Fairfax 2025

[Parsad]

5 hours ago, SafetyinNumbers said:

How do you decide when to sell?

 

The stuff I have in my taxable and corporate accounts will never be sold.  They are long-term holdings regardless of market volatility or valuation.  

 

The stuff in my non-taxable accounts is based on valuation...if it goes to 2.2-2.5 times book, I'll probably be completely out.  If it got to 1.7-2.0 times book, I would be seriously thinning the position.

 

The stuff I bought two weeks ago, I sold that yesterday at $2,450...it was a non-taxable account.  I was just betting on a rebound to fair value.

 

Because of my conservative bent on valuation, selling is never a problem.  I have probably sold too early on several occasions, but I've also bought too early on many occasions.  It's just part of the game!  Averaging in has been the saving grace...you trust your analysis, you keep buying till the bottom, and then average out over time as it goes back up.  Cheers!

[Viking]

How is Fairfax’s equity portfolio performing QTD (to Nov 26)? The holdings that I track are up about $413 million, or $18/Fairfax share. That is a solid result. Currency is a mild headwind (strong US$). Big gainers? Orla Mining (gold) and Eurobank.

 

2025 is shaping up to be an exceptional year for Fairfax's equity portfolio. 

 

[djokovic1]

3 hours ago, dartmonkey said:

MW Eat, which operates the Michelin-starred Veeraswamy alongside restaurant chains including Chutney Mary, Amaya and Masala Zone, has been bought by Toronto-based Fairfax Financial Holdings for an undisclosed sum.

 

I am not a fan of buying restaurant chains but I have been to most of these and the food is great FWIW

[anshulp]

VL_20251128_FFH9TO.pdfI took a glance at the recent value line report. I thought their eps estimates were interesting . 

 

$201.35 for 2025 and $205 for 2026. 

 

I personally have $200 ish in my head for next year. Obviously sales etc could influence this. 

[Viking]

Earnings Estimate Summary for 2025 and 2026 - Update

 

This post provides a little more detail on my 2025 and 2026 earnings forecast for Fairfax. These projections incorporate insights from the April AGM, Q1–Q3 2025 interim results, and broader developments since the prior update in August.

 

At the beginning of 2025, my EPS estimate for Fairfax stood at $152 per share. That increased to $161 in March. As has been the case for several years, I have consistently underestimated Fairfax’s earnings power—and, as the updated forecasts show, this trend continues in 2025. Yes, I need to stop being such a pessimist when it comes to Fairfax!

 

Executive Summary

 

Looked at through the lens of earnings, Fairfax is quietly having the best year in the company’s history.

 

2025 Outlook

·       Diluted EPS: ~$195 per share

·       Excess of Fair Value over Carrying Value (FV–CV): +$38/share (after tax)

·       Economic EPS: ~$233/share

 

2026 Outlook

·       Diluted EPS: ~$190 per share

·       Excess of FV–CV: +$10/share (after tax)

·       Economic EPS: ~$200/share

 

Context and Valuation

 

From 2023 through 2026E, diluted EPS are tracking to average about $180/share, with excess of fair value over carrying value for non-insurance associate and consolidated holdings (FV–CV) gains averaging $22/share. That places normalized economic EPS at ~$200/share annually—a conservative baseline to use today when forecasting future results.

 

With Fairfax shares trading currently around $1,700, the valuation works out to ~8.5x normalized economic EPS. For a business of Fairfax’s quality, earnings durability, and capital allocation capability, this is very inexpensive.

 

 

Framework for the Forecast

 

Estimating Fairfax’s future EPS, BVPS, and ROE requires assessing three fundamental drivers:

 

·       Underwriting profit – How good is the P/C insurance business?

·       Total return on the investment portfolio – How good is the team at Hamblin Watsa?

·       Capital allocation – How good is senior management?

 

Key Top-Level Assumptions

 

2025    

• Combined ratio: 93.5%
• Total return on investments: 10.5%

2026    

• Combined ratio: 93.5%
• Total return on investments: 7.6% (This is conservative)

Note: Total return on investments includes annual changes in FV–CV.

 

Six-Year Snapshot: The Transformation Since 2021

 

The chart below clearly communicates the dramatic transformation that has happened with earnings, beginning in 2021. Importantly, the increase has been driven by operating income. 

• Operating income/share (2016–2020 average): ~$39
• Operating income/share (2024): ~$235
• Estimated operating income/share (2025): ~$258

That is a 562% increase relative to the pre-turnaround average.

 

Normalized earnings have clearly reset to a much higher, more durable level—and the trajectory remains positive.

 

 

Street Estimates (as of Nov 17, 2025)

 

Sell-side forecasts for diluted EPS:

• 2025: $195
• 2026: $188

These numbers exclude FV–CV value creation. Analysts now understand Fairfax’s fundamentals far better than even a year ago, and their estimates reflect that progress.

 

—————

 

Detailed Assumptions for Each Line-Item in Forecast for 2025

 

1. Underwriting Profit

 

Estimate: $1.68 billion (2025)

 

Assumptions:

• Net premiums written growth of 5% (moderating hard market)
• Combined ratio of 93.5%
  • Catastrophes: significant in Q1, light in Q3
  • Continued reserve releases (following strong 2024 trends)

---

 

2. Interest and Dividend Income

 

Estimate: $2.68 billion (2025)

 

Tailwinds:

• Growth in fixed-income portfolio from $47B to $50B
• Investment in Blizzard Vacatia ($810 million)
• Ongoing expansion of the mortgage loan portfolio via Kennedy Wilson

Headwind:

• Moderation in short-term rates 

Yield Assumption:

• 2025 fixed-income yield: ~5.1% (same as 2024)

---

 

3. Share of Profit of Associates

 

Estimate: $860 million (2025)

 

Drivers:

• Eurobank, Poseidon/Atlas delivering steady performance
• EXCO Resources benefiting from higher natural gas prices

Headwinds:

• Unrealized 1H loss on Waterous III (Greenfire)
• Peak Achievement moving to consolidated category in Q4 2024 ($57 million)
• Sale of Stelco in Q4 2024 ($18 million)

---

 

4. Non-Insurance Consolidated Operations

 

Estimate: $360 million (2025)

 

Tailwinds:

• Additions of Sleep Country (closed Oct 2024)
• Peak Achievement and Meadow Foods shifting from associate to consolidated

This revenue/earnings stream is breaking out and positioned for meaningful growth.

---

 

5. IFRS 17: Discounting and Risk Adjustment

 

Two main variables drive this bucket:

• Net written premium growth (~5%)
• Trend in interest rates (we assume Treasury yields remain at September 30 levels)

This category remains difficult to model; confidence in the estimate is low.

 

6. Life Insurance and Run-Off

 

Expect adverse reserve development in run-off to be partially offset by earnings from the Greek life insurance operations.

 

Note:
For actuals, Buckets 5 and 6 are combined. Fairfax does not provide these separately, but we can back into them based on other disclosed data.

---

 

7. Interest Expense

 

Estimate: $828 million (2025)

• Q3 2025 run rate: $213M

---

 

8. Corporate Overhead and Other

 

Estimate: $480 million (2025)

• Up from $450M in 2024

---

9. Net Gains on Investments

 

Estimate: $2.625 billion (2025)

 

Drivers in 1H 2025:

• Mark-to-market increases in FFH-TRS, Orla Mining, and other holdings
• Benefits from declining bond yields
• Realized gain of $178.7M from Sigma sale in Q1

---

 

10. Gain on Sale / Deconsolidation of Insurance Subsidiaries

 

Estimate: $0 (2025)

 

This this bucket captures large asset sales, usually insurance. Over the past five years, large one-time gains from asset sales/revaluations have averaged about $400 million per year.

 

This bucket remains a wild card. Fairfax has increasing amounts of latent value on its balance sheet, and historically has surfaced it through sales or revaluations—typically resulting in large realized gains.

 

resulting in large realized gains.

---

 

11. Income Taxes

 

Estimate: ~20% (2025)

 

• Down from 24.4% in 2024
• Investment gains, taxed at lower rates, are a larger share of earnings in 2025

---

 

12. Non-Controlling Interests

 

Estimate: 7% (2025)

 

As Fairfax buys out minority partners in its insurance subsidiaries (e.g., Brit in 2024; potentially Allied World next), NCI should continue declining—meaning more earnings accrue to common shareholders.

---

 

13. Effective Shares Outstanding

 

Estimate: 21.0 million (YE 2025)

 

Fairfax ended 2024 at 21.7M effective shares outstanding, down 1.3M from 2023.
We project a further 700,000 share reduction (-3.2%) in 2025.

 

Notes:

• “Underwriting profit” includes insurance and reinsurance (ex-life/run-off)
• “Interest and dividend income” and “share of profit of associates” include insurance, reinsurance, and life/run-off

[dartmonkey]

1 hour ago, Viking said:

13. Effective Shares Outstanding

 

Estimate: 21.0 million (YE 2025)

 

Fairfax ended 2024 at 21.7M effective shares outstanding, down 1.3M from 2023.
We project a further 700,000 share reduction (-3.2%) in 2025.

 

 

Maybe a tad optimistic: in the first 3 quarters of 2025, they have retired about 340,000 shares, slower than 2024's 1.3 million shares for the whole year:

• At March 31, 2025 there were 21,581,313 common shares effectively outstanding (December 31, 2024 – 21,668,466).
• At June 30, 2025 there were 21,591,832 common shares effectively outstanding (December 31, 2024 – 21,668,466).
• At September 30, 2025 there were 21,328,705 common shares effectively outstanding (December 31, 2024 – 21,668,466).

True, there was the price dip in Oct/November, mostly recovered now, but to get to 700,000 for the year, they would have to buyback more in Q4 than Q1-Q3 combined.

[Santayana]

They did buy another 100,000 in October, and hopefully even more in November when the price fell post earnings announcement.

[Hoodlum]

1 hour ago, Santayana said:

They did buy another 100,000 in October, and hopefully even more in November when the price fell post earnings announcement.

I’ve noticed that FFH had block sales of between 30k-80k shares at market closes this week.  I hope that was Fairfax buying. 

[Hoodlum]

On 11/26/2025 at 5:18 PM, Viking said:

How is Fairfax’s equity portfolio performing QTD (to Nov 26)? The holdings that I track are up about $413 million, or $18/Fairfax share. That is a solid result. Currency is a mild headwind (strong US$). Big gainers? Orla Mining (gold) and Eurobank.

 

2025 is shaping up to be an exceptional year for Fairfax's equity portfolio. 

 

thanks for posting his @Viking  I was not expecting much of a gain in the equity portfolio during q4, with the gains we have already had this year.  But it looks like we are on our way to notable gains here again.  It wouldn’t surprise me if the current TRS and Metlen losses turn to gains by the end of the year.  ORLA is also up another 9% over the past 2 days as Gold flew past $4200.  ORLA may be the largest contributor to equity gains this quarter. 
 

While Foran Mining is not on your list, it almost reached an all time high today, with Fairfax owning 23%.  McIlvenna Bay is expected to reach commercial production by mid-2026 with copper and zinc to be the main minerals, along with some gold/silver.  I could see this equity provide some noticeable gains in 2026. The copper mining sector is trying to consolidate like we have seen with Teck, BHP and Anglo-American over the past few weeks. The industry seems to be preparing for when demand is expected to rise as copper is a key component for EVs. 

[djokovic1]

@Viking as usual great analysis. I am in a very similar place. I am also optimistic on a more longer term view i.e EPS 3-5 years out due to compounding + great capital allocation. Sell-side analysts usually don't go out further than 1-2 years. For example for 28E and 29E, sell side only has a non-sensical number from Morningstar.

I also had a question for the forum: Are the preferred shares included in the calculation of diluted shares outstanding? In other words when they buyback the preferred's does diluted share count go down? And if so by how much?

[Hoodlum]

2 hours ago, djokovic1 said:

@Viking as usual great analysis. I am in a very similar place. I am also optimistic on a more longer term view i.e EPS 3-5 years out due to compounding + great capital allocation. Sell-side analysts usually don't go out further than 1-2 years. For example for 28E and 29E, sell side only has a non-sensical number from Morningstar.

I also had a question for the forum: Are the preferred shares included in the calculation of diluted shares outstanding? In other words when they buyback the preferred's does diluted share count go down? And if so by how much?

I found this company press release that suggests Preferred Shares are included in diluted shares outstanding. 

 

https://www.businesswire.com/news/home/20230707581417/en/Beacon-Announces-Agreement-to-Repurchase-All-Outstanding-Series-A-Cumulative-Convertible-Participating-Preferred-Stock

 

Series A Preferred Stock Repurchase

 

The transaction is expected to provide substantial benefits to Beacon and its common stockholders, including:

• Reducing diluted share count on an as converted basis by 9.69 million shares;
• Providing immediate accretion to earnings per share;

Edited November 29, 2025 by Hoodlum

[SafetyinNumbers]

2 hours ago, djokovic1 said:

I also had a question for the forum: Are the preferred shares included in the calculation of diluted shares outstanding? In other words when they buyback the preferred's does diluted share count go down? And if so by how much?

Fairfax preferred were not convertible like @Hoodlum ‘s example above so there is no impact on diluted share count but preferred dividends do reduce net income available to common shareholders. Further, to the extent the preferred are bought back below book value, they will boost net income by that amount. 
 

 

[dartmonkey]

2 hours ago, djokovic1 said:

I also had a question for the forum: Are the preferred shares included in the calculation of diluted shares outstanding? In other words when they buyback the preferred's does diluted share count go down? And if so by how much?

Normally preferred shares would only included in the diluted share if they are convertible, which is probably why Hoodlum’s Beacon preferred share repurchase example would reduce the diluted share count. 

 

In Fairfax’s case, the I- and J-series of preferred shares whose repurchase they have announced for Dec. 31st are not convertible. As far as I can tell, none of Fairfax’s remaining preferred shares are convertible, as opposed to the E-series which were redeemed earlier this year.

 

[Redskin212]

Redemption of the preferred shares is great capital allocation.  One overlooked aspect of the discussion is the fact that the interest paid on the preferreds is non-deductible for tax purposes.  I believe this is a huge motivator in redeeming and puts the idea/action to the top of the list.  

[dartmonkey]

1 hour ago, Redskin212 said:

Redemption of the preferred shares is great capital allocation.  One overlooked aspect of the discussion is the fact that the interest paid on the preferreds is non-deductible for tax purposes.  I believe this is a huge motivator in redeeming and puts the idea/action to the top of the list.  

Absolutely. I guess there were good reasons to issue these preferred shares as far as regulatory capital goes, but now that they are in a comfortable capital position and their own shares are more reasonably priced, and equity markets pricey in general, it’s hard to argue against battening down the hatches and redeeming these shares. 

[SafetyinNumbers]

1 hour ago, Redskin212 said:

Redemption of the preferred shares is great capital allocation.  One overlooked aspect of the discussion is the fact that the interest paid on the preferreds is non-deductible for tax purposes.  I believe this is a huge motivator in redeeming and puts the idea/action to the top of the list.  

That plus these are rate reset preferred that were issued when interest rates were lower and when CAD was closer to par. Another example how Fairfax extracts returns from every part of the capital structure.

[SafetyinNumbers]

33 minutes ago, dartmonkey said:

it’s hard to argue against battening down the hatches and redeeming these shares. 

This is the opposite of battening down the hatches. Perpetual preferred gives more flexibility not less. This was a decision based on maximizing returns as they replaced the preferred with long term debt which has tax advantages as you noted.

Edited November 29, 2025 by SafetyinNumbers

[dartmonkey]

3 hours ago, SafetyinNumbers said:

3 hours ago, dartmonkey said:

it’s hard to argue against battening down the hatches and redeeming these shares. 

This is the opposite of battening down the hatches. Perpetual preferred gives more flexibility not less. This was a decision based on maximizing returns as they replaced the preferred with long term debt which has tax advantages as you noted.

These preferred shares are in many ways similar to debt, but they have the advantage of being treated as equity by regulators, and the disadvantage of having the dividends non-deductible as opposed to debt. Now that they are not constrained by capital availability, and have better credit, they can repurchase the preferred shares without falling afoul of regulators. 

 

I'm just saying that paying down debt puts them in a stronger position than purchasing new equity investments or writing more insurance policies. Repurchasing the preferred shares might not be quite as much 'battening down the hatches' as reducing regular debt, but it still puts them in a position where they will have less fixed expenses, don't you agree?

[djokovic1]

Thanks everyone for your comments, helpful!

[SafetyinNumbers]

3 hours ago, dartmonkey said:

These preferred shares are in many ways similar to debt, but they have the advantage of being treated as equity by regulators, and the disadvantage of having the dividends non-deductible as opposed to debt. Now that they are not constrained by capital availability, and have better credit, they can repurchase the preferred shares without falling afoul of regulators. 

 

I'm just saying that paying down debt puts them in a stronger position than purchasing new equity investments or writing more insurance policies. Repurchasing the preferred shares might not be quite as much 'battening down the hatches' as reducing regular debt, but it still puts them in a position where they will have less fixed expenses, don't you agree?

I agree lower fixed expenses is a good thing but it’s with the same leverage so it’s about maximizing returns not an attempt to reduce risk which is what I thought you were suggesting 

I’m not sure preferred have much impact on regulatory capital since they are issued at the holding company level and not in the regulated subsidiaries. The preferred probably help debt ratings i.e. lower cost for debt vs having more debt at the time they were issued. The excess capital that you note makes them unnecessary for that reason.

 

 

[petec]

On 11/29/2025 at 4:01 PM, dartmonkey said:

it still puts them in a position where they will have less fixed expenses, don't you agree?

 

Depends where the cash comes from. If they buy back prefs from operating cash flow, yes. If they issue debt to buy back shares, then no (assuming the rate paid is the same).

 

I think this is an extension of the logic that leads them to a short duration position on the asset side of their balance sheet. If you don't think long term fixed rate debt is worth buying, you presumably think it is worth selling. So they're selling fixed rate debt and buying back floating rate liabilities. At the same time they're improving tax deductibility at little or no cost in terms of regulatory capital (because as SiN says, the prefs are issued at the holdco).

 

 

[dartmonkey]

5 hours ago, petec said:

Depends where the cash comes from. If they buy back prefs from operating cash flow, yes. If they issue debt to buy back shares, then no (assuming the rate paid is the same).

 

I think this is an extension of the logic that leads them to a short duration position on the asset side of their balance sheet. If you don't think long term fixed rate debt is worth buying, you presumably think it is worth selling. So they're selling fixed rate debt and buying back floating rate liabilities.

That's an interesting way of thinking about it, selling debt as opposed to selling. 

I guess it's hard to know for sure, since we don't know what their alternative use of the funds might have been. The way I was looking at it, the preferred shares are 'debt-like', and they are paying down that debt, in a way that is tax advantageous. If they are paying down that debt by issuing other shorter term debt, then there are just buying long-term in exchange for short-term, which might be what they want, but they are not reducing their risk. If on the other hand they are retiring the preferreds as opposed to making equity investments or repurchasing their own shares, then they are playing it safe. It could be either.

[SafetyinNumbers]

1 hour ago, dartmonkey said:

If they are paying down that debt by issuing other shorter term debt, then there are just buying long-term in exchange for short-term, which might be what they want, but they are not reducing their risk.

They issued 10 and 30 year CAD debt. Riskier than pref technically as it uses up debt capacity and has a maturity date but practically not really. Arguably lower risk when considering their expectations for long term interest rates given the pref were floating and rates are fixed for the debt up to 30 years. 

[SafetyinNumbers]

Check out my most recent article for the Globe and Mail about Fairfax. This is a gift article. 
 

https://www.theglobeandmail.com/gift/b04eb1bcd666173196423362ad31a8785d529ba1ad1cee14b25891c6ca2ccfbf/AKS47ZLUWZFSXEKQVGUNGOWYCU/

[gary17]

I just assumed selling for booking gains to off set losses