Fairfax 2025

[Hoodlum]

Huron University gets $10M donation to launch Canada’s first Fairfax Centre for Free Enterprise

 

https://www.ctvnews.ca/london/article/huron-university-gets-10m-donation-to-launch-canadas-first-fairfax-centre-for-free-enterprise/

 

“We are making a statement: that we believe in Canada, and that it can be the land of opportunity for everyone, and that the free enterprise system that has helped to make the country what it is today should be recognized, maintained and cultivated for the benefit of all Canadians. We believe that Huron University can help lead a revival of the entrepreneurial spirit that is key to our shared future,” said Prem Watsa, chairman and CEO of Fairfax.

[mananainvesting]

3 hours ago, MMM20 said:

Exactly. I posted I comment along those lines on the Brooklyn Investor blog post. He’s thoughtful but didn’t seem aware of Digit - that speaks to the misconceptions still out there that explain why FFH is still cheap!
 

Also, Let’s not forget Ki. It not just another insurance company. 

[MMM20]

11 minutes ago, mananainvesting said:

Also, Let’s not forget Ki. It not just another insurance company. 

Yeah I mentioned that one too.

[Peregrine]

Hi all, is there an itinerary out yet on all the events around the AGM?

[SafetyinNumbers]

6 hours ago, Peregrine said:

Hi all, is there an itinerary out yet on all the events around the AGM?

 

 

[Munger_Disciple]

Interview with C&F CEO:

https://www.insuranceinsider.com/article/2eh1w9cjvqzlvuewo2upt/insider-on-air/crum-forster-a-cautionary-tale-and-a-redemption-story-adee?zephr_sso_ott=5JWMyr

 

Imagine living thru' a period of 200CR!

Edited Thursday at 11:37 PM by Munger_Disciple

[Redskin212]

Marc Adee is one of those fantastic CEO’s who you have never heard of. Extremely intelligent and a real quiet leader.  He joined C&F when it was basically dead and navigated through years of adverse development to finally get back to operating at a CR less than 100.  Once he successfully got the underwriting back under control, he has turned his attention to raising the profile of C&F and letting people know what a great company and great place to work it is. Well done Marc!  Fairfax is lucky to have him at the helm of C&F

[gfp]

https://www.fairfax.ca/press-releases/fairfax-announces-intention-to-redeem-cumulative-preferred-shares-series-e-f-m-02-28-2025/

[Maverick47]

14 hours ago, Munger_Disciple said:

Interview with C&F CEO:

https://www.insuranceinsider.com/article/2eh1w9cjvqzlvuewo2upt/insider-on-air/crum-forster-a-cautionary-tale-and-a-redemption-story-adee?zephr_sso_ott=5JWMyr

 

Imagine living thru' a period of 200CR!

Seems like the lesson he wants those insurance professionals that will follow him to learn, is to understand from history  “where they might die (200 CR  for Commercial Lines for the 20 years of 1965 to 1985) so that they’ll never go there again…”.

[Redskin212]

Cleaning up some of the Preferred Shares o/s.  My math is $C428.5 million being redeemed, taking advantage of the weak Canadian dollar.

[Redskin212]

Sorry my math is poor  but still think they are taking advantage of weak Canadian dollar

[KFRCanuk]

19 minutes ago, Redskin212 said:

Sorry my math is poor  but still think they are taking advantage of weak Canadian dollar

 

Fantastic way of putting it. I'm not commenting on your math.

[Viking]

Warren Buffett and Berkshire Hathaway

 

Warren Buffett just released his annual letter to shareholders. So it is timely to do a post on the artist himself and his masterpiece called Berkshire Hathaway.

 

Warren Buffett is the GOAT.

 

Over the past 59 years (1965-2024), the per-share market value of Berkshire Hathaway’s stock has increased at a CAGR of 19.9%. Over the same time frame, the S&P500 with dividends has increased at a CAGR of 10.4%.

 

The CAGR of 19.9% is impressive. But what is even more impressive is how long it has been sustained - 59 years. Yes, that performance makes Buffett the GOAT.

 

But there is more to the Buffett story than just the return he has delivered.

• He is very shareholder friendly. This gets glossed over at times (because he does so many things exceptionally well). But it is one of the things that separates Buffett from many other great capital allocators.
• He is also an educator with top-notch communication skills. Buffett’s annual letters have become must reads for investors. And tens of thousands make the pilgrimage to Omaha each year to hear Warren Buffett speak at Berkshire Hathaway’s annual meeting.
• He wanted small/retail investors to succeed. Many small/retail investors have made vast fortunes from their investment in Berkshire Hathaway over the past 6 decades. They did not have to pay nose-bleed high private equity fees (like a 2% annual management fee + 20% performance fee) to invest alongside Buffett.

As a result, Buffett is both adored and worshipped by Berkshire Hathaway shareholders. And rightly so. This is very rare for someone who made their fortune running a business and investing in financial markets.

 

Warren Buffett is also a unicorn - he is one of a kind.

 

Buffett is one of a kind - his intellectual/psychological makeup. But that was not enough. He was also in the right place at right time. Born in the US. Born a male. Taught early in life (before his habits were formed) directly by the master himself, Ben Graham. Discovered his lifelong business partner, Charlie Munger, in 1959 - who taught him other important lessons, like the importance of buying quality. Buffett is a unicorn.

 

What Buffett has accomplished for small/retail investors will never be repeated:

• What he did - CAGR of 19.9% for 59 years.
• How he did it - via Berkshire Hathaway - a publicly traded company (which allowed small/retail investors to participate and fully benefit from his amazing skills).

Warren Buffett the god?

 

Yes, Warren Buffett has assumed god-like status. His writings are considered sacred texts. His methods are now taken as gospel.

 

This can be problematic (we will come back to this later).

 

Where are we at today?

 

Warren Buffett is 94 years old. And Berkshire Hathaway has morphed over the past 2 decades into a massive conglomerate. Its core growth engine, P/C insurance, is now just one of many big businesses that the company has.

 

Berkshire Hathaway’s massive size and Buffett’s advanced age has important ramifications for Berkshire Hathaway shareholders - future returns will be lower than past returns. Buffett has been warning about this for decades.

 

If we look at Berkshire Hathaway’s returns from the past 59 years and separate them into decades we can see the slowdown. Three periods become apparent:

• First 29 years (1965 to 1994) CAGR = 29.2%
• Next 10 years (1994 to 2004) CAGR = 15.7%
• Last 20 years (2004 to 2024) CAGR = 10.8%

Bottom line, as an investment, Berkshire Hathaway’s best years are behind it. Moving forward, Berkshire Hathaway’s stock will likely generate returns that are similar to those of the S&P500 with dividends. This is not a bad outcome - most professional money managers underperform the S&P500 (when their returns are measured over a 10 year time horizon).

 

 

This naturally leads to the following question:

 

Who is the next Warren Buffett?

 

Ok, you probably felt your pulse quicken when you read that question.

 

This is, of course, the proverbial million dollar question. We are all on the lookout for the next ‘Warren Buffett.’ For investors, it is a bit like the endless search for the mythical holy grail. That person just HAS to be out there.

 

But there is a problem. As we already pointed out, Buffett is a unicorn.

 

What does this mean?

 

It means it’s not possible to find another Warren Buffett.

 

There I said it.

 

Sorry if that felt a little like showering in cold water. But it is what it is. And an investor needs to live in the real world.

 

OK. So does that mean investors should give up with their search? No.

 

What should we do when we hit a wall?

 

One solution is to reframe the question.

 

Maybe investors are looking for the wrong thing. Instead of looking for the next Warren Buffett (impossible), why don’t we look for something that is possible…

 

What is that?

 

Which company could be the next Berkshire Hathaway?

 

To answer this question, let’s review what Berkshire Hathaway’s secret sauce is/was:

• Run by founder - skilled at attracting and retaining top talent.
• Family/founder controlled - allowed for long term focus in running the business.
• Core engine is P/C insurance - benefited from growing, low cost float that could be invested.
• Decentralized operations - attracts entrepreneurs.
• Centralized capital allocation - among other things, invests in equities.
• Strong company culture - built over decades and championed by founder.
• Company is run for benefit of shareholders - focus is on growing per share value for shareholders over the long run.
• Good communicator - primarily via letter in annual report; Q&A at annual meeting.

What about return expectations?

 

We are going to keep this reasonable. We are looking for a company that might be able to deliver a return to shareholders of 15% per year over the next 10 years.

 

Does a company like this exist?

 

Before we can answer that question we need to discuss with one more issue.

 

The curse of Warren Buffett.

 

When investors look for the next Berkshire Hathaway, they usually do so through the lens of Warren Buffett. So, when they evaluate other companies - and the decisions made by their management teams - they usually ask the following question: “Is that what Warren Buffett would have done?”

 

Do you see the problem with this approach?

 

Yes, they are really looking for a clone of Warren Buffett. And as we discussed earlier, that does not exist.

 

And I get it - investors can’t help themselves. They love and worship Warren Buffett so much they can’t let go - they don’t want to let go. In this regard, Buffett has become a curse for many investors. It is stopping them from being rational and dispassionate when they look at other companies.

 

Is it possible to find another Warren Buffett? No. Is it possible to find another Berkshire Hathaway? Yes. Perhaps the key is the P/C insurance model.

 

The P/C insurance model

 

Buffett has said repeatedly that the core engine that propelled the growth of Berkshire Hathaway over the decades was its P/C insurance business. The really interesting thing is other investors/companies have done something similar.

 

Other investors/companies have built great fortunes over many decades exploiting the P/C insurance model:

• Shelby Davis - CAGR of 23% over 47 years
• Henry Singleton/Teledyne - CAGR of 20.4% over 27 years.
• Larry Tisch/Loews
• Warren Buffett/Berkshire Hathaway - CAGR of 19.9% over 59 years.

But here is the really interesting thing: they all did it in completely different ways.

 

So investors don’t need to find the next Warren Buffett. Instead, they need to find the next investor/company who is poised to exploit the P/C insurance model to drive above average returns for shareholders in the coming years. This approach offers investors their best chance of finding the next ‘Berkshire Hathaway type of investment.’

 

————

 

Which company looks poised to best exploit the P/C insurance model in the coming years?

 

I think it might be Fairfax Financial.

 

Truth be told, Fairfax has been successfully exploiting the P/C insurance model for decades. Over the past 39 years its share price (plus dividends) has delivered a CAGR of 19% in US$ terms (it was 18.3% at the end of 2023 - from Fairfax’s 2024 AGM presentation). That is exceptional long term performance.

 

But more relevant to our post today, Fairfax is still a small company. It has been aggressively expanding its P/C insurance business over the past decade (growing that core engine). And it is still run by its founder.

 

Over the past 5 years Fairfax has dramatically outperformed its P/C insurance peers. Fairfax has delivered a total return to shareholders of 25.2% for each of the past 5 years. And even after that performance, it is trading today at the lowest valuation (compared to peers).

 

Most importantly, Fairfax’s P/C insurance business has never been better positioned. Its investment management business has never been better positioned. Over the past 5 years, the execution from its senior management team has been best-in-class. As a result, the company has never been better positioned in its history than it is today.

 

Today, Fairfax is providing investors with the next iteration of how to successfully exploit the P/C insurance model - and drive enormous per share value for shareholders over the long term. Lots of investors just don’t see it… yet. Likely because they are looking for the wrong thing.

 

Part 2 is contained in the next post in this thread.

 

 

Edited 1 hour ago by Viking

[Viking]

Comparing Berkshire Hathaway to Fairfax

 

Yes, Fairfax and Berkshire Hathaway are similar in many important ways. However, both companies also have important differences. We review both their similarities and differences in this post.

 

How Berkshire Hathaway and Fairfax are similar:

 

1.) Ownership/Control:

• Founder is the controlling shareholder - allows business to be run with a long term focus.
• Insurance - Critical to being able to optimize the management of the insurance cycle.
• Investments - Expands opportunity set to higher return opportunities, like equities.
• Founders have modest pay packages. The vast majority of their net worth is held in the company. The result is strong alignment of their interests with those of shareholders.

2.) Business structure:

• Small head office – handles capital allocation and succession planning.
• Decentralized operating structure:
• Insurance businesses are run by their presidents/CEO’s.
• Investments / equity holdings are run by their CEO’s.

3.) Growth engine: P/C insurance business - generating low cost and growing amounts of float.

 

4.) Investing framework

• Value investors at their core – Ben Graham was the foundational teacher.

5.) strong culture - carefully crafted and shaped over decades; championed/role modelled by the founder/CEO.

 

6.) Communication with shareholders: Informs and teaches shareholders about the business.

• Long letters in each annual report.
• Presentation / Q&A at the AGM.

7.) Shareholder focus: Focus is on building per share value for shareholders over the long term.

 

8.) Exceptional long-term track record: Built an enormous amount of wealth for shareholders over decades:

• Berkshire Hathaway = 19.9% per year for 59 years
• Fairfax = 19% per year for 39 years (US$ including dividends)

How Berkshire Hathaway and Fairfax are different:

 

1.) Size of company

• Berkshire Hathaway is a giant-sized company.
• Fairfax is a much smaller company. Today, this makes it much easier for Fairfax:
  • To grow its insurance business (and float).
  • When making investments. Fairfax has a much larger opportunity set (in both public and private markets). And a good decision will more easily move the performance needle at Fairfax.

2.) Importance of P/C insurance

• Berkshire Hathaway has morphed into a huge conglomerate over the past 2 decades; today, P/C insurance is one of a couple of large business units.
• Fairfax is still primarily a P/C insurance company; as a result its business is much more leveraged to the benefits of float.

 

3.) Capital allocation

• Berkshire Hathaway and Fairfax are very different animals when it comes to how they do capital allocation (what tools they use and how they use them). Berkshire Hathaway is much more constrained in its approach.
• Fairfax is open to using all tools in the capital allocation toolbox (like Henry Singleton was when he ran Teledyne). Fairfax can also be very creative with how it uses the tools. Below we highlight some of the differences in their approach.

Sources of capital

 

4.) Use of equity

• Berkshire Hathaway is loathe to issue new BRK shares and, until recent years, was not a fan of buying back its stock.
• Fairfax has always been very active with its equity, issuing FFH shares when its stock was trading at a premium (using the proceeds to buy P/C insurers who were trading at a discount) and then - years later - aggressively buying back FFH shares when its stock was trading at a discount.

5.) Use of debt

• Berkshire Hathaway uses a very modest amount of debt (usually at the subsidiary level).
• Fairfax is much more comfortable using debt as an another form of leverage (in addition to float) to boost earnings and returns for shareholders.

6.) Use of minority partners

• Berkshire Hathaway does not use minority partners as a source of cash.
• Minority partners have been a significant source of short term capital for Fairfax over the years. Capital is sourced when opportunities arise (two recent examples: Allied World acquisition in 2017 and buyback of 2 million Fairfax shares in 2021). Minority partners are bought out when Fairfax is flush with cash (like we have been seeing in recent years).

7.) Holding period

• When it comes to investments, Berkshire Hathaway’s style can be described as ‘buy and hold forever.’
• Fairfax is much more opportunistic when it comes to holding period. Selling is an important source of cash and it has delivered significant value to Fairfax and its shareholders over the years.
  • Insurance: Taking advantage of the mania in cats and dogs, In 2022, Fairfax sold its pet insurance business and realized a $1 billion gain after tax. Most people did not even know that Fairfax owned this business (it was very small).
  • Investments: In 2022, Fairfax sold Resolute Forest Products at the peak of the lumber cycle at a premium price. In 2024, Stelco was sold at a premium price to Cleveland-Cliffs.

Investing

 

8.) Kind of value investor: After Ben Graham, the big influences on Buffett and Watsa’s/Fairfax’s investing styles have been quite different.

• Warren Buffett was influenced by Charlie Munger and Phil Fisher - This pushed Buffett to ‘quality at a fair price.’
• Prem Watsa/Fairfax was influenced by John Templeton and Peter Cundill (others?) - Watsa/Fairfax has remained more of a traditional value investor (buy low and sell high). It does appear in recent years as though Fairfax has been moving towards ‘quality at a fair price’ (putting more of a premium on management, balance sheet strength and earnings profile).

9.) Geography

• Berkshire Hathaway has been focussed primarily on the US with its P/C insurance business and its investment businesses.
• Fairfax has been aggressively growing out its international P/C insurance footprint. And it has significant investments outside of the US (Canada, India, Greece).
  • When Digit (P/C insurance start-up in India) was looking for a partner in 2016-17  they went to Berkshire Hathaway first – who said no. They then went to Fairfax , who said yes. And Berkshire’s loss has become Fairfax’s gain. Fairfax’s $154 million investment in Digit is now worth more than $2 billion. More importantly, today Fairfax owns a control position in a large, fast growing P/C insurance companies in India - who is expected to have the fastest growing economy in the world over the next decade.

10.) Resource industries/commodities

• Fairfax appears more comfortable investing in these sectors than Berkshire Hathaway - Fairfax will invest where they find value. More than 10% of Fairfax’s equity portfolio today is invested in a diverse group of resource/commodity plays – oil and gas, gold, copper, royalties.

Other items

 

11.) Dividend

• Berkshire has never paid a dividend.
• Fairfax currently pays a small dividend of US$15/share.

12.) Stage of Life Cycle:

• At Berkshire Hathaway, today Buffett appears focused primarily on preservation of capital – listening to him talk about his responsibilities to long term shareholders, he sometimes sounds like he is managing a trust.
• Fairfax still appears to be primarily focused on driving per share returns for shareholders over the long term.

Summary

 

From a structural perspective, Berkshire Hathaway and Fairfax have many similarities. However, when it comes to execution, they both have many meaningful differences. Both companies have outstanding long term track records - they are both very good at what they do. Both companies should be celebrated for their differences (not derided). Importantly for today, Fairfax is a much younger and smaller company than Berkshire Hathaway.

 

Fairfax looks like an athlete who has just entered their prime. Over the past 5 years, Fairfax’s performance (appreciation of share price) has been best-in-class among P/C insurance companies - and it hasn’t been close. It appears Berkshire Hathaway has handed off the outperformance baton to Fairfax who is now running with it - most investors just haven’t recognized it yet.

 

————-

 

Pet peeve

 

Does this mean we should start calling Prem Watsa the Warren Buffett of the north (again)?

 

No. This was a stupid thing to say 20 or 30 years ago. It is even more stupid today. IMHO, it is a lazy and inaccurate comparison to try to make (although it will probably get lots of clicks). Buffett is the GOAT. Trying to compare anyone to the GOAT is never going to go well. To do so does a great disservice to Watsa. Both men are great in their own right - and each should be celebrated for what each has delivered/accomplished over many decades for small/retail investors (like me and many others on this wonderful board).

 

—————

 

What about Markel?

 

Markel is a fine company. It appears Markel has decided they are going to try and clone Warren Buffett. As I have said above, I don’t think that is possible. In recent years, Markel appears to be having its challenges executing that strategy/model - it’s business has been experiencing some issues and as a result its share price has badly lagged P/C insurance peers over the past 5 years. Recently, they have called in ‘external consultants and advisors’ to help them figure things out - hardly the sign of a well run company.

 

Comparing Markel to Fairfax today, I think Fairfax is better positioned in both its core P/C insurance and its investment management businesses. But most importantly, over the past 5 years, Fairfax’s senior management team has been executing much better than the senior team at Markel (capital allocation, succession planning, P/C insurance, investments). As a result, my guess is Fairfax’s business results and share price will continue to outperform those of Markel in the coming years.

Edited 9 hours ago by Viking

[Junior R]

FFH has really done during good during these market drawdowns

[Viking]

3 hours ago, Junior R said:

FFH has really done during good during these market drawdowns

@Junior R Good point. Fairfax’s stock really outperformed big time in the 2022 bear market in stocks (+40% compared to S&P500). Today Fairfax is flush with cash and they think their stock is cheap at current levels. And they are walking the talk (they reduced effective shares outstanding by 5.7% in 2024). So if the stock sells off meaningfully (i.e. 10% or more) I would expect Fairfax to get aggressive with buybacks again. Great set up for shareholders in the current environment (volatility appears to be picking up). 
 

Long term shareholders really should be hoping for a big decline in Fairfax’s share price. At least that is what Buffett has said repeatedly…

 

It would be great if Fairfax was able to take out a significant number of shares in 2025 at a slight premium to book value. 

Edited 1 hour ago by Viking

[cwericb]

4 hours ago, Junior R said:

FFH has really done during good during these market drawdowns

 

As a long term shareholder I have seen this pattern numerous times. 

 

During the financial crisis in the 2008-2010 and later, there were numerous periods when the market was tanking and yet Fairfax share price would not suffer the same drops as the general market and at times would actually increase. When people today simply look back at the charts and think yeah there was quite a period where FFH share price was flat for a period, actually during a number of those periods it was FFH share price NOT dropping along with the market. Had it not been for my shares in Fairfax during those difficult times I would not have lasted in the markets and would not be invested in the markets now.

 

Today, Fairfax is becoming a truly world wide company and what happens in any one part of the globe should not have as much impact on FFH share price as with many other companies that are more restricted in their geographical operations.