Fairfax 2025

[Viking]

20 hours 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 When I reference Fairfax management as being best in class it is looking at the total picture. Of course, that does not mean they are best in class at every aspect of it.

 

In terms of where I got 20% for 40 years, my source was Fairfax AGM presentation (19.2% over 39 years, US$ and including dividends reinvested). This year the total return is tracking +20%. FYI, Fairfax was founded in 1985.

[Dipesh Patel]

 

Barron's 2026 Stock Picks

Amazon (AMZN)

Bristol Myers Squibb (BMY)

Comcast (CMCSA)

Exxon Mobil (XOM)

Fairfax Financial Holdings (FRFHF)

Flutter Entertainment (FLUT)

Madison Square Garden Sports (MSGS)

SL Green Realty (SLG)

VISA (V)

Disney (DIS)

FFH is number 5 for 2026

[yqsun]

20 minutes ago, Dipesh Patel said:

 

 

Barron's 2026 Stock Picks

Amazon (AMZN)

Bristol Myers Squibb (BMY)

Comcast (CMCSA)

Exxon Mobil (XOM)

Fairfax Financial Holdings (FRFHF)

Flutter Entertainment (FLUT)

Madison Square Garden Sports (MSGS)

SL Green Realty (SLG)

VISA (V)

Disney (DIS)

FFH is number 5 for 2026

 

[SafetyinNumbers]

1 hour ago, Dipesh Patel said:

 

 

Barron's 2026 Stock Picks

Amazon (AMZN)

Bristol Myers Squibb (BMY)

Comcast (CMCSA)

Exxon Mobil (XOM)

Fairfax Financial Holdings (FRFHF)

Flutter Entertainment (FLUT)

Madison Square Garden Sports (MSGS)

SL Green Realty (SLG)

VISA (V)

Disney (DIS)

FFH is number 5 for 2026

Number 5 alphabetically, number 1 in most of our portfolios

[Xerxes]

They got stop calling Fairfax, mini-Berkshire. 
 

Either that or I start calling Berkshire, …. The American Jumbo Fairfax 

[SafetyinNumbers]

1 hour ago, Xerxes said:

They got stop calling Fairfax, mini-Berkshire. 
 

Either that or I start calling Berkshire, …. The American Jumbo Fairfax 

Meanwhile, Markel. FFH’s half brother, is trying to be mini-Berkshire. Both seem like a good source of future FFH shareholders. 
 

I went on the Know Your Risk podcast last week and shared my view that FFH has actually built a better mousetrap than Berkshire. 

 

https://podcasts.apple.com/ca/podcast/know-your-risk-podcast/id1121724780?i=1000741063660

[Xerxes]

2 hours ago, SafetyinNumbers said:

Meanwhile, Markel. FFH’s half brother, is trying to be mini-Berkshire. Both seem like a good source of future FFH shareholders. 
 

I went on the Know Your Risk podcast last week and shared my view that FFH has actually built a better mousetrap than Berkshire. 

 

https://podcasts.apple.com/ca/podcast/know-your-risk-podcast/id1121724780?i=1000741063660

Thank you

was not aware of that podcast. 

[djokovic1]

Bill Ackman's holding company Howard Hughes has just acquired Vantage, an insurer, for 1.5x BV. We discussed Ackman's goal earlier in the thread to replicate the Berkshire business model, with less investment leverage but a much higher proportion of equities. Will be interesting to follow. 

And on the forum, we have been discussing the 'right' multiple for Fairfax, I found Ackman's below comments (in quotes) pertinent, and aligned with how I think about multiples on insurers.

 

"To sort of highlight that, we've shown on this page sort of how insurers are valued in the public markets based upon the return on equity and where they sit within certain categories. So if you look, the first handful of companies are kind of pure-play specialty providers, which earn attractive high teens to low 20s ROEs. And those companies actually trade anywhere between 2x and 3x book value. At the bottom of the page, there are a couple of insurers, Arch and AXA, which traded a lower than 2x book value multiple, but have a lot more exposure to the natural catastrophe reinsurance markets, of which Vantage has very limited exposure, as we talked about before, stepping away through the complexion of different types of business models and all the comps that we've shown here, we think it's reasonable to think that companies that earn a high teens to 20% type return on equity in the public markets despite some differences in business mix, tend to trade north of 2x book value."

 

And the below comment from him: You can pretty much replace Howard Hughes with Fairfax below:

 

 

"So a way to think about this investment is we're creating the company at something like less than 1.4x book value. The plan is to grow book value at a higher compound rate have achieved a return on equity of high teens or in excess of 20%. And then the business becomes worth a higher multiple. So you  get the benefit of growth in book value plus a higher multiple, the combination leads to a very attractive return for Howard Hughes"

 

And a couple of the slides referenced above:

 

 

 

 

 

[Duke In Shadows]

It will be interesting to see how successful Bill Ackman’s $HHH and Bruce Flatt’s $BN, move into insurance ultimately is. Float ofc is one of those easy to understand, very hard to execute concepts. Many have tried to replicate what $BRK and $FFH.TO have done. You don’t know most of their names—survivorship bias does that. Fairfax has the real moat here. Try starting an insurance holdco tomorrow and see how long it takes to build underwriting discipline, trust, and culture. You could argue Ackman is attempting that in real time. Long-term $FFH holders know the lesson set was expensive and learned over decades—mistakes you can’t shortcut, and won't need to relearn. Add in people who stay because of culture, not comp, and the moat compounds. Over the past decade, many have noticed how much margin can exist in insurance. Far fewer have proven they can earn it consistently.

[sholland]

It is my understanding that Berkshire’s insurance operations struggled until Ajit Jain was hired.

 

The Fairfax Way seemed to indicate that Fairfax’s insurance operations struggled until Andy Barnard was put in charge.

 

Do members of this board agree or disagree with my assessment that Andy Barnard is to Fairfax as Ajit Jain is to Berkshire?

Edited December 19, 2025 by sholland

[Viking]

@sholland , from the book below “Hiring Andy was the single best decision I’ve made.” Prem Watsa

 

Prem has hired many, many outstanding individuals - this says something. (Back in 2021, before investments turned around, Prem was probably VERY happy that insurance had been performing well). 

 

Link to book on Odyssey web site: https://online.fliphtml5.com/bxxq/xlyw/#p=1

 

The file below is a pig to download (took me about 5 minutes when I tested the link). And it is full of my highlights...

 

Odyssey Group Enduring Momentum - May 18 2021.pdf

Edited December 19, 2025 by Viking

[sholland]

20 minutes ago, Viking said:

@sholland , from the book below “Hiring Andy was the single best decision I’ve made.” Prem Watsa

 

Prem has hired many, many outstanding individuals - this says something. (Back in 2021, before investments turned around, Prem was probably VERY happy that insurance had been performing well). 

 

Link to book on Odyssey web site: https://online.fliphtml5.com/bxxq/xlyw/#p=1

 

The file below is a pig to download (took me about 5 minutes when I tested the link). And it is full of my highlights...

 

Odyssey Group Enduring Momentum - May 18 2021.pdf 21.2 MB · 9 downloads

Thanks Viking!  I will read the book immediately. 

[Parsad]

10 hours ago, Xerxes said:

They got stop calling Fairfax, mini-Berkshire. 
 

Either that or I start calling Berkshire, …. The American Jumbo Fairfax 

 

It's ok...it's a compliment nonetheless.  Unlike Berkshire, most of us were into Fairfax very early in it's lifespan...the fact that we all recognized this 15-20-25 years ago...well that's a compliment to each of us as well!  Cheers!

[Parsad]

9 hours ago, SafetyinNumbers said:

Meanwhile, Markel. FFH’s half brother, is trying to be mini-Berkshire. Both seem like a good source of future FFH shareholders. 
 

I went on the Know Your Risk podcast last week and shared my view that FFH has actually built a better mousetrap than Berkshire. 

 

https://podcasts.apple.com/ca/podcast/know-your-risk-podcast/id1121724780?i=1000741063660

 

Let's not take away from Berkshire.  It was the first...done at a time when no one even thought of investing float for the long-term...and it's reputation was stellar! 

 

Buffett crafted what is essentially the Mona Lisa of the business world.  Everyone else is Michelangelo, Picasso, Rembrandt, Raphael, Monet, et al.  Near perfect, but not perfect!

 

Cheers!

[Parsad]

3 hours ago, sholland said:

It is my understanding that Berkshire’s insurance operations struggled until Ajit Jain was hired.

 

The Fairfax Way seemed to indicate that Fairfax’s insurance operations struggled until Andy Barnard was put in charge.

 

Do members of this board agree or disagree with my assessment that Andy Barnard is to Fairfax as Ajit Jain is to Berkshire?

 

No, Andy Barnard would be akin to Jack Byrne who fixed Geico, ran Fireman's Fund and founded White Mountain.  

 

Ajit is one of one!  If he was 15 years younger, he should have been running Berkshire instead of Abel or anyone else.  

 

Cheers!

[SafetyinNumbers]

50 minutes ago, Parsad said:

Let's not take away from Berkshire

I wasn’t taking away from Berkshire. In my view, Berkshire’s success has a had a lot more to do with superior stock picking than its structure while FFH has structured itself worn more leverage so the hurdle rate for equity returns is lower which is what I think makes it a better mouse trap. I know you don’t like leverage though. 

[Parsad]

27 minutes ago, SafetyinNumbers said:

I wasn’t taking away from Berkshire. In my view, Berkshire’s success has a had a lot more to do with superior stock picking than its structure while FFH has structured itself worn more leverage so the hurdle rate for equity returns is lower which is what I think makes it a better mouse trap. I know you don’t like leverage though. 

 

That's actually not true.  Berkshire's size is what is causing the diminishing returns...it's universe of investments rarely moves the needle these days.  When it was Fairfax's size, it was killing it and did so for another 30 years! 

 

In an absolute calamity, Berkshire would also be the last company standing...because of its structure.  That may be the case for Fairfax one day, but not today or in the past. 

 

And if you think Buffett's rule is paramount...rule # 1, do not lose capital...rule #2, don't forget rule #1...then that structure is the pre-eminent structure for all businesses. 

 

Cheers!

[SafetyinNumbers]

7 minutes ago, Parsad said:

 

That's actually not true.  Berkshire's size is what is causing the diminishing returns...it's universe of investments rarely moves the needle these days.  When it was Fairfax's size, it was killing it and did so for another 30 years! 

 

In an absolute calamity, Berkshire would also be the last company standing...because of its structure.  That may be the case for Fairfax one day, but not today or in the past. 

 

And if you think Buffett's rule is paramount...rule # 1, do not lose capital...rule #2, don't forget rule #1...then that structure is the pre-eminent structure for all businesses. 

 

Cheers!

What’s been Berkshire’s investments to equity leverage since inception? 
 

I do not think Buffett’s rule is paramount. When making probabilistic bets like writing insurance, losing is expected. The same thing applies to probabilistic investing which I appreciate is not how most people invest these days. They follow rules instead and it has worked so I’m not throwing shade just highlighting different approaches. 
 

Cheers!

[Parsad]

1 hour ago, SafetyinNumbers said:

What’s been Berkshire’s investments to equity leverage since inception? 
 

I do not think Buffett’s rule is paramount. When making probabilistic bets like writing insurance, losing is expected. The same thing applies to probabilistic investing which I appreciate is not how most people invest these days. They follow rules instead and it has worked so I’m not throwing shade just highlighting different approaches. 
 

Cheers!

 

Investment to equity, and debt to equity leverage works until the shit hits the fan!  How did Fairfax's leverage work for it after acquiring Odyssey Re and Crum & Forster, and then after Hurricane Andrew and Hugo hit?

 

It may work for 20 years and then when that outlier event, or multiple outlier events hit, you find out exactly how the leverage cuts.  

 

Why do you think Fairfax's leverage has gotten lower over time...from almost 8-1 to 3-1?  Why do you think they are focused more on underwriting quality, rather than acquiring distressed insurance businesses for the cheap float leverage?

 

Prem realized that he wants Fairfax to be around 50-100 years...not just during his lifetime.  And to create a sustainable model like that, he would have to reduce leverage and improve quality.  In other words, closer to Berkshire and not old Fairfax.  And we're all better for it...including Prem!

 

Cheers!

[Maverick47]

35 minutes ago, SafetyinNumbers said:

What’s been Berkshire’s investments to equity leverage since inception? 
 

I do not think Buffett’s rule is paramount. When making probabilistic bets like writing insurance, losing is expected. The same thing applies to probabilistic investing which I appreciate is not how most people invest these days. They follow rules instead and it has worked so I’m not throwing shade just highlighting different approaches. 
 

Cheers!

I’m going to add what may just be a subtle distinction between Buffett’s rule #1 to not lose money, and rule #2 which is not to forget rule #1…and how it interacts with probabilistic bets, where Buffett clearly has been willing to accept rather large catastrophic insurance losses which might actually involve the loss of SOME capital in a given accounting period, but NEVER enough to risk killing the company…consistent with Parsad’s observation that in an absolute catastrophe Berkshire would be the last company standing.

 

Buffett clearly understands at a visceral level how a corporation is unique.  On a personal level, Buffett has told the story of asking how much money one might require in order to play a game of Russian roulette with a revolver with 1,000 chambers, and a single bullet in one of those chambers.

 

That’s the kind of probabilistic bet most insurance CEO’s are familiar with in regards to their own companies, and I can guarantee you that most of them are comfortable with risk tolerances that ensure a probability that they would survive an event that would only kill or seriously wound the company perhaps once in 250 years.  They often purchase reinsurance protection to protect themselves against such a loss and are willing to forgo purchasing reinsurance protection above that level.

 

But what that really means is that in any single year, there is a 1 in 250 chance that the company might have an event that WOULD kill or wound it (with perhaps the best case scenario requiring raising new capital or issuing debt in an unfavorable environment, and the worst case scenario resulting in insolvency or being rescued/taken over by a competitor).

 

If a company is willing to run that level of corporate mortality risk for thirty consecutive years, there is actually a mathematical likelihood of a little more than 11% that they won’t survive uninjured or alive over that same time frame (1- (0.996^30) =0.113 

 

In the US, there was a Supreme Court case in the early 1819 called Dartmouth v. Woodward.  Chief Justice John Marshall who wrote that opinion included a legal definition of a corporation, and defined it as an artificial being or person that “possesses the capacity of perpetual succession”.

 

Returning to the Russian roulette question, Buffett has said he wouldn’t accept any amount of money to pull the trigger because “the upside doesn’t do much for me, and I think the downside is fairly clear”.

 

He understands better than most that he particularly wouldn’t want his own corporation to run the risk of dying, when it could potentially have a perpetual lifespan.  Running the risk of dying at 0.4% per year for a company over 100 years means that there would be almost a 1 in three chance that the company wouldn’t live to see its 100th birthday.

 

That’s why Buffett and Munger often said they didn’t want to take risks that could kill their company.  Munger has said that they could easily have increased Berkshire’s return on equity by a small amount if they had been willing to incur a bit more debt.  He’s also said that in any long sequence of investment results, multiplying by zero in any given year destroys the entire compounding experiment, which explains why they wanted to keep the risk of corporate death as low as possible.

 

Over time, Fairfax is likely to move in a similar direction, in terms of limiting the likelihood of corporate death, what with their geographic diversification of insurance exposures, and their retention of valuable assets and investments at the holding company level that are uncorrelated with insurance risk.

 

Prem has been clear that he intends Fairfax to survive and succeed past his own lifespan.  But the smaller size than Berkshire and his willingness to buy shares back aggressively when selling for less than intrinsic value is likely to stave off for decades more into the future, the point at which its size would become, as Berkshire’s is at the present, an impediment to achieving a 15% ROE.

 

 

 

 

 

 

[Parsad]

43 minutes ago, Maverick47 said:

I’m going to add what may just be a subtle distinction between Buffett’s rule #1 to not lose money, and rule #2 which is not to forget rule #1…and how it interacts with probabilistic bets, where Buffett clearly has been willing to accept rather large catastrophic insurance losses which might actually involve the loss of SOME capital in a given accounting period, but NEVER enough to risk killing the company…consistent with Parsad’s observation that in an absolute catastrophe Berkshire would be the last company standing.

 

Buffett clearly understands at a visceral level how a corporation is unique.  On a personal level, Buffett has told the story of asking how much money one might require in order to play a game of Russian roulette with a revolver with 1,000 chambers, and a single bullet in one of those chambers.

 

That’s the kind of probabilistic bet most insurance CEO’s are familiar with in regards to their own companies, and I can guarantee you that most of them are comfortable with risk tolerances that ensure a probability that they would survive an event that would only kill or seriously wound the company perhaps once in 250 years.  They often purchase reinsurance protection to protect themselves against such a loss and are willing to forgo purchasing reinsurance protection above that level.

 

But what that really means is that in any single year, there is a 1 in 250 chance that the company might have an event that WOULD kill or wound it (with perhaps the best case scenario requiring raising new capital or issuing debt in an unfavorable environment, and the worst case scenario resulting in insolvency or being rescued/taken over by a competitor).

 

If a company is willing to run that level of corporate mortality risk for thirty consecutive years, there is actually a mathematical likelihood of a little more than 11% that they won’t survive uninjured or alive over that same time frame (1- (0.996^30) =0.113 

 

In the US, there was a Supreme Court case in the early 1819 called Dartmouth v. Woodward.  Chief Justice John Marshall who wrote that opinion included a legal definition of a corporation, and defined it as an artificial being or person that “possesses the capacity of perpetual succession”.

 

Returning to the Russian roulette question, Buffett has said he wouldn’t accept any amount of money to pull the trigger because “the upside doesn’t do much for me, and I think the downside is fairly clear”.

 

He understands better than most that he particularly wouldn’t want his own corporation to run the risk of dying, when it could potentially have a perpetual lifespan.  Running the risk of dying at 0.4% per year for a company over 100 years means that there would be almost a 1 in three chance that the company wouldn’t live to see its 100th birthday.

 

That’s why Buffett and Munger often said they didn’t want to take risks that could kill their company.  Munger has said that they could easily have increased Berkshire’s return on equity by a small amount if they had been willing to incur a bit more debt.  He’s also said that in any long sequence of investment results, multiplying by zero in any given year destroys the entire compounding experiment, which explains why they wanted to keep the risk of corporate death as low as possible.

 

Over time, Fairfax is likely to move in a similar direction, in terms of limiting the likelihood of corporate death, what with their geographic diversification of insurance exposures, and their retention of valuable assets and investments at the holding company level that are uncorrelated with insurance risk.

 

Prem has been clear that he intends Fairfax to survive and succeed past his own lifespan.  But the smaller size than Berkshire and his willingness to buy shares back aggressively when selling for less than intrinsic value is likely to stave off for decades more into the future, the point at which its size would become, as Berkshire’s is at the present, an impediment to achieving a 15% ROE.

 

 

Fantastic post! 

 

I remember Munger telling a story at a small press conference in Omaha during the Berkshire AGM many years ago (don't ask how I got in there)...the story went that a young man came up to Munger and said "Mr. Munger, I greatly admire what you and Mr. Buffett have achieved.  My question is how can I do it faster!?"

 

That small, modest risk of loss in any given year, becomes a certainty over time.  It's why Buffett and other insurers sought NBC exclusions in policies after 9/11.  I'm ok if insurers want to use leverage to goose results over time.  I just don't think that should be the gold standard!  Cheers!

[UK]

1 hour ago, Maverick47 said:

I’m going to add what may just be a subtle distinction between Buffett’s rule #1 to not lose money, and rule #2 which is not to forget rule #1…and how it interacts with probabilistic bets, where Buffett clearly has been willing to accept rather large catastrophic insurance losses which might actually involve the loss of SOME capital in a given accounting period, but NEVER enough to risk killing the company…consistent with Parsad’s observation that in an absolute catastrophe Berkshire would be the last company standing.

 

Buffett clearly understands at a visceral level how a corporation is unique.  On a personal level, Buffett has told the story of asking how much money one might require in order to play a game of Russian roulette with a revolver with 1,000 chambers, and a single bullet in one of those chambers.

 

That’s the kind of probabilistic bet most insurance CEO’s are familiar with in regards to their own companies, and I can guarantee you that most of them are comfortable with risk tolerances that ensure a probability that they would survive an event that would only kill or seriously wound the company perhaps once in 250 years.  They often purchase reinsurance protection to protect themselves against such a loss and are willing to forgo purchasing reinsurance protection above that level.

 

But what that really means is that in any single year, there is a 1 in 250 chance that the company might have an event that WOULD kill or wound it (with perhaps the best case scenario requiring raising new capital or issuing debt in an unfavorable environment, and the worst case scenario resulting in insolvency or being rescued/taken over by a competitor).

 

If a company is willing to run that level of corporate mortality risk for thirty consecutive years, there is actually a mathematical likelihood of a little more than 11% that they won’t survive uninjured or alive over that same time frame (1- (0.996^30) =0.113 

 

In the US, there was a Supreme Court case in the early 1819 called Dartmouth v. Woodward.  Chief Justice John Marshall who wrote that opinion included a legal definition of a corporation, and defined it as an artificial being or person that “possesses the capacity of perpetual succession”.

 

Returning to the Russian roulette question, Buffett has said he wouldn’t accept any amount of money to pull the trigger because “the upside doesn’t do much for me, and I think the downside is fairly clear”.

 

He understands better than most that he particularly wouldn’t want his own corporation to run the risk of dying, when it could potentially have a perpetual lifespan.  Running the risk of dying at 0.4% per year for a company over 100 years means that there would be almost a 1 in three chance that the company wouldn’t live to see its 100th birthday.

 

That’s why Buffett and Munger often said they didn’t want to take risks that could kill their company.  Munger has said that they could easily have increased Berkshire’s return on equity by a small amount if they had been willing to incur a bit more debt.  He’s also said that in any long sequence of investment results, multiplying by zero in any given year destroys the entire compounding experiment, which explains why they wanted to keep the risk of corporate death as low as possible.

 

Over time, Fairfax is likely to move in a similar direction, in terms of limiting the likelihood of corporate death, what with their geographic diversification of insurance exposures, and their retention of valuable assets and investments at the holding company level that are uncorrelated with insurance risk.

 

Prem has been clear that he intends Fairfax to survive and succeed past his own lifespan.  But the smaller size than Berkshire and his willingness to buy shares back aggressively when selling for less than intrinsic value is likely to stave off for decades more into the future, the point at which its size would become, as Berkshire’s is at the present, an impediment to achieving a 15% ROE.

 

 

 

 

 

 

Great post, thank you!

[Charlie]

3 hours ago, Maverick47 said:

I’m going to add what may just be a subtle distinction between Buffett’s rule #1 to not lose money, and rule #2 which is not to forget rule #1…and how it interacts with probabilistic bets, where Buffett clearly has been willing to accept rather large catastrophic insurance losses which might actually involve the loss of SOME capital in a given accounting period, but NEVER enough to risk killing the company…consistent with Parsad’s observation that in an absolute catastrophe Berkshire would be the last company standing.

 

Buffett clearly understands at a visceral level how a corporation is unique.  On a personal level, Buffett has told the story of asking how much money one might require in order to play a game of Russian roulette with a revolver with 1,000 chambers, and a single bullet in one of those chambers.

 

That’s the kind of probabilistic bet most insurance CEO’s are familiar with in regards to their own companies, and I can guarantee you that most of them are comfortable with risk tolerances that ensure a probability that they would survive an event that would only kill or seriously wound the company perhaps once in 250 years.  They often purchase reinsurance protection to protect themselves against such a loss and are willing to forgo purchasing reinsurance protection above that level.

 

But what that really means is that in any single year, there is a 1 in 250 chance that the company might have an event that WOULD kill or wound it (with perhaps the best case scenario requiring raising new capital or issuing debt in an unfavorable environment, and the worst case scenario resulting in insolvency or being rescued/taken over by a competitor).

 

If a company is willing to run that level of corporate mortality risk for thirty consecutive years, there is actually a mathematical likelihood of a little more than 11% that they won’t survive uninjured or alive over that same time frame (1- (0.996^30) =0.113 

 

In the US, there was a Supreme Court case in the early 1819 called Dartmouth v. Woodward.  Chief Justice John Marshall who wrote that opinion included a legal definition of a corporation, and defined it as an artificial being or person that “possesses the capacity of perpetual succession”.

 

Returning to the Russian roulette question, Buffett has said he wouldn’t accept any amount of money to pull the trigger because “the upside doesn’t do much for me, and I think the downside is fairly clear”.

 

He understands better than most that he particularly wouldn’t want his own corporation to run the risk of dying, when it could potentially have a perpetual lifespan.  Running the risk of dying at 0.4% per year for a company over 100 years means that there would be almost a 1 in three chance that the company wouldn’t live to see its 100th birthday.

 

That’s why Buffett and Munger often said they didn’t want to take risks that could kill their company.  Munger has said that they could easily have increased Berkshire’s return on equity by a small amount if they had been willing to incur a bit more debt.  He’s also said that in any long sequence of investment results, multiplying by zero in any given year destroys the entire compounding experiment, which explains why they wanted to keep the risk of corporate death as low as possible.

 

Over time, Fairfax is likely to move in a similar direction, in terms of limiting the likelihood of corporate death, what with their geographic diversification of insurance exposures, and their retention of valuable assets and investments at the holding company level that are uncorrelated with insurance risk.

 

Prem has been clear that he intends Fairfax to survive and succeed past his own lifespan.  But the smaller size than Berkshire and his willingness to buy shares back aggressively when selling for less than intrinsic value is likely to stave off for decades more into the future, the point at which its size would become, as Berkshire’s is at the present, an impediment to achieving a 15% ROE.

 

Buffett once made a mathematical example like this.

So the essence is that low probability events become to certainties over time.

And this goes for everything, not only reinsurance companies.

So beware of low quality in everything, because over time it can/will kill you....

It is no surprise that Munger insisted on high quality companies

 

Edited December 19, 2025 by Charlie

[SafetyinNumbers]

6 hours ago, Parsad said:

Why do you think Fairfax's leverage has gotten lower over time...from almost 8-1 to 3-1?  Why do you think they are focused more on underwriting quality, rather than acquiring distressed insurance businesses for the cheap float leverage?

They were buying float cheap using expensive equity which was trading at multiples of book. It looked a lot riskier than it was especially if cutting premiums. The book value gets the benefit on acquisition but then gets hit through the income statement as the losses are recognized through claims.
 

You didn’t answer the question on BRK’s leverage. I haven’t studied it like you clearly have. I only did a few spot checks and was surprised how low the float per share was at various times. 

[73 Reds]

8 hours ago, Parsad said:

 

That's actually not true.  Berkshire's size is what is causing the diminishing returns...it's universe of investments rarely moves the needle these days.  When it was Fairfax's size, it was killing it and did so for another 30 years! 

 

In an absolute calamity, Berkshire would also be the last company standing...because of its structure.  That may be the case for Fairfax one day, but not today or in the past. 

 

And if you think Buffett's rule is paramount...rule # 1, do not lose capital...rule #2, don't forget rule #1...then that structure is the pre-eminent structure for all businesses. 

 

Cheers!

The disadvantage of size can be turned into a huge advantage by expanding the circle of competence.  We'll see if that happens under Greg's watch.