Fairfax 2025

[Hsmpanl]

1 hour ago, SafetyinNumbers said:

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/

It was available for me on Apple News for free, posting link in case it works for others https://stocks.apple.com/A6rV0uvuFS2u6nZTJI6BIVg

[SafetyinNumbers]

23 minutes ago, Hsmpanl said:

It was available for me on Apple News for free, posting link in case it works for others https://stocks.apple.com/A6rV0uvuFS2u6nZTJI6BIVg

Awesome, thanks!

[UK]

4 hours ago, SafetyinNumbers said:

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/

 

Nice! Thank you!

[Crip1]

11 hours ago, Hsmpanl said:

It was available for me on Apple News for free, posting link in case it works for others https://stocks.apple.com/A6rV0uvuFS2u6nZTJI6BIVg

Thanks for posting, though, neither of these are working for me (I'm an Android guy). Either way, for those of us who can't access and don't want to pony up for the subscription to the G&M, can you give a brief synopsis?

[Redskin212]

Investing is hard, and it has changed substantially since the global financial crisis. Today, most institutions use a “core and explore” strategy: They allocate the majority of client capital to a core portfolio of high-quality stocks that broadly track the institutions’ benchmarks, then deploy the remainder into less conventional sectors or stocks that may not screen as well.

The best practitioners of this approach know not to overstay their welcome in lower-quality stocks. They look for reasons to sell quickly. That instinct, however, often leads to mispricing. In the case of Fairfax Financial Holdings Ltd. 

FFH-T +4.73%increase

 

Fairfax is trading near price levels first reached this past June, but its price-to-book multiple has declined from 1.7 times to 1.4 times. Historically, Fairfax shares underperform seasonally from June 30 to Oct. 31, when the property and casualty insurance company faces greater exposure to catastrophic losses during U.S. hurricane season. Unsurprisingly, investors are weary when short term earnings are at their highest risk! In fact, over the past 11 years, Fairfax has underperformed the S&P/TSX Financials ETF (XFN) in nine of them since 2015.

Book excerpt: How Fairfax Financial got its groove back

In 2025, that seasonal underperformance reached its widest margin in more than a decade – nearly 20 per cent versus XFN – despite no major hurricanes making landfall in the continental United States. What explains this disconnect? Investors appear to have broadly sold down P&C insurers insurers amid concerns about slowing premium growth in a softening insurance market and weaker investment income as interest rates declined. Yet Fairfax still outperformed its Canadian peers – Intact Financial Corp. 

 

 

Fairfax has several reasons to outperform and I expect it to continue. Relative to peers, it trades at a lower valuation, is actively buying back shares and will be added to the S&P/TSX 60 Index this month, increasing demand for shares and reducing supply – all while expecting a comparable and potentially significantly higher return on equity given the nature of its investment portfolio, which has much higher exposure to equities. Being in the S&P/TSX 60 also means more institutions may choose to add Fairfax to their core portfolios, which will only help expand the company’s price-to-book multiple.

Another source of selling appears to come from value investors. Many of them held through the stagnant 2010-to-2020 decade, when the stock barely moved, and have since enjoyed a remarkable rally. Over 15 years, their compounded annual return now approaches 15 per cent. Some of these investors cite the historical price-to-book range from that period as a reason to take profits, arguing the stock is once again near the top of its range. But such reasoning assumes mean reversion and overlooks fundamental changes in Fairfax’s balance sheet and business mix.

While short-term interest rates may decline, long-term rates could rise. And while certain insurance markets may soften, lower premium growth means more capital for share buybacks or to buy out minority interests of insurance subsidiaries Allied World Assurance Co. Holdings Ltd. and OdysseyRe. Both actions are accretive to Fairfax’s forward return on equity.

Investors also confuse a soft insurance market with lower underwriting income, but that ignores the cyclicality of reserve releases from the previous hard market, which should support profitability for years to come. Too often ignored is the company’s equity portfolio, recorded well below fair value, which could meaningfully lift future return on equity as gains are realized over the medium term.

Fairfax’s historical price-to-book range from 2005 to 2025 has little relevance today. Fairfax has amortized roughly US$2-billion in goodwill and intangible assets since 2017, following its Allied World acquisition – despite substantial premium growth. It has also repurchased shares above book value, which reduces equity and, from an accounting perspective, boosts return on equity. Both developments support a higher price-to-book multiple, all else equal.

With hurricane season now over, the company’s usual seasonal headwinds turn into tailwinds. Over the past decade, Fairfax has outperformed XFN seven times between Nov. 1 and June 30, with the past four years particularly strong.

 

This year may follow the same pattern. Since Nov. 1, Fairfax has outperformed XFN by about 4 per cent. If the shares trade up another 25 per cent from here by next June 30, Fairfax would once again trade at 1.6 times book value – similar to where it traded in June, 2025.

The company also enjoys an unusual catalyst: the publication of The Fairfax Way by David Thomas, the first book chronicling the firm’s 40-year history and highlighting why investors have trusted their long-term savings with Fairfax – much as early readers of Robert Hagstrom’s The Warren Buffett Way, published in 1994, did with Berkshire Hathaway Inc. Having read the book, I think it will be difficult for probabilistic investors to read The Fairfax Way and not want to buy the shares, which ultimately will support the multiple.

Berczy Park Capital has continued to increase its position in Fairfax, which now represents 58 per cent of net assets, up from 35 per cent from when I last wrote about Fairfax on May 1, 2024. Under almost any reasonable scenario, Fairfax appears positioned to compound at more than 15 per cent annually for the foreseeable future – comfortably above our 10-per-cent hurdle rate. Of course, as any probabilistic investor appreciates, there are no guarantees.

Asheef Lalani, CFA, is chief investment officer at Toronto-based family office Berczy Park Capital and is an independent director of Mako Mining Corp. and Sailfish Royalty Inc. He was previously a portfolio manager for UBS Securities.

[Marco Van Basten]

New Chubb presentation out.  One interesting tid-bit, expect to cut 20% of workforce over the next 3-4 years thanks to technology despite growing the business.  Expect run-rate expense savings to = 150 basis points of combined ratio.

[Hoodlum]

21 hours ago, Marco Van Basten said:

New Chubb presentation out.  One interesting tid-bit, expect to cut 20% of workforce over the next 3-4 years thanks to technology despite growing the business.  Expect run-rate expense savings to = 150 basis points of combined ratio.

 

I wonder how this would impact employee moral as a 20% reduction of workforce in 3-4 years cannot be done through attrition and early retirement packages alone.  This is not something you want to drag out for 3 years.

[Marco Van Basten]

1 hour ago, Hoodlum said:

 

I wonder how this would impact employee moral as a 20% reduction of workforce in 3-4 years cannot be done through attrition and early retirement packages alone.  This is not something you want to drag out for 3 years.

Why not?  If you assume that the average employee tenure is 20 years, then without firing anyone you can get there after 4 years, no?

[Hoodlum]

15 minutes ago, Marco Van Basten said:

Why not?  If you assume that the average employee tenure is 20 years, then without firing anyone you can get there after 4 years, no?

 

Maybe if they have a larger number of long tenured employees.   I have also seen in companies that there is never a consistent 20% reduction across a company as some areas could not sustain such a drop.  

 

 

Edited December 10, 2025 by Hoodlum

[SafetyinNumbers]

22 hours ago, Marco Van Basten said:

New Chubb presentation out.  One interesting tid-bit, expect to cut 20% of workforce over the next 3-4 years thanks to technology despite growing the business.  Expect run-rate expense savings to = 150 basis points of combined ratio.

This is an interesting discussion that I think applies tangentially to Fairfax too. To me it looks like Fairfax ramped technology spend a few years ago as premium growth accelerated. In theory, we should have seen more operating leverage but the expense ratio initially went down and then went back up again on more investment. This investment should have benefits so presumably at some point, the expense ratio will be lower and an improvement in the combined ratio could be more sustainable. 

[Crip1]

22 hours ago, Marco Van Basten said:

New Chubb presentation out.  One interesting tid-bit, expect to cut 20% of workforce over the next 3-4 years thanks to technology despite growing the business.  Expect run-rate expense savings to = 150 basis points of combined ratio.

I'm not buying the "cost savings" aspect. Reason is simple...everyone is going to do this and everyone is going to reduce costs and competitive pressures will see to it that everyone cuts rates so that the cost savings will largely disappear. It's less about increasing profitability and more about maintaining profitability. 

 

-Crip

[SafetyinNumbers]

Fairfax canceled 274k shares last month.
 

 

[gfp]

Thanks for the heads up.  So that should put the share count below 21 million, eh?

[Viking]

1 hour ago, gfp said:

Thanks for the heads up.  So that should put the share count below 21 million, eh?

 

Yes. Effective shares outstanding was 21.33 million at Sept 30. 

• Oct  107,000
• Nov 275,000

Assuming they were all cancelled, new total = 20.95 million.

 

Do they keep buying back in December?

 

This puts effective shares outstanding below where they were Dec 31, 2013. All the shares issued to fund the international insurance expansion (2015 to 2017) have been repurchased.  

Edited December 10, 2025 by Viking

[Hoodlum]

9 minutes ago, Viking said:

 

Yes. Effective shares were 21.33 million at Sept 30. 

• Oct 107,000
• Nov 275,000

 

I believe the 107k may include up until the first 4 days in November, ahead of the Q3 release.  So maybe a bit of an overlap with the 275k shares.   But great none the less and adds to the 541k shares purchase up until the end of Q3.   We could get close to 5% of outstanding shares bought back by year end.  

Edited December 10, 2025 by Hoodlum

[Hoodlum]

30 minutes ago, Viking said:

 

Do they keep buying back in December?

 

This puts effective shares outstanding below where they were Dec 31, 2013. All the shares issued to fund the international insurance expansion (2015 to 2017) have been repurchased.  

 

They are almost certainly still buying back now.  The share price today is the same as it was in August when they were buying back shares.  That was 4 months ago when book value was lower and there was somewhat less certainty of Q3 earning heading into Hurricane season.  I can see them continuing to buy back shares below $2500.

[Buffett_Groupie]

On 11/24/2025 at 10:51 PM, Parsad said:

 

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!

Anyone could've averaged down and bought more over the years, though. Unfortunately, I'm not qualified or good enough to be a professional investor. My day job has been running an IT consulting company (see attached) since 1995 (yes, it's been 30 years despite constant decline in the last 2 decades, which is a reminiscence of some guy's textile operation except he's smart to pivot after 20 years whereas I'm still stuck in the lousy business).

AJC & Associates Inc. Profile.pdf

[Whensthepaintdry?]

[Phoenix01]

8 minutes ago, Whensthepaintdry? said:

From the article:

Fairfax Financial Holdings

Fairfax Financial may be the closest thing to a mini Berkshire Hathaway -- and it may be a better bet at this point.

The Toronto-based property and casualty insurer has strong insurance operations, an excellent investment record, and phenomenal long-term performance under founder and chairman Prem Watsa, 75. The company targets 15% annual growth in book value, against what's probably high-single-digit growth at Berkshire. It has a market value of about $40 billion, against Berkshire's $1.1 trillion, which makes it easier to grow.

"This is like investing in Berkshire in 1993," says investor Charlie Frischer.

Its current price/book ratio of 1.5 is in line with Berkshire's, but Frischer says the true figure for Fairfax is closer to a cheaper 1.25 times because some investments are carried below market value. It has an excellent portfolio of Indian investments such as a controlling stake in the Bangalore airport.

Fairfax even partners with a Berkshire alumnus, David Sokol, who was once viewed as a successor to Warren Buffett. Sokol runs a containership business in which Fairfax owns a 43% stake. The stock trades mainly in Canada, and has thinly traded U.S. shares now around $1,750.

[SafetyinNumbers]

20 hours ago, Phoenix01 said:

This is like investing in Berkshire in 1993," says investor Charlie Frischer.

Its current price/book ratio of 1.5 is in line with Berkshire's, but Frischer says the true figure for Fairfax is closer to a cheaper 1.25 times because some investments are carried below market value. It has an excellent portfolio of Indian investments such as a controlling stake in the Bangalore airport.

Congrats on the quote @kodiak

 

Charlie and I were chatting about this earlier today. The forward return for BRK from Dec 12, 1993 to Dec 12, 1998 was ~247% which equates to a CAGR of ~28%. That is an excellent return and well exceeds my 10% hurdle but If that was the over/under for FRFHF over the next 5 years, I would bet the over, but it’s not an easy bet.
 

For the 5 years ending 2025, FFH will have compounded BVPS over 20% and this seems entirely possible for the next 5 given the set up. To match Berkshire, the P/B multiple would have to expand to 2x. The right tails get interesting because the higher the CAGR in BVPS, the higher the multiple is likely to get at some point over the forecast period.
 

I initially made an error that was corrected by @Marco Van Basten and miscalculated BRK’s return as a 20% CAGR over the forward 5 year period from this date in 1993. That over/under for FFH is much easier to bet the over on. 

 

 

Edited December 13, 2025 by SafetyinNumbers
Error made in CAGR calculation

[Viking]

18 minutes ago, SafetyinNumbers said:

Congrats on the quote @kodiak

 

Charlie and I were chatting about this earlier today. The forward return for BRK from Dec 12, 1993 to Dec 12, 1998 was ~247% which equates to a CAGR of 20%. That is an excellent return and well exceeds my 10% hurdle but If that was the over/under for FRFHF over the next 5 years, I would bet the over. 
 

For the 5 years ending 2025, FFH will have compounded BVPS over 20% and this seems entirely possible for the next 5 given the set up. Even at a 15% CAGR in BVPS, the multiple will likely expand by at least 25% getting to the bogey. The right tails get interesting because the higher the CAGR in BVPS, the higher the multiple is likely to get at some point over the forecast period. A ~20% CAGR in BVPS and an almost doubling of the multiple and the forward 5 year return for FFH might not be that different than the last 5 which is a ~40% CAGR. That’s a much harder over/under bet to make than it might look at first.

 

 

@SafetyinNumbers , that is an interesting comparison/analysis. One kicker is the significant hidden value that is residing on the balance sheet - economic value that has already been created that has not yet been captured in the accounting results. 
 

Excess of FV over CV is $2.5 billion, and growing. Fairfax India/BIAL is another. Ki is another. And then there are the non-insurance consolidated companies. And a couple billion in equities that we don’t have any visibility on (captured in ‘other’ in Fairfax’s summary). 
 

But an even bigger kicker is the fact that Fairfax has been aggressively optimizing its equity/non-insurance holdings since about 2018. We are now getting the additional benefit of compounding on a high quality group of holdings. This is a new development for Fairfax - with two benefits: 

1. Higher earnings
2. Higher ‘hidden value’ creation
3. Much larger investment gains

When you weave it all together (the hidden value that is hidden + what is coming) that 15% hurdle rate looks low. And likely explains why Fairfax continues to be piggish with their share buybacks. 
 

I know you get this. I don’t think most investors do. 

Edited December 13, 2025 by Viking

[TwoCitiesCapital]

1 hour ago, SafetyinNumbers said:

Congrats on the quote @kodiak

 

Charlie and I were chatting about this earlier today. The forward return for BRK from Dec 12, 1993 to Dec 12, 1998 was ~247% which equates to a CAGR of 20%. That is an excellent return and well exceeds my 10% hurdle but If that was the over/under for FRFHF over the next 5 years, I would bet the over. 
 

For the 5 years ending 2025, FFH will have compounded BVPS over 20% and this seems entirely possible for the next 5 given the set up. Even at a 15% CAGR in BVPS, the multiple will likely expand by at least 25% getting to the bogey. The right tails get interesting because the higher the CAGR in BVPS, the higher the multiple is likely to get at some point over the forecast period. A ~20% CAGR in BVPS and an almost doubling of the multiple and the forward 5 year return for FFH might not be that different than the last 5 which is a ~40% CAGR. That’s a much harder over/under bet to make than it might look at first.

 

 

 

I think 20% per annum for the next 5-years may be doable - but I expect it'll be quite a bit more difficult than before and is the optimistic end of the spectrum. 

 

1) interest rates are falling - not rising - providing downside to reinvestment risk instead of upside. . 

 

2) hard market is slowing/softening instead of accelerating meaning float will grow more slowly. Float exploding whole rates were rising is a double whammy that has significant benefit to Fairfax over the last 5-years. 

 

3) some of the hidden value has already been resurfaced - things like Pet Insurance, run-off, and TRS unearthed a lot of value, but that means there is likely less to unearth today. 

 

4) catastrophes have been fairly modest - we could see an uptick

 

5) certain equity investments of theirs are unlikely to repeat performance - StelCo special divs and sale unlikely to be repeated by CLF, Eurobank unlikely to keep up its 60+% compounding from its higher base, etc. 

 

6) even outside of TRS, the buybacks down were very beneficial. Buybacks carried out today at higher prices/multiples will be less advantageous 

 

I think they'll do very good going forward, but the bar is significantly higher. 

 

I think the best thing for Fairfax here would be a recession to disrupt equity/fixed income markets so they could put some capital to work at higher returns that could be juiced for a few years. 

 

Barring that, I expect ROE to come down from the last 5-years. 

[SafetyinNumbers]

4 minutes ago, TwoCitiesCapital said:

1) interest rates are falling - not rising - providing downside to reinvestment risk instead of upside. . 

Short rates are falling. Long rates not much yet. Plus they have duration locked in for a few years and they might be in the process of stepping up lending against real estate with the KW deal. If credit spreads widen over the next 5 years at some point, that could supercharge returns given the leverage.

 

5 minutes ago, TwoCitiesCapital said:

2) hard market is slowing/softening instead of accelerating meaning float will grow more slowly. Float exploding whole rates were rising is a double whammy that has significant benefit to Fairfax over the last 5-years.

Parts of the market are softening. Float growth will slow but float per share might still go up as they use less reinsurance and buy in minority interests at Allied World and Odyssey. Their share of Ki will also go up as the Class C shares are extinguished on IPO. 
 

8 minutes ago, TwoCitiesCapital said:

3) some of the hidden value has already been resurfaced - things like Pet Insurance, run-off, and TRS unearthed a lot of value, but that means there is likely less to unearth today. 

Ki is obviously a big one on the insurance side. The TRS are continuing. Goodwill amortization and purchases of stock above book value lower equity meaning the same earnings result in a higher ROE all else being equal. 
 

9 minutes ago, TwoCitiesCapital said:

4) catastrophes have been fairly modest - we could see an uptick

Cats are a smaller portion of the business than before. Partially because they have grown other lines but also because they are more global than before. Cats ticking up would just help pricing anyway so they would make it up pretty quickly on price if we are using a 5 year window. 
 

11 minutes ago, TwoCitiesCapital said:

5) certain equity investments of theirs are unlikely to repeat performance - StelCo special divs and sale unlikely to be repeated by CLF, Eurobank unlikely to keep up its 60+% compounding from its higher base, etc. 

 

BIAL, Poseidon and Eurobank still have carrying values well below fair value. There likely a few more of those like AGT, Dexterra etc… plus the stuff they own is still growing. SCR and GFR could provide very big gains if oil prices stay flat but a lot more if the oil price goes to $80+. 
 

14 minutes ago, TwoCitiesCapital said:

6) even outside of TRS, the buybacks down were very beneficial. Buybacks carried out today at higher prices/multiples will be less advantageous 

As discussed above. Buybacks above BV boost forward ROE.

 

15 minutes ago, TwoCitiesCapital said:

I think the best thing for Fairfax here would be a recession to disrupt equity/fixed income markets so they could put some capital to work at higher returns that could be juiced for a few years. 

We agree that Fairfax is defensive and a dislocation can boost forward returns making the 20% bogey more likely. 
 

Anyway, that’s what makes a market. 

[TwoCitiesCapital]

2 hours ago, SafetyinNumbers said:

Short rates are falling. Long rates not much yet. Plus they have duration locked in for a few years and they might be in the process of stepping up lending against real estate with the KW deal. If credit spreads widen over the next 5 years at some point, that could supercharge returns given the leverage.

 

Short rates are where Fairfax is currently positioned. While I hope they climb out on the maturity curve - the fact that they haven't yet suggests that they probably aren't going to. 

 

Agreed IF spreads widen. Would love to see that - short term pain setting up sustainable longer term returns. But IF it doesn't happen then we're still flat to declining on interest income. At the very least, not accelerating like we were in the 20% per annum period. 

 

2 hours ago, SafetyinNumbers said:

Parts of the market are softening. Float growth will slow but float per share might still go up as they use less reinsurance and buy in minority interests at Allied World and Odyssey. Their share of Ki will also go up as the Class C shares are extinguished on IPO. 

 

 

No debate on float per share growing. But it'll grow more slowly than it did in 2020 - 2025 when they achieved the 20% you expect going forward. 

 

2 hours ago, SafetyinNumbers said:

Ki is obviously a big one on the insurance side. The TRS are continuing. Goodwill amortization and purchases of stock above book value lower equity meaning the same earnings result in a higher ROE all else being equal. 

 

 

Yes. Plenty of investment possibilities - but unlikely to repeat the last 5-years. 

 

Buying back stock BELOW book boosts ROE more. The debate isn't whether or not they can get positive returns - it's if the returns they accrue at 1.25 - 1.5x book will match those when they repurchasing sub-1x. 

 

2 hours ago, SafetyinNumbers said:

Cats are a smaller portion of the business than before. Partially because they have grown other lines but also because they are more global than before. Cats ticking up would just help pricing anyway so they would make it up pretty quickly on price if we are using a 5 year window. 

 

Cats ticking up would be good for longer term pricing, but could wreck performance in any any given year. And there is nothing that says they only happen once in the 5-years. 20% is a high bar - we need catastrophes to cooperate. 

 

2 hours ago, SafetyinNumbers said:

BIAL, Poseidon and Eurobank still have carrying values well below fair value.

 

There likely a few more of those like AGT, Dexterra etc… plus the stuff they own is still growing. SCR and GFR could provide very big gains if oil prices stay flat but a lot more if the oil price goes to $80+. 

 

But unlikely to provide the returns Eurobank did from 2020 onward or the TRS did from such low levels. 

 

Plenty of stuff to contribute to returns - but will likely be lower returns than the last 5-years. 

 

2 hours ago, SafetyinNumbers said:

Anyways, that's what makes a marker

 

In this case, it doesn't cuz I'm not trying to sell to you at these prices

 

I still own Fairfax and thank it'll do well. I just think 20%/yr for the next 5-years is a tad optimistic. 

[SafetyinNumbers]

5 hours ago, TwoCitiesCapital said:

I still own Fairfax and thank it'll do well. I just think 20%/yr for the next 5-years is a tad optimistic. 

What over/under would you set for forward 5 year returns?

 

5 hours ago, TwoCitiesCapital said:

Buying back stock BELOW book boosts ROE more.

I don’t think this is true mathematically. Buying stock below book increases BVPS while earnings power stays the same means a lower ROE all else being equal. Obviously, it’s still better than buying above BV because the goal is to compound BVPS faster. 
 

We disagree on the odds of things generally but I think a good approach for anyone else analyzing forward returns is to spend time thinking about what’s needed to create a 15-20% ROE using the framework below on an reported basis. I emphasize reported basis because while Eurobank stock has gone up a lot since 2020, for example, we have only booked our share of their earnings but none of the multiple expansion so that’s all future ROE as we sell our proportionate share into their buyback over the next 5 years.