Financial Holdings Ltd. (Fairfax) and related entities. At the same time, Standard & Poor's revised its outlook to negative from stable.

Fairfax is the parent of Odyssey Re (Bermuda) Ltd., a Bermuda-based reinsurer which has received an A- rating from S&P for both counterparty credit and financial strength.

The rating actions and change in outlook for FFH primarily reflect S&P's growing concerns about Fairfax's profitability, which for the third consecutive quarter has been below expectations.

In the first nine months of 1999, Fairfax's pretax earnings (including realised capital gains) have fallen almost 50 percent from the same period in 1998. The significant drop in earnings reflects decreases in realised capital gains but, more importantly, also reflects the continuation of disappointing underwriting results in its insurance and reinsurance operations, S&P said.

Underwriting profitability, as measured by the combined ratio, was about 112 percent for the first nine months of 1999.

In the last two years, Fairfax has made several large acquisitions in the insurance and reinsurance sector, which S&P believes has placed a strain on management's ability to control and ultimately achieve a combined ratio of 100 percent or better.

S&P believes recent management changes at the operational level, coupled with the recent acquisitions of TIG Holdings Inc. and Crum & Forster Insurance Co., are proving more troublesome from an earnings perspective than originally anticipated. Additionally, earnings have been hurt by the soft worldwide insurance and reinsurance market.

S&P will meet with Fairfax and its various operations during the next several months to evaluate the prospects for improving profitability. Fairfax Financial Holdings Ltd. is a Security Circle insurer, which means it voluntarily underwent Standard & Poor's most comprehensive analysis and was assigned a rating in one of the top four categories for financial security.

The negative outlook reflects S&P's concerns about profitability, particularly at the underwriting level, which S&P believes should be closer to a combined ratio of 105 percent for the consolidated group, given Fairfax's current ratings.