Fairfax 2025

[gfp]

13 minutes ago, hasilp89 said:

what's the point? That BRK price has gone up in Hard and Soft Markets? Could argue that BRK became more and more valuable as U/W profits declined as a % of total profit?

 

My original question to chatGPT was meant to show me that it didn't matter at all to Berkshire's early share price performance whether US P&C pricing was "soft" or "hard" but ChatGPT didn't do it right and perplexity didn't really get the hard and soft markets right either so it doesn't seem like a valuable exercise.

 

But I'll keep buying Fairfax again today even though the hard market is over and it's time to PANIC!  

 

See you at $1570 USD / share!

[hasilp89]

14 minutes ago, gfp said:

 

My original question to chatGPT was meant to show me that it didn't matter at all to Berkshire's early share price performance whether US P&C pricing was "soft" or "hard" but ChatGPT didn't do it right and perplexity didn't really get the hard and soft markets right either so it doesn't seem like a valuable exercise.

 

But I'll keep buying Fairfax again today even though the hard market is over and it's time to PANIC!  

 

See you at $1570 USD / share!

 i hear you - and I'm not panicking - I'm just trying to understand what might / could happen - and maybe trying to understand if i should be also be adding. Nothing new but an important part of investing is to know oneself - I'm younger than a lot of folks on this site and have a lot less experience in drawdowns and certainly the cycles of the insurance industry. One thing i know about myself and it is probably true of most investors is that if they don't understand why something is drawing down they panic -> sell. The wiser ones, who know what they own, understand the noise, they will be that investor that can hold the duration of the BRK chart. 

 

 

[SafetyinNumbers]

53 minutes ago, hasilp89 said:

That makes sense in theory but is there anyway to validate it or is it anecdotal? Reserve releases have increasingly become a greater share of U/W Profit for YTD which is a function of Q1 wildfires. How can you know what amount of reserves can be released? With property pricing coming down (Some additional comments from WRB and RYAN) wouldn't flat premium volumes and a single CAT event push combined ratios above 100? 

 

I understand this is all part of the cycle, Short term trends and not a reason to panic (I am not selling shares) but i think some skepticism about the range of near outcomes is warranted.

 

 

 

WRB - The reinsurance marketplace, clearly, the property market, particularly property cat, that bloom is off the rose. From our perspective, there's still margin in the business. We'll see how long that lasts. It's without a doubt eroding. And to that end, you can feel the growing groundswell, but frankly, it's palpable around 1/1 and the appetite that's going to be coming from the reinsurance market. So we'll have to see what 1/1 holds.

 

 

RYAN - We saw a rapid decline in property pricing as the quarter progressed, especially in the month of June. We expect this significantly soft pricing environment to continue at least in the near term, which drives our expectation for property to decline modestly for the full year. Despite this rapid decline in property insurance pricing, flow into the channel remains strong. And we took share, won head-to-head against our competitors and had another quarter of high renewal retention.

 

RYAN - I would just add that our property submission flow remains very strong. Our retention levels are high. But the month of June, the rate deceleration accelerated. Last quarter, we saw a 10% to 20% reductions on average. This quarter, 20% to 30%. So June really accelerated. We're continuing to win head-to-head in the field. 

I think this chart shows how reserve releases are cyclical. It makes sense as high reserves are booked in a hard market and if there are no unfavourable developments have to be released in line with average claim duration (4 years). Premiums were growing fast 4 years ago and with slower premium growth since 2024, the reserve releases should have growing impact. 
 

[hasilp89]

6 minutes ago, SafetyinNumbers said:

I think this chart shows how reserve releases are cyclical. It makes sense as high reserves are booked in a hard market and if there are no unfavourable developments have to be released in line with average claim duration (4 years). Premiums were growing fast 4 years ago and with slower premium growth since 2024, the reserve releases should have growing impact. 
 

That is very helpful, Thank you!

[Junior R]

23 minutes ago, hasilp89 said:

 i hear you - and I'm not panicking - I'm just trying to understand what might / could happen - and maybe trying to understand if i should be also be adding. Nothing new but an important part of investing is to know oneself - I'm younger than a lot of folks on this site and have a lot less experience in drawdowns and certainly the cycles of the insurance industry. One thing i know about myself and it is probably true of most investors is that if they don't understand why something is drawing down they panic -> sell. The wiser ones, who know what they own, understand the noise, they will be that investor that can hold the duration of the BRK chart. 

 

 

I think this is based on Progressive and Travelers earnings which might have caused panic selling on FFH...but FFH is also different they are not on the US market and on the TSX there is a lot of investors who want higher yield divs...ie hence why IFC trades at a higher multiple ... Earnings is out probably next week ...then this should recover but no one will knows when this bottoms ...I did add more today ...risk/reward here is good

Edited October 21, 2025 by Junior R

[Viking]

A picture is worth 1,000 words. The best performing insurance company (over the past 5 years) is available at the cheapest valuation (compared to peers). What to do? Panic, of course. I love Mr. Market. (My guess is Fairfax does too.)

 

[Viking]

3 hours ago, gfp said:

I tried to assign a task to ChatGPT and it broke the damn thing

 

That is a simply brilliant way (mental model) to help think about the current situation. Thank you for sharing (I may borrow it to use in a future post  )

[Viking]

Chuck Akre - How to Find a Compounding Machine

 

Chuck Akre is one of the investing greats. He delivered very good returns over the long term for his investors. He also was a very good communicator and teacher. In our post today, we will explore Akre’s wisdom. To see what it can teach us about Fairfax.

 

Over his lifetime, Chuck Akre tried to answer two questions:

1. What makes a great investment?
2. What makes a great investor?

—————

 

Akre’s north star: rate of return

 

“The bottom line of all investing is rate of return.” Chuck Akre

 

Early in his journey, Akre focussed on understanding the power of compounding and how it should be incorporated into an investment framework. For Akre, the answer was rate of return.

 

The goal of an investor was to earn an above average rate of return (high return on equity). For an investor to earn an above average rate of return they need to invest in businesses that earn an above average rate of return.

 

Investors should only fish in the ‘above average rate of return’ pond.

 

What makes a great investment?

 

What is it about the business that allows it to earn an above average rate of return over the long term?

 

Akre found an answer to this question. The investment framework he developed he called the 3 legged stool

 

The 3 legged stool

 

Akre’s investment framework describes the characteristics of a great business.

 

Leg 1.) Exceptional / high quality business.

• High rate of return business.
• Generates high returns on invested capital.

Leg 2.) High quality management

• Demonstrable skill (able) at running the business (operations). Long track record.
• Integrity (honest) - Treats shareholders as partners.
• Management (results) should be evaluated using per share metrics (to ensure no dilution is happening).

Leg 3.) Good reinvestment opportunities

• This is what allows high return businesses to keep earning high returns into the future.
• Creates long term value by unleashing the power of compounding.
• Want to see both a history and a long runway of future opportunity.

Of the three legs, the third is the most important.

 

Find a stock that checks all three boxes and your have found a compounding machine. That is investing nirvana.

 

One more important input.

 

Purchase price

 

Don’t overpay.

 

This will allow you to earn higher future returns (this results in better compounding).

 

Summary

 

“Everything should be made as simple as possible, but not simpler.” Albert Eintstein

 

Yes, this is a deceptively simple framework.

 

Here is how Chuck Akre summarizes his approach:

 

"The three areas of analysis – business, management, and reinvestment – are the key components of what we call our ‘three-legged stool.’ When we find a business that satisfies all three of our requirements, we refer to it as a ‘compounding machine,’ and we seek to purchase shares at a modest valuation." Chuck Akre

 

————-

 

Additional comments:

 

How to think about risk

 

When you find a company that checks all the boxes:

• Exceptional quality
• Strong management
• Abundant reinvestment opportunities
• Purchased at a discount

Investing using this framework exposes an investor to below average risk. (Akre did not define risk in terms of price volatility.)

 

When to sell

 

The hardest part of investing is being patient and holding a winning investment for the long term. You will be tempted to sell it. It will probably be a mistake (according to Akre).

 

It is very difficult to find a great investment - it takes years. So when you find one it should be held. Even if it looks overvalued at times.

 

Not surprisingly, Akre had a concentrated portfolio. That had low turnover.

 

How to measure the performance of a management team

 

The change in the share price over time. Per share metrics are the ones that matter.

 

On the importance of making (and learnings from) mistakes

 

“Good judgement comes from experience. And experience comes from bad judgement.” An old saying often repeated by Akre.

 

Markel

 

Akre was a fan of Markel (the historical performance of the company back when it was a compounding machine). It would interesting to get his thoughts on the company today.

 

—————

 

Trying to solve the investment puzzle - Chuck Akre - Talks at Google

• https://youtu.be/O38I7QIc_eQ?si=diFIZa5m16SmmwfE

—————

 

How does Fairfax look using Akre’s investment framework?

 

Leg 1.) Exceptional / high quality business?

 

Fairfax has compounded BVPS at 19% for the past 39 years. The model it uses is similar to the one used by Berkshire Hathaway in the 1980’s and 1990’s (when it was more leveraged to P/C insurance).

 

Leg 2.) High quality management

 

The management team at Fairfax is exceptional. They are equally good at:

• Running the business (P/C insurance and investment management). They have a long track record of excellence in both businesses. When it comes to capital allocation over the past 5 years, their performance has been best-in-class compared to P/C insurance peers.
• High integrity. Shareholders are viewed as valued partners. The communication is very good. Management is focussed on driving per share value for long term shareholders.

Leg 3.) Good reinvestment opportunities

 

Fairfax has developed an amazing range of capabilities across both P/C insurance and investment management businesses.

 

With P/C insurance, the company now has a global platform. This gives it a large opportunity set to continue its growth (organically or by acquisition).

 

With investment management, the company has a diverse set of capabilities.

• Traditional asset classes: fixed income and equities.
• Alternative asset classes: private equity, venture capital, commodities, real estate.
• Global reach, with specialty in India.

Built (earned) over decades, Fairfax has an extensive network of external partners. OMERS (funding). Kennedy Wilson (real estate). These relationships help enormously with deal flow.

 

In short, the opportunity set today for Fairfax has never been better in the company’s history. Capital will be allocated to where it is able to earn the best return. This should allow the company to continue to earn above average rates of return in the coming years. In turn, this should create enormous value for long term shareholders.

 

Fairfax checks all three boxes of Akre’s three legged stool - it looks like a compounding machine.

 

But we need to look at one more important input - valuation.

 

How is the stock being valued today?

 

Before making any adjustments, Fairfax’s stock looks cheap. Make adjustments for excess of FV over CV for associated and consolidated holdings and the stock looks even cheaper.

 

Edited October 21, 2025 by Viking

[Junior R]

Chubb just posted good earnings

 

Chubb Ltd $CB Earnings Report

1⃣ Revenue: $14.87B vs. est. $14.57B
2⃣ EPS: $7.49 vs. est. $5.51

 

Quote

Chubb Reports Third Quarter Net Income Per Share of $6.99, Up
22.6%, and Record Core Operating Income Per Share of $7.49, Up
30.9%; Consolidated Net Premiums Written of $14.9 Billion, Up
7.5%; Record P&C Combined Ratio of 81.8%

• Net income was $2.80 billion, up 20.5%, and record core operating income was $3.00 billion, up 28.7%.
• P&C net premiums written were $12.93 billion, up 5.3%. North America was up 4.4%, including growth of
8.1% in personal insurance and 3.5% in commercial insurance, or 6.2% adjusting for the impact of two
non-recurring items that benefited 2024. Overseas General was up 9.7%, including growth of 15.5% in
consumer insurance and 5.8% in commercial insurance; Asia, Latin America, and Europe were up 14.3%,
10.6% and 4.8%, respectively.
• P&C underwriting income was a record $2.26 billion, up 55.0%, with a record combined ratio of 81.8%.
P&C current accident year underwriting income excluding catastrophe losses was a record $2.18 billion,
up 10.3% over prior year, with a combined ratio of 82.5%.
• Total pre-tax catastrophe losses in the quarter were $285 million compared with $765 million last year,
and $2.56 billion for the nine months compared with $1.78 billion last year.
• Total pre-tax favorable prior period development was $361 million compared with $244 million last year.
• Life Insurance net premiums written were $1.93 billion, up 24.6%, and segment income was $324 million,
up 14.2%.
• Pre-tax net investment income was $1.65 billion, up 9.3%, and adjusted net investment income was $1.78
billion, up 8.3%. Both were records.
• Annualized return on equity (ROE) was 15.9%. Annualized core ope

 

Edited October 21, 2025 by Junior R

[villainx]

Chubb combined ratio in the low 80s seem good?

[Junior R]

22 minutes ago, villainx said:

Chubb combined ratio in the low 80s seem good?

I am not sure what they did but but combined ratio beat , premiums also beat and also earnings...

 

lower cat

Edited October 21, 2025 by Junior R

[LC]

For those buying, how are you thinking about downside risk from here?

 

If we see a softening insurance market, lower interest rates, and normalized equity portfolio gains, earnings could drop significantly. 

[Santayana]

Pretty interesting discrepancy between WRB and CB reports.

[Gregmal]

16 minutes ago, LC said:

For those buying, how are you thinking about downside risk from here?

 

If we see a softening insurance market, lower interest rates, and normalized equity portfolio gains, earnings could drop significantly. 

What is this worth on the other side of the cycle? Think you can make the case for high teens or low 20 multiple on trough-ish EPS. 

[Viking]

50 minutes ago, LC said:

For those buying, how are you thinking about downside risk from here?

 

If we see a softening insurance market, lower interest rates, and normalized equity portfolio gains, earnings could drop significantly. 

 

From my perspective, the most important factor when analyzing Fairfax is capital allocation. This will impact Fairfax's results much more than anything else in the coming years. The management team at Fairfax has been delivering a clinic in capital allocation over the past 5 years. My guess is they will continue to make good decisions - and this means they will likely continue to compound excess capital at above average rates of return in the coming years. 

 

I try not to get stuck in the weeds.

 

Like tying to guess the path of interest rates over the next couple of years. 

 

Equities are volatile. This is shaping up to be a banner year - although no one is giving Fairfax credit for the big gains that are not mark to market (like the big move in Eurobank). Some years will be better than others. Over time, the returns from holding equities will be much better than if they simply held bonds. 

 

The insurance cycle is... cyclical. Fairfax has been around for 39 years. For most of that time, P/C insurance has been in a soft market (hard markets are very rare). And Fairfax has grown its insurance business like a weed. For a better comp, look at the last 10 years. Fairfax doubled the size of its insurance business in a soft market. And then doubled it again in a hard market. Sorry, I do not understand all of the hand wringing today about a soft market. 

 

The problem that many investors have is they want to know today exactly what Fairfax is going to do in the coming years. Unfortunately, that is not possible with Fairfax. That lack of visibility is not a problem (for Fairfax and for long term investors). It is one of the core strengths of their business model.

Edited October 21, 2025 by Viking

[Viking]

A question for board members... what is the economic impact on Fairfax of buying out their minority partners in Allied World and Odyssey? What is the impact on Fairfax's P/C insurance business?

 

Is taking out a minority partner essentially the same thing as making an acquisition of another large P/C insurance company? Does this activity not grow Fairfax's P/C insurance business? NPW. And underwriting profit.

 

Except here's the kicker... What is the price Fairfax will have to pay to buy more of these 2 exceptional companies? Because of the call option feature, I think Fairfax will be able to take out the minority partners at a very attractive price/valuation. 

 

Someone please explain to me what I am missing?

 

-----------

 

The fact that Fairfax has not taken out their minority partner in Allied World tells us something important (I think). I think it tells us that Fairfax is continuing to find better opportunities in which to deploy their excess capital. If true, that will be bullish for future returns.

Edited October 21, 2025 by Viking

[gfp]

12 minutes ago, Viking said:

A question for board members... what is the economic impact on Fairfax of buying out their minority partners in Allied World and Odyssey? What is the impact on Fairfax's P/C insurance business?

 

Is taking out a minority partner essentially the same thing as making an acquisition of another large P/C insurance company? Does this activity not grow Fairfax's P/C insurance business?

 

Except here's the kicker... What is the price Fairfax will have to pay to buy more of these 2 exceptional companies? Because of the call option feature, I think Fairfax will be able to take out the minority partners at a very attractive price/valuation. 

 

Someone please explain to me what I am missing?

 

You're not missing anything - it's the exact opposite of Berkshire's primary problem, which is too much money constantly coming in with nowhere to invest it.  Fairfax has its minority interest capital allocation opportunities pre-negotiated and laid out in front of it.

 

For those asking about people (like me) who are buying here and how we are thinking about risk..  For me it comes down to how big I want Fairfax to be relative to everything else in my portfolio.  I want Fairfax to be bigger than it currently is relative to my other two large positions.  When it is going down every day, I have my opportunity to buy shares.  They show you a mark to market loss until suddenly they don't 

[Maverick47]

49 minutes ago, Viking said:

A question for board members... what is the economic impact on Fairfax of buying out their minority partners in Allied World and Odyssey? What is the impact on Fairfax's P/C insurance business?

 

Is taking out a minority partner essentially the same thing as making an acquisition of another large P/C insurance company? Does this activity not grow Fairfax's P/C insurance business?

 

Except here's the kicker... What is the price Fairfax will have to pay to buy more of these 2 exceptional companies? Because of the call option feature, I think Fairfax will be able to take out the minority partners at a very attractive price/valuation. 

 

Someone please explain to me what I am missing?

Good question, @Viking…and the answer has to be that it is much better for Fairfax to buy out minority owners of the high quality insurers they already know and trust than to pay higher multiples for partial or total ownership of insurers that might be acquisition targets in external markets, but of whose management and reserving practices they are not as familiar with.
 

Think back to when Buffett owned half of GEICO’s common stock, and had to pay a market price plus a premium to gain full ownership of the company whose reserving practices and operational and investment management were all known and trusted by him.  Fairfax is in an even better position than Buffett was given the prices at which they are able to take out their trusted minority partners.

 

And if for some reason Fairfax stock looks to be an even better investment than buying out minority partners, we can trust that Fairfax will find a way to balance their reinvestment opportunities as they did when they sold 10% of Odyssey to enable a Fairfax stock buyback.  I think we can all agree that doing that was better for us as remaining shareholders than if they had borrowed funds externally (probably at an even higher cost?) and used it to take out some minority interests instead.

 

Bottom line, I don’t need Fairfax to make the exact reinvestments that I, with my lack of direct knowledge of their opportunity set, think they should make.  They have more than earned my trust that they will continue to treat me as a partner and that the reinvestment decisions they make in the future will be those that are likely to benefit us both.  

Edited October 21, 2025 by Maverick47

[Hoodlum]

Chubb’s CEO seems confident of continuing ROE growth over the medium term. 

 

"In sum, Chubb's fundamentals and our positioning are excellent, and our balance sheet, starting with our loss reserves, has never been stronger. I am confident we will maintain superior earnings growth, including double-digit growth in EPS, book and tangible book value, with core operating ROE increasing to 14% plus over the medium term, CATs and FX notwithstanding."

Edited October 21, 2025 by Hoodlum

[Castanza]

1 hour ago, Gregmal said:

What is this worth on the other side of the cycle? Think you can make the case for high teens or low 20 multiple on trough-ish EPS. 

Yup and Fairfax is also unique because it doesn’t trade in line with peers. I guess it’s up to the individual in whether they think that gap closes or the permanent market discount continues.

 

Personally like JOE I don’t give a shit because I’m looking 20 years out. 1600 vs 1700 ain’t going to make a hill of beans different (well maybe if you’re @gfp buying fat stacks) in the long run if you’re mindset is it will eventually trade in line with peers. 

[Junior R]

12 minutes ago, Castanza said:

Yup and Fairfax is also unique because it doesn’t trade in line with peers. I guess it’s up to the individual in whether they think that gap closes or the permanent market discount continues.

 

Personally like JOE I don’t give a shit because I’m looking 20 years out. 1600 vs 1700 ain’t going to make a hill of beans different (well maybe if you’re @gfp buying fat stacks) in the long run if you’re mindset is it will eventually trade in line with peers. 

even if it doesn't trade inline with peers the earnings itself will have multiple expansion ...plus they will keep buying stock...thats why I keep wondering what happens when share count gets to 10m to 15m ....I could see that happening in like 5 years from now

[Viking]

A new book is coming out on Fairfax called ‘The Fairfax Way: Inside Prem Watsa’s Secret to Lasting Success’.  I am really looking forward to getting a copy… Available for pre-ordered (Nov 18 release). It is desperately needed. Looks to me like the author (David Thomas) nailed the timing of its release.
 

https://www.amazon.ca/Fairfax-Way-Inside-Lasting-Success/dp/1037802195
 

----------

About the author (from Amazon): DAVID THOMAS has had a front-row seat on the Canadian business world for several decades in Toronto, serving twice as Editor of the Financial Post and leading the reporting team at the Globe and Mail’s Report on Business. He served stints as Editor-in-Chief at MoneySense, Marketing and Canadian Business, and as Business Editor at Maclean’s. He was born in Vancouver and is currently based in London, England, where you can still buy newspapers at the convenience store.

 

Edited October 22, 2025 by Viking

[Maverick47]

13 minutes ago, Viking said:

A new book is coming out on Fairfax called ‘the Fairfax Way: Inside Prem Watsa’s Secret to Lasting Success’.  I am really looking forward to getting a copy… Available for pre-ordered (Nov 18 release). It is desperately needed. Looks to me like the author (David Thomas) nailed the timing of its release.
 

https://www.amazon.ca/Fairfax-Way-Inside-Lasting-Success/dp/1037802195
 

Awesome!  Thanks for sharing @Viking.  I’ve pre-ordered it myself just now.   
 

By the way, anyone else notice who the publisher is?  That’s what I call serendipity….

[Munger_Disciple]

15 minutes ago, Viking said:

A new book is coming out on Fairfax called ‘the Fairfax Way: Inside Prem Watsa’s Secret to Lasting Success’.  I am really looking forward to getting a copy… Available for pre-ordered (Nov 18 release). It is desperately needed. Looks to me like the author (David Thomas) nailed the timing of its release.
 

https://www.amazon.ca/Fairfax-Way-Inside-Lasting-Success/dp/1037802195
 

 

Thanks. I ordered mine & looking forward to reading it. 

[Redskin212]

 thanks for pointing out