Fairfax 2025

[djokovic1]

1 hour ago, Viking said:

I love reading about Fairfax's history. It is really interesting. But is it informational for an investor today? I think it is a potential minefield for many investors. 

 

My view is the best way to think about Fairfax's history over the past 40 years is through the lens of 5 completely different companies - each one had a very different business model (what was actually driving earnings at the time). And, of course, earnings is the key. 

 

Personally for me, looking back at the history has been very useful to understand the evolution from the start to today. It has given me a lot of context. (Your compendium has been extremely useful for that too!) And as you correctly say, see them mature into the best version of themselves.

 

I honestly think being relatively new to the investment (2024), lets me look at it without any baggage of the past 2000-2020. And additionally, I am comparing it not only to other comparable insurers (Fairfax has highest ROE and lowest multiple) but also other opportunities in the market. It is very very rare (impossible?) to find a liquid large cap, on a single digit PE mutliple with 15-20% ROE, and earnings roughly locked in for next 3-4 years and compounding. 

I know it all sounds bullish, but thats my honest assessment. Personally, for me the biggest risk is interest rates going below 2% for the long term, but thats unlikely in my view.

 

 

[Viking]

21 minutes ago, djokovic1 said:

 

Personally for me, looking back at the history has been very useful to understand the evolution from the start to today. It has given me a lot of context. (Your compendium has been extremely useful for that too!) And as you correctly say, see them mature into the best version of themselves.

 

I honestly think being relatively new to the investment (2024), lets me look at it without any baggage of the past 2000-2020. And additionally, I am comparing it not only to other comparable insurers (Fairfax has highest ROE and lowest multiple) but also other opportunities in the market. It is very very rare (impossible?) to find a liquid large cap, on a single digit PE mutliple with 15-20% ROE, and earnings roughly locked in for next 3-4 years and compounding. 

I know it all sounds bullish, but thats my honest assessment. Personally, for me the biggest risk is interest rates going below 2% for the long term, but thats unlikely in my view.

 

@djokovic1, Iike you, I also get good value from looking back at Fairfax's history - it clearly shows how much the company has changed. And why the future will not resemble the past. The Fairfax supertanker is going in an entirely new direction. 

Edited November 24, 2025 by Viking

[Parsad]

5 hours ago, backtothebeach said:

 

Damn, I knew about the "lost decade" post GFC, but actually, if you got in right at the peak in 1998, you only had the dividend to show for 23.5 years.

 

https://www.fairfax.ca/wp-content/uploads/1998-Letter.pdf

"After a 9% increase in shares outstanding, earnings per share increased by
51% to $32.63 per share. Book value per share increased by 47% to $185 per share and our share price followed suit, increasing 69% to $540 per share"

 

"We have US$700 million in S&P Index puts"

 

So it peaked at ~3x BV. Does not look crazy in terms of earnings though.

 

This is probably old news for most here, but I think I am going to have to go back and read every annual report that is available, to really understand how this company has evolved over its history.

 

Peaked at nearly 4 times book value!  Crazy!  Fairfax had done really well for a bunch of years and then combined with market irrational exuberance, there was a very speculative interest in Fairfax.  I know some people who bought then...they weren't particularly happy for a decade, but they were smart enough to keep averaging in as the price fell.  That kept them ahead of the game over time and today are wealthy.  But it would have only worked if you averaged in over time.  A one time purchase would have been a very bad one!  Cheers!

[Parsad]

4 hours ago, patterson said:

While P/B may be losing relevance for FFH for many reasons (for example, as FV/CV grows), wasn’t book value always a flawed metric for insurance companies? Wouldn’t a better measure be adjusted BVPS + float per share – goodwill (part of the cost to acquire float)? That number is (very roughly) $2450 usd per share.

 

Actually p/b is probably one of the best measurements/stats for pure insurance companies.  It starts to hold less value when an insurance company enters other lines of business, and the value of the measurement has to be adjusted based on the type of insurance and quality of underwriting.  

 

Traditional insurance companies can be valued up to 1.5-2.5 times book value.  Reinsurance heavy companies should be valued between 0.8-1.4 times book value.  But it's an art...it's not hard and fixed...as you have to make assumptions on the management's underwriting abilities long-term, as well as how float is invested and if they use significant leverage. 

 

Cheers! 

[SafetyinNumbers]

1 minute ago, Parsad said:

 

Peaked at nearly 4 times book value!  Crazy!  Fairfax had done really well for a bunch of years and then combined with market irrational exuberance, there was a very speculative interest in Fairfax.  I know some people who bought then...they weren't particularly happy for a decade, but they were smart enough to keep averaging in as the price fell.  That kept them ahead of the game over time and today are wealthy.  But it would have only worked if you averaged in over time.  A one time purchase would have been a very bad one!  Cheers!

The P/B wasn’t that crazy when the investment:equity leverage was factored in. With 6:1 leverage if the portfolio could earn 7% and the combined ratio was at 100% or better, it made sense to buy. The assumption about the combined ratio was clearly wrong and could have been forecasted to be wrong. What assumptions are the bulls (like me) making now that are clearly wrong?

 

[Parsad]

8 minutes ago, SafetyinNumbers said:

The P/B wasn’t that crazy when the investment:equity leverage was factored in. With 6:1 leverage if the portfolio could earn 7% and the combined ratio was at 100% or better, it made sense to buy. The assumption about the combined ratio was clearly wrong and could have been forecasted to be wrong. What assumptions are the bulls (like me) making now that are clearly wrong?

 

 

 

Are you kidding me?  The leverage is what caused the problems and nearly destroyed Fairfax in the ensuing years.  Leverage is leverage...it cuts both ways. 

 

When you have large catastrophe losses, it wipes out huge swathes of equity and makes the company extremely vulnerable or can kill it.  When you get it right, it juices returns at the risk of large catastrophe losses. 

 

There is no way to make leverage risk free.  Float is not risk free leverage...it's just leverage that is cheaper than debt when underwriting and investment culture is good.

 

There is nothing wrong in your assumption that you can pay a higher p/b for Fairfax...but caveat emptor...buyer beware.  The higher valuation you pay, the lower your margin of safety.  Optimism is not a good defense when investing!  Cheers!

[SafetyinNumbers]

2 hours ago, Parsad said:

Are you kidding me?  The leverage is what caused the problems and nearly destroyed Fairfax in the ensuing years.  Leverage is leverage...it cuts both ways. 

 

I kid not. Issuing equity well above book value increased equity first. The losses from underwriting then hit the equity. The earnings from the float initially covered it but ultimately the reason they were able to buy float so cheap was because there was a lot of bad policies on the books. When they bought float they got the investments and the future claims.

[Parsad]

8 minutes ago, SafetyinNumbers said:

I kid not. Issuing equity well above book value increased equity first. The losses from underwriting then hit the equity. The earnings from the float initially covered it but ultimately the reason they were able to buy float so cheap was because there was a lot of bad policies on the books. When they bought float they got the investments and the future claims.

 

Sorry, I didn't understand exactly what you were referencing.  Yeah, shares sold at a premium were beneficial.  Unfortunately, not beneficial to the shareholders who bought those overpriced shares!  Cheers!

[SafetyinNumbers]

2 hours ago, Parsad said:

 

Sorry, I didn't understand exactly what you were referencing.  Yeah, shares sold at a premium were beneficial.  Unfortunately, not beneficial to the shareholders who bought those overpriced shares!  Cheers!

Certainly not but they had a serious flaw in their forecast assuming they weren’t just chasing momentum. Is it correct to say that you don’t make forecasts in your process?

[Buffett_Groupie]

On 11/23/2025 at 7:23 PM, Parsad said:

 

You can pay what you want for Fairfax, but when it hit its peak in 1998, any shareholders who had bought then didn't see break even again until 2014...that's 16 years with no gain unless you were averaging in over 16 years.  Margin of safety serves a real purpose...it avoids irrational exuberance!  Cheers!

I first bought it in 1998 at $498/share and thought it's bargain because the high was close to $700.

[Parsad]

1 hour ago, SafetyinNumbers said:

Certainly not but they had a serious flaw in their forecast assuming they weren’t just chasing momentum. Is it correct to say that you don’t make forecasts in your process?

 

Definitely make forecasts...using conservative assumptions though, which helps reduce flaws in forecasting.  Or I average down in many of those cases where I just wasn't conservative enough. 

 

My main point is that if people think that they are being conservative by extrapolating the last 5 years over the last 30 years...that may just be one of those significant flaws!  Cheers!

[Parsad]

1 hour ago, Buffett_Groupie said:

I first bought it in 1998 at $498/share and thought it's bargain because the high was close to $700.

 

Yeah, but you were one of those people who averaged down over the years, and actually bought more when it was cheaper...that was your saving grace and why you are rich now!    Otherwise you would not be nearly as rich, nor as happy!  Cheers!

[villainx]

Step 1: Buy stock

Step 2: Get huge drawdown

Step 3: ...

Step 4: you are rich!

 

[Munger_Disciple]

Question for @Parsad, @gfp or other shareholders about the Sixty Two Investment Company. I get FFH owns roughly 50% of the underlying company shares but does Prem & his family own the rest or are there other shareholders of Sixty Two that have minority ownership in it? Thanks

[Parsad]

1 hour ago, villainx said:

Step 1: Buy stock

Step 2: Get huge drawdown

Step 3: ...

Step 4: you are rich!

 

 

That's pretty much what he did!  If you go to the AGM, look for the guy in flip-flops and probably a t-shirt even though its very early spring in Toronto!  

 

No suit, no tie...no shoes even.  Most shareholders would feel like they should give this guy some money.  But nope, he does not need it!  Cheers!

[Parsad]

35 minutes ago, Munger_Disciple said:

Question for @Parsad, @gfp or other shareholders about the Sixty Two Investment Company. I get FFH owns roughly 50% of the underlying company shares but does Prem & his family own the rest or are there other shareholders of Sixty Two that have minority ownership in it? Thanks

 

There might be a cousin or two...maybe Robbert Hartog was also in there before he passed away...but as far as I know, Prem and Nalini own the 50%. 

 

Like Buffett's kids, their children will be stewards of the capital and do with it what their parents would want them to do.  The Watsa's have a very deep philanthropic streak, so I imagine much of it will be given to worthy causes over the long-term.

 

Cheers!  

[gfp]

1 hour ago, Munger_Disciple said:

Question for @Parsad, @gfp or other shareholders about the Sixty Two Investment Company. I get FFH owns roughly 50% of the underlying company shares but does Prem & his family own the rest or are there other shareholders of Sixty Two that have minority ownership in it? Thanks

 

There are only two owners of The Sixty Two Investment Company Limited.  But one of the shareholders is "The Second 1109 Holdco Ltd." which, while controlled by Prem, is probably majority economically owned by the Watsa Family Trust at this point.

 

 

 

Originally, before Fairfax Financial itself became a shareholder of Sixty Two, there were other shareholders of Sixty Two:  "prominent Canadian businessmen" and Confederation Life Insurance Company (Prem's former employer).

 

Edited November 25, 2025 by gfp

[SafetyinNumbers]

7 hours ago, Parsad said:

Definitely make forecasts...using conservative assumptions though, which helps reduce flaws in forecasting.  Or I average down in many of those cases where I just wasn't conservative enough. 

Can you tell us what you are forecasting for FFH over the next 3-5 years and what modelling assumptions are used to get there? 

[bluedevil]

22 hours ago, hardcorevalue said:

Just a friendly reminder that P/B on FFH is losing relevance as it matures...

This is a fantastic company. A top 1% compounder at a single digit multiple with the S&P at 30x. 

I understand conservatism and cyclicality but this thing looks dirt cheap here to me. 

 

I think it's more likely that not that we never see the prior cycle p/b multiples for the rest of my life. 

 

There's a whole class of new shareholders that are going to discover Fairfax as the company continues to execute. The notion of float is not understood by the general public but they will look at it with amazement and bid this up. Index inclusion will come eventually here. 

Anyways, obviously super biased here but this looks cheap cheap cheap. 

 

Agree.

 

One of best P/C insurance operations in world.  In terms of underwriting profitability, over the last 8 years, 15%-ish organic premium growth, with 95% combined ratio.  Decentralized and globalized.  Great and sticky management in place. Does not need acquisitions.  Right incentives based on long-term philosophy/orientation.  Huge growth opportunities in developing world, particularly india and ME.

The performance over the last few years (specifically the industry leading expansion during the hard market) shows this is a high-performance machine.  Prem says it is one of the world's leading P/C companies, and I would have to agree.  

 

In terms of investments, it has set up an ideal investment platform:

Permanent capital.  Ultra patient client.  Zero restrictions on investments (including public/private/venture/location, etc.), except for regulatory insurance restraints.  Worldwide investment platform/capability.

Compare that to Markel, for example, where they essentially have one investor (who is not a spring chicken), who basically focuses on companies in the S&P 500.

 

It is financially strong.  And getting stronger.  5 billion in income is largely locked in for a few years, and by the end of that, the financial strength of the company should hopefully be rock solid.

 

Of course, there are risks.  AI disruption; long-period of low interest rates, huge catastrophes, etc.  But does look cheap to me!  At least i think over the next decade that the p/bv ratio will not contract and a shareholder will very likely get to fully enjoy the compounded growth in book value over that time.

[Txvestor]

20 hours ago, Parsad said:

 

Are you kidding me?  The leverage is what caused the problems and nearly destroyed Fairfax in the ensuing years.  Leverage is leverage...it cuts both ways. 

 

When you have large catastrophe losses, it wipes out huge swathes of equity and makes the company extremely vulnerable or can kill it.  When you get it right, it juices returns at the risk of large catastrophe losses. 

 

There is no way to make leverage risk free.  Float is not risk free leverage...it's just leverage that is cheaper than debt when underwriting and investment culture is good.

 

There is nothing wrong in your assumption that you can pay a higher p/b for Fairfax...but caveat emptor...buyer beware.  The higher valuation you pay, the lower your margin of safety.  Optimism is not a good defense when investing!  Cheers!

No question that the leverage is more compared to other holding companies.
However, I think everyone agrees that the insurance companies are in a lot better shape now than even just a decade ago. Clearly Management is very strong and tenured, and they are very decentralized. Additionally, they're diversified geographically across different lines of businesses as well as a cross seven subsidiary companies. I think that alone mitigates the leverage risk somewhat. When I look at the impact of the California wildfires on their CR this year, I feel like even something 10x that would be a heavy but manageable hit to their equity. 
As other posters have pointed out they are in an already strong financial position, getting even stronger by the year. Lastly, the associated and subsidiary companies as well as venture investments are performing very well. And finally they have a large buffet of allocation options for the capital coming in annually. I think with all that it deserves to be rerated to 1.5-2x book. 

Edited November 25, 2025 by Txvestor

[Munger_Disciple]

11 hours ago, gfp said:

 

There are only two owners of The Sixty Two Investment Company Limited.  But one of the shareholders is "The Second 1109 Holdco Ltd." which, while controlled by Prem, is probably majority economically owned by the Watsa Family Trust at this point.

 

 

 

Originally, before Fairfax Financial itself became a shareholder of Sixty Two, there were other shareholders of Sixty Two:  "prominent Canadian businessmen" and Confederation Life Insurance Company (Prem's former employer).

 

 

Thanks @gfp! So Prem & his family own roughly 1.267 million FFH shares on an as converted basis. That comes to an economic interest of 5.92% of FFH.

 

Initially I was looking for information on Sixty Two in the annual report but much more detailed & better information is available (as you pointed out) in the proxy. 

Edited November 25, 2025 by Munger_Disciple

[Munger_Disciple]

11 hours ago, Parsad said:

 

There might be a cousin or two...maybe Robbert Hartog was also in there before he passed away...but as far as I know, Prem and Nalini own the 50%. 

 

Like Buffett's kids, their children will be stewards of the capital and do with it what their parents would want them to do.  The Watsa's have a very deep philanthropic streak, so I imagine much of it will be given to worthy causes over the long-term.

 

Cheers!  

 

Thanks @Parsad!

[Parsad]

7 hours ago, SafetyinNumbers said:

Can you tell us what you are forecasting for FFH over the next 3-5 years and what modelling assumptions are used to get there? 

 

$180-200 USD per share in earnings...add it to book value every year...multiple of 1.25.  Buy below that, you are good.  Buy well below that...you have a nice margin of safety.  Cheers!

[SafetyinNumbers]

Just now, Parsad said:

 

$180-200 USD per share in earnings...add it to book value every year...multiple of 1.25.  Buy below that, you are good.  Buy well below that...you have a nice margin of safety.  Cheers!

How do you get to $180-200 per share in earnings? 

[Parsad]

1 hour ago, Txvestor said:

No question that the leverage is more compared to other holding companies.
However, I think everyone agrees that the insurance companies are in a lot better shape now than even just a decade ago. Clearly Management is very strong and tenured, and they are very decentralized. Additionally, they're diversified geographically across different lines of businesses as well as a cross seven subsidiary companies. I think that alone mitigates the leverage risk somewhat. When I look at the impact of the California wildfires on their CR this year, I feel like even something 10x that would be a heavy but manageable hit to their equity. 
As other posters have pointed out they are in an already strong financial position, getting even stronger by the year. Lastly, the associated and subsidiary companies as well as venture investments are performing very well. And finally they have a large buffet of allocation options for the capital coming in annually. I think with all that it deserves to be rerated to 1.5-2x book. 

 

I'm talking about the past, back in 1998 through 2007.  When they were using heavy leverage and buying below average insurers and turning them around.  Leverage used that way wasn't any better than debt and they were using a lot...especially after the Crum and Odyssey acquisitions.  That's when they got clobbered and Sam Mitchell suggested let's take the hit and clean everything up at once.  Then Andy came in and the insurance culture changed in 2010.  They are now running the way they should have always been running...but you live and learn!  Cheers!