Fairfax 2025

[gfp]

https://www.fitchratings.com/research/insurance/fitch-upgrades-fairfax-ratings-outlook-stable-22-04-2025

[Parsad]

9 hours ago, mananainvesting said:

One of the things that I ponder is, How/why did Mohnish Pabrai miss $FFH.TO over the last few years. I think it is a reasonable assumption that he is aware of what Fairfax does, its management etc and yet why doesn't he invest in $FFH.TO? 

 

I wonder why he doesn't see $FFH.TO as a high compounding machines (15%)? or is his return expectation higher than 15%? 

 

9 hours ago, Whensthepaintdry? said:

I’m not sure, but I’m glad he didn’t . He would have talked about it non stop. 

 

7 hours ago, Hektor said:

Ego, may be.

 

A lot of managers missed it...name how many of the Gurus from Guru Focus bought it? 

 

Name how many readers here compared to members bought it?  So why pick on Mohnish?

 

If you were lucky or smart enough to buy it...maybe put your ego aside and thank your stars you did!

 

Cheers!

[Parsad]

On 4/13/2025 at 5:10 AM, Cigarbutt said:

This post is not to suggest that the above statements are incorrect. It's just a 1999 reminiscence coming across the word "nervous". Offsprings in my house suggest such type of historical recollections are so "Y2K" and may not be terribly relevant to our new era. That's fine.

i remember listening to a presentation given by FFH executives around 1999 (their communications with the outside world was very limited then but it looks like they needed to open up a little as their underwriting results were becoming visibly terrible, they had developed a HUGE unrrealized bond loss position and they had a significant growing loss position on their large put against the S&P. When asked by an analyst about such put (the unconventionality of it etc), Roger Lace (maybe it was Brian Bradstreet) answered that, to the contrary, such puts were not only an option but a necessity (something like that) in such environment. This was an unusual comment (my perspective, unconventional but not necessarily wrong) because then (from AR 1999), they had only an 8% allocation to stocks, most of their stock allocation was in Korea and Japan and their put position was quite large, all that because they had growing "concerns" since the growing "speculation" starting in late 1996..

Then, they showed that they were right (eventually) and they were lucky in their timing. Eventually, it seems, they continued to be right but the timing became trickier. Also, they used standard valuations tools then, tools that have become even less reliable for timing purposes or perhaps it's different this time?

 

When the tech wreck happened, not everything went down...it was almost entirely tech.  Value stocks had 3 great years after, as people where avoiding them for tech stocks until February 2020, and many had been cut in half including Berkshire, Coca-cola, Wells Fargo, etc.  While over 65% of tech stocks fell 80% or more between 2000 and 2003.

 

Great financial crisis was so catastrophic that the entire market went down dramatically...virtually no sector left unscathed.  

 

Pandemic was closer to GFC...just broad damage across almost all sectors.  

 

Current tariff problem seems more like October 1987...dramatic fall, dramatic recovery...long-term bull market after!

 

History rarely repeats, but often rhymes.  So it's hard to know whether puts are a good idea or not.  Better off having a comfortable position in the markets at most times, and a healthy amount of dry powder (depends on your comfort level). 

 

When the shit hits the fan, average in small amounts after each drop of 10% (or increasing amounts after each 10% drop) until you are fully invested if markets have dropped 50%.  If they keep dropping (like a Depression) keep switching out of higher P/E stocks into even lower ones. 

 

Even in the worst drops, there was a massive rebound 1-3 years out...including 1929.  If you've averaged in with your cash, bought cheaper and cheaper assets, you'll be ahead of the game when things rebound...and not when they rebound to where things used to be, but just the initial bounce.  You'll just have to make your emergency fund last longer until that massive rebound!

 

Cheers!   

[nwoodman]

5 hours ago, gfp said:

https://www.fitchratings.com/research/insurance/fitch-upgrades-fairfax-ratings-outlook-stable-22-04-2025

Excellent, some upgrades were on my personal catalyst list.  Probably saves them 30-40bps on future borrowings.

 

Fitch Upgrade – April 2025

IDR: A- (from BBB+), Outlook: Stable

Why the Upgrade?

• Strong underwriting: 92.7% combined ratio (7 years profitable)
• Large holding company cash: $2.3B
• High net income: $3.9B in 2024
• Solid capital: Prism score “Strong”
• Improved fixed-charge coverage: 10.6x

Current FLR (Financial Leverage Ratio)

• 30.3% consolidated
• 25.9% excluding non-recourse debt

Future Upgrade Triggers

• Combined ratio in low 90s
• FLR ≤ 25% (or ≤ 21% ex-non-recourse)
• Prism score: Very Strong
• Continued reserve releases

Downgrade Triggers

• Combined ratio ≥ 95%
• FLR ≥ 32% (or ≥ 28% ex-non-recourse)
• Holding company cash < $1B
• Reserve hits or major leveraged acquisitions

 

 

[mananainvesting]

3 hours ago, Parsad said:

 

 

 

A lot of managers missed it...name how many of the Gurus from Guru Focus bought it? 

 

Name how many readers here compared to members bought it?  So why pick on Mohnish?

 

If you were lucky or smart enough to buy it...maybe put your ego aside and thank your stars you did!

 

Cheers!

 

I mentioned Mohnish cause I think he is a very rational investor and one who I think understands insurance well. When I had initially bought Fairfax and later got to know Mohnish knew about Fairfax (attends the annual meetings), I doubted whether my thesis on Fairfax was flawed, I doubted whether Fairfax management was actually good.

 

Now, over the years I have gained confidence in Fairfax Management by listening to calls/interviews and how consistent they are. But every year that I don't see Mohnish buying Fairfax , in the back of my head I wonder whether my understanding of the economics of  the insurance business maybe flawed. I am trying to be open to different views about Fairfax. 

 

Most of my other holdings keep my ego in check  

 

 

 

[Parsad]

1 hour ago, mananainvesting said:

 

I mentioned Mohnish cause I think he is a very rational investor and one who I think understands insurance well. When I had initially bought Fairfax and later got to know Mohnish knew about Fairfax (attends the annual meetings), I doubted whether my thesis on Fairfax was flawed, I doubted whether Fairfax management was actually good.

 

Now, over the years I have gained confidence in Fairfax Management by listening to calls/interviews and how consistent they are. But every year that I don't see Mohnish buying Fairfax , in the back of my head I wonder whether my understanding of the economics of  the insurance business maybe flawed. I am trying to be open to different views about Fairfax. 

 

Most of my other holdings keep my ego in check  

 

 

 

 

I think you'll do fine if you just trust your own analysis and work through it rigorously.  Too many people look to other managers to confirm their own belief...it's dangerous.  I learned my lesson 20 years ago trying to follow Seth Klarman into a couple of investments.  Their methods probably do not mirror my methods, thus why they probably see the same investment differently.  Cheers!

[adventurer]

5 hours ago, Parsad said:

 

When the tech wreck happened, not everything went down...it was almost entirely tech.  Value stocks had 3 great years after, as people where avoiding them for tech stocks until February 2020, and many had been cut in half including Berkshire, Coca-cola, Wells Fargo, etc.  While over 65% of tech stocks fell 80% or more between 2000 and 2003.

 

Great financial crisis was so catastrophic that the entire market went down dramatically...virtually no sector left unscathed.  

 

Pandemic was closer to GFC...just broad damage across almost all sectors.  

 

Current tariff problem seems more like October 1987...dramatic fall, dramatic recovery...long-term bull market after!

 

History rarely repeats, but often rhymes.  So it's hard to know whether puts are a good idea or not.  Better off having a comfortable position in the markets at most times, and a healthy amount of dry powder (depends on your comfort level). 

 

When the shit hits the fan, average in small amounts after each drop of 10% (or increasing amounts after each 10% drop) until you are fully invested if markets have dropped 50%.  If they keep dropping (like a Depression) keep switching out of higher P/E stocks into even lower ones. 

 

Even in the worst drops, there was a massive rebound 1-3 years out...including 1929.  If you've averaged in with your cash, bought cheaper and cheaper assets, you'll be ahead of the game when things rebound...and not when they rebound to where things used to be, but just the initial bounce.  You'll just have to make your emergency fund last longer until that massive rebound!

 

Cheers!   

Hi Parsad,

 

so you are no advocate for going all in at all? For instance when you come across an undervalued comapany like you yourself did with Fairfax a few years back ("swinging big")? FOMO hits even harder for undervalued companies than for fairly companies.

 

[cwericb]

8 hours ago, Parsad said:

 

A lot of managers missed it...name how many of the Gurus from Guru Focus bought it? 

 

Name how many readers here compared to members bought it?  So why pick on Mohnish?

 

If you were lucky or smart enough to buy it...maybe put your ego aside and thank your stars you did!

 

Cheers!

 

SO. Here is what I can't get through my thick skull.

 

When I see members post their holdings I can't help but notice the number of members of this board that don't show Fairfax as a holding - and this is nothing new. Why?

 

I mean the name of our board is The Corner of FAIRFAX and Berkshire, so the company is no secret. 

 

One of the main discussion topics is, and always has been Fairfax. The sum point of the Fairfax posts has always focused on the amazing potential of Fairfax. A quick look at a chart for Fairfax stock price will show price performance far and above any index. And yet a good percentage of members do not own shares in Fairfax - even with stellar future performance almost a given. 

 

My own shares in Fairfax date back to 2007 and have never once found a good reason to sell a share. And yes, there have been times when share price has stagnated or declined, but during those same times, Fairfax shares were often still out-performing the general market.

 

And it is not like it is difficult to find detailed info on the subject. The Fairfax thread contains what must be the most detailed examination of any company ever to list on a stock market. I imagine Fairfax management probably checks Viking's posts just to see how the company is doing from week to week. Other than Prem's trips to the bathroom, everything about the company is pretty well detailed in the posts on the subject.

 

So even today the potential is well known, detailed, and probably as good as it has ever been, so what am I missing?

 

I just find it rather strange that on a Fairfax board that there would be so many members not holding any significant shares in the company.

 

[73 Reds]

5 minutes ago, cwericb said:

 

SO. Here is what I can't get through my thick skull.

 

When I see members post their holdings I can't help but notice the number of members of this board that don't show Fairfax as a holding - and this is nothing new. Why?

 

I mean the name of our board is The Corner of FAIRFAX and Berkshire, so the company is no secret. 

 

One of the main discussion topics is, and always has been Fairfax. The sum point of the Fairfax posts has always focused on the amazing potential of Fairfax. A quick look at a chart for Fairfax stock price will show price performance far and above any index. And yet a good percentage of members do not own shares in Fairfax - even with stellar future performance almost a given. 

 

My own shares in Fairfax date back to 2007 and have never once found a good reason to sell a share. And yes, there have been times when share price has stagnated or declined, but during those same times, Fairfax shares were often still out-performing the general market.

 

And it is not like it is difficult to find detailed info on the subject. The Fairfax thread contains what must be the most detailed examination of any company ever to list on a stock market. I imagine Fairfax management probably checks Viking's posts just to see how the company is doing from week to week. Other than Prem's trips to the bathroom, everything about the company is pretty well detailed in the posts on the subject.

 

So even today the potential is well known, detailed, and probably as good as it has ever been, so what am I missing?

 

I just find it rather strange that on a Fairfax board that there would be so many members not holding any significant shares in the company.

 

I think the answer is rather straight forward:  Folks who don't  hold Fairfax believe their investments will do  better.  Were it not for Viking, I wouldn't own the stock; it was his analysis that tipped the scales and far outweighed commentary from all other posters that I had read here combined.  Of course there may also be folks who don't believe the last 5 years of out-performance will continue or they simply don't trust Prem Watsa.   The beauty of investing is every successful entrepreneur demonstrates a different way to build wealth. 

[SafetyinNumbers]

30 minutes ago, 73 Reds said:

I think the answer is rather straight forward:  Folks who don't  hold Fairfax believe their investments will do  better.  Were it not for Viking, I wouldn't own the stock; it was his analysis that tipped the scales and far outweighed commentary from all other posters that I had read here combined.  Of course there may also be folks who don't believe the last 5 years of out-performance will continue or they simply don't trust Prem Watsa.   The beauty of investing is every successful entrepreneur demonstrates a different way to build wealth. 

Most people invest on narrative so belief is much more important than math. I also think expected returns for most active investors is north of 20% so they don’t think FFH can meet the hurdle as a) they expect multiple contraction and b) they think ROEs will return to 2010-20 levels.

[Whensthepaintdry?]

I wasn’t trying to imply anything negative about Monish. I’m genuinely happy that super investors don’t talk about Fairfax. If they had I probably would have missed the boat even more than I did. 

[Txvestor]

1 hour ago, cwericb said:

 

SO. Here is what I can't get through my thick skull.

 

When I see members post their holdings I can't help but notice the number of members of this board that don't show Fairfax as a holding - and this is nothing new. Why?

 

I mean the name of our board is The Corner of FAIRFAX and Berkshire, so the company is no secret. 

 

One of the main discussion topics is, and always has been Fairfax. The sum point of the Fairfax posts has always focused on the amazing potential of Fairfax. A quick look at a chart for Fairfax stock price will show price performance far and above any index. And yet a good percentage of members do not own shares in Fairfax - even with stellar future performance almost a given. 

 

My own shares in Fairfax date back to 2007 and have never once found a good reason to sell a share. And yes, there have been times when share price has stagnated or declined, but during those same times, Fairfax shares were often still out-performing the general market.

 

And it is not like it is difficult to find detailed info on the subject. The Fairfax thread contains what must be the most detailed examination of any company ever to list on a stock market. I imagine Fairfax management probably checks Viking's posts just to see how the company is doing from week to week. Other than Prem's trips to the bathroom, everything about the company is pretty well detailed in the posts on the subject.

 

So even today the potential is well known, detailed, and probably as good as it has ever been, so what am I missing?

 

I just find it rather strange that on a Fairfax board that there would be so many members not holding any significant shares in the company.

 

If you take 2009-2020 I don't think you can argue the results were any good.
For a reference I've been a stock holder since 2008. Forget the stock price, even the P&L was mediocre for most of those years, underwriting was less consistent, the investments were poor(think BB and Sandridge energy to name a couple) and market hedges and deflation swaps eroded value, interest rates on a huge bond portfolio were minimal to zero, the green shoot unicorns like Digit and Ki etc were unproven and nascent, and Prem came to the shareholders and asked for his control to be cemented, and the stock reflected all that. Essentially being flat for 10yrs and trading at a discount (sometimes significant discount to BV). 
However since 2020 both management's approach as well as circumstances have changed. I won't elaborate on that as posters like Viking have done a mighty fine job of that.
Yet, to say the turnaround (both aspects) has been spectacular is an understatement. 

However, I think there is a recency bias and it's still part of the discount that Fairfax has to the market or frankly its peers. It's closing gradually.
IMHO in an environment where interest rates seem set to be higher go forth than the 2010s and frankly for the foreseeable future, Fairfax should easily be trading at closer to 2.2x book rather than the 1.3x book it currently does. Especially when we all know book itself is atleast 10% conservatively valued. But that's the opportunity, that's why I have been adding Fairfax shares a little at a time and it's now roughly 20% of my portfolio. The dilemma I have is that I think Fairfax India is also significantly undervalued, arguably more than even the mothership, and I think India is likely to grow more over a 20yr horizon than globally or atleast the western economies, so I've put an additional 5% in that, otherwise it would have been 25% in Fairfax. 
I don't have the cahunas to go any higher unless the stock itself does the lifting for me.  
 

Edited April 23, 2025 by Txvestor

[Charlie]

1 hour ago, cwericb said:

So even today the potential is well known, detailed, and probably as good as it has ever been, so what am I missing?

 

I just find it rather strange that on a Fairfax board that there would be so many members not holding any significant shares in the company.

@cwericb I think it is outside my circle of competence.

You have great value investors, but I don´t like to invest in some countries (Greece, India), you have more leverage, the invesmtent is in deep value stocks and not wonderful companies, the management has a track record of dancing out of their circle of competence.

Of course, Fairfax is smaller, but most small companies tend to stay small.

If I had to bet I would say they will outperform, but I don´t have to bet and I am half-way rich. 

I just think Berkshire is more safe. 

[MMM20]

2 hours ago, cwericb said:

When I see members post their holdings I can't help but notice the number of members of this board that don't show Fairfax as a holding - and this is nothing new. Why?

 

2 hours ago, cwericb said:

So even today the potential is well known, detailed, and probably as good as it has ever been, so what am I missing?

 

23 minutes ago, Charlie said:

circle of competence

 

^this

[SafetyinNumbers]

2 hours ago, MMM20 said:

 

 

 

^this

Ultimately, buying FFH is making a bet on expected value investing and most investors are deterministic so they can’t get comfortable. For the last 16 years, buying quality has come with growth and multiple expansion so there has been no reason to change tactics. 

[Crip1]

5 hours ago, 73 Reds said:

I think the answer is rather straight forward:  Folks who don't  hold Fairfax believe their investments will do  better.  Were it not for Viking, I wouldn't own the stock; it was his analysis that tipped the scales and far outweighed commentary from all other posters that I had read here combined.  Of course there may also be folks who don't believe the last 5 years of out-performance will continue or they simply don't trust Prem Watsa.   The beauty of investing is every successful entrepreneur demonstrates a different way to build wealth. 

In Buffet's article "The Superinvestors of Graham-and-Doddsville" he spelled out the successes of those students, but noted that their portfolios over the years were quite dissimilar. The bottom line is that there are multiple avenues to wealth-generating heaven.

 

@cwericb I'll grant you, it is a little odd...wonder how many don't hold Berkshire?

 

-Crip

 

[Viking]

The benefits of having a decentralized operating structure

 

Investors spend a lot of time trying to understanding the numbers. Because it is relatively easy. Other things like company structure and culture gets very little attention. Because they are much more difficult things to understand and evaluate. 

 

Fairfax has a decentralized operating structure. One advantage of having a decentralized operating structure is it promotes an entrepreneur mindset among employees. This can be a very powerful driver of results - today and (more importantly) in the future.

 

In recent months Fairfax has been explaining to shareholders the importance of its decentralized operating structure. Prem included a long section on this topic in his letter to shareholders in the 2024AR. This covered the big picture. And at Fairfax’s AGM in April of 2025, we heard from the presidents of Northbridge and Allied World. Their comments got more into the weeds. Going to Fairfax’s AGM and listening to the presidents speak - attendees get to see/hear first-hand:

• The quality of the people running the insurance businesses. 
• The entrepreneurial spirit that is shining through the different companies. 

Fairfax’s structure attracts and rewards entrepreneurs. Fairfax has been methodically/patiently working at it for 39 years. Today, Fairfax has put together an amazing collection of companies - all lead by entrepreneurs - both in its insurance companies and non-insurance equity investments. This positions the company exceptionally well for the future. 

 

What Fairfax has built over the past 39 years would be exceptionally difficult to duplicate - and it would take a long time. A decentralized operating structure is an important part of Fairfax’s moat. Even if it is not well understood by investors.  

 

In this post we will explore Fairfax’s decentralized operating structure:

• Part 1: The big picture - Prem Watsa
• Part 2: Grow organically - Silvy Wright - President - Northbridge
• Part 3: Grow by acquisition - Lou Iglesias - President - Allied World

—————

 

Part 1: The big picture – Prem Watsa

 

In the 2024 annual report, Prem began his shareholder letter by discussing Fairfax’s decentralized operating structure and its importance to the success of the company. We have included the full quote below (it is long).

 

Comments from Prem in Fairfax's 2024AR:

 

"Since we began in 1985, 39 years ago, our book value per share has compounded at 18.7% per year (including dividends) while our common stock price has compounded at 19.2% (including dividends) annually. As I have mentioned previously, our success throughout our history and again in 2024, has come under a decentralized structure with outstanding management executing a disciplined approach to underwriting. 

 

"Over the years, those who have followed Fairfax, read our letters and attended our annual meeting, are well aware that we are passionately devoted to the decentralized operating philosophy. This year, I want to spend more time on this subject. Aside from helping inform our shareholders about our thinking in the past and present, I have an ulterior motive that comes from an eye on the future. As Fairfax rolls into the future, your Chairman (gradually) passes leadership to the next generation, and they, in turn, to later generations; it is very important that we memorialize why decentralization is such a critical feature of Fairfax. I want and expect Fairfax to thrive over the next 100 years, and well beyond. To do so, I believe it is of paramount importance that we never abandon our decentralized approach! 

 

"So, why are we so fervently attached to this model? At its foundation, decentralization places its faith in the many rather than the few. Embedded in the Guiding Principles, which we have published every year in this report, is our deep and abiding respect for the fact that we are all created equal before God. All of our offices display prominently The Golden Rule; treat others as you want to be treated yourself as depicted in all the religions of the world. All of our CEO’s have a plaque with the following quote Ronald Reagan loved so much and kept on his desk: “There is no limit to what a man can do or where he can go if he doesn’t care who gets the credit.” Decentralization is the best system for unleashing the power of the many, rather than being limited to the talents of the few. And it aligns so perfectly with the foundational values of Fairfax since its inception. Our optimism in what empowered people can accomplish is unbounded! 

 

"What are the advantages of an empowering, decentralized operating system? Let me count the ways: 

 

1.) Ownership and Accountability 

 

"Each of our CEO’s is given full autonomy over all underwriting and operational functions within their company, other than investments. They set strategy and tactics. They are responsible for managing risk within the limits of their allocated capital. Accordingly, they are fully accountable for underwriting performance and its results. The decisions implemented in their companies are their own, not those passed down from above. 

 

2.) Management Retention 

 

"A direct benefit of this Ownership Culture is the exceptional continuity of management we enjoy at Fairfax. As I write this, our Presidents and Senior Executives at Fairfax average close to 20 years of service. We are big believers in the benefits that come from this continuity. Rather than shuttling in new leaders every four or five years, our companies are able to continually build on success, without undergoing the strategic U-turns that management turnover often brings. 

 

3.) Flexibility and Nimbleness 

 

"The autonomy our companies enjoy allows a degree of operating agility absent from large, centralized organizations. Our performance during the recent hard market years of 2020 to 2023 bear this out, as we advantageously expanded at an industry leading pace! We rely on the expertise and judgment at each of our companies, and we do not prescribe from the top. For example, when the cyber insurance market underwent radical change at the end of 2020, we had four of our major companies dramatically expand their activity, each pursuing a different strategy. Had we imposed a one-size-fits-all approach to this challenging class, the growth would have been a fraction of what it was. 

 

4.) Reduced Leakage from Acquisitions 

 

"We do not, as a general rule, look to integrate acquisitions into existing operations, which means we keep much more of the business and people we acquire. Our industry is replete with examples of acquisitions that have little to show after three or four years because people have left and portfolios have melted away! 

 

5.) Financial Flexibility 

 

"Maintaining independent, separately capitalized companies gives us a source of financial flexibility. While it will always be the case that none of our companies is for sale, there may be times it makes sense for us to sell a minority stake. Witness the sale of 10% of Odyssey a few years ago, enabling us to make a large share re-purchase at an opportune time. 

 

"At Fairfax, for today and the future, we believe the best conditions for operating success depend on the Three Ts: 

1. Trust must be reciprocal between the holding and operating companies. Trust has to be earned and its strength increases over time. Decentralization cannot work without it. 
2. Transparency with clear and open communication is required at all times. 
3. Talent is necessary to operate successfully at a high level in a challenging industry.

"There are those who might look at Fairfax from the outside and lay out a plan that would, on paper, describe myriad benefits to be obtained by abandoning our approach. They would do so without being able to quantify the intangible benefits we enjoy. It is vitally important to me that the Fairfax approach does not change because I believe our long-term success depends on it!!"

 

Prem Watsa – Fairfax 2024 Annual Report

 

—————

 

Part 2: Driving organic growth - Silvy Wright - President - Northbridge

 

Background 

 

The Athappan Cup was established at Fairfax in 2024. It will be awarded at the AGM each year to one of Fairfax’s insurance companies for underwriting excellence. The first-ever winner of the award was Northbridge Financial. The company delivered a 90.1% CR over the past 5 years - with reserve redundancies every year.

 

What was Northbridge’s secret sauce? At the AGM, Silvy Wright gave us some insight into what has enabled Northbridge’s stellar performance over the past 5 years. She took attendees back in time. And highlighted the importance of Fairfax’s decentralized operating structure - and how it allowed Northbridge to transform its Canadian operations in 2012 (operationally - the brining together what had been 4 separate companies). Today, we are seeing the benefits of this transformation in the underwriting results that Northbridge has been able to deliver over the past 5 years.

 

Comments from Silvy Wright at Fairfax’s AGM in April 2025:

 

“(A)s you can appreciate, we've all had different journeys, and mine started in 1994. So I just want to take just a few moments to share an employee experience. And that's me.

 

“In 1994, I joined Markel. And Markel, as you all know, was the first company Prem bought. And in 1994, Markel was about $60 million in revenue (and) 60 people… I was not a president 30 years ago. Well, my parents would have been pretty proud if that happened. But I wasn't the president back then. (When) I joined, I was an accountant, but with a strong entrepreneurial drive.

 

“And it was very clear to me, when I joined Markel, that Prem's philosophy on decentralization really inspired that entrepreneurial spirit in Markel. There were 60 of us. And when I refer to entrepreneurial spirit, I'm thinking you feel like an owner of the company, so you work like an owner of the company. You've got the freedom to take risks or you have the freedom to challenge the status quo. And then you have a great sense of pride of what you do. And that spirit lived in all 60 people, from the collections manager who collected every dollar like her own, to the underwriting head who developed strong relationships with the customers. And within that environment, all the employees built the leading transportation insurer of Canada.

 

“Now of course, it didn't happen overnight, but over the years, that's what all the employees did. So flash forward, so I'm still here, 16 years later, I learned a lot at Markel, a lot of freedom, a lot of mistakes, learning along the way, and I was appointed the CEO of Northbridge Financial (in 2011). Northbridge Financial represented the Canadian insurance operations of four separate companies.

 

“And at that time -- I know you're not going to like this Prem. But at that time, we asked for the unthinkable. And that is to bring the 4 companies together from an operational perspective. And we asked for that because we really wanted to compete more effectively in the changing landscape in Canada. Not for layoffs -- we didn't have layoffs. But we knew that we could leverage the combined talents of the group. We can leverage the diverse portfolios that we had in the various companies so that we could be a stronger force with the broker distribution and then obviously to leverage scale to invest in that company. So that's what we did.

 

“But the top goal of that beginning was not that obvious. The obvious was, okay, you're going to make changes, you better make a profit. The top goal was not that. The top goal, having been with Fairfax already 16 years at that time, was to build the culture and the entrepreneurial spirit that I knew creates success in the long term.

 

“And so that's what we did. We empower -- we continuously fostered an employee empowerment. And empowerment does not work if it just sits at the top, right? Yes, presidents have freedom. But the success is when you cascade that empowerment throughout the organization. When people feel that they have the freedom to challenge the status quo, to come up to the president and share an idea, and that's what we've done. And we're not perfect, but we've unleashed a lot of talent, and it's all in the talent of those employees that we have established a very good record. And now we have a nice shiny silver cup.

 

“So, with that, thank you…  Prem… the trust… we both took a risk, and it paid off.”

 

Silvy Wright - Fairfax's AGM - April 2025

 

—————

 

Part 3: Driving growth by acquisition – Lou Iglesias – President – Allied World

 

Background

 

Fairfax purchased Allied World in 2017. In terms of size, at the time it was a massive purchase for Fairfax. Allied World has since become a big success story for Fairfax (and the senior management team and employees of Allied World). It was a purchase that almost didn’t happen. Why it did happen is instructive. 

 

At the AGM, Lou Iglesias told attendees the story of why Allied World decided to sell their business to Fairfax back in 2017. The story highlights the importance of Fairfax’s decentralized operating structure - and how it was a key part of Allied World’s decision-making process. And how it will likely help Fairfax with acquisitions in the future. 

 

Comments from Lou Iglesias at Fairfax’s AGM in April of 2025:

 

“It's good to see everybody. Obviously, one of the themes at the AGM this year is decentralization. So, I thought I would… talk about Allied World and decentralization and how it affects an operating company. And I'd like to start with a little story. I know some of my new friends that I met last night would like to hear a story about that.

 

“So going back to 2016, 2017 time-frame. At Allied, we were looking for a transaction, right? We were a midsized public company. We thought getting a bigger, better platform would help us continue our journey, build our company out. We felt that we still had the ability to create a lot of value.

 

“So we were talking to several suitors. And one, we got pretty far along with. We were working with them for over a year, and we're getting close to the finish line. And so now we're getting into the details. And we started to realize that this would be a merger and that it would be likely that Allied World would be broken up. And that didn't sit very well with us. It wasn't what we wanted as a company. So that transaction never happened. 

 

“Shortly after that, we get a call from Fairfax. And at the time, we didn't know a lot about Fairfax. We were a little bit tired of working for over a year on a transaction that didn't work, and we were a little reluctant. But Prem said, wait a minute, Fairfax does things differently. You should hear us out. And we all know Prem could be very convincing. So we took the meeting, and we heard a lot about the Fairfax culture, which sounded very good to us. And we heard a lot about decentralization in the independent operating model, which sounded great to us because, again, we felt that we still had a great runway to build our company out.

 

“So we finished a meeting. I went across the street to the restaurant with John Bender and Wes DuPont, who are sitting up there and a couple of others. And being the good underwriters that we are, we were kind of skeptical, a little bit. Prem loves to tell that story. We're a little skeptical, but we did our diligence, and we found out, yes, that is how they do it at Fairfax. And we did the transaction. And very quickly, since Fairfax exceeded most of our expectations, the skepticism went away, right? So very quickly, we got past that.

 

“But the point of this story is, number one, decentralization was so important to Allied World that it's likely that we may never have been part of Fairfax if it wasn't for it. And I think the second thing to take away is that I think Fairfax is going to have the #1 slot to talk to companies and acquire companies that still feel that they could do great things, right? Because that's the platform that you want to be able to move your company forward. So we had our own same management team, staff, strategies, no layoffs, right, and we move forward.

 

“So where does that bring us today? So if you look at the full 6 years that we've been part of the Fairfax family we've posted over $1.6 billion of underwriting profit, over $3.6 billion of net income. Our combined ratio has improved for 6 years in a row every year. In 2024, just last year, we had $540 million of underwriting income, which is a record for Allied World and our third record year in a row. And we've more than doubled the size of the company at over $7.2 billion since we were acquired.

 

“So, a lot of things go into that. I credit our people, who I think are fantastic, and Andy talked about people. The ability to keep the best people certainly is a huge part of the results that I just talked about. That's one thing. We have great professionals at our company.

 

“But I'd also say, I could say with great confidence that in a centralized company or in a merged company, that level of performance I don't think would have been possible. And prior to Allied World, I was with a large centralized company for many years so I could see the differences pretty clearly. And they're stark, right? The ability to run your business, the ability to carry out your strategy seamlessly, to keep the best people, the lack of bureaucracy which is a really, really big benefit for all the Fairfax companies, is tremendous.

 

“And last thing I really want to touch on is trust because I don't believe that you could have a successful decentralized operation without trust, right? And we trust Fairfax explicitly. We believe they trust us as well. But trust equals transparency, right? So you could have decentralization. We have a tremendous amount of transparency without having to write thousands of reports, right? Andy and I, in a 1-hour call, will cover what would take me 7 hours of reports that I would have had to write, okay? Transparency is key.

 

“And I also think that Fairfax deserves a tremendous amount of credit. It's not easy to run a large decentralized company as successfully as they do, a large global company. It takes dedication, takes discipline, professionalism, and it takes a very unique skill set to be able to do it effectively. So great credit to Fairfax. And I think all the operating companies benefit tremendously.”

 

Lou Iglesias - Fairfax's AGM - April 2025

Edited April 23, 2025 by Viking

[cwericb]

5 hours ago, Txvestor said:

If you take 2009-2020 I don't think you can argue the results were any good.
 

Thanks all for the comments.

 

I may be wrong, but I think you will find that if you take those same dates 2009-2020 and plot both FFH and the TSX index on a graph, you will find that Fairfax actually out performed the TSX during that period. So while performance might not have been great, it appears to have at least beat the index - and this doesn't include dividends.

 

Further, there were times during the GFC when stocks were hit hard and yet Fairfax stock price stayed level or increased. 

 

Now while that may sound like a detail, it balanced off losers in my personal portfolio during that period and helped me to sleep at night. 

 

I have held FFH since 2007 @ about $215 a share and added through time. If I had tried to time the market there is no way I would ever been smart enough to have cherry picked when to jump in and out of FFH. But I am quite happy with my returns on Fairfax and it represents a bit over 50% of my portfolio.

[Parsad]

13 hours ago, adventurer said:

Hi Parsad,

 

so you are no advocate for going all in at all? For instance when you come across an undervalued comapany like you yourself did with Fairfax a few years back ("swinging big")? FOMO hits even harder for undervalued companies than for fairly companies.

 

 

Depends...if you are young and have no dependents.  Swing away and swing big...but do it smart.

 

If you are married and probably have children...swing for homeruns when they are obvious, but don't go all in.

 

If you are like me now and just need singles or doubles...no need to go all in.  

 

Cheers!

[Parsad]

3 hours ago, cwericb said:

Thanks all for the comments.

 

I may be wrong, but I think you will find that if you take those same dates 2009-2020 and plot both FFH and the TSX index on a graph, you will find that Fairfax actually out performed the TSX during that period. So while performance might not have been great, it appears to have at least beat the index - and this doesn't include dividends.

 

Further, there were times during the GFC when stocks were hit hard and yet Fairfax stock price stayed level or increased. 

 

Now while that may sound like a detail, it balanced off losers in my personal portfolio during that period and helped me to sleep at night. 

 

I have held FFH since 2007 @ about $215 a share and added through time. If I had tried to time the market there is no way I would ever been smart enough to have cherry picked when to jump in and out of FFH. But I am quite happy with my returns on Fairfax and it represents a bit over 50% of my portfolio.

 

There's nothing wrong with that at all...a little over 13% annualized over 18 years.  Keep a good chunk in FFH, another good chunk in a good, cheap ETF and the final slug in deep discount ideas you find that may give you better than 13% annualized return.  Not too complicated...takes a lot of the psychology out of it...and considerable continuity in what you hold...as well as limited capital gains!  Cheers!

[Txvestor]

7 hours ago, cwericb said:

Thanks all for the comments.

 

I may be wrong, but I think you will find that if you take those same dates 2009-2020 and plot both FFH and the TSX index on a graph, you will find that Fairfax actually out performed the TSX during that period. So while performance might not have been great, it appears to have at least beat the index - and this doesn't include dividends.

 

Further, there were times during the GFC when stocks were hit hard and yet Fairfax stock price stayed level or increased. 

 

Now while that may sound like a detail, it balanced off losers in my personal portfolio during that period and helped me to sleep at night. 

 

I have held FFH since 2007 @ about $215 a share and added through time. If I had tried to time the market there is no way I would ever been smart enough to have cherry picked when to jump in and out of FFH. But I am quite happy with my returns on Fairfax and it represents a bit over 50% of my portfolio.

Thanks for your perspective.  But it's all a matter of your vantage point. If memory serves me right I bought my first shares of Fairfax at $330US in 2009. A decade later when Prem bought a tranche of shares, I believe he paid less than that. Now clearly his timing was a lot better than mine.  
I guess many of you are Canadian investors and TSX and Canadian $ is your benchmark.
As a US based investor in $US, the time frame I referenced 2009-2020 was very mediocre compared to any US benchmark. 
Now the last 5yrs have substantially made up for that. Fortunately I had the conviction to hold on to my original shares and add on the way up building to my current position size. 
However for me the more exciting part is what is likely to happen with Fairfax over the next 5-10yrs. Its still trading at a discount to market, which will almost invariably close, and its insurance, bond investments and private equity investments as well as Indian investments seem well positioned with a degree of predictably and diversification even. Add to that the share buybacks and billions in capital annually to deploy opportunistically and it's a great set up for continued outperformance of the indexes. 

 

Edited April 24, 2025 by Txvestor

[djokovic1]

@MMM20 @Charlie

 

My view is that for FFH it is not a question of circle of competence.

 

The 'simple' question an investor has to answer is: Do you trust Prem and his investment team's capital allocation abilities over the next decades?

 

In my view there is a 40 year track record to help answer that question. 

PS: It seems to run in the family, his son has compounded at 29% net (5 years) h/t @SafetyinNumbers

[cwericb]

8 hours ago, Txvestor said:

Now the last 5yrs have substantially made up for that. Fortunately I had the conviction to hold on to my original shares and add on the way up building to my current position size. 
 

I purchased my first shares in 2007 @ $215 CDN and like you, I still have them. We are both probably quite satisfied that we did. While others were in and out of FFH over the years I don't know if they did much better over all, than we did with our original shares. And you are probably quite right about the CDN$ vs U$ as CDN has slipped massively over those years. 

[cwericb]

4 minutes ago, djokovic1 said:

@MMM20 @Charlie

 

My view is that for FFH it is not a question of circle of competence.

 

The 'simple' question an investor has to answer is: Do you trust Prem and his investment team's capital allocation abilities over the next decades?

 

In my view there is a 40 year track record to help answer that question. 

PS: It seems to run in the family, his son has compounded at 29% net (5 years) h/t @SafetyinNumbers

 

Yes. I think Prem and company have done a spectacular job over the years but I hope that Prem will step back from the spotlight and let Ben have a larger presence, simply because no one lives forever. Perhaps there may be some signs of this happening.

 

One of my main objections regarding Fairfax has been that you rarely see mention of the company without Prem's name attached and I believe that this has not necessarily helped the share price in recent years, (think Blackberry, hedges, etc). JMHO 

[villainx]

1 hour ago, cwericb said:

While others were in and out of FFH over the years I don't know if they did much better over all, than we did with our original shares.

 

I was in and out and I would say I likely did worse.   I was younger and stupider then so there's that.  I was close but wasn't ready to be a better investor then.

 

 

 

Edited April 24, 2025 by villainx