,348 $
95,255
100,628
95,537
119,298
—
—
—

78,004 $
93,999
99,382
101,036
122,069
135,010
—
—

73,250 $ 72,565
84,340
84,775
87,277
89,839
91,089
93,783
118,442
119,461
131,895
132,783
162,781
165,267
— 167,192

11,050
18,174
18,761
15,060
37,538
47,976
85,975
128,974

Total incurred loss and loss adjustment expenses $ 915,581

Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
For the Years Ended December 31,

Accident
Year

2013
(unaudited)

2014
(unaudited)

2015
(unaudited)

2016
(unaudited)

2017
(unaudited)

2018
(unaudited)

2019
(unaudited)

2020

2013
2014
2015
2016
2017
2018
2019
2020

12,665 $
—
—
—
—
—
—
—

22,119
9,044
—
—
—
—
—
—

27,048
19,814
8,161
—
—
—
—
—

30,787
25,710
17,656
8,405
—
—
—
—

35,033
30,627
24,315
22,484
10,335
—
—
—

37,862
34,738
28,321
29,174
24,292
13,528
—
—

42,063
39,067
32,692
34,095
34,882
31,507
16,457
—

44,440
41,835
35,899
39,508
42,950
44,879
35,065
15,205

Total paid loss and loss adjustment expenses
Total incurred loss and loss adjustment expenses
Outstanding liabilities for loss and allocated loss adjustment expenses for accident years prior to 2013

299,781
915,581
257,453

Liabilities for loss and allocated loss adjustment expenses, net of reinsurance

$ 873,253

Average Annual Percentage Payout of Incurred Loss and Allocated Loss Adjustment Expenses by Age,
Net of Reinsurance

In Year:

Average of
each year

10.2%

12.9%

8.7%

5.0%

5.6%

3.9%

7.3%

7.8%

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Non-U.S. Property Reinsurance

The following tables present i) incurred loss and allocated loss adjustment expenses (net of reinsurance), ii)
total IBNR liabilities plus expected development on reported loss and iii) cumulative paid loss and allocated loss
adjustment expenses (net of reinsurance) for the Non-U.S. Property Reinsurance line of business for the year
ended and as of December 31, 2020 (in thousands):

Incurred Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
For the Years Ended December 31,

Accident
Year

2013

2014

2015

2016

2017

2018

(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)

2019
(unaudited)

2020

2013
2014
2015
2016
2017
2018
2019
2020

$ 361,223 $ 333,642 $ 309,945 $ 297,643 $ 282,609 $ 277,237 $ 277,169 $ 273,947
260,046
226,256
320,388
332,068
384,143
461,199
585,452

262,756
229,750
325,886
336,339
394,782
— 501,289
—
—

266,549
235,385
335,500
350,776
— 401,334
—
—

318,662
— 355,809
—
—
—
—
—

273,639
250,196
359,757
— 380,575
—
—
—

292,987
268,403
— 363,840
—
—
—
—

— 345,289
—
—
—
—
—
—

As of
December 31, 2020
Total of IBNR
Liabilities Plus
Expected
Development on
Reported Losses

2,339
3,801
5,644
17,775
22,027
40,302
54,101
309,696

Total incurred loss and loss adjustment expenses $2,843,499

Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
For the Years Ended December 31,

Accident
Year

2013
(unaudited)

2014
(unaudited)

2015
(unaudited)

2016
(unaudited)

2017
(unaudited)

2018
(unaudited)

2019
(unaudited)

2020

2013
2014
2015
2016
2017
2018
2019
2020

49,033
—
—
—
—
—
—
—

$ 158,656
66,035
—
—
—
—
—
—

$ 220,087
170,602
52,524
—
—
—
—
—

$ 243,386
217,347
150,746
60,100
—
—
—
—

$ 255,052
231,920
182,215
190,545
62,265
—
—
—

$ 261,521
240,014
192,416
233,487
193,857
51,241
—
—

$ 265,234
243,964
204,510
258,289
257,512
208,307
63,607
—

$ 267,188
247,043
210,481
269,712
283,441
271,009
244,692
90,720

Total paid loss and loss adjustment expenses
Total incurred loss and loss adjustment expenses
Outstanding liabilities for loss and allocated loss adjustment expenses for accident years prior to 2013

1,884,286
2,843,499
62,127

Liabilities for loss and allocated loss adjustment expenses, net of reinsurance

$1,021,340

Average Annual Percentage Payout of Incurred Loss and Allocated Loss Adjustment Expenses by Age,
Net of Reinsurance

In Year:

Average of
each year

17.4%

40.9%

18.6%

8.7%

4.1%

4.5%

1.8%

1.6%

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

U.S. Casualty Insurance

The following tables present i) incurred loss and allocated loss adjustment expenses (net of reinsurance), ii)
total
iii) cumulative number of reported loss
IBNR liabilities plus expected development on reported loss,
(determined by the number of events, not claimants, regardless of whether or not any payments were ultimately
made) and iv) cumulative paid loss and allocated loss adjustment expenses (net of reinsurance) for the U.S.
Casualty Insurance line of business for the year ended and as of December 31, 2020 (in thousands):

Incurred Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
For the Years Ended December 31,

Accident
Year

2013

2016
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)

2019

2015

2014

2017

2018

As of

December 31, 2020

Total of IBNR
Liabilities Plus Cumulative
Number of
Development on Reported
Reported Losses

Expected

Claims

2020

2013 $ 244,726 $ 241,873 $ 238,051 $ 217,364 $ 207,109 $ 206,216 $ 205,180 $ 204,319 $
2014
2015
2016
2017
2018
2019
2020

238,953
246,180
238,673
328,917
464,897
546,450
— 580,703

243,118
250,801
244,709
349,488
476,153
— 541,703
—

— 294,177
—
—
—
—
—
—

275,305
— 287,419
—
—
—
—
—

259,288
278,209
278,025
— 341,698
—
—
—

252,427
258,870
263,819
356,730
— 458,328
—
—

269,942
286,650
— 278,509
—
—
—
—

6,624 $ 23,076
29,612
5,008
27,627
8,735
18,757
9,309
17,608
30,588
18,432
111,239
17,129
254,348
12,671
396,928

Total incurred loss and loss adjustment expenses $2,849,092

Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
For the Years Ended December 31,

Accident
Year

2013
(unaudited)

2014
(unaudited)

2015
(unaudited)

2016
(unaudited)

2017
(unaudited)

2018
(unaudited)

2019
(unaudited)

2020

2013
2014
2015
2016
2017
2018
2019
2020

51,986
—
—
—
—
—
—
—

86,527
59,690
—
—
—
—
—
—

$ 128,490
94,896
66,555
—
—
—
—
—

$ 162,146
143,152
103,030
59,657
—
—
—
—

$ 174,795
177,765
154,993
100,615
60,032
—
—
—

$ 186,538
209,941
196,107
154,153
118,611
74,198
—
—

$ 192,374
221,230
217,701
187,563
191,339
177,531
91,475
—

Total paid loss and loss adjustment expenses
Total incurred loss and loss adjustment expenses
Outstanding liabilities for loss and allocated loss adjustment expenses for accident years prior to 2013

$ 194,170
225,533
224,885
207,489
249,507
271,354
191,714
95,102

1,659,754
2,849,092
9,363

Liabilities for loss and allocated loss adjustment expenses, net of reinsurance

$1,198,701

Average Annual Percentage Payout of Incurred Loss and Allocated Loss Adjustment Expenses by Age,
Net of Reinsurance

In Year:

Average of
each year

19.6%

18.9%

22.1%

16.8%

9.9%

4.5%

2.5%

0.8%

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

U.S. Property Insurance

The following tables present i) incurred loss and allocated loss adjustment expenses (net of reinsurance), ii)
total
iii) cumulative number of reported loss
IBNR liabilities plus expected development on reported loss,
(determined by the number of events, not claimants, regardless of whether or not any payments were ultimately
made) and iv) cumulative paid loss and allocated loss adjustment expenses (net of reinsurance) for the U.S.
Property Insurance line of business for the year ended and as of December 31, 2020 (in thousands):

Incurred Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
For the Years Ended December 31,

2013

2016
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)

2018

2014

2015

2017

2019

2020

—

— 227,198
—

233,124
— 187,266
—

$ 212,167 $ 203,970 $ 197,496 $ 197,124 $ 196,391 $ 196,374 $ 196,272 $ 196,351
229,508
193,990
205,178
221,359
267,160
371,941
365,423

229,538
193,911
205,579
221,793
267,568
— 374,697
—
—

230,867
194,253
205,659
224,065
— 289,059
—

231,401
195,061
209,572
— 230,670
—

232,178
197,486
— 221,585
—

—

Accident
Year

2013

2014

2015

2016

2017

2018

2019

2020

As of

December 31, 2020

Total of IBNR
Liabilities Plus
Expected

Cumulative
Number of
Development on Reported
Reported Losses

Claims

1 $ 10,604
12,402
5
13,916
20
14,011
81
19,421
251
24,860
754
29,459
3,064
22,976
94,813

Total incurred loss and loss adjustment expenses $2,050,910

Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
For the Years Ended December 31,

Accident
Year

2013
(unaudited)

2014
(unaudited)

2015
(unaudited)

2016
(unaudited)

2017
(unaudited)

2018
(unaudited)

2019
(unaudited)

2020

2013
2014
2015
2016
2017
2018
2019
2020

101,466 $
—
—
—
—
—
—
—

190,056 $
80,295
—
—
—
—
—
—

192,033 $
221,162
77,398
—
—
—
—
—

194,391 $
228,772
181,585
75,333
—
—
—
—

195,998 $
230,614
193,617
199,384
77,377
—
—
—

196,122 $
230,488
193,539
203,238
208,714
113,119
—
—

196,126 $ 196,143
229,236
229,213
193,750
193,551
204,164
204,060
219,374
217,062
263,470
259,647
358,872
205,868
194,751
—

Total paid loss and loss adjustment expenses
Total incurred loss and loss adjustment expenses
Outstanding liabilities for loss and allocated loss adjustment expenses for accident years prior to 2013

1,859,760
2,050,910
380

Liabilities for loss and allocated loss adjustment expenses, net of reinsurance

$ 191,530

Average Annual Percentage Payout of Incurred Loss and Allocated Loss Adjustment Expenses by Age,
Net of Reinsurance

In Year:

Average of
each year

45.1%

50.9%

2.8%

0.7%

0.3%

0.0%

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Non-U.S. Casualty Insurance

The following tables present i) incurred loss and allocated loss adjustment expenses (net of reinsurance) and
ii) total IBNR liabilities plus expected development on reported loss and iii) cumulative paid loss and allocated loss
adjustment expenses (net of reinsurance) for the Non-U.S. Casualty Insurance line of business for the year ended
and as of December 31, 2020 (in thousands):

Incurred Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
For the Years Ended December 31,

Accident
Year

2013
(unaudited)

2014
(unaudited)

2015
(unaudited)

2016
(unaudited)

2017
(unaudited)

2018
(unaudited)

2019
(unaudited)

2020

2013
2014
2015
2016
2017
2018
2019
2020

87,312 $
—
—
—
—
—
—
—

83,838 $
87,602
—
—
—
—
—
—

84,287 $
88,889
87,511
—
—
—
—
—

85,590 $
87,326
86,119
81,750
—
—
—
—

83,983 $
84,846
84,535
78,300
91,883

87,932 $
78,702
77,172
81,596
93,689
— 104,647
—
—

81,960 $ 82,076
78,441
78,286
81,262
80,044
76,246
79,862
87,251
90,402
105,981
105,084
143,615
— 141,357
— 173,035
—

As of
December 31, 2020
Total of IBNR
Liabilities Plus
Expected
Development on
Reported Losses

11,312
19,177
28,995
27,279
37,025
43,246
85,909
147,895

Total incurred loss and loss adjustment expenses $827,907

Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
For the Years Ended December 31,

Accident
Year

2013
(unaudited)

2014
(unaudited)

2015
(unaudited)

2016
(unaudited)

2017
(unaudited)

2018
(unaudited)

2019
(unaudited)

2020

2013
2014
2015
2016
2017
2018
2019
2020

5,781 $
—
—
—
—
—
—
—

9,409 $
5,081
—
—
—
—
—
—

17,380 $
12,155
3,894
—
—
—
—
—

25,775 $
20,064
8,943
3,427
—
—
—
—

35,706 $
32,630
19,259
10,703
4,135
—
—
—

41,909
37,941
26,497
18,471
12,827
5,037
—
—

47,917
44,484
33,850
24,818
21,041
20,731
13,508
—

57,258
47,824
41,633
37,487
32,249
38,003
35,581
12,223

Total paid loss and loss adjustment expenses
Total incurred loss and loss adjustment expenses
Outstanding liabilities for loss and allocated loss adjustment expenses for accident years prior to 2013

302,258
827,907
201,142

Liabilities for loss and allocated loss adjustment expenses, net of reinsurance

$ 726,791

Average Annual Percentage Payout of Incurred Loss and Allocated Loss Adjustment Expenses by Age,
Net of Reinsurance

In Year:

Average of
each year

6.4%

10.4%

9.4%

8.8%

10.6%

7.4%

6.7%

10.1%

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The reconciliation of the net incurred and paid claims development tables (preceding) to the liability for
unpaid losses and loss adjustment expenses in the consolidated statement of financial position as of December 31,
2020 is as follows (in thousands):

December 31,
2020

Net unpaid loss and allocated loss adjustment expenses:

U.S. Casualty Reinsurance................................................................................................
U.S. Property Reinsurance ...............................................................................................
Non-U.S. Casualty Reinsurance........................................................................................
Non-U.S. Property Reinsurance .......................................................................................
U.S. Casualty Insurance....................................................................................................
U.S. Property Insurance ...................................................................................................
Non-U.S. Casualty Insurance............................................................................................
Unallocated loss adjustment expenses............................................................................
Workers' compensation discount ....................................................................................
Other................................................................................................................................
Effect of foreign exchange rates ......................................................................................

Total unpaid loss and allocated loss adjustment expenses,

1,223,764
333,412
873,253
1,021,340
1,198,701
191,530
726,791
90,744
(32,248)
177,224
(7,692)

net of reinsurance.................................................................................................

5,796,819

Reinsurance recoverable on unpaid losses and loss adjustment expenses:

U.S. Casualty Reinsurance................................................................................................
U.S. Property Reinsurance ...............................................................................................
Non-U.S. Casualty Reinsurance........................................................................................
Non-U.S. Property Reinsurance .......................................................................................
U.S. Casualty Insurance....................................................................................................
U.S. Property Insurance ...................................................................................................
Non-U.S. Casualty Insurance............................................................................................
Unallocated loss adjustment expenses............................................................................
Effect of foreign exchange rates ......................................................................................
Other................................................................................................................................
Total reinsurance recoverable on unpaid losses .....................................................

10,472
104,700
197
72,580
330,552
122,816
353,704
300
(1,744)
54,235
1,047,812

Total gross unpaid loss and loss adjustment expenses....................................................

6,844,631

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table sets forth the activity in the liability for unpaid losses and loss adjustment expenses for

the years ended December 31, 2020, 2019 and 2018 (in thousands):

Gross unpaid losses and loss adjustment expenses,

beginning of year............................................................................ $ 6,080,670

$ 5,728,203

$ 5,463,595

2020

2019

2018

Less: Ceded unpaid losses and loss adjustment

expenses, beginning of year...........................................................

894,255

927,035

866,985

Net unpaid losses and loss adjustment expenses,

beginning of year ......................................................................

5,186,415

4,801,168

4,596,610

Add: Net incurred losses and loss adjustment expenses related to:
Current year ................................................................................
Prior years ...................................................................................

Total net incurred losses and loss adjustment

2,644,068
(219,506)

2,383,580
(229,549)

2,061,397
(345,652)

expenses..............................................................................

2,424,562

2,154,031

1,715,745

Less: Net paid losses and loss adjustment expenses related to:

Current year ................................................................................
Prior years ...................................................................................

574,232
1,366,281

521,425
1,254,766

399,891
1,033,807

Total net paid losses and loss adjustment

expenses..............................................................................

1,940,513

1,776,191

1,433,698

Effect of exchange rate changes .......................................................

126,355

7,407

(77,489)

Net unpaid losses and loss adjustment expenses, end of year.........
Add: Ceded unpaid losses and loss adjustment

5,796,819

5,186,415

4,801,168

expenses, end of year ....................................................................

1,047,812

894,255

927,035

Gross unpaid losses and loss adjustment

expenses, end of year.......................................................... $ 6,844,631

$ 6,080,670

$ 5,728,203

Net incurred losses and loss adjustment expenses related to the current year were $2,644.1 million, $2,383.6
million and $2,061.4 million for the years ended December 31, 2020, 2019 and 2018, respectively. The increases in
incurred losses and loss adjustment expenses for the years ended December 31, 2020 and December 31, 2019
were principally attributable to increased losses associated with premium growth. The increase in incurred losses
and loss adjustment expenses for the year ended December 31, 2018 was principally attributable to increased
losses associated with premium growth partially offset by a reduction in current year catastrophe losses. For the
years ended December 31, 2020, 2019 and 2018, current year property catastrophe losses were $196.4 million,
$289.4 million and $257.4 million, respectively. For the year ended December 31, 2020, current year property
catastrophe losses included $27.3 million related to Hurricane Laura and $17.7 million related to Midwest
Derecho. In addition, for the year ended December 31, 2020, current year losses included $146.3 million related to
the COVID-19 pandemic. For the year ended December 31, 2019, current year property catastrophe losses
included $91.5 million related to Typhoon Hagibis, $46.5 million related to Typhoon Faxai, and $25.9 million
related to Hurricane Dorian. For the year ended December 31, 2018, current year catastrophe losses included
$35.0 million related to the Northern California Wildfires, $30.9 million related to Hurricane Michael, $28.1 million
related to Typhoon Jebi, and $15.0 million related to the Southern California Wildfires.

Net incurred losses and loss adjustment expenses related to prior years included reductions in loss estimates
of $219.5 million, $229.5 million and $345.7 million for the years ended December 31, 2020, 2019 and 2018,
respectively. The reductions in prior years incurred losses and loss adjustment expenses were attributable to
decreased loss estimates due to loss emergence lower than expectations in most regions and lines of business.

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Net paid losses and loss adjustment expenses related to the current year were $574.2 million, $521.4 million
and $399.9 million for the years ended December 31, 2020, 2019 and 2018, respectively. The increase in paid
losses and loss adjustment expenses for the year ended December 31, 2020 was principally due increased
payments on current year catastrophe losses. The increase in paid losses and loss adjustment expenses for the
year ended December 31, 2019 was principally due to Crop business in U.S. Property Insurance. The increase in
paid losses and loss adjustment expenses for the year ended December 31, 2018 was principally attributable to
increased losses associated with premium growth partially offset by a reduction in current year catastrophe losses.

The effects of exchange rate changes on net unpaid losses and loss adjustment expenses resulted in
increases of $126.4 million and $7.4 million for the years ended December 31, 2020 and 2019, respectively, and a
decrease of $77.5 million for the year ended December 31, 2018, and were attributable to Non-U.S. Reinsurance
and Non-U.S. Insurance.

Ceded unpaid losses and loss adjustment expenses were $1,047.8 million, $894.3 million and $927.0 million
as of December 31, 2020, 2019 and 2018, respectively. The increase in ceded unpaid losses and loss adjustment
expenses for the year ended December 31, 2020 was principally attributable to Insurance business. The decrease
in ceded unpaid losses and loss adjustment expenses for the year ended December 31, 2019 was principally
attributable to a decrease in ceded unpaid reinsurance recoverables on catastrophe losses.

The Company uses tabular reserving for workers compensation indemnity loss reserves, which are
considered to be fixed and determinable, and discounts such reserves using an interest rate of 3.5%. Workers
compensation indemnity loss reserves have been discounted using the Life Table for Total Population: United
States, 2009. Reserves reported at the discounted value were $46.9 million and $49.9 million as of December 31,
2020 and 2019, respectively. The amount of case reserve discount was $13.9 million and $16.2 million as of
December 31, 2020 and 2019, respectively. The amount of incurred but not reported reserve discount was $18.3
million and $18.7 million as of December 31, 2020 and 2019, respectively.

The Company is not materially exposed to asbestos and environmentally-related liabilities and does not

establish a specific reserve for such exposures.

7. Reinsurance and Retrocessions

The Company utilizes reinsurance and retrocessional agreements to reduce and spread the risk of loss on its
insurance and reinsurance business and to limit exposure to multiple claims arising from a single occurrence. The
Company is subject to accumulation risk with respect to catastrophic events involving multiple treaties, facultative
certificates and insurance policies. To protect against these risks, the Company purchases catastrophe excess of
loss protection. The retention, the level of capacity purchased, the geographical scope of the coverage and the
costs vary from year to year. Additionally, the Company purchases specific protections related to the insurance
business underwritten in both the U.S. and abroad.

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

There is credit risk with respect to reinsurance, which would result in the Company recording a charge to
earnings in the event that such reinsuring companies are unable, at some later date, to meet their obligations
under the reinsurance agreements in force. Reinsurance recoverables are recorded as assets and a reserve for
uncollectible reinsurance recoverables is established based on the Companys evaluation of each reinsurers or
retrocessionaires ability to meet its obligations under the agreements. Premiums written and earned are stated
net of reinsurance ceded in the consolidated statements of operations. Direct, reinsurance assumed, reinsurance
ceded and net amounts for the years ended December 31, 2020, 2019 and 2018 follow (in thousands):

Premiums Written

Direct ....................................................................................
Add: assumed .......................................................................
Less: ceded ...........................................................................
Net ..................................................................................

Premiums Earned

2020

Year Ended December 31,
2019

2018

2,232,629 $
2,214,048
657,126
3,789,551 $

1,967,401 $
1,848,558
422,190
3,393,769 $

1,626,198
1,702,430
430,808
2,897,820

2,055,922 $
2,065,821
535,103
3,586,640 $

1,784,599 $
1,779,967
385,413
3,179,153 $

1,491,083
1,652,231
387,885
2,755,429

The total amount of reinsurance recoverable on paid and unpaid losses as of December 31, 2020 and 2019
was $1,214.5 million and $979.5 million, respectively. The reserve for uncollectible reinsurance recoverable was
$9.7 million and $11.7 million, as of December 31, 2020 and 2019, respectively, and has been netted against
reinsurance recoverables on loss payments in the consolidated balance sheets.

8. Reinsurance Recoverables

The Companys ten largest reinsurers represent 70.6% of its total reinsurance recoverables as of December
31, 2020. Amounts due from all other reinsurers are diversified, with no other individual reinsurer representing
more than $25.1 million, or 2.1%, of reinsurance recoverables as of December 31, 2020, and the average balance is
less than $2.3 million. The Company held total collateral of $276.4 million as of December 31, 2020, representing
22.8% of total reinsurance recoverables. The following table shows the total amount as of December 31, 2020 that
is recoverable from each of the Companys ten largest reinsurers for paid and unpaid losses, the amount of
collateral held and each reinsurers A.M. Best rating (in thousands):

Reinsurer
Federal Crop Insurance Corporation .........................................
Lloyd's Syndicates (excluding Brit PLC Syndicate 2987) ............
Markel CatCo Reinsurance Ltd. .................................................
CRC Reinsurance Limited...........................................................
Markel Global Reinsurance Company .......................................
Berkley Insurance Company ......................................................
Hannover Rueck SE....................................................................
Swiss Reinsurance America Corporation ...................................
Everest Reinsurance (Bermuda) Ltd. .........................................
Brit (Lloyd's Syndicate 2987) .....................................................
Sub-total...............................................................................
All other .....................................................................................
Total................................................................................

Reinsurance
Recoverable
244,145
$
210,323
118,010
79,240
48,555
43,034
36,384
26,860
25,797
25,209
857,557
356,916
$ 1,214,473

% of
Total

Collateral

A.M.
Best
Rating

20.2% $
17.3
9.7
6.5
4.0
3.5
3.0
2.2
2.1
2.1
70.6
29.4

100.0% $

— NR

3,005 A
117,903 NR
79,240 NR

— A
— A+
223 A+
— A+
— A+
954 A

201,325
75,027
276,352

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Several individual reinsurers are part of the same corporate group. The following table shows the five largest
aggregate amounts that are recoverable from all individual entities that form part of the same corporate group as
of December 31, 2020 and the amount of collateral held from each group (in thousands):

Reinsurer
Federal Crop Insurance Corporation.................................................
Lloyd's Syndicates (excluding Brit PLC Syndicate 2987)....................
Markel Corporation...........................................................................
Fairfax Financial Holdings Ltd. ..........................................................
WR Berkley Corporation ...................................................................
Sub-total ......................................................................................
All other ............................................................................................
Total .......................................................................................

Reinsurance

Recoverable

244,145
210,323
183,060
134,512
43,034
815,074
399,399
$ 1,214,473

% of

Total

20.2% $
17.3
15.0
11.1
3.5
67.1
32.9

100.0% $

Collateral

—
3,005
117,911
82,920
—
203,836
72,516
276,352

Reinsurance recoverables were $979.5 million and collateral was $296.5 million, or 30.3% of the reinsurance

recoverable balance, as of December 31, 2019.

The Company is the beneficiary of letters of credit, cash and other forms of collateral to secure certain
amounts due from its reinsurers. Collateral held by the Company as of December 31, 2020 was comprised of the
following forms (in thousands):

Form of Collateral
Trust agreements ............................................................................................... $
Funds withheld from reinsurers .........................................................................
Letters of credit ..................................................................................................

Total .............................................................................................................. $

Collateral

% of
Recoverables

133,876
88,904
53,572
276,352

11.0%
7.3
4.5
22.8%

Each reinsurance contract between the Company and the reinsurer describes the losses that are covered
under the contract and terms upon which payments are to be made. The Company often has the ability to utilize
collateral to settle unpaid balances due under its reinsurance contracts when it determines that the reinsurer has
not met its contractual obligations. Letters of credit are for the sole benefit of the Company to support the
obligations of the reinsurer, providing the Company with the unconditional ability, in its sole discretion, to draw
upon the letters of credit in support of any unpaid amounts due under the relevant contracts. Cash and
investments supporting funds withheld from reinsurers are included in the Companys invested assets. Funds
withheld from reinsurers are typically used to automatically offset payments due to the Company in accordance
with the terms of the relevant reinsurance contracts. Amounts held under trust agreements are typically
comprised of cash and investment grade fixed income securities and are not included in the Companys invested
assets. The ability of the Company to draw upon funds held under trust agreements to satisfy any unpaid amounts
due under the relevant reinsurance contracts is typically unconditional and at the sole discretion of the Company.

9. Debt Obligations, Common Shares and Non-Controlling Interest Preferred Shares of Subsidiaries

Debt Obligations

The amortized cost by component of the Companys debt obligations as of December 31, 2020 and 2019

were as follows (in thousands):

Series A Floating Rate Senior Debentures due 2021 .......................................... $
Series C Floating Rate Senior Debentures due 2021 ..........................................

Total debt obligations ................................................................................... $

49,998
39,986
89,984

49,971
39,971
89,942

December 31,
2020

December 31,
2019

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

On November 28, 2006, the Company completed the private sale of a $40.0 million aggregate principal
amount of floating rate senior debentures, Series C, due December 15, 2021 (the Series C Notes). Interest on the
Series C Notes accrues at a rate per annum equal to the three-month London Interbank Offer Rate (LIBOR), reset
quarterly, plus 2.50%, and is payable quarterly in arrears on March 15, June 15, September 15 and December 15 of
each year. The Company has the option to redeem the Series C Notes at par, plus accrued and unpaid interest, in
whole or in part on any interest payment date. For the years ended December 31, 2020 and 2019, the average
annual interest rate on the Series C Notes was 3.22% and 4.94%, respectively.

On February 22, 2006, the Company issued a $50.0 million aggregate principal amount of floating rate senior
debenture Series A, due March 15, 2021 (the Series A Notes), pursuant to a private placement offering. Interest
on the Series A Notes is due quarterly in arrears on March 15, June 15, September 15 and December 15 of each
year at an interest rate equal to the three-month LIBOR, reset quarterly, plus 2.20%. The Series A Notes are
callable by the Company on any interest payment date at their par value, plus accrued and unpaid interest. For the
years ended December 31, 2020 and 2019, the average annual interest rate on Series A Notes was 2.92% and
4.64%, respectively.

As of December 31, 2020 and 2019, the estimated fair value of the Companys debt obligations was $91.0
million and $92.6 million, respectively. The estimated fair value is based on quoted market prices of the Companys
debt, where available, for debt similar to the Companys, and discounted cash flow calculations.

Common Shares

The Company issued 2,582 common shares to OUSHI during the fourth quarter of 2019, in exchange for a

$225.5 million capital contribution.

The Company did not issue any common shares during the years ended December 31, 2020 and 2018.

The Company did not declare or pay any common share dividends during the year ended December 31,
2020. The Company declared and paid $50.0 million in common share dividends during the year ended December
31, 2019. The Company declared and paid $100.0 million in common share dividends during the year ended
December 31, 2018.

Non-Controlling Interest Preferred Shares of Subsidiaries

TIG Insurance Company (TIG), a Fairfax affiliate, holds all 23,807 shares of Hudsons 5.5% Series A
preferred stock with a liquidation preference of $1,000 per share and an aggregate book value of $23.8 million,
and all 5,492 shares of Greystones 5.5% Series A preferred stock, with a liquidation preference of $1,000 per share
and an aggregate book value of $5.5 million. The shares are not redeemable by Hudson or Greystone prior to
January 1, 2031. On or after January 1, 2031, the shares are redeemable, in whole or in part, by Hudson or
Greystone. On October 5, 2020, Greystones Board of Directors declared a preferred dividend to TIG in the amount
of $0.3 million, which was paid on October 21, 2020 and Hudsons Board of Directors declared a preferred dividend
to TIG in the amount of $1.3 million, which was paid on November 2, 2020. On October 9, 2019, Greystones Board
of Directors declared a preferred dividend to TIG in the amount of $0.3 million, which was paid on October 23,
2019 and Hudsons Board of Directors declared a preferred dividend to TIG in the amount of $1.3 million, which
was paid on October 24, 2019. On October 4, 2018, Greystones Board of Directors declared a preferred dividend
to TIG in the amount of $0.3 million, which was paid on October 22, 2018. On December 6, 2018, Hudsons Board
of Directors declared a preferred dividend to TIG in the amount of $1.3 million, which was paid on December 21,
2018. The aggregate amount of the preferred shares of Hudson and Greystone owned by TIG is presented on the
balance sheet as non-controlling interest preferred shares of subsidiaries in the amount of $29.3 million.

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10. Federal and Foreign Income Taxes

The components of the federal and foreign income tax provision included in the consolidated statements of

operations for the years ended December 31, 2020, 2019 and 2018 are as follows (in thousands):

Current:

United States ............................................................................... $
Foreign.........................................................................................
Total current income tax (benefit) provision .........................

(22,140) $
1,638
(20,502)

71,233
35,579
106,812

19,516
31,555
51,071

2020

2019

2018

Deferred:

United States tax expense (benefit) ............................................
United States change in valuation allowance

on certain foreign tax credits .................................................
Foreign tax expense (benefit)......................................................
Total deferred income tax provision (benefit) .......................

Total federal and foreign income tax provision................ $

49,548

(1,987)

(28,134)

—
7,390
56,938
36,436

28,124
(5,200)
20,937
127,749

—
242
(27,892)
23,179

Deferred federal and foreign income taxes reflect the tax impact of temporary differences between the
amount of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws and
regulations. Components of federal and foreign income tax assets and liabilities as of December 31, 2020 and 2019
are as follows (in thousands):

Unpaid losses and loss adjustment expenses..................................................... $
Unearned premiums...........................................................................................
Reserve for potentially uncollectible balances...................................................
Pension and benefit accruals..............................................................................
Investments ........................................................................................................
Foreign tax credit................................................................................................
Other ..................................................................................................................
Total deferred tax assets...............................................................................
Less valuation allowance ....................................................................................
Deferred tax assets after valuation allowance..............................................
Deferred acquisition costs ..................................................................................
Foreign deferred items .......................................................................................
Other ..................................................................................................................
Total deferred tax liabilities ..........................................................................
Net deferred tax assets............................................................................
Deferred income taxes on accumulated other

comprehensive income (loss) ...............................................................
Deferred federal and foreign income tax asset ..................................................
Current federal and foreign income tax receivable (payable) ......................
Federal and foreign income taxes receivable..................................................... $

2020

2019

54,084
51,988
2,982
29,867
40,371
51,017
—
230,309
(28,124)
202,185
54,706
7,723
20
62,449
139,736

34,361
174,097
54,613
228,710

48,583
44,011
2,981
27,952
108,869
50,860
5,084
288,340
(28,124)
260,216
48,430
15,113
—
63,543
196,673

21,369
218,042
(4,575)
213,467

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table reconciles federal and foreign income taxes at the statutory federal income tax rate to
the Companys tax provision and effective tax rate for the years ended December 31, 2020, 2019 and 2018 (in
thousands):

2020

2019

2018

Income before income tax................................ $296,543

Income tax provision computed at the

% of
Pre-tax
Income

Amount

% of
Pre-tax
Income

Amount
$246,954

Amount
$533,140

U.S. statutory tax rate on income .................. $ 62,274

21.0% $111,959

21.0% $ 51,860

21.0%

(Decrease) increase in income tax

resulting from:

Dividend received deduction ......................
Tax-exempt income.....................................
Proration recovery of tax preferred

income ......................................................
Foreign tax expense ....................................
State tax expense ........................................
True-up of prior year taxes..........................
Write-off of subsidiary NOL DTL..................
U.S. tax reform - tax rate adjustment .........
Change in valuation allowance....................
Other, net....................................................

Total federal and foreign income

(6,147)
(814)

215
774
(455)
(4,243)
—
(11,145)
—
(4,023)

(2.1)
(0.3)

0.1
0.3
(0.2)
(1.4)
—
(3.8)
—
(1.3)

(4,400)
(719)

205
1,300
483
(5,659)
(3,473)
(2,249)
28,124
2,178

(0.8)
(0.1)

0.0
0.2
0.1
(1.1)
(0.7)
(0.4)
5.3
0.5

(1,499)
(3,325)

831
380
1,226
(7,434)
—
(22,156)
—
3,296

(0.6)
(1.3)

0.3
0.2
0.5
(3.0)
—
(9.0)
—
1.3

tax provision........................................ $ 36,436

12.3% $127,749

24.0% $ 23,179

9.4%

Pre-tax income (loss) generated in the United States was $140.5 million, $515.9 million, and $132.0 million
for the years ended December 31, 2020, 2019 and 2018, respectively. Foreign pre-tax income was $156.1 million,
$17.2 million and $115.0 million for the years ended December 31, 2020, 2019 and 2018, respectively.

The Company has claimed the benefit of a foreign tax credit (FTC) in the tax years ended December 31,

2020, 2019 and 2018.

The Company is included in the United States tax group of Fairfax (US) Inc. (Fairfax (US)). The method of
allocation among the companies is subject to a written agreement. Tax payments are made to, or refunds received
from, Fairfax (US) in amounts equal to the amounts as if separate income tax returns were filed with federal taxing
authorities.

The United States Tax Cuts and Jobs Act (the Act) was signed into law on December 22, 2017. The Act
included a minimum base erosion and anti-abuse tax (BEAT) on certain payments to foreign affiliates and a US
tax on foreign earnings for certain global intangible low-taxed income ("GILTI"). The Company has evaluated the
accounting policy election related to the BEAT and GILTI provisions and has concluded both will be treated as
period costs. As a result, no related deferred taxes were recorded.

The effects of the Act related to loss reserve discounting included a special transition rule allowing for the
changes to loss reserve discounting as of December 31, 2017 to be spread ratably over 8 years. During 2019 the
Internal Revenue Service (IRS) issued final regulations and Revenue Procedure 2019-31 resulting in a $2.0 million
increase to the initial computation. The Company will recognize the adjusted benefit of $11.4 million ratably from
years ending December 31, 2018 to December 31, 2025.

The Company paid federal and foreign income taxes of $37.6 million, $104.3 million and $83.4 million for the
years ended December 31, 2020, 2019 and 2018, respectively. As of December 31, 2020, the Company had a
current tax receivable of $54.6 million, which included $38.1 million receivable from Fairfax (US) and a net
receivable of $16.5 million to various foreign governments. As of December 31, 2019, the Company had a current

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

tax payable of $4.6 million, which included $2.7 million receivable from Fairfax (US) and a net payable of $7.3
million to various foreign governments. The Company files income tax returns with various federal, state and
foreign jurisdictions.

The Companys U.S. federal income tax returns for tax years prior to 2019 are closed. The IRS is expected to
complete their audit of the Companys 2019 returns during 2021. Effective for 2018 and 2019 tax years, the
Company participates in the IRSs Compliance Assurance Program (CAP). Under CAP, the IRS begins their
examination of the tax year before the income tax return is filed. The goal of CAP is to expedite the exam process
and reduce the level of uncertainty regarding a taxpayers filing positions by examining significant transactions and
events as they occur. The IRS has not proposed any material adjustments as part of the Companys ongoing
examinations. Effective for tax year 2020 the IRS changed requirements for continued participation in CAP, the
Company no longer participates in the program and will be subject to the normal IRS audit selection process.
Income tax returns filed with various state and foreign jurisdictions remain open to examination in accordance
with individual statutes.

The Company has elected to recognize accrued interest and penalties associated with uncertain tax positions
as part of the income tax provision. The Company does not have any material unrecognized tax benefits and has
not recognized any accrued interest or penalties associated with uncertain tax positions.

For federal income tax return purposes, the Company has FTC carryovers of $51.0 million, of which $2.6
million, $18.4 million, $5.6 million, $21.5 million and $2.9 million expire in 2026, 2027, 2028, 2029 and 2030
respectively.

When necessary, valuation allowances are established to reduce the deferred tax assets to amounts that are
more likely than not to be realized. In assessing the need for a valuation allowance, the Company considers all
available evidence for each tax jurisdiction, including past operating results, estimates of future taxable income,
and the feasibility of tax planning strategies. The Company assessed the realization of its FTC carryovers based on
currently enacted U.S. and foreign tax laws and determined that it is more likely than not that FTC carryovers
related to foreign branch income will not be utilized prior to their expiration. As a result, a valuation allowance of
$28.1 million was recorded against the FTC carryovers, which is included in the Companys 2019 effective tax rate
reconciliation as change in valuation allowance. The amount of the deferred tax asset considered realizable,
however, could change if future taxable income during the carryforward period differs from current estimates.
After considering the realization of its FTC carryovers related to current foreign branch income, the Company had
no material change to the previously recorded valuation allowance for tax year ended December 31, 2020.

11. Commitments and Contingencies

(a)

Contingencies

The Company participates in Lloyds through its 100% ownership of the capital provider for Newline
Syndicate (1218), for which the Company directly or indirectly provides 100% of the capacity. The results of
Newline Syndicate (1218) are consolidated in the financial statements of the Company. In support of Newline
Syndicate (1218)s capacity at Lloyds, the Company has pledged securities and cash with a fair value of $402.9
million as of December 31, 2020 in a deposit trust account in favor of the Society and Council of Lloyds. The
securities may be substituted with other securities at the discretion of the Company, subject to approval by
Lloyds. The securities are carried at fair value and are included in investments and cash in the Companys
consolidated balance sheets. Interest earned on the securities is included in investment income. The pledge of
assets in support of Newline Syndicate (1218) provides the Company with the ability to participate in writing
business through Lloyds, which remains an important part of the Companys business. The pledged assets
effectively secure the contingent obligations of Newline Syndicate (1218) should it not meet its obligations. The
Companys contingent liability to the Society and Council of Lloyds is limited to the aggregate amount of the
pledged assets. The Company has the ability to remove funds at Lloyds annually, subject to certain minimum
amounts required to support outstanding liabilities as determined under risk-based capital models and approved
by Lloyds. The funds used to support outstanding liabilities are adjusted annually and the obligations of the
Company to support these liabilities will continue until they are settled or the liabilities are reinsured by a third
party approved by Lloyds. The Company expects to continue to actively operate Newline Syndicate (1218) and
support its requirements at Lloyds and Company believes that Newline Syndicate (1218) maintains sufficient

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

liquidity and financial resources to support its ultimate liabilities and the Company does not anticipate that the
pledged assets will be utilized.

ORC agreed to guarantee the performance of all the insurance and reinsurance contract obligations of
Compagnie Transcontinentale de Réassurance (CTR), a former subsidiary of Fairfax, in the event CTR became
insolvent and CTR was not otherwise indemnified under its guarantee agreement with a Fairfax affiliate. CTR was
dissolved and its assets and liabilities were assumed by subsidiaries of Fairfax that have the responsibility for the
run-off of its liabilities. Fairfax has agreed to indemnify ORC for all its obligations incurred under its guarantee. The
Companys potential exposure in connection with this agreement stems from the remaining gross reserves relating
to these liabilities, which are estimated to be $50.4 million as of December 31, 2020. The Company believes that
the financial resources of the Fairfax subsidiaries that have assumed CTRs liabilities provide adequate protection
to satisfy the obligations that are subject to this guarantee. The Company does not expect to make payments
under this guarantee and does not consider its potential exposure under this guarantee to be material to its
consolidated financial position.

ORC has agreed to guarantee the payment of all of the insurance contract obligations (the Subject
Contracts), whether incurred before or after the agreement, of Falcon Insurance Company (Hong Kong) Limited
(Falcon), a subsidiary of Fairfax Asia, in the event Falcon becomes insolvent. The guarantee by ORC was made to
assist Falcon in writing business through access to ORCs financial strength ratings and capital resources. ORC is
paid a fee for this guarantee of one quarter of one percent of all gross premiums earned associated with the
Subject Contracts on a quarterly basis. For each of the years ended December 31, 2020, 2019 and 2018, Falcon
paid $0.1 million to ORC in connection with this guarantee. ORCs potential exposure in connection with this
agreement is estimated to be $152.9 million, based on Falcons loss reserves at December 31, 2020. Fairfax has
agreed to indemnify ORC for any obligation under this guarantee. The Company believes that the financial
resources of Falcon provide adequate protection to support its liabilities in the ordinary course of business. The
Company anticipates that Falcon will meet all of its obligations in the normal course of business and does not
expect to make any payments under this guarantee. The Company does not consider its potential exposure under
this guarantee to be material to its consolidated financial position.

During 2015, in consideration for an appropriate fee, ORC agreed to guarantee the payment of certain
obligations of TIG with respect to a certain contract of reinsurance of asbestos, pollution and health hazard claims
(the APH contract) entered into by TIG with an unrelated third party. The guarantee was made to enable TIG to
access ORCs financial strength ratings and capital resources for securing the APH Contract. ORCs maximum
exposure in connection with this guarantee is $350.0 million; as of December 31, 2020, the Companys estimated
exposure under the guarantee is $32.2 million, based on TIGs loss reserves for the APH Contract at December 31,
2020. The Company i) believes that the financial resources of TIG provide adequate protection to support is
liabilities in the ordinary course of business; ii) anticipates that TIG will meet all of its obligations in the normal
course of business; and iii) does not expect to make any payments under this guarantee.

The Company and its subsidiaries are involved, from time to time,

in ordinary litigation, arbitration
proceedings and regulatory assessments as part of the Companys business operations. In the Companys opinion,
the outcome of these actions, individually or collectively, is not likely to result in outcomes that would be material
to the financial condition or results of operations of the Company.

(b)

Commitments

The Company and its subsidiaries lease office space and furniture and equipment under long-term operating

leases expiring through the year 2033. Minimum annual rentals follow (in thousands):

2021 ............................................................................................................................................ $
2022 ............................................................................................................................................
2023 ............................................................................................................................................
2024 ............................................................................................................................................
2025 ............................................................................................................................................
2026 and thereafter ....................................................................................................................

Total....................................................................................................................................... $

Amount

10,711
10,339
10,271
10,160
8,790
44,550
94,821

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company leases certain office and retail space held as an investment under various operating leases.
Lease income for the years ended December 31, 2020, 2019 and 2018 was $35.6 million, $37.0 million and $5.6
million, respectively. Future rental income from these leases are as follows (in thousands):

Total....................................................................................................................................... $

Amount

27,074
25,341
23,881
16,703
13,876
82,427
189,302

Rental expense, before sublease income under these operating leases, was $18.1 million, $15.9 million and
$12.2 million for the years ended December 31, 2020, 2019 and 2018, respectively. The Company recovered less
than $0.1 million for the years ended December 31, 2020 and 2019. The Company recovered $0.1 million for the
year ended December 31, 2018.

The adoption of ASU 2016-02 and ASU 2018-11, both entitled Leases, did not have a material effect on the
Companys results of operations or liquidity. Additional information regarding the Companys operating leases are
as follows (in thousands):

As of
12/31/2020

As of
12/31/2019

Operating lease right of use asset....................................................................$

66,093

Operating lease liabilities.................................................................................$

82,557

Weighted average remaining operating lease term ........................................
Weighted average discount rate on operating leases .....................................

5 years

4.18%

60,722

67,071

4 years

4.45%

Maturities of the existing lease liabilities are expected to occur as follows:

2021 .................................................................................................................
2022 .................................................................................................................
2023 .................................................................................................................
2024 .................................................................................................................
2025 .................................................................................................................
Thereafter ........................................................................................................
Undiscounted lease payments.........................................................................
Less: present value adjustment ......................................................................
Total operating lease liability ...........................................................................$

10,413
9,716
9,681
9,822
8,675
44,925
93,232
10,675
82,557

12. Statutory Information and Dividend Restrictions

ORC, the Companys principal operating subsidiary, is subject to state regulatory restrictions that limit the
maximum amount of dividends payable. In any 12-month period, ORC may pay dividends equal to the greater of
(i) 10% of statutory capital and surplus as of the prior year end or (ii) net income for such prior year, without prior
approval of the Insurance Commissioner of the State of Connecticut (the Connecticut Commissioner).
Connecticut law further provides that (i) ORC must report to the Connecticut Commissioner, for informational
purposes, all dividends and other distributions within five business days after the declaration thereof and at least
ten days prior to payment and (ii) ORC may not pay any dividend or distribution in excess of its earned surplus,
defined as the insurers unassigned funds surplus reduced by 25% of unrealized appreciation in value or
revaluation of assets or unrealized profits on investments, as reflected in its most recent statutory annual
statement on file with the Connecticut Commissioner, without the Connecticut Commissioners approval. The

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

maximum ordinary dividend capacity available during 2021, without prior approval, is $362.4 million. ORC
declared and paid to OGHI dividends of $200.0 million, $50.0 million and $150.0 million during the years ended
December 31, 2020, 2019 and 2018, respectively. Hudson declared and paid dividends on its preferred shares
owned by TIG of $1.3 million during each of the years ended December 31, 2020, 2019 and 2018. Greystone
declared and paid dividends on its preferred shares owned by TIG of $0.3 million during each of the years ended
December 31, 2020, 2019 and 2018.

The following is the consolidated statutory basis net income and policyholders surplus of ORC and its

subsidiaries, for each of the years ended and as of December 31, 2020, 2019 and 2018 (in thousands):

Net income........................................................................................ $
Policyholders' surplus .......................................................................

2020
(108,039) $
3,666,493

2019
317,879
3,518,242

2018
302,562
3,336,595

13. Related Party Transactions

The Company has entered into various reinsurance arrangements with Fairfax and its affiliates. The amounts
included in or deducted from income, expense, assets and liabilities in the accompanying consolidated financial
statements with respect to reinsurance assumed and ceded from and to affiliates as of and for the years ended
December 31, 2020, 2019 and 2018, follow (in thousands):

Assumed:

Premiums written....................................................................................... $
Premiums earned .......................................................................................
Losses and loss adjustment expenses ........................................................
Acquisition costs.........................................................................................
Reinsurance payable on paid losses ...........................................................
Reinsurance balances receivable................................................................
Unpaid losses and loss adjustment expenses.............................................
Unearned premiums ..................................................................................

Ceded:

Premiums written....................................................................................... $
Premiums earned .......................................................................................
Losses and loss adjustment expenses ........................................................
Acquisition costs.........................................................................................
Ceded reinsurance balances payable .........................................................
Reinsurance recoverables on paid losses ...................................................
Reinsurance recoverables on unpaid losses...............................................
Unearned premiums ..................................................................................

2020

2019

2018

182,879 $
144,822
108,916
22,530
11,709
44,919
211,148
71,286

89,842 $
71,597
58,117
15,899
6,135
1,957
137,146
46,773

92,225 $
82,125
66,579
16,201
5,838
28,108
167,154
32,953

56,189 $
46,279
21,956
8,183
4,598
1,181
106,695
28,433

75,672
81,975
59,295
14,749
6,873
22,033
158,833
22,751

44,805
41,883
12,989
7,020
4,316
950
99,673
18,489

The Companys subsidiaries have entered into investment management agreements with Fairfax and its
wholly-owned subsidiary, Hamblin Watsa Investment Counsel Ltd. These agreements generally provide for an
annual base fee, calculated and paid quarterly based upon each subsidiarys average invested assets for the
preceding three months, and an incentive fee, which is payable if realized gains on equity investments exceed
certain benchmarks. These agreements may be terminated by either party on 30 days notice. For the years ended
December 31, 2020, 2019 and 2018, total fees, including incentive fees, of $17.3 million, $18.7 million and $22.4
million, respectively, are included in the consolidated statements of operations.

Included in other expenses, net, for the years ended December 31, 2020, 2019 and 2018, are charitable
contribution expenses of $2.7 million, $5.2 million and $2.5 million, respectively, primarily representing amounts
to be funded by OGHI to the Odyssey Group Foundation, a not-for-profit entity through which the Company
provides funding to charitable organizations active in the communities in which the Company operates.

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Due to expense sharing and investment management agreements with Fairfax and its affiliates, the Company
has accrued, on its consolidated balance sheet, amounts receivable from affiliates of $3.1 million and $2.9 million
as of December 31, 2020 and 2019, respectively, and amounts payable to affiliates of $0.3 million and $2.3 million
as of December 31, 2020 and 2019, respectively.

Between 2017 and 2020, the Company loaned an affiliate, Farmers Edge Inc. (Farmers Edge), $74.2 million.
The loans bear interest at 12% per annum and are due on June 30, 2021. The Farmers Edge loans contain a
conversion feature where the Company has the option (but not the obligation) to convert all or part of the unpaid
principal amount and the accrued and unpaid interest on the loans as of the conversion into common shares at the
conversion price.

On January 22, 2018, the Company loaned an affiliate, EXCO Resources, Inc. (EXCO), $59.4 million in the
form of a senior secured debtor-in-possession revolving credit facility loan. The notes bear interest at 4.9% per
annum on Tranche A and 5.9% per annum on Tranche B and had a maturity date of January 22, 2019, with a
maturity extension clause until July 22, 2019. The EXCO loans were repaid on June 28, 2019.

On February 13, 2020 and March 9, 2020, the Company loaned Fairfax (US), $130.0 million and $30.0 million,
respectively, at interest rates of 1.59% and 1.50% per annum, respectively. The loans were repaid on March 19,
2020. On July 9, 2019 and October 8, 2019, the Company loaned Fairfax (US), $100.0 million and $50.0 million,
respectively, at interest rates of 2.13% and 1.69% per annum, respectively. The loans were repaid on September
27, 2019 and December 27, 2019, respectively. On August 10, 2018 and October 29, 2018, the Company loaned to
Fairfax (US), $50.0 million and $50.0 million, respectively, at interest rates of 2.42% and 2.55% per annum,
respectively. The loans were repaid on September 28, 2018 and December 19, 2018, respectively.

During 2020 and 2019, the Company loaned an affiliate, Sigma Co International Corp, $6.1 million. The loan

bears interest at 5.0% and has a maturity date of June 19, 2024.

On April 17, 2019, the Company loaned an affiliate, AGT Food and Ingredients Inc. (AGT), $70.8 million. The
loan to AGT bears interest at 6.0% and has a maturity date of April 16, 2020. The loan may be successively
extended an additional 364 days with written notice. The maturity on this loan was extended to April 16, 2021.

On April 17, 2019, the Company loaned an affiliate, Alliance Pulse Processors Inc. (Alliance), $16.7 million.
The loan to Alliance bears interest at 6.0% and has a maturity date of April 16, 2020. The loan may be successively
extended an additional 364 days with written notice. The maturity on this loan was extended to April 16, 2021.

On January 28, 2020, the Company loaned an affiliate, Toys R Us (Canada) Ltd. (Toys), 18.9 million. The

loan to Toys bears interest at 9.5% and has a maturity date of January 28, 2023.

In the ordinary course of the Companys investment activities, the Company makes investments in
investment funds, limited partnerships and other investment vehicles in which Fairfax or its affiliates may also be
investors.

14. Employee Benefits

The Company provides its employees with benefits through various plans as described below.

Defined Benefit Pension Plan

The Company maintains a qualified, non-contributory, defined benefit pension plan (the Pension Plan)
covering substantially all employees in the United States hired prior to August 1, 2011 who have reached age
twenty-one.
Employer contributions to the Pension Plan are in accordance with the minimum funding
requirements of the Employee Retirement Income Security Act of 1974, as amended.

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables set forth the Pension Plans unfunded status and accrued pension cost recognized in the

Companys consolidated financial statements as of December 31, 2020 and 2019 (in thousands):

Change in projected benefit obligation:

Benefit obligation at beginning of year ................................................................ $
Service cost...........................................................................................................
Interest cost..........................................................................................................
Actuarial loss.........................................................................................................
Benefits paid.........................................................................................................
Benefit obligation at end of year ....................................................................

Change in Plan assets:

Fair value of Pension Plan assets at beginning of year .........................................
Actual appreciation on Pension Plan assets .........................................................
Actual contributions during the year....................................................................
Benefits paid.........................................................................................................
Fair value of Pension Plan assets at end of year .............................................

Funded status and accrued pension cost .................................................. $

2020

2019

242,035
10,052
7,708
34,086
(9,926)
283,955

140,500
1,389
18,600
(9,926)
150,563
(133,392) $

195,448
8,669
8,123
36,196
(6,401)
242,035

127,183
11,918
7,800
(6,401)
140,500
(101,535)

The net amount reported in the consolidated balance sheets related to the accrued pension cost for the
Pension Plan of $133.4 million and $101.5 million, as of December 31, 2020 and 2019, respectively, is included in
other liabilities. The unamortized amount of accumulated other comprehensive loss related to the Pension Plan is
$108.2 million and $72.6 million, before taxes, as of December 31, 2020 and 2019, respectively.

As of December 31, 2020 and 2019, the fair value and percentage of fair value of the total Pension Plan

assets by type of investment are as follows (in thousands):

Equity securities ........................................................................... $ 129,622
17,486
Mutual funds - fixed income securities ........................................
3,455
Money market..............................................................................
Fair value of Plan assets.......................................................... $ 150,563

86.1% $ 102,627
25,585
11.6
12,288
2.3
100.0% $ 140,500

73.0%
18.2
8.8
100.0%

As of December 31,

2020

2019

The Pension Plan seeks to maximize the economic value of its investments by applying a long-term, value-
oriented approach to optimize the total investment returns of the Pension Plans invested assets. Assets are
transferred and allocated among various investment vehicles, when appropriate. The long-term rate of return
assumption is based on this flexibility to adjust to market conditions. The actual return on assets has historically
been in line with the Companys assumptions of expected returns. The Company contributed $18.6 million to the
Pension Plan during the year ended December 31, 2020. During each of the years ended December 31, 2019 and
2018, the Company contributed $7.8 million to the Pension Plan. The Company currently expects to make a
contribution to the Pension Plan of $7.8 million during 2021.

The Company accounts for its Pension Plan assets at fair value as required by GAAP. The Company has
categorized its Pension Plan assets, based on the priority of the inputs to the valuation technique, into a three-
level fair value hierarchy, using the three-level hierarchy approach described in Note 3.

Quoted market prices are used for determining the fair value of the Companys Pension Plan assets. The
majority of these Pension Plan assets are common stocks and mutual funds that are actively traded in a public
market. The Pension Plans money market account, for which the cost basis approximates fair value, is also
classified as a Level 1 investment. As of December 31, 2020, a majority of the Pensions assets were categorized as
Level 1 assets except for the investments measured using NAV.

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In accordance with ASU 2015-07, investments that are measured at fair value using NAV per share (or its
equivalent) as a practical expedient, have not been classified in the fair value hierarchy. The Company reclassified
the hedge fund from Level 3 assets to NAV during the year ended December 31, 2020. As of December 31, 2020,
$23.9 million of investments reported as equity securities are not included within the fair value hierarchy tables.

The Companys Level 3 Pension Plan assets were valued by a third party, providing a net asset value, by
using valuation techniques that include unobservable inputs. Generally, hedge funds invest in securities that trade
in active markets, and as a result, their net asset values reflect their fair values. As of December 31, 2018, the
Pension Plan investments that are classified as Level 3 had a fair value of $12.9 million. For the year ended
December 31, 2018, there was a decrease in the market value of $1.6 million for the Pension Plan investments that
were classified as Level 3. The Plan did not have Level 3 investments as of December 31, 2019. The Plan did have
Level 3 investments as of December 31, 2018.

The following table provides a summary of changes in the fair value of Level 3 financial assets for the years

ended December 31, 2020 and 2019 (in thousands):

Balance, January 1, 2019............................................................................................................. $
Reclassify from Level 3 to NAV ................................................................................................
Balance, December 31, 2019 and 2020....................................................................................... $

Hedge Fund

12,938
(12,938)
—

The following table provides a summary of the Plans investment that is measured at fair value using

reported NAV per share as a practical expedient for the year ended December 31, 2020 (in thousands):

Investment

Fair Value

India Fund.............................................. $

23,909

Unfunded
Commitment
$
—

Settlement
Terms
(1)

Redemption
Frequency
Monthly

Redemption Notice
Period Frequency
60 days + month end

Fair Value Estimated Using Net Asset Value per Share as of December 31, 2020

(1) The last business day of each month.

The NAV of each share is determined by dividing the NAV of that class of share by the number of redeemable
participating preference shares in issue in that class of shares. The Plan invests in a fund that is valued at NAV per
share as a practical expedient.

The following table presents the targeted asset allocation percentages for the Pension Plans assets by type:

Equities...................................................................................................................................................
Mutual funds - fixed income securities ..................................................................................................
Total target asset allocations............................................................................................................

Targeted
Asset
Allocation
%

80.00
20.00
100.00

The weighted average assumptions used to calculate the benefit obligation as of December 31, 2020 and

2019 are as follows:

Discount rate ............................................................................................................................
Rate of compensation increase ................................................................................................

2.50%
3.60%

3.25%
3.60%

2020

2019

The discount rate represents the Companys estimate of the interest rate at which the Pension Plans
benefits could be effectively settled. The discount rates are used in the measurement of the Pension Plans
accumulated benefit obligations and the service and interest cost components of net periodic Pension Plan benefit
cost.

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The net periodic benefit cost included in the Companys consolidated statements of operations for the years

ended December 31, 2020, 2019 and 2018 is comprised of the following (in thousands):

Net Periodic Benefit Cost:

Service cost .......................................................................................... $
Interest cost .........................................................................................
Return on Plan assets...........................................................................
Recognized actuarial loss .....................................................................

Net periodic benefit cost ................................................................ $

10,052
7,708
(8,311)
5,499
14,948

8,669
8,123
(7,544)
2,714
11,962

9,739
7,607
(8,483)
2,933
11,796

2020

2019

2018

The amortization of actuarial losses and of prior service costs (currently reflected in accumulated other
comprehensive income) as components of net periodic cost are expected to be $9.4 million and $0.0 million,
respectively, for the year ended December 31, 2021.

The amortization period for unamortized pension costs and credits, including prior service costs, if any, and
actuarial gains and losses, is based on the remaining service period for those employees expected to receive
pension benefits. Actuarial gains and losses result when actual experience differs from that assumed or when
actuarial assumptions are changed.

2020

2019

2018

Change in accumulated other comprehensive loss:

Beginning balance ................................................................................ $
Actuarial loss and return on plan assets arising during the year .........
Amortization of actuarial gain recognized in net periodic costs..........

72,644
41,007
(5,498)
Accumulated other comprehensive loss at end of year ................. $ 108,153

43,536
31,822
(2,714)
72,644

43,612
2,857
(2,933)
43,536

The weighted average assumptions used to calculate the net periodic benefit cost for the years ended

December 31, 2020, 2019 and 2018 are as follows:

Discount rate ..............................................................................................................
Rate of compensation increase ..................................................................................
Expected long term rate of return on Pension Plan assets ........................................

2020
3.25%
3.60%
6.00%

2019
4.25%
3.60%
6.00%

2018
3.75%
3.80%
6.00%

The accumulated benefit obligation for the Pension Plan was $247.2 million and $211.5 million as of the

December 31, 2020 and 2019 measurement dates, respectively.

The Pension Plans expected future benefit payments for the next 10 years are shown below (in thousands):

Year
2021 ..................................................................................................................................................... $
2022 .....................................................................................................................................................
2023 .....................................................................................................................................................
2024 .....................................................................................................................................................
2025 .....................................................................................................................................................
2026 – 2030 .........................................................................................................................................

Amount

11,658
11,873
12,494
13,736
14,373
82,930

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Excess Benefit Plans

The Company maintains two non-qualified excess benefit plans (the Excess Plans) that provide more highly
compensated officers and employees in the United States hired prior to August 1, 2011 with defined retirement
benefits in excess of qualified plan limits imposed by federal tax law. The following tables set forth the combined
amounts recognized for the Excess Plans in the Companys consolidated financial statements as of December 31,
2020 and 2019 (in thousands):

Change in projected benefit obligation:

Change in Excess Plans’ assets:

Fair value of Excess Plans’ assets at beginning of year ........................................
Actual contributions during the year....................................................................
Benefits paid.........................................................................................................
Fair value of Excess Plans’ assets at end of year.............................................

Funded status and accrued pension cost .................................................. $

2020

2019

31,094
1,275
969
8,972
(504)
41,806

—
504
(504)
—
(41,806) $

26,833
1,100
1,098
3,671
(1,608)
31,094

—
1,608
(1,608)
—
(31,094)

The net amount reported in the consolidated balance sheets related to the accrued pension cost for the
Excess Plans of $41.8 million and $31.1 million, as of December 31, 2020 and 2019, respectively, is included in
other liabilities. The unamortized amount of accumulated other comprehensive loss related to the Excess Plan is
$14.2 million and $5.6 million, before taxes, as of December 31, 2020 and 2019, respectively.

The weighted average assumptions used to calculate the benefit obligation as of December 31, 2020 and

2019 are as follows:

2.50%
3.60%

3.25%
3.60%

2020

2019

The discount rate represents the Companys estimate of the interest rate at which the Excess Plans benefits
could be effectively settled. The discount rates are used in the measurement of the Excess Plans accumulated
benefit obligations and the service and interest cost components of net periodic Excess Plans benefit cost.

Net periodic benefit cost included in the Companys consolidated statements of operations for the years

ended December 31, 2020, 2019 and 2018 is comprised of the following (in thousands):

Net Periodic Benefit Cost:

Service cost .......................................................................................... $
Interest cost .........................................................................................
Recognized net actuarial loss...............................................................
Recognized prior service cost...............................................................

Net periodic benefit cost ................................................................ $

1,275
969
301
—
2,545

1,100
1,098
27
—
2,225

1,410
1,011
279
(5)
2,695

2020

2019

2018

The amortization of actuarial losses and of prior service costs (currently reflected in accumulated other
comprehensive income) as components of net periodic costs are expected to be $1.3 million and less than $0.0
million, respectively, for the year ended December 31, 2021.

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company expects to contribute $4.7 million to the Excess Plans during the year ended December 31,

2021, which represents the amount necessary to fund the 2021 expected benefit payments.

Change in accumulated other comprehensive loss:

Beginning balance ................................................................................ $
Actuarial loss (gain) arising during the year .........................................
Amortization of actuarial gain recognized in net periodic costs..........
Amortization of prior service costs recognized in net periodic costs ..

Accumulated other comprehensive loss at end of year ................. $

5,563
8,972
(301)
—
14,234

1,919
3,671
(27)
—
5,563

5,270
(3,077)
(279)
5
1,919

2020

2019

2018

The weighted average assumptions used to calculate the net periodic benefit cost for the years ended

December 31, 2020, 2019 and 2018 are as follows:

2020
3.25%
3.60%

2019
4.25%
3.60%

2018
3.75%
3.80%

The accumulated benefit obligation for the Excess Plans was $33.2 million and $26.1 million as of

December 31, 2020 and 2019, respectively.

The Excess Plans expected benefit payments for the next 10 years are shown below (in thousands):

Year
2021.................................................................................................................................................. $
2022..................................................................................................................................................
2023..................................................................................................................................................
2024..................................................................................................................................................
2025..................................................................................................................................................
2026 – 2030 ......................................................................................................................................

Amount

4,711
4,369
3,835
4,314
3,760
18,385

Postretirement Benefit Plan

The Company provides certain health care and life insurance (postretirement) benefits for retired
employees in the United States. Substantially all employees in the United States hired prior to August 1, 2011 may
become eligible for these benefits if they reach retirement age while working for the Company. The Companys
cost for providing postretirement benefits other than pensions is accounted for in accordance with ASC 715,
Compensation Retirement Benefits. The following tables set forth the amounts recognized for the
postretirement benefit plan in the Companys consolidated financial statements as of December 31, 2020 and
2019 (in thousands):

2020

2019

Change in accumulated post retirement obligation:

Accumulated postretirement obligation at beginning of year ............................. $
Service cost .....................................................................................................
Interest cost ....................................................................................................
Actuarial loss ...................................................................................................
Plan amendment.............................................................................................
Benefits paid ...................................................................................................
Participant contributions ................................................................................
Retiree Drug Subsidy receipts .........................................................................
Accumulated post retirement obligation at end of year ...........................

Funded status and accrued prepaid pension cost................................ $

92,123
2,890
2,963
2,626
(48,454)
(1,769)
173
—
50,552
(50,552) $

79,183
3,715
3,330
7,681
—
(1,980)
140
54
92,123
(92,123)

The net amount reported in the consolidated balance sheets related to the accrued benefit cost for the
postretirement plan of $50.6 million and $92.1 million, as of December 31, 2020 and 2019, respectively, is included

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

in other liabilities. The liability for accumulated other comprehensive (income) loss related to the postretirement
plan is $(35.6) million and $10.4 million, before taxes, as of December 31, 2020 and 2019, respectively. The
postretirement plan was amended during the year ended December 31, 2020 to provide Medicare eligible
participants a flat dollar stipend for supplemental Medicare coverage. The flat dollar stipend is assumed to
increase 5% every three years. This plan amendment reduced the postretirement plan obligation by $48.5 million
as of December 31, 2020.

The weighted average assumptions used to calculate the benefit obligation as of December 31, 2020 and

2019 are as follows:

2.50%
3.80%

3.25%
3.80%

2020

2019

The discount rate represents the Companys estimate of the interest rate at which the postretirement
benefit plan benefits could be effectively settled. The discount rates are used in the measurement of the
postretirement accumulated postretirement benefit obligations and the service and interest cost of net periodic
postretirement benefit cost.

Net periodic benefit cost included in the Companys consolidated statements of operations for the years

ended December 31, 2020, 2019 and 2018 is comprised of the following (in thousands):

Net Periodic Benefit Cost:

Service cost .......................................................................................... $
Interest cost .........................................................................................
Recognized actuarial loss .....................................................................

Net periodic benefit cost ................................................................ $

2,890
2,963
162
6,015

3,715
3,330
—
7,045

4,007
3,010
351
7,368

2020

2019

2018

The amortization of actuarial losses and of prior service costs (currently reflected in accumulated other
comprehensive income) as components of net periodic costs are expected to be $1.1 million and $(11.0) million,
respectively, for the year ended December 31, 2021.

2020

2019

2018

Change in accumulated other comprehensive loss:

Beginning balance................................................................................. $
Prior service cost - plan amendment....................................................
Actuarial loss (gain) arising during the year .........................................
Amortization of actuarial gain recognized in net periodic costs ..........

Accumulated other comprehensive (income) loss at end of year .. $

10,354
(48,454)
2,626
(162)
(35,636) $

2,673
—
7,681
—
10,354

10,655
—
(7,631)
(351)
2,673

The weighted average assumptions used to calculate the net periodic benefit cost for the years ended

December 31, 2020, 2019 and 2018 are as follows:

2020
3.25%
3.80%

2019
4.25%
3.80%

2018
3.75%
3.80%

The postretirement plans expected benefit payments for the next 10 years are shown below (in thousands):

Year
2021.................................................................................................................................................. $
2022..................................................................................................................................................
2023..................................................................................................................................................
2024..................................................................................................................................................
2025..................................................................................................................................................
2026 – 2030 ......................................................................................................................................

Amount

1,806
2,026
2,183
2,346
2,549
14,689

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The annual assumed rate of increase in the per capita cost of covered benefits (i.e., health care cost trend
rate) is assumed to be 5.47% in 2021, gradually decreasing to 4.50% in 2038 and remaining constant thereafter.
The health care cost trend rate assumption has a significant effect on the amounts reported. For example,
increasing the assumed health care cost trend rates by one percentage point in each year would increase the
accumulated postretirement benefit obligation by $6.9 million (13.63% of the benefit obligation as of
December 31, 2020) and the service and interest cost components of net periodic postretirement benefit costs by
$1.4 million for the year ended December 31, 2020. Decreasing the assumed health care cost trend rates by one
percentage point in each year would decrease the accumulated postretirement benefit obligation and the service
and interest cost components of net periodic postretirement benefit cost for the year ended December 31, 2020
by $5.7 million and $1.0 million, respectively.

Other Plans

The Company also maintains a defined contribution profit sharing plan for all eligible employees. Each year,
the Board of Directors may authorize payment of an amount equal to a percentage of each participants basic
annual earnings based on the results of the Company for that year. These amounts are credited to the employees
accounts maintained by a third party, which has contracted to provide benefits under the plan. No additional
discretionary contributions were authorized for the years ended December 31, 2020, 2019 or 2018.

The Company maintains a qualified deferred compensation plan pursuant to Section 401(k) of the Internal
Revenue Code of 1986, as amended. Employees may contribute up to 50% of base salary on a pre-tax basis,
subject to annual maximum contributions set by law ($19,500 in 2021 plus an additional $6,500 if an employee is
age 50 or older). The Company contributes an amount equal to 100% of each employees pre-tax contribution up
to certain limits. The maximum matching contribution is 4.0% of annual base salary, with certain government-
mandated restrictions on contributions to highly compensated employees. The Company also maintains a non-
qualified deferred compensation plan to allow for contributions in excess of qualified plan limitations. The
Companys contributions to both of these plans, which totaled $3.8 million, $3.4 million, and $3.1 million for the
years ended December 31, 2020, 2019 and 2018, respectively, are included primarily in other underwriting
expenses in the consolidated statements of operations.

All employees in the United States hired on or after August 1, 2011 are eligible for an annual profit sharing
contribution, subject to the profit sharing plan limitations. The Company makes this contribution regardless of
whether or not elective deferrals were made during the year. The profit sharing contribution is paid each January
and uses the prior years 401(k) compensation (base pay, short-term disability earnings and any overtime earnings)
to determine the actual contribution for each employee. These profit sharing contributions are calculated as a
percentage of earnings at the end of each year and allocated to participant accounts in January of the following
year, with contribution percentages based upon each employees years of service as follows:

Years of Service
Less than or equal to 5 years ........................................................................................................................
More than 5 years but less than or equal to 15............................................................................................
More than 15 years.......................................................................................................................................

Percent

6%
7%
8%

The profit sharing contribution amounts vest based upon the following vesting schedule:

Years of Service
Less than 2 years...........................................................................................................................................
2 years but less than 3 ..................................................................................................................................
3 years but less than 4 ..................................................................................................................................
4 years but less than 5 ..................................................................................................................................
5 years but less than 6 ..................................................................................................................................
6 years or more.............................................................................................................................................

Percent

0%
20%
40%
60%
80%
100%

ODYSSEY GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. Stock-Based Compensation Plans

Fairfax Restricted Share Plan and Share Option Plan

In 1999, Fairfax established the Fairfax Financial 1999 Restricted Share Plan (the Fairfax Restricted Share
Plan) and the Share Option Plan (the Option Plan) (collectively, the Fairfax Plans), in which the Company
participates. The Fairfax Plans generally provide officers, key employees and directors who were employed by or
provided services to the Company with awards of restricted shares or stock options (with a grant price of zero) of
Fairfax common stock (collectively, Restricted Share Awards). The Restricted Share Awards generally vest over
five years. The Company had 470,684 Restricted Share Awards outstanding as of December 31, 2020.

The fair value of the Restricted Share Awards is estimated on the date of grant based on the market price of
Fairfaxs stock and is amortized to compensation expense on a straight-line basis over the related vesting periods.
The Company purchases Fairfax common stock on the open market to cover the grant of a Restricted Share Award
and reflects such purchase as a reduction in the Companys additional paid-in capital. As of December 31, 2020,
there was $39.9 million of unrecognized compensation cost related to unvested Restricted Share Awards granted
from the Fairfax Plans that was netted against additional paid-in capital, which is expected to be recognized over a
remaining weighted-average vesting period of 2.4 years. The total fair values of the Restricted Share Awards
granted for the years ended December 31, 2020, 2019 and 2018 were $19.9 million, $17.8 million and $18.8
million, respectively. As of December 31, 2020, the aggregate fair value of the Restricted Share Awards outstanding
was $120.6 million. For the years ended December 31, 2020, 2019 and 2018, the Company recognized expense
related to the Fairfax Plans of $16.8 million, $16.0 million and $17.2 million, respectively.

The following table summarizes activity for the Fairfax Plans for the year ended December 31, 2020:

Awards outstanding as of December 31, 2019

Granted .........................................................................................................
Vested ...........................................................................................................
Forfeited........................................................................................................
Unallocated ...................................................................................................

Shares /
Options

341,821
59,982
(53,603)
(2,126)
124,610

Awards outstanding as of December 31, 2020...................................................

470,684

Vested and exercisable as of December 31, 2020 ..............................................

58,387

Weighted-
Average Value
at Grant Date

481.83
331.37
463.35
420.62
300.66

417.08

498.32

Employee Share Purchase Plans

Under the terms of the Odyssey Re Holdings Corp. (Non-Qualified) 2010 Employee Share Purchase Plan (the
2010 ESPP), eligible employees are given the election to purchase Fairfax common shares in an amount up to
10% of their annual base salary. The Company matches these contributions by purchasing, on the employees
behalf, a number of Fairfaxs common shares equal in value to 30% of the employees contribution. In the event
that the Company achieves a net combined ratio in any calendar year that is less than the lesser of i) 100% or ii)
the average of the reported net combined ratios of the ten (10) most recent calendar years prior to the current
calendar year, additional shares are purchased by the Company for the employees benefit, in an amount equal in
value to 20% of the employees contribution during that year. During the year ended December 31, 2020, the
Company purchased 25,688 Fairfax common shares on behalf of employees pursuant to the 2010 ESPP, at an
average purchase price of $327.81. The compensation expense recognized by the Company for purchases of
Fairfaxs common shares under the 2010 ESPP was $1.8 million, $1.8 million and $1.5 million for the years ended
December 31, 2020, 2019 and 2018, respectively.