Fairfax 2025

[Marco Van Basten]

14 hours 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 you made  a mathematical mistake.  20% 5 year CAGS is 147% return, turning a $1 into $2.47.  A 247% return turns a dollar in $3.47

[SafetyinNumbers]

39 minutes ago, Marco Van Basten said:

I think you made  a mathematical mistake.  20% 5 year CAGS is 147% return, turning a $1 into $2.47.  A 247% return turns a dollar in $3.47

You are correct! My mistake. I changed it above and acknowledged your help. The commentary on the over/under of a 20% CAGR is still interesting though as clearly most investors expect less than that. 

 

[villainx]

I think value wise, some folks want a certain margin of safety than simple expecting a certain % return. 
 

 

[SafetyinNumbers]

1 hour ago, villainx said:

I think value wise, some folks want a certain margin of safety than simple expecting a certain % return. 
 

 

Isn’t that what margin of safety is?

[MMM20]

If a fair return would be ~10-12% and it’s currently priced to ~20-25%, that’s just another way of framing margin of safety.  It’s the flip side of the same coin. 

[villainx]

I think even with confidence in the numbers, Fairfax gets (ab)normal share price swings, so what is good at current prices looks a bit more interesting at 10% lower like just a month ago in November.  

 

 

[djokovic1]

I agree with you @SafetyinNumbers and would be comfortable saying we get a >20% CAGR over next 5 years. My sense is a lot of investors benchmark the right P/B multiple for FFH is ~1.3-1.4x due to history (and consequently EPS ~10x) but I think that is wrong. So over the next 5 years I expect, multiple expansion from today's level to 2x+ book also to happen which will add to returns from 15-20% EPS compounding (thats my base case expectation). Of course timing of that occurring is impossible to tell, but with continued execution, it will happen at some point.

[Txvestor]

13 hours ago, djokovic1 said:

I agree with you @SafetyinNumbers and would be comfortable saying we get a >20% CAGR over next 5 years. My sense is a lot of investors benchmark the right P/B multiple for FFH is ~1.3-1.4x due to history (and consequently EPS ~10x) but I think that is wrong. So over the next 5 years I expect, multiple expansion from today's level to 2x+ book also to happen which will add to returns from 15-20% EPS compounding (thats my base case expectation). Of course timing of that occurring is impossible to tell, but with continued execution, it will happen at some point.

That is assuming they keep their play book consistent and insurance markets stay as they are and investments go reasonably well. 
All of course big assumptions. 
Their recent shortening of the bond duration beyond their liabilities makes me feel like they are still in the macro game(something for which they suffered in the 2010s), some of their paper gains are just that and haven't been harvested and could disappear just as quick as they developed and of course the TRS is basically a sort of option play that depends on their share price appreciation until it is closed out, and it could just as well accentuate downside as it did to the upside. 
While I agree with the consensus here that -~$200 a year eps is likely over the next 2-3yrs. It's by no means certain and the market skepticism to not assign an 2x book multiple isn't unwarranted. 
I think the key reason the stock re-rated in recent years and deserved to rerate is the consistency and metamorphosis of the insurance subs into a top tier collection of diversified insurers. 
As for the Bonds, Greek and Indian investments, TRS and so on, so far so good is all anyone can say. Not everyone is 100% confident in those. They're doing well for the moment.  

Edited December 14, 2025 by Txvestor

[djokovic1]

4 hours ago, Txvestor said:

It's by no means certain and the market skepticism to not assign an 2x book multiple isn't unwarranted. 

 

I refreshed the below table right now, and the headline hasn't changed since then. I.e Fairfax is the cheapest insurer in the comp set and has the highest last 5 yr ROE.

 

So for your argument to be correct, you have to either say: i) most other insurers are mispriced by the market and should trade materially lower (as opposed to Fairfax being mispriced) or ii) You have to make a case that, Fairfax is idiosyncratically over earning over the last 5 years and its returns (but not other insurers) will come down in the future.

 

In summary, it's more likely the market is wrong on Fairfax rather than the market being wrong on most other insurers. It can't be both.

 

 

All numbers from CapIQ without any adjustments.

 

I am happy to take take the optimistic view especially because they have locked in rates for the next 3 years i.e downside is low, but also other factors highlighted by @Viking @SafetyinNumbers

[Txvestor]

1 hour ago, djokovic1 said:

 

I refreshed the below table right now, and the headline hasn't changed since then. I.e Fairfax is the cheapest insurer in the comp set and has the highest last 5 yr ROE.

 

So for your argument to be correct, you have to either say: i) most other insurers are mispriced by the market and should trade materially lower (as opposed to Fairfax being mispriced) or ii) You have to make a case that, Fairfax is idiosyncratically over earning over the last 5 years and its returns (but not other insurers) will come down in the future.

 

In summary, it's more likely the market is wrong on Fairfax rather than the market being wrong on most other insurers. It can't be both.

 

 

All numbers from CapIQ without any adjustments.

 

I am happy to take take the optimistic view especially because they have locked in rates for the next 3 years i.e downside is low, but also other factors highlighted by @Viking @SafetyinNumbers

Obviously I share your sentiment to some degree or else it wouldn't be 20+% of my portfolio, but to answer your binary Q, I do think the market feels they have over earned last few years and with falling interest rates exacerbated by them trimming duration to under 3yrs and less than their liability duration, a softening insurance market and stocks generally trading at bullish levels they might mean revert. 

Yes, It's a relatively better priced but no longer a screaming bargain is my point. There are downside scenarios and if they come to pass the TRS will juice it in both direction. 

[73 Reds]

7 minutes ago, Txvestor said:

Obviously I share your sentiment to some degree or else it wouldn't be 20+% of my portfolio, but to answer your binary Q, I do think the market feels they have over earned last few years and with falling interest rates exacerbated by them trimming duration to under 3yrs and less than their liability duration, a softening insurance market and stocks generally trading at bullish levels they might mean revert. 

Yes, It's a relatively better priced but no longer a screaming bargain is my point. There are downside scenarios and if they come to pass the TRS will juice it in both direction. 

For me Fairfax remains as compelling a long-term hold as ever.  Inflation will re-emerge and push interest rates up, an upcoming soft insurance market will harden again and stock valuations will decline and then go back up.  These are entirely unavoidable factors that don't affect the long term trajectory of a well-run company.

Edited December 14, 2025 by 73 Reds
spelling

[backtothebeach]

I made this graph, so I thought I'd share it. Using daily closing prices starting in January 2021.

[petec]

On 12/14/2025 at 7:09 AM, djokovic1 said:

 

I refreshed the below table right now, and the headline hasn't changed since then. I.e Fairfax is the cheapest insurer in the comp set and has the highest last 5 yr ROE.

 

So for your argument to be correct, you have to either say: i) most other insurers are mispriced by the market and should trade materially lower (as opposed to Fairfax being mispriced) or ii) You have to make a case that, Fairfax is idiosyncratically over earning over the last 5 years and its returns (but not other insurers) will come down in the future.

 

In summary, it's more likely the market is wrong on Fairfax rather than the market being wrong on most other insurers. It can't be both.

 

 

All numbers from CapIQ without any adjustments.

 

I am happy to take take the optimistic view especially because they have locked in rates for the next 3 years i.e downside is low, but also other factors highlighted by @Viking @SafetyinNumbers

 

It would be interesting to do this on a tangible BV basis. IIRD Fairfax has been more acquisitive (of insurance subsidiaries) than peers. What that effectively means is that more of Fairfax's franchise value is captured on its balance sheet as an intangible. So to compare with companies that mostly grew organically, p/tbv is a better measure.

[SafetyinNumbers]

48 minutes ago, petec said:

 

It would be interesting to do this on a tangible BV basis. IIRD Fairfax has been more acquisitive (of insurance subsidiaries) than peers. What that effectively means is that more of Fairfax's franchise value is captured on its balance sheet as an intangible. So to compare with companies that mostly grew organically, p/tbv is a better measure.

The difference should be captured in ROE. If you are going to switch to P/TBV then it should be compared to ROTBV as well.

[Santayana]

3 hours ago, backtothebeach said:

I made this graph, so I thought I'd share it. Using daily closing prices starting in January 2021.

 

So many great buying opportunities.

[Viking]

On 12/14/2025 at 4:09 AM, djokovic1 said:

 

I refreshed the below table right now, and the headline hasn't changed since then. I.e Fairfax is the cheapest insurer in the comp set and has the highest last 5 yr ROE.

 

So for your argument to be correct, you have to either say: i) most other insurers are mispriced by the market and should trade materially lower (as opposed to Fairfax being mispriced) or ii) You have to make a case that, Fairfax is idiosyncratically over earning over the last 5 years and its returns (but not other insurers) will come down in the future.

 

In summary, it's more likely the market is wrong on Fairfax rather than the market being wrong on most other insurers. It can't be both.

 

 

All numbers from CapIQ without any adjustments.

 

I am happy to take take the optimistic view especially because they have locked in rates for the next 3 years i.e downside is low, but also other factors highlighted by @Viking @SafetyinNumbers

@djokovic1 , that is a great summary. Fairfax’s performance has smoked peers over the past 6 years - it hasn’t been a little better, it has been much better. At the same time is it the cheapest - based on P/BV or PE (which is ok to use to compare). What this means is despite its epic run the past 5 years, the stock is still dirt cheap. 
 

What explains this apparent contradiction?
 

Fairfax continues to be under-followed and, as a result, misunderstood. Not complicated.

 

And many who follow the company are having a hard time keeping up with improving fundamentals. Which causes more misunderstanding. I am in this camp. My earnings estimates have usually been way too conservative (my initial forecast for 2025 was $152/share). And I was equally terrible in 2024. And 2023. And 2022…

 

Over the past 5 years, it is like Fairfax’s version of the movie Groundhog Day continuously playing out for investors. Under followed. Misunderstood. Undervalued. Rinse and repeat each year for 5 years straight. The same movie is still playing today…

Edited December 15, 2025 by Viking

[Buckeye]

1 hour ago, Viking said:

@djokovic1 , that is a great summary. Fairfax’s performance has smoked peers over the past 6 years - it hasn’t been a little better, it has been much better. At the same time is it the cheapest - based on P/BV or PE (which is ok to use to compare). What this means is despite its epic run the past 5 years, the stock is still dirt cheap. 
 

What explains this apparent contradiction?
 

Fairfax continues to be under-followed and, as a result, misunderstood. Not complicated.

 

And many who follow the company are having a hard time keeping up with improving fundamentals. Which causes more misunderstanding. I am in this camp. My earnings estimates have usually been way too conservative (my initial forecast for 2025 was $152/share). And I was equally terrible in 2024. And 2023. And 2022…

 

Over the past 5 years, it is like Fairfax’s version of the movie Groundhog Day continuously playing out for investors. Under followed. Misunderstood. Undervalued. Rinse and repeat each year for 5 years straight. The same movie is still playing today…

Under followed. Misunderstood. Undervalued. (Stock appreciates 30%) Rinse and repeat each year for 5 years straight. The same movie is still playing today…

[Buffett_Groupie]

On 12/14/2025 at 7:09 AM, djokovic1 said:

 

I refreshed the below table right now, and the headline hasn't changed since then. I.e Fairfax is the cheapest insurer in the comp set and has the highest last 5 yr ROE.

 

So for your argument to be correct, you have to either say: i) most other insurers are mispriced by the market and should trade materially lower (as opposed to Fairfax being mispriced) or ii) You have to make a case that, Fairfax is idiosyncratically over earning over the last 5 years and its returns (but not other insurers) will come down in the future.

 

In summary, it's more likely the market is wrong on Fairfax rather than the market being wrong on most other insurers. It can't be both.

 

 

All numbers from CapIQ without any adjustments.

 

I am happy to take take the optimistic view especially because they have locked in rates for the next 3 years i.e downside is low, but also other factors highlighted by @Viking @SafetyinNumbers

The table shows Mr. Market gives zero respect to the company with the highest ROE and lowest P/B & P/E among major P&C insurers, right?

[djokovic1]

9 minutes ago, Buffett_Groupie said:

The table shows Mr. Market gives zero respect to the company with the highest ROE and lowest P/B & P/E among major P&C insurers, right?

 

Well Mr. Market likely remembers the 2010-2020 decade and (wrongly) continues to penalize Fairfax for that. But my guess is the tide will turn as they keep executing, you could argue it has started to turn the last few years (but intrinsic value has also gone up a lot!).

[Hsmpanl]

11 minutes ago, djokovic1 said:

 

Well Mr. Market likely remembers the 2010-2020 decade and (wrongly) continues to penalize Fairfax for that. But my guess is the tide will turn as they keep executing, you could argue it has started to turn the last few years (but intrinsic value has also gone up a lot!).

Yeah, I'm relatively new to the FFH story but it seems to me that the increased stock price is because the market can't ignore the dramatic increases in interest income and total earnings over the last few years. I still don't think the market is giving FFH credit for being a high quality underwriter or for their equity/debt investment prowess. The narrative is still in line with the Brett Horns of the world... "Prem is highly volatile and can't be trusted, underwriting is suspect and the valuation should be discounted as a result".

 

Love the compounding over the last few years and seems highly likely to continue for several years to come. 

[Viking]

2 hours ago, Buckeye said:

Under followed. Misunderstood. Undervalued. (Stock appreciates 30%) Rinse and repeat each year for 5 years straight. The same movie is still playing today…

I think lots of investors have not been grasping the magnitude of the change that has been happening each and every year for 5 years straight. If you don’t follow the company in a very detailed way it will be impossible to see. What has been happening at Fairfax is not normal - so it is not surprising that most do not see it / value it. It really is a crazy set up (in the best of ways).
 

The part that I find most interesting today is the size of earnings, the good reinvestment opportunities and the effect of compounding and time on future earnings. A close second is hidden value - how big it is today, how much it is growing each year and when it gets surfaced. Fairfax continues to be such an interesting story…

Edited December 16, 2025 by Viking

[villainx]

1 hour ago, Viking said:

most interesting today is the size of earnings

 

you mean those juicy management fees from FIH?!???!!!

 

 

[UK]

10 hours ago, Viking said:

@djokovic1 , that is a great summary. Fairfax’s performance has smoked peers over the past 6 years - it hasn’t been a little better, it has been much better. At the same time is it the cheapest - based on P/BV or PE (which is ok to use to compare). What this means is despite its epic run the past 5 years, the stock is still dirt cheap. 
 

What explains this apparent contradiction?
 

Fairfax continues to be under-followed and, as a result, misunderstood. Not complicated.

 

And many who follow the company are having a hard time keeping up with improving fundamentals. Which causes more misunderstanding. I am in this camp. My earnings estimates have usually been way too conservative (my initial forecast for 2025 was $152/share). And I was equally terrible in 2024. And 2023. And 2022…

 

Over the past 5 years, it is like Fairfax’s version of the movie Groundhog Day continuously playing out for investors. Under followed. Misunderstood. Undervalued. Rinse and repeat each year for 5 years straight. The same movie is still playing today…

 

I agree! And if you think it is misunderstood in NA, it is like even still totally not on the radars here in EU, or more globally I think. Some time ago I remember trying to buy few shares for my relatives in local bank and you literally had to ask them to include FFH into their trading system, meaning nobody has done it before, despite some crazy speculative and much smaller CAP stuff already being present on the list. It is easy to underappreciate this, being here at COBF and having the opportunity to follow FFH through the eyes of members such as Viking and other:)

 

Edited December 16, 2025 by UK

[Hoodlum]

S&P has assigned an A+ rating to Polish Re.  I believe this is initial coverage by S&P. All of these upgrades to the insurance subs are going to help with underwriting going forward. 

 

https://www.spglobal.com/ratings/en/regulatory/article/-/view/type/HTML/id/3489968

[Viking]

Valuation – Fairfax, PC Insurance Peers and Margin of Safety

 

 "The three most important words in investing are margin of safety.” Warren Buffett

 

Introduction: Margin of Safety in Practice

 

Ben Graham introduced margin of safety as the central concept of investing in The Intelligent Investor. The idea is simple but powerful: buy stocks at a meaningful discount to intrinsic value – buy something for $0.50 that is worth $1.00. Doing so limits downside risk if you are wrong and provides substantial upside if you are right.

 

A great deal has happened at Fairfax Financial over the past five years. The stock has performed exceptionally well, raising an obvious question for investors:

 

After such a strong run, is Fairfax now expensive?
Or is the market still undervaluing the company?

 

To answer this, we step back and apply traditional P/C insurance valuation tools using a relative valuation framework, comparing Fairfax to a group of high-quality peers.

---

 

Methodology and Peer Group

 

Valuation Approach: Relative Valuation

 

There are many ways to value a company. In this analysis, we use relative valuation – comparing Fairfax to comparable P/C insurance companies – to address three core questions:

1. How have these companies performed?
2. How are they being valued today?
3. Does valuation align with performance?

Peer Group

 

We compare Fairfax against the following P/C insurers (alphabetical order):

• Berkshire Hathaway (BRK) – Historical gold standard; now a diversified conglomerate
• Chubb (CB) – Large, global, traditional insurer
• Intact Financial (IFC.TO) – Largest P/C insurer in Canada; expanding globally
• Markel (MKL) – “Baby Berkshire”; U.S.-focused
• Travelers (TRV) – Large U.S. insurer; DJIA component
• W.R. Berkley (WRB) – High-quality U.S. insurer

 Each company has a distinct business model. Accordingly, this analysis remains high-level and focuses on metrics most relevant to P/C insurers.

---

 

Measuring Performance: A Six-Year View

 

Buffett has often suggested that five years is a reasonable timeframe for evaluating management performance. We extend the window slightly to six years – starting December 31, 2019 – to avoid distortions caused by Covid-related volatility.

 

Performance Metrics Used

• Change in Book Value Per Share (BVPS)
• Total Shareholder Return (share price appreciation + dividends)

---

 

Performance Analysis

 

1. Change in Book Value: 5.75-Year View (Dec 31, 2019–Sept 30, 2025)

 

Book value growth has long been a core metric for evaluating P/C insurers.

 

Results:

• Fairfax ranks #1 among peers
• BVPS growth: +148%
• CAGR: 17.1%

 Fairfax’s outperformance is material. There is a wide divergence of results across the peer group, with Chubb (7.2% CAGR) and Travelers (5.9% CAGR) at the bottom of the range.

  

 

An Important Adjustment: Economic vs Accounting Performance

 

BVPS captures accounting results. What ultimately matters, however, are economic results.  

 

Over the past 6 years, Fairfax’s economic results have exceeded even its strong accounting results. The most obvious the example is excess of fair value over carrying value for non-insurance associate and consolidated companies, which stood at $2.5 billion ($108 per diluted share, pre-tax) at September 30, 2025. There are numerous examples, including BIAL. 

 

The key point is straightforward: Fairfax’s book value is understated. As a result, its true economic outperformance relative to peers is even greater than what reported BVPS suggests. 

 

---

 

2. Total Shareholder Return - 5.95-Year View (Dec 31, 2019–Dec 12, 2025)

 

Over the long term, total shareholder return is likely the best single metric for evaluating company performance.

 

Total shareholder return includes share price appreciation plus all dividends paid (including special dividends).  

 

Results:

• Fairfax ranks #1 again
• Total return: +294%
• CAGR: 25.9%

 Most peers delivered respectable returns in the low-to-mid teens. Fairfax’s performance, by contrast, has been exceptional – dramatically outpacing the group.

 

---

 

Valuation Analysis

 

Having established performance leadership, we now turn to valuation.

 

1. Price-to-Book Value (P/BV)

• Fairfax P/BV: 1.48x

 Fairfax trades at the lowest P/BV in the peer group. Compared to the most expensive names—such as Intact Financial and W. R. Berkley—Fairfax is meaningfully cheaper.

 

Moreover, as discussed earlier, Fairfax’s book value understates its economic value. Adjusting for this implies that Fairfax’s true P/BV is even lower. In other words, the stock is cheaper than it appears on reported numbers.

 

---

 

2. Price-to-Earnings (P/E)

 

While P/E is not ideal for insurers, it remains useful for peer comparison.

• Fairfax trailing P/E: 8.9x

 Once again, Fairfax screens as the cheapest stock in the group. By a wide margin.

 

---

 

Summary of Findings

 

Performance

 

Over the past six years, Fairfax has delivered:

• Best-in-class BVPS growth
• Best-in-class total shareholder return

Valuation

 

Despite this performance, Fairfax currently trades at:

• P/BV: 1.48x
• P/E: 8.9x

 Both are the lowest among peers.

---

 

Interpreting the Disconnect

 

What explains this valuation gap?

• Management quality? Best-in-class
• Earnings quality? Highest in company history; durable and repeatable
• Future prospects? Stronger than ever, with both insurance and investment engines performing at a high level 

Ratings agencies agree:

• AM Best upgrades (2023 and 2025)
• S&P Global upgrades (2024 and 2025)

 Sell-side analysts have steadily raised estimates and price targets, with most rating Fairfax Outperform or Top Pick.

 

The simplest explanation is often the most accurate. Fairfax remains under-followed. As a result, it continues to be misunderstood and mis-valued. 

---

 

Conclusion: Margin of Safety Remains

 

An investor today is able to buy the top performing P/C insurance company - with among the strongest future prospects - at the cheapest valuation in its peer group. 

 

In Ben Graham’s terms, the stock still appears to offer a meaningful margin of safety.

 

Does that make any sense? No – of course not.

 

 “The way of the successful investor is normally to do nothing — not until you see money lying there, somewhere over in the corner, and all that is left for you to do is go over and pick it up.” Jim Rogers