Fairfax 2025

[Hamburg Investor]

I think we all should be absolutely happy, that analysts don't understand Fairfax and that Markets are not fair all the time.

Is it entirely consistent to benefit from a structure and system (such as the market) because it offers us purchasing opportunities, while at the same time getting annoyed when the price does not reflect the intrinsic value after we made our purchase? Why should the mispricing end? Why should we have a right to it? Who says so?

We have no right to expect the market to always turn in our favor when we need it to. Those aren't the rules of the game, and there's little point in getting upset about it. Either you accept them, or you simply don't invest in this game.

And better than that, we all profit from the low share price again (so we not only profited when we purchased our shares): We are all net buyers this year with every share we hold throughout the year.

If things continue like this, each of us will own 5% more of this wonderful machine on December 31 than we did on January 1. And we got that 5% of a machine growing with 15% to 20% at a great discount!

If Fairfax continues to grow at this rate, the price remains constant, and Fairfax puts all its profits into buybacks, then Fairfax would buy back all its outstanding shares in less than 10 years.

Think about that for a moment: If Fairfax price stays were it is today forever and it would put everything in buybacks from now on and you would hold just one share for less than 10 years, you would own whole Fairfax! How is that a bad position? And with every share bought back, you get nearer to that point owning the whole (Okay, which you won't reach in the end of course; but still it shows something about the value creation of the buybacks at these prices... So we should be happy, shouldn't we?)

If the market price would always mirror the growth of earnings (so knowing, what the earnings will be and discounting that), none of us would beat the market. None!

Noone would have profited from BRK, as the discount of future cash flows would have resulted in such a high price in 1960ies, that it would have given the same return to us than any other equity investment at the same time. If the DCF would be 100% accurate and easy for everyone to do, if everything was transparent for everyone, if all the numbers of the future were known und understand, we would all get the same returns.

Unfortunately, there is no market that always responds when we want it to. But why lament this fact? Would it really be so great if the rules of the game were such that the market always responded when and how we needed it to? Where would the fun be in that? And where and what would the art of investing, the challenge, be? And we can't change the rules anyway, and the realistic alternative (everyone gets the same return) is not exactly attractive.

In other words: No Mr. Market, no buybacks. No wrong analysis somewhere in the world, no outperformance somewhere else.

It's not the articles and podcasts bringing other people to understand the beauty of Fairfax (as much as you all helped me and I am really grateful!), that help us outperforming over the longterm. It's the Brett Horns. The Mr. Horns of the world prepare the ground for our outperformance. No Brett Horns, no great entry price for Fairfax for us and no buybacks. 

Edited November 11, 2025 by Hamburg Investor

[73 Reds]

4 minutes ago, Hamburg Investor said:

I think we all should be absolutely happy, that analysts don't understand Fairfax and that Markets are not fair all the time.

Is it entirely consistent to benefit from a structure and system (such as the market) because it offers us purchasing opportunities, while at the same time getting annoyed when the price does not reflect the intrinsic value after we made our purchase? Why should the mispricing end? Why should we have a right to it? Who says so?

We have no right to expect the market to always turn in our favor when we need it to. Those aren't the rules of the game, and there's little point in getting upset about it. Either you accept them, or you simply don't invest in this game.

And better than that, we all profit from the low share price again (so we not only profited when we purchased our shares): We are all net buyers this year with every share we hold throughout the year.

If things continue like this, each of us will own 5% more of this wonderful machine on December 31 than we did on January 1. And we got that 5% of a machine growing with 15% to 20% at a great discount!

If Fairfax continues to grow at this rate, the price remains constant, and Fairfax puts all its profits into buybacks, then Fairfax would buy back all its outstanding shares in less than 10 years.

Think about that for a moment: If Fairfax price stays were it is today forever and it would put everything in buybacks from now on and you would hold just one share for less than 10 years, you would own whole Fairfax! How is that a bad position? And with every share bought back, you get nearer to that point owning the whole (Okay, which you won't reach in the end of course; but still it shows something about the value creation of the buybacks at these prices... So we should be happy, shouldn't we?)

If the market price would always mirror the growth of earnings (so knowing, what the earnings will be and discounting that), none of us would beat the market. None!

Noone would have profited from BRK, as the discount of future cash flows would have resulted in such a high price in 1960ies, that it would have given the same return to us than any other equity investment at the same time. If the DCF would be 100% accurate and easy for everyone to do, if everything was transparent for everyone, if all the numbers of the future were known und understand, we would all get the same returns.

Unfortunately, there is no market that always responds when we want it to. But why lament this fact? Would it really be so great if the rules of the game were such that the market always responded when and how we needed it to? Where would the fun be in that? And where and what would the art of investing, the challenge, be? And we can't change the rules anyway, and the realistic alternative (everyone gets the same return) is not exactly attractive.

In other words: No Mr. Market, no buybacks. No wrong analysis somewhere in the world, no outperformance somewhere else.

It's not the articles and podcasts bringing other people to understand the beauty of Fairfax (as much as you all helped me and I am really grateful!), that help us outperforming over the longterm. It's the Brett Horns. The Mr. Horns of the world prepare the ground for our outperformance. No Brett Horns, no great entry price for Fairfax for us and no buybacks. 

I wish there were more Brett Horns.  And no one is buying back my shares.

[Hektor]

15 minutes ago, Hamburg Investor said:

I think we all should be absolutely happy, that analysts don't understand Fairfax and that Markets are not fair all the time.

+1

15 minutes ago, Hamburg Investor said:

We have no right to expect the market to always turn in our favor when we need it to. Those aren't the rules of the game, and there's little point in getting upset about it. Either you accept them, or you simply don't invest in this game.

+1

[Hektor]

11 minutes ago, 73 Reds said:

I wish there were more Brett Horns.  And no one is buying back my shares.

+1

[netcash1]

Let's not forget about EXCE. This natural gas holding could start showing some Green Shoots.

 

 

[Viking]

4 minutes ago, netcash1 said:

Let's not forget about EXCE. This natural gas holding could start showing some Green Shoots.

I wonder if we do not see more consolidation of the nat gas producers in the US over the next year as demand from LNG exports picks up. I wonder if EXCO is viewed as being a desirable target? Not sure what region they are in and the quality of their assets. 

[Hsmpanl]

38 minutes ago, Viking said:

I wonder if we do not see more consolidation of the nat gas producers in the US over the next year as demand from LNG exports picks up. I wonder if EXCO is viewed as being a desirable target? Not sure what region they are in and the quality of their assets. 

They are not attractively positioned. Rising nat gas prices will always help, but EXCOs assets are poorly located and their new wells have much lower IRRs than competitors. I don't see much upside with it personally.

[SafetyinNumbers]

1 hour ago, Hsmpanl said:

They are not attractively positioned. Rising nat gas prices will always help, but EXCOs assets are poorly located and their new wells have much lower IRRs than competitors. I don't see much upside with it personally.

Are you familiar with the financials? They contributed $38.8m in profit in Q3 but maybe that’s not repeatable?

 

 

[Hsmpanl]

28 minutes ago, SafetyinNumbers said:

Are you familiar with the financials? They contributed $38.8m in profit in Q3 but maybe that’s not repeatable?

 

 

No, I was actually just looking for information on EXCO but there really isn't anything since the restructuring a while back. I'm mostly familiar with their Eagle Ford position, need to look more into Haynesville and Marcellus. Haynesville could be valuable depending on where their acreage is and how much is undeveloped, but generally within the industry EXCO has a pretty poor reputation.

Edited November 11, 2025 by Hsmpanl

[Viking]

Today we will continue our review of Fairfax's Q3 earnings. To provide context, I will start with the big picture and then zoom in. Our goal is to improve our understanding of the company. 

 

Fairfax has 5 income streams that feed into reported earnings:

• Underwriting income
• Interest and dividend income
• Share of profit of associates
• Non-insurance consolidated companies
• Investment gains (realized and unrealized)

In recent years, the first three income streams have inflected higher:

• Underwriting income
• Interest and dividend income
• Share of profit of associates

At the same time, the fifth income stream, investment gains, has continued its strong performance.

 

Not surprisingly, with 4 of the 5 incomes streams performing at a very high level, reported earnings at Fairfax have spiked higher. This has transformed the company. This has also spiked the stock price over the past 5 years.

 

—————-

 

Fairfax just reported Q3, 2025 earnings. They were very good.

 

What was one of the key take-away from Fairfax’s Q3 results?

 

It appears Fairfax’s smallest income stream, non-insurance consolidated companies, is (finally) breaking out. Over the first 9 months of 2025:

• Revenue was $6.5 billion, an increase of 38%.
• Pre-tax income was $257 million, an increase of 143%.

But here is the key: Pre-tax income for 2025 is understated. In 1H-2025 there was a $108.6 million impairment charge for Boat Rocker (to fix this legacy problem child). If we exclude this one-time charge pre-tax income was about $366 million over the first 9 months of 2025. This extrapolates to about $500 million for the year. Yes, that is a big number for a company of Fairfax’s size. 

 

 

So what?

 

The emergence of the non-insurance consolidated companies income stream is a significant development for a number of reasons:

1. It is big and it is growing quickly - The investments have already happened. In recent years, Fairfax has been investing a significant amount of capital to grow the number of companies that fall into this bucket of holdings.
   • 2022: Recipe, Grivalia Hospitality
   • 2024: Sleep Country, Peak Achievement, Meadow Foods
2. It has a long runway of growth ahead of it. Fairfax will be generating a significant amount excess capital in the coming years - which will support continued investment in this bucket of holdings.
3. Like a coiled spring being released, earnings are now spiking higher. Of course, a new large and growing source of earnings is a significant development for long term investors of Fairfax.
4. It will grow operating earnings. This income stream forms part of operating earnings, which are considered to be high quality sources of earnings as they are more stable and predictable than investment gains.
5. It is not priced into the stock today. This income stream is not really on the radar of investors or analysts. As a result, it is not built into their models today.

In 2025, non-insurance operating companies bucket has emerged as another large and growing income stream for Fairfax. This increases the number of material/important incomes streams for Fairfax from 4 to 5. And with the hard market in P/C insurance slowing, the timing of its emergence is very good - the non-insurance operating companies bucket of holdings will provide Fairfax with an important growth engine in the coming years. Fairfax has set the table nicely.

 

—————-

 

A 5-Year Journey - It doesn’t matter until it does

 

Underwriting profit didn't matter at Fairfax until it began spiking higher in 2021. Interest and dividend income did not matter... until it began spiking higher in 2022. Share of profit of associates did not matter until it spiked higher in 2022. My guess is non-insurance consolidated holdings is (finally) spiking higher... and it is going to matter to Fairfax's total results moving forward (become a meaningful contributor). 

 

From 2020 to 2023, non-insurance operating companies delivered an average pre-tax income of $12 million per year. So it is not surprising this income stream is not on the radar of investors or analysts. My guess is this is about to change.

 

Why?

 

Fairfax has been busy at work for the past 5 years getting all of the companies in ‘non-insurance consolidated holdings’ performing at an acceptable level ('optimizing' the operating results of each of the businesses). Two holdings have been especially problematic: Farmers Edge and Boat Rocker. The write-offs from these two companies have been enormous over the past 4 years. The good news is both of these holdings appear to have been dealt with (Farmers Edge plan of arrangement/take private and Boat Rocker sale/merger into a stronger Blue Ant Media). After hitting some pot holes in 2023 and 2024, it appears Grivalia Hospitality’s business has also stabilized.

 

In our table below, if we add the large annual write-offs (B) to pre-tax income (A) we can get a better read of the what the underlying run-rate of pretax-net income actually has been for this group of companies. As the very large write-offs come to an end, the strength and profitability of the businesses captured in this bucket of holdings will begin to shine through more fully.

 

I think that is what we are starting to see. Pre-tax income from non-insurance consolidated holdings came in at $120 million in Q2 and $195 million in Q3. My guess is $450 to $500 million is likely a good annual estimate of where this income stream is at today. That is a material number for Fairfax - large enough to get the attention of investors and analysts.

 

 

Edited November 11, 2025 by Viking

[SafetyinNumbers]

55 minutes ago, Hsmpanl said:

No, I was actually just looking for information on EXCO but there really isn't anything since the restructuring a while back. I'm mostly familiar with their Eagle Ford position, need to look more into Haynesville and Marcellus. Haynesville could be valuable depending on where their acreage is and how much is undeveloped, but generally within the industry EXCO has a pretty poor reputation.

Strathcona has a poor reputation too. It hasn’t hurt the returns. 

[Santayana]

Pretty hard to get a meaningful position at a good price on something that everyone loves.

[Hsmpanl]

43 minutes ago, SafetyinNumbers said:

Strathcona has a poor reputation too. It hasn’t hurt the returns. 

Fair point, Waterous hasn't bankrupted any companies though, right? I also think long life, lower decline assets like oil sands are a very different animal than unconventional wells. Maybe EXCO have been excellent stewards of their Haynesville assets and stand to generate a ton of FCF with higher nat gas prices. My personal opinion is gas supply still has the ability to overwhelm any increases in gas demand and you have to bank and distribute any windfalls from higher prices like in 2022. Too often I've seen operators ramp up capex at exactly the wrong time and before you know it they are back to breaking even and spent all of the excess cash generated on wells that will never provide a return on that capital.

[Hoodlum]

On 10/21/2025 at 7:24 PM, 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
 

----------

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.

 

 

I posted a little more info on this book that is coming next week.
 

 

 

 

[wondering]

I read the piece in the Globe and Mail. I can't wait for my copy to come. It seems like @Viking ghost wrote this book. Everything the author mentioned, Viking already talked about it a year ago. Haha

[Txvestor]

11 hours ago, Hamburg Investor said:

I think we all should be absolutely happy, that analysts don't understand Fairfax and that Markets are not fair all the time.

Is it entirely consistent to benefit from a structure and system (such as the market) because it offers us purchasing opportunities, while at the same time getting annoyed when the price does not reflect the intrinsic value after we made our purchase? Why should the mispricing end? Why should we have a right to it? Who says so?

We have no right to expect the market to always turn in our favor when we need it to. Those aren't the rules of the game, and there's little point in getting upset about it. Either you accept them, or you simply don't invest in this game.

And better than that, we all profit from the low share price again (so we not only profited when we purchased our shares): We are all net buyers this year with every share we hold throughout the year.

If things continue like this, each of us will own 5% more of this wonderful machine on December 31 than we did on January 1. And we got that 5% of a machine growing with 15% to 20% at a great discount!

If Fairfax continues to grow at this rate, the price remains constant, and Fairfax puts all its profits into buybacks, then Fairfax would buy back all its outstanding shares in less than 10 years.

Think about that for a moment: If Fairfax price stays were it is today forever and it would put everything in buybacks from now on and you would hold just one share for less than 10 years, you would own whole Fairfax! How is that a bad position? And with every share bought back, you get nearer to that point owning the whole (Okay, which you won't reach in the end of course; but still it shows something about the value creation of the buybacks at these prices... So we should be happy, shouldn't we?)

If the market price would always mirror the growth of earnings (so knowing, what the earnings will be and discounting that), none of us would beat the market. None!

Noone would have profited from BRK, as the discount of future cash flows would have resulted in such a high price in 1960ies, that it would have given the same return to us than any other equity investment at the same time. If the DCF would be 100% accurate and easy for everyone to do, if everything was transparent for everyone, if all the numbers of the future were known und understand, we would all get the same returns.

Unfortunately, there is no market that always responds when we want it to. But why lament this fact? Would it really be so great if the rules of the game were such that the market always responded when and how we needed it to? Where would the fun be in that? And where and what would the art of investing, the challenge, be? And we can't change the rules anyway, and the realistic alternative (everyone gets the same return) is not exactly attractive.

In other words: No Mr. Market, no buybacks. No wrong analysis somewhere in the world, no outperformance somewhere else.

It's not the articles and podcasts bringing other people to understand the beauty of Fairfax (as much as you all helped me and I am really grateful!), that help us outperforming over the longterm. It's the Brett Horns. The Mr. Horns of the world prepare the ground for our outperformance. No Brett Horns, no great entry price for Fairfax for us and no buybacks. 

Very true. But all of this is only meaningful if they buy back in large quantities at these price levels. I feel confident they will but time will tell. The good news is that they have streams of cash flowing in right now. 
But equally some of it can evaporate with a weak share price Ie the TRS position. There could easily be a large cat event mopping up a lot of capital, interest rates could collapse weakening their interest income stream esp. now that they have shortened their average maturity duration, and geopolitics could impact their holdings quite heavily as they are more Internationally diversified than most. 

All of that said, they have the opportunity to deploy about 4B in buying out full ownership of their insurance subs, and even more stakes in their associates and outstanding minority stakes in consolidated companies. 
In addition other opportunities will surely come up.  

So share buybacks compete with those priorities for capital. I think they look at all these option sets when deciding to buy back shares. And if they aren't buying back a ton perhaps they are finding even better options for the capital is my assumption.
Having said that 4-5% a year is a solid clip. as thinly as Fairfax trades, it may not be feasible to buy a lot more as well, like Berkshire Fairfax has a lot of forever holders.

Adding it to the TSX could be an eventual catalyst for a melt up. 
$1600 v $2k a share means an extra 1% of the company for the same capital outlay on share buybacks as this year. I think we should all be happy for this continuing as long as possible.
I think when they close out their TRS position is when they feel the share is approaching its intrinsic value. 

Edited November 12, 2025 by Txvestor

[SafetyinNumbers]

55 minutes ago, Txvestor said:

All of that said, they have the opportunity to deploy about 4B in buying out full ownership of their insurance subs,

How do you calculate that?

[Viking]

2 hours ago, wondering said:

I read the piece in the Globe and Mail. I can't wait for my copy to come. It seems like @Viking ghost wrote this book. Everything the author mentioned, Viking already talked about it a year ago. Haha

@wondering, the themes that I writte about have been discussed and debated by many on this board for the past 5 years. Sometimes there has been a lot of guessing going on. The author appears to have had access to Fairfax - that is going to provide a new level of understanding for all of us on some important topics. There is no monopoly on ideas. At the end of the day, I just hope it’s a good book and does justice to Fairfax and its employees (and I expect that it does). 

[Txvestor]

1 hour ago, SafetyinNumbers said:

How do you calculate that?

If you look at their reported non controlling interests line in the consolidated balance sheet it says $4.2B. 

[giulio]

On 3/15/2023 at 2:53 PM, giulio said:

Here is what I found most interesting reading FFH 2022 annual report:

• Ki had a CR of 99% and received a $152M investment from a third-party investor

  • gross premiums written of $834 million in only its second year of operation

  • IIRC Brit has 20% economic interest in Ki; curious to know what the plans are for Ki and why Brit opted for only a 20% interest

  • Interestingly, Ki and Digit writes similar level of premiums; of course, prospects are materially different, I wonder what Ki valuation might be

• consolidated investments' total revenue of $5.6 billion, EBITDA of $743 million and pre-tax income of $303 million (excluding a $133 million writedown of Farmers Edge) before minority interest in 2022

  • Management guidance: 15% on 2.1B BV (this is what I understand from Watsa's letters)

  • Nice to see a table on consolidated companies' EBITDA, interest expense, D&A and pre-tax income (page 208)

  • Markel ventures in 2022 = revenues of $4.8 billion, record EBITDA of $506 million

• 

  • Reserves development has not been so "favourable" since 2017: 3 years of losses, an improvement in the last 2 years, but a major "help" was from FX

  • Maybe this will improve as past acquisitions are digested and a better underwriting discipline prevails

• Future allocation -> I think FFH will spend roughly $2.3B repurchasing minority interests in its insurance companies (excluding dividends). I think these deals, similar to Eurolife's, have a fixed price (i.e. a call option). In 2022 FFH paid $650M for 12% of Allied (650M cash + value of the option + dividend accrued = 733.5M as reported); based on these numbers, I estimate FFH will pay another $930M for the remaining 17.1%, for a total of approximately $1.6B (what co-investors invested in 2016). Add to this $900M related to Odyssey and $375M for Brit.

  • FFH has the option to purchase the remaining interests of the minority shareholders

    • in Allied World at certain dates until September 2024

    • in Brit at certain dates commencing in October 2023

    • in Odyssey Group at certain dates commencing in January 2025

  • As a side note: FFH essentially uses OMERS et alius as debt providers, paying them dividends (interests) at a 7-8% rate

• Insurance market: "Favourable underwriting conditions are expected to continue into 2023, albeit more modestly after very healthy rate increases in both 2021 and 2022"

  • don't expect 15%+ growth in 2023

• Unless...

  • "if interest rates remain higher for longer, the unrealized investment losses will take many years to unwind and could prolong the hard market for a few years

  • The reinsurance sector continued (...) to achieve significant rate increases. Following the landfall of Hurricane Ian, in 2023 the reinsurance market sustained its most challenging January 1st renewal season since 2001, following the 9/11 attacks

• float increased by $3,393.1 to $31,230.0 (12% growth)

• I highlighted a couple of lines on the company strong culture which I believe is underestimated and not  enough appreciated as a competitive advantage (20 years of service for officers...these people want to stay and grow within Fairfax, it must be good!)

Very happy to receive comments and discuss if I missed something or if there are errors in what I wrote!

 

Thanks,

G

@Txvestor @SafetyinNumbers

If my calculations are correct ffh will spend approximately $1.8B to repurchase minorities in their insurance subs.

 

Best,

G

[SafetyinNumbers]

4 hours ago, giulio said:

@Txvestor @SafetyinNumbers

If my calculations are correct ffh will spend approximately $1.8B to repurchase minorities in their insurance subs.

 

Best,

G

i have about the same as you @giulio. If we are right @Txvestor, FFH just got $100/sh cheaper for you. 

[netcash1]

4 hours ago, giulio said:

@Txvestor @SafetyinNumbers

If my calculations are correct ffh will spend approximately $1.8B to repurchase minorities in their insurance subs.

 

Best,

G

Can you please point me to where it say's Ki received $152M investment in the latest financials?  Thank you

[giulio]

4 hours ago, netcash1 said:

Can you please point me to where it say's Ki received $152M investment in the latest financials?  Thank you

Not from the latest financials. Page 87 of the 2022 annual report!

[giulio]

Buying back insurance minorities should add approximately $20 per shares in earnings... 

[Viking]

Attached below is an update to my earnings estimate for Fairfax for 2025 and 2026.

• 2025 = $195/diluted share (economic EPS = $233/share)
• 2026 = $190/diluted share (economic EPS = $200/share)

Bottom line, Fairfax's fundamentals continue to improve, so my estimates for both years have increased. At the bottom I have also included the change in excess of FV over CV for associate and consolidated holdings. This is additional economic value that is being created that is not being captured in the accounting results. Adding reported EPS with this number provides a conservative estimate for the increase in economic earnings for the year. This estimate is conservative because it does not capture all the value creation that is happening under the hood at Fairfax. 

 

For 2026, I am being conservative with investment gains, given the size of gains we are likely to see in 2025. Bottom line, Fairfax is generating economic earnings of about $200/share. I think this is a reasonable number to use as a normalized number. I think it is conservative given my low estimate for investment gains. 

 

With the shares trading at $1,600, that puts the PE at about 8x. P/BV - 1.3 and the company is delivering an average ROE in the high teens. That looks pretty cheap to me for a high quality company with an outstanding long term track record that is very well positioned, well managed and very shareholder friendly. 

 

Let me know what you think.

 

 

Edited November 12, 2025 by Viking