Fairfax 2025

[Xerxes]

 

https://podcasts.apple.com/ca/podcast/yet-another-value-podcast/id1526149547

[Marco Van Basten]

@Viking, I don't mean to criticize, but I would not say that Fairfax's management is best in class.  Chubb for instance seems to have a better insurance business.  

[Viking]

42 minutes ago, Marco Van Basten said:

@Viking, I don't mean to criticize, but I would not say that Fairfax's management is best in class.  Chubb for instance seems to have a better insurance business.  

@Marco Van Basten, what criteria are you using to judge management? I think change in BVPS and total shareholder return are pretty standard metrics. And from my perspective, 5 years is a good timeframe to use - it is long enough. I used 6 years to remove the noise from Covid (the lower starting point - Dec 31, 2025 - would have helped Fairfax even more and I didn’t want that). 
 

Fairfax has smoked Chubb. Chubb is a fine company. But the execution from the management at Fairfax has simply been much, much better over the past 5 years - and it is backed up by the numbers. 
 

Fairfax has a much better business model than Chubb. Fairfax optimizes for both insurance and investments. Chubb only optimizes for insurance (essentially only invests in fixed income). When Fairfax executes well - like it has been for the past 5 years - its results (and returns) are much better. 

Edited December 16, 2025 by Viking

[Viking]

36 minutes ago, Marco Van Basten said:

@Viking, I don't mean to criticize, but I would not say that Fairfax's management is best in class.  Chubb for instance seems to have a better insurance business.  

As an example, Chubb got caught with its pants down when the bubble in bonds popped - they lost billions and book value got crushed. 
 

That time period was a great example of where accounting results grossly overstated economic results. It wasn’t a solvency issue (it could have been for some if catastrophe losses had also been historically high) but it was a real loss. 
 

Remember, most P/C insurance companies were buying corporate bonds in 2020 and 2021 at 1% yields - matching duration with their insurance liabilities. Stupid. They forgot about something called interest rate/duration risk. And their mistake cost shareholders billions. They failed management 101 - risk management. But because all the P/C insurers were doing it - they got a free pass. “Who could have known?” They said. 

Edited December 16, 2025 by Viking

[Maverick47]

1 hour ago, Marco Van Basten said:

Chubb for instance seems to have a better insurance business.  

This could well be a case where 5 years is not long enough to make a combined ratio comparison of the two underwriting results and use that to make a judgement that the lower combined ratio company’s underwriting business is better.  What we don’t know is how exposed each company is to catastrophic risk for example, and when a company is highly exposed to cat risk, a few years of light cat risk can make their combined ratio look very favorable.  
 

I have to wonder about Chubb’s high valued home property business for example.  Most of those customers are going to be concentrated in coastal areas such as Florida, the Northeast, and California.  A lot of the premium could well be paying for hurricane, earthquake and wildfire risk in those areas, and with the exception of the CA wildfires this year, the underwriting results for that segment of their business would be expected to be quite favorable otherwise.

 

Every line of business and geography should have its own target combined ratio normalized for average expected cats.  For example, say a Florida home exposed property book has a target 88 combined ratio, normalized for expected hurricane cats of 15 points per year.  So in a non-hurricane year the Florida property book would need to record a combined ratio 15 points better than 88 to be on track for targeted profitability over the long haul.

 

A 78 combined ratio for the Florida book in such a year would seem fantastic, but is actually projected to be 5 points above a long term target.

That’s the kind of risk adjustment that should be made for an apples to apples combined ratio comparison, but it’s not something that we investors on the outside have available to us.

[djokovic1]

5 hours ago, Xerxes said:

 

https://podcasts.apple.com/ca/podcast/yet-another-value-podcast/id1526149547

 

I heard this earlier in the day and was quite underwhelmed by it sadly. 

[djokovic1]

2 hours ago, Viking said:

@Marco Van Basten, what criteria are you using to judge management? I think change in BVPS and total shareholder return are pretty standard metrics. And from my perspective, 5 years is a good timeframe to use - it is long enough. I used 6 years to remove the noise from Covid (the lower starting point - Dec 31, 2025 - would have helped Fairfax even more and I didn’t want that). 
 

Fairfax has smoked Chubb. Chubb is a fine company. But the execution from the management at Fairfax has simply been much, much better over the past 5 years - and it is backed up by the numbers. 
 

Fairfax has a much better business model than Chubb. Fairfax optimizes for both insurance and investments. Chubb only optimizes for insurance (essentially only invests in fixed income). When Fairfax executes well - like it has been for the past 5 years - its results (and returns) are much better. 

 

100% agree. It's not even close. Since 1993, 36 years, Chubb has compounded SP at 12%, nice, but no where near FFH's ~20% compounding. In investing terms, because of the impact of compounding that is light years of difference in the same industry.

 

Separately, I would put Chubb in the mediocre, average insurer bucket because they don't use the superpower that insurers have. I.e to invest their float wisely. By using appropriate investment leverage and a meaningful amount in equities. But for that you need long term alignment, ownership, skill and conviction -> all of which together are rare. Which is why so few do it namely, Fairfax, Berkshire, Markel and Protector.

[petec]

On 12/15/2025 at 12:50 PM, SafetyinNumbers said:

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.

 

Yes of course you compare like with like. But my point is that having different amounts of intangibles on the balance sheet skews a simple p/bv comparison. That has nothing to do with roe.

[yesman182]

41 minutes ago, djokovic1 said:

 

I heard this earlier in the day and was quite underwhelmed by it sadly. 

I agree 100%. Host was fixated on old news, shorts, blackberry, macro calls. Definitely not bringing in new investors. 

[Marco Van Basten]

3 hours ago, Viking said:

As an example, Chubb got caught with its pants down when the bubble in bonds popped - they lost billions and book value got crushed. 
 

That time period was a great example of where accounting results grossly overstated economic results. It wasn’t a solvency issue (it could have been for some if catastrophe losses had also been historically high) but it was a real loss. 
 

Remember, most P/C insurance companies were buying corporate bonds in 2020 and 2021 at 1% yields - matching duration with their insurance liabilities. Stupid. They forgot about something called interest rate/duration risk. And their mistake cost shareholders billions. They failed management 101 - risk management. But because all the P/C insurers were doing it - they got a free pass. “Who could have known?” They said. 

I am aware of Chubb's performance, including bond disaster in 2022.  I think on the investment side most insurance companies are run by incompetent morons.  Mr Watsa clearly is not one of them.   It is my understanding that whether you look at 5, 10 or 15 years, Chubb's underwriting has been much better than Fairfax.  The investment performance of Fairfax was much better than most of the other insurance companies over the last 5 or 10 or 15 years, I agree.  However, the last 20 years saw declining interest rate environment, how will the results look if you have stable interest rates in the 5% range?  Look I own Fairfax, it is a large position for me, but I am don't think that Mr Watsa walks on water.  The TRS, which turned out to be brilliant in retrospect could have been very problematic in case of several large catastrophes in a row, coupled with a general market decline.  Again, I am long the stock, and I admire Mr Watsa, however, we should remember that he has made some very big mistakes on the investing side (who hasn't?) and that again, my only point is that on the underwriting side, there are people better than Fairfax.  Yes, Fairfax has an excellent insurance business on the underwriting side, but in my opinion, Chubb's underwriting has been better.  

[djokovic1]

11 minutes ago, Marco Van Basten said:

Yes, Fairfax has an excellent insurance business on the underwriting side, but in my opinion, Chubb's underwriting has been better

Yes but this still misses the key insight. That for a well run insurer, the investment returns are 3:1 more impactful than underwriting returns due to investment leverage. So you would rather have 90% CR and more float and invest that float wisely than 85% CR and less float and invest the float badly.

 

Which shows in the long term results

Edited December 17, 2025 by djokovic1

[Hsmpanl]

39 minutes ago, yesman182 said:

I agree 100%. Host was fixated on old news, shorts, blackberry, macro calls. Definitely not bringing in new investors. 

Yeah, never been a fan of that podcast or blog. Host just likes to hear himself talk.

[Xerxes]

2 hours ago, djokovic1 said:

 

I heard this earlier in the day and was quite underwhelmed by it sadly. 

sorry to hear that. I may have to skip it. 

[yesman182]

50 minutes ago, Xerxes said:

sorry to hear that. I may have to skip it. 

The host was stating the PB was 2. He was using CAD numbers in numerator and USD numbers in denominator, so you aren’t missing much! 

[Hoodlum]

23 minutes ago, yesman182 said:

The host was stating the PB was 2. He was using CAD numbers in numerator and USD numbers in denominator, so you aren’t missing much! 

The host also stated that Fairfax had stopped their buybacks in 2025.  I stopped listening at the 3/4 mark.  I don’t believe they even discussed the turnaround of the insurance subs with the great contribution from Andy Barnard, unless I missed that. 

[Xerxes]

Yeah. I was planning to listen to it on the weekend, as I am going through the book. 
 

I usually reserve Thursday and Fridays the week for some pump-it-up-Dan-Ives “it is 9 PM and party going to 4 AM” podcasts. Not value investing. That is for weekend. 
 

 

 

 

Edited December 17, 2025 by Xerxes

[Duke In Shadows]

TOP

[SafetyinNumbers]

5 hours ago, petec said:

 

Yes of course you compare like with like. But my point is that having different amounts of intangibles on the balance sheet skews a simple p/bv comparison. That has nothing to do with roe.

I think it has everything to do with ROE. With the same earnings power, the company with the a large amount of intangibles will have a lower ROE vs the one without. P/BV only matters in context with ROE. 

[Viking]

4 hours ago, Marco Van Basten said:

I am aware of Chubb's performance, including bond disaster in 2022.  I think on the investment side most insurance companies are run by incompetent morons.  Mr Watsa clearly is not one of them.   It is my understanding that whether you look at 5, 10 or 15 years, Chubb's underwriting has been much better than Fairfax.  The investment performance of Fairfax was much better than most of the other insurance companies over the last 5 or 10 or 15 years, I agree.  However, the last 20 years saw declining interest rate environment, how will the results look if you have stable interest rates in the 5% range?  Look I own Fairfax, it is a large position for me, but I am don't think that Mr Watsa walks on water.  The TRS, which turned out to be brilliant in retrospect could have been very problematic in case of several large catastrophes in a row, coupled with a general market decline.  Again, I am long the stock, and I admire Mr Watsa, however, we should remember that he has made some very big mistakes on the investing side (who hasn't?) and that again, my only point is that on the underwriting side, there are people better than Fairfax.  Yes, Fairfax has an excellent insurance business on the underwriting side, but in my opinion, Chubb's underwriting has been better.  

@Marco Van Basten, Fairfax has compounded at 19% for 40 years. Is that not getting close to a ‘walk on water’ track record?

 

I think I was pretty hard on Prem and Fairfax at times back in 2019, 2020 and 2021. But I applaud people who acknowledge their mistakes and make the necessary changes. We see the changes Fairfax made in their much improved results. Their mistakes appear to have made them a much stronger organization. 

In terms of insurance, there are lots of fine insurance companies out there, and Chubb appears to be one of them. I do think Fairfax is getting better at insurance. Are they in the top tier? I will let the insurance guys on the board opine on that. 

[villainx]

4 hours ago, Xerxes said:

sorry to hear that. I may have to skip it. 

 

I felt the guest was the problem, he wasn't an analyst or enthusiastic shareholder.  Thomas just wasn't knowledgeable enough to engage in conversation.  I normally am okay with this podcast, and listen to it depending on the guest.  If host asks dumb questions or makes dumb statements, knowledgable guest should be able to set things straight.

 

edit: i mean if @SafetyinNumbers was the guests, maybe not historical narrative, but the investment pluses and minuses would have been explained more fully, like he does here and other podcasts.

 

Edited December 17, 2025 by villainx

[djokovic1]

1 hour ago, villainx said:

I felt the guest was the problem, he wasn't an analyst or enthusiastic shareholder.  Thomas just wasn't knowledgeable enough to engage in conversation.

Agreed

[Marco Van Basten]

8 hours ago, Viking said:

@Marco Van Basten, Fairfax has compounded at 19% for 40 years. Is that not getting close to a ‘walk on water’ track record?

 

I think I was pretty hard on Prem and Fairfax at times back in 2019, 2020 and 2021. But I applaud people who acknowledge their mistakes and make the necessary changes. We see the changes Fairfax made in their much improved results. Their mistakes appear to have made them a much stronger organization. 

In terms of insurance, there are lots of fine insurance companies out there, and Chubb appears to be one of them. I do think Fairfax is getting better at insurance. Are they in the top tier? I will let the insurance guys on the board opine on that. 

Viking, I was again only referring to the insurance business, not the combination of insurance and investing.  Also, I may be wrong, but the annualized return from 05/01/1987 (Bloomberg could not run from 12/16/1985) till 12/16/2025 was 15.327% in USD, which is actually below BRK/A at 15.6765%.   How do you get 19% annualized over 40 years?  Thank you.

Edited December 17, 2025 by Marco Van Basten

[UK]

1 hour ago, Marco Van Basten said:

Viking, I was again only referring to the insurance business, not the combination of insurance and investing.  Also, I may be wrong, but the annualized return from 05/01/1987 (Bloomberg could not run from 12/16/1985) till 12/16/2025 was 15.327% in USD, which is actually below BRK/A at 15.6765%.   How do you get 19% annualized over 40 years?  Thank you.

 

I have comparison only vs BRK. It seems quite not bad?

 

 

BRK FFH float.pdf

Edited December 17, 2025 by UK

[Marco Van Basten]

@UK, my only point originally was that while Fairfax's management was excellent, it was far from the best on the insurance side as Chubb's underwriting results have been much better.  To be fair, Chubb's results on the investment side have been lousy.  Also, when Viking stated that Fairfax returned 19% per annum for 40 years, I checked on Bloomberg and could not get close.  It is about 15.3% in USD from 05/01/1987, Bloomberg would not give me a 40 year calculation.  

[UK]

21 minutes ago, Marco Van Basten said:

@UK, my only point originally was that while Fairfax's management was excellent, it was far from the best on the insurance side as Chubb's underwriting results have been much better.  To be fair, Chubb's results on the investment side have been lousy.  Also, when Viking stated that Fairfax returned 19% per annum for 40 years, I checked on Bloomberg and could not get close.  It is about 15.3% in USD from 05/01/1987, Bloomberg would not give me a 40 year calculation.  

 

Yes, I agree, there is still better insurance operations, but perhaps it is mostly mix driven, like with CB, which is mainly primary insurance. Perhaps nobody also would argue that Progressive or stand alone Geico is not miles better business (at least until those robots takes auto over:)). But recently, and I think the track record is getting quite clear on this, FFH insurance is not worse as BRK insurance as the whole. I think this change from ~2015 is really important in FFH case, because historically it was not the case and I am quite optimistic they are not going back and it is more likely this will improve in the future.

 

Edited December 17, 2025 by UK