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Anecdotally, I have noticed the combined ratio of an acquisition goes up after Fairfax acquires them. I think this is because they are much more conservative on reserving so there is some padding required. The street seems to assume it means they did a bad deal but I think it’s classic Fairfax income deferral.

No, they expect a 15% return if it keeps its multiple. I think the key is the investments:equity leverage. If they sacrifice that, then ROE expectations probably come down. That’s the position BRK is in. Too much success and not enough high return opportunities to reinvest. Fairfax has high return investment options for now including buying back shares and buying in minority interests.

Interesting that most are discussing future returns expectations but only a few here are focusing on what actually matters, i.e. the per share earning power of the business and relative IV. I certainly have no idea where interest rates will be in the future or what returns to expect from ffh equity portfolio, or investment gains. What helps me in having a better/complete view is calculating look-through earnings. Last year they were ~190USD per share. These excludes gains from investments and derivates such as TRS. Is this a reasonable expectation going forward? YES. On average, over the next 5 years I expect ffh to earn ~200USD per share. The possible downsides are pretty clear to all: higher CR, slower growth or reduced NPW, lower yield on FI, lower returns from equities. Here are the factors that may help mitigate these risks: less premiums ceded, minorities buyback, longer FI duration, shift from gov to corporate bonds, higher income from consolidated companies, reinvestment of earnings, lower shares count. Not everything that matters can be counted and not everything that can be counted matters. Still, starting from last year 190, I am pretty sure that 1) buying back minorities can add 20USD per share, 2) consolidated operations might add another 20, 3) s/o will be lower, closer to 18M if I have to guess. What's a fair multiple? Certainly not 8x. 13x or 15x? That means today IV is 2600-3000USD. You can then triangulate this estimate with other methodologies, P/B, float + equity? Hard for me to see a value lower than 3000. You cannot know exactly what bonds will yield or what realized gains will be. You know the company culture, investment framework and horizon. Make your bets accordingly. Best, G