What will diluted net earnings per share (US$) be for Fairfax in Q2-2025?

[dartmonkey]

I want to revise my pick ($50-$59) upwards by a couple of notches ($70-$79), even if I can't change my vote in the poll. Here's my thinking:

 

Eurobank: shares up E0.45, so for 1.2b shares of Eurobank, divided by 21.4m shares of FFH o/s, that means $25 per FFH share, say $20 after tax;

TRS: shares up $459 (hard to believe!), so 1.76m TRS for 21.4m shares means 459*1.76/21.4 = $37.7 per FFH share, say $30 after tax;

Underwriting: 2023 and 2024 averaged $400m underwriting earnings per quarter, say $320m after tax. We think this was probably a particularly good quarter, so maybe $500m, so that would be 500/21.4=$23 per share

 

Of course there are many more elements to consider, but most of them will be positive, and just the above 3 total to $73 per share. Maybe I should have gone for $80-89.

 

Forex affects book value and fluctuates from quarter to quarter, no doubt positively this quarter (because of marked US dollar weakness) but this I believe does not affect earnings.

 

 

 

 

[Crip1]

3 hours ago, Hoodlum said:

 

One other item I will watch for is the amount of Holding Company cash/short-term securities.  In Q2 2024 it was $2.5B, but at the end of Q1 2025 it had dropped to $2.1B.   I would like to see this at $3B+ at the end of Q2.

Curious to know why the $3 billion mark is target. Not saying that I agree or disagree, it would just be helpful to understand the rationale.

 

-Crip

[Hoodlum]

41 minutes ago, Crip1 said:

Curious to know why the $3 billion mark is target. Not saying that I agree or disagree, it would just be helpful to understand the rationale.

 

-Crip

Having significant cash at the holding company helps during an adverse event. Fairfax has been increasing its cash holdings over the past 3 years with last year’s cash holding peaking before the hurricane season.  
 

I believe they will do the same again this year.  Based on ~20% ROE over the past year, that would translate to holding $3B in cash.  There is certainly no formula that I am aware of for this and it would be interesting to see how others compare. 

[SafetyinNumbers]

1 hour ago, Hoodlum said:

Having significant cash at the holding company helps during an adverse event. Fairfax has been increasing its cash holdings over the past 3 years with last year’s cash holding peaking before the hurricane season.  
 

I believe they will do the same again this year.  Based on ~20% ROE over the past year, that would translate to holding $3B in cash.  There is certainly no formula that I am aware of for this and it would be interesting to see how others compare. 

The insurance subsidiaries are capital and reserves heavy. I don’t the cash at the holdco matters that much except that some people really care about it.

[dartmonkey]

10 hours ago, Haryana said:

I observe continued misunderstanding among multiple posters on inclusion of Eurobank share price increase despite explicit clarifications by multiple other posters that they are equity accounted as an associate.

Yes, mea culpa. Eurobank as an associate (20-50% ownership) is equity accounted, meaning only Fairfax’s 33% proportion of Eurobank’s earnings (about E314m in Q1, not announced for Q2) get counted towards Fairfax’s Q2 earnings, so maybe about E105m pre-tax if Q2 is like Q1, nowhere near the E540m gain in market value of their stake.I should have just gone back to Viking’s table of equity holdings, where they are clearly divided according to accounting treatment (0-20% minority interest, 20-50% equity accounting, 50+% consolidated.)

 

They still probably get over $60 per share in Q2 all things considered, with things like Orla and some of the Indian holdings and even Blackberry (all the equity holdings were pretty low on March 31st, and the non-US ones will have been boosted by US$ weakness), but Viking will probably blow us away with all the details. 

[SafetyinNumbers]

10 minutes ago, dartmonkey said:

Yes, mea culpa. Eurobank as an associate (20-50% ownership) is equity accounted, meaning only Fairfax’s 33% proportion of Eurobank’s earnings (about E314m in Q1, not announced for Q2) get counted towards Fairfax’s Q2 earnings, so maybe about E105m pre-tax if Q2 is like Q1, nowhere near the E540m gain in market value of their stake.I should have just gone back to Viking’s table of equity holdings, where they are clearly divided according to accounting treatment (0-20% minority interest, 20-50% equity accounting, 50+% consolidated.)

 

They still probably get over $60 per share in Q2 all things considered, with things like Orla and some of the Indian holdings and even Blackberry (all the equity holdings were pretty low on March 31st, and the non-US ones will have been boosted by US$ weakness), but Viking will probably blow us away with all the details. 

They report Eurobank earnings on a lag of one quarter so FFH’s share of Eurobank’s Q1 earnings is what will show up in FFH Q2 earnings.

[Viking]

My estimate is diluted EPS for Q2 will come in around $65/share. I am not sure how to model all the different impacts from IFRS, so how this shakes out will impact my number. Here are a few assumptions that went into my estimate:

• Underwriting income = $380 million (CR = 95%)
• Interest and dividends: $605 million
• Share of profit of associates = $240 million
• Non-insurance consolidated companies = $75 million
• Investment gains (realized and unrealized) = $1.2 billion (stocks, bonds, Digit, IIFL Finance). I have tried to net out the impact of interest rates on the bond portfolio and IFRS.
• Interest Expense = $196 million
• Corporate Expense = $110 million
• Tax rate = 24% (I hope we get an update from Fairfax on the call of what this should be moving forward). 

I am watching for any adverse development in runoff (I think this is running at around $200 to $250 million per year). I built in $50 million to my estimate above.
 

Excess of fair value over carrying value might increase by +$1 billion in Q2 = $45/share (pre-tax) or about $35/share after tax.

 

I continue to believe a significant amount of value (over what is being reported in accounting results) is also building in the equity holdings that are private. The most recent examples are the sales of Sigma in Q1 and Praktiker in July. The sale of Praktiker might net an investment gain of $100 million when Fairfax reports Q3 results. 
 

When I weave it all together my guess is economic value increased at Fairfax by well over $100/share in Q2. Outstanding.

 

What is interesting is my $65/share estimate is likely close to the average of those who voted. Thanks to everyone for chiming in. It was interesting/insightful to read the logic that others were using. And to be clear - I hope I am way off with my estimate - and those who voted for $100/share are proven correct! 

Edited July 25, 2025 by Viking

[Hoodlum]

Now officially announced for next Thursday/Friday 
 

https://www.fairfax.ca/press-releases/fairfax-announces-conference-call-4/

 

[Viking]

On 7/25/2025 at 2:15 PM, Haryana said:

1. Orla had dramatically high contribution to earnings in Q1 but their contribution in Q2 is only a few dollars

2. Not to count most of the major Indian holdings as they are consolidated/equity accounted like Eurobank

3. Blackberry is a smaller position and its gain in the Q2 was nothing all that much dramatic for a difference

4. Fairfax own stock TRS (Total Return Swap) are the big deal for contribution to Net Investment gains in Q2

 

@Haryana, below is commentary on the tax rate from the Q3, 2024 Q&A on the confernece call. To your point, hopefully we get an update on the call on Friday of what average tax rate (range) to use moving forward.  

----------

Fairfax’s tax rate has ticked higher in 2024. Where Fairfax’s new ‘normalized’ tax rate settles once all

the dust has settled will be something to monitor moving forward.

--------------

Comments from Fairfax’s Q3 2024 conference call:

 

Question: Tom MacKinnon

A question with respect to the tax rate - you know, it used to track kind of in the low 20s,

maybe, and now it’s been sort of closer to 25%. How should we be thinking about that going

forward?

 

Answer: Peter Clarke

Hey, thanks for the question, Tom. Yes, the tax rate is elevated in the quarter, and there’s a lot of

things going on, as you might know, on the tax side; but why don’t I pass it to Jen, who can give us a

little more detail?

 

Answer: Jennifer Allen

Yes, thanks Tom. As Peter indicated, there are a lot of moving parts within the global tax regime. As

you indicated, our effective tax rate is sitting at 25.1%, elevated over 2023. A couple things

driving that - in 2024, we now are under the global minimum tax, where there is a 15% mandated

tax in certain jurisdictions that we didn’t have prior, primarily being in Bermuda, so on a YTD basis

included in that number is about $107 million, about $30 million expense in the quarter. We also

have a change in the tax rate legislation in India, where they changed their long-term capital gains

rate - that also cost us another about $50 million in the quarter.

 

There’s a couple of other things we’re still closely watching, which is the interest limitation tax rule

that’s in place - currently no impact materially on our financials, but there could be, that’s where the

30% limitation rule could come into play at the holding company, and then we’re still tracking quite

closely the capital gains rate, the inclusion rate change that’s coming in Canada as well, so as Peter

indicated, a lot of moving parts on tax. I think trying to normalize what that effective tax rate

would be is a little difficult, but I would say it is going to be elevated from prior year. If you

kind of put in maybe a 22% to a 25%, you’re probably going to be in the ballpark where we’ll

land.

Edited July 28, 2025 by Viking

[Viking]

Fairfax's Q2, 2025 earnings results are in... diluted EPS came in at $61.61/share. I would have to give the 'mob' at Corner of Berkshire and Fairfax a solid A- for their collective forecast (I am ignoring the +$100 votes because I think some of these included excess of FV over CV). Those who voted '$50 to $59' were super close. And those who voted '$60 to $69' hit the bulls-eye.

 

Overall, it looks to me like this crowd is not mad... actually pretty rational. Well done! And thanks for participating and commenting. 

 

Edited August 1, 2025 by Viking

[Hamburg Investor]

9 hours ago, Viking said:

And those who voted '$60 to $69' hit the bulls-eye.

Congrats to the winners!
 

 

9 hours ago, Viking said:

(I am ignoring the +$100 votes because I think some of these included excess of FV over CV)

 @Viking, over the longterm - if you would repeat this survey each quarter over the next 10+ years - it might be a good idea to include that votings into the question, if the mob of cobf is a good proxy for eps over the longterm. As you write yourself someday hidden assets will come to the surface. This will be called "surprise" wildly, while I'd disagree (and my understanding is: you too). It's just a surprise when that happens, but not if. So I will name  that "not really surprises" in the following.

So with rising hidden value on a lot of different assets (.... FHAPS... another 900mn dollar in q2 FV/CV...) the outs for such "not really surprises" are growing each and every quarter.

In other words: While it's possible to be approximately right ignoring this not really surprises, as long as hidden assets stay hidden, it's also clear, that such not surprises will boost eps dramatically in any given quarter, when getting realized.

E.g. just trimming the new FV/CV part (2.3bn or 2.4bn dollar) in any quarter by around 8 percent (might be 6 percent or 10 percent, but you get the point...) would give an extra 10 dollar per share. So e. g. in this quarter, that would have brought the 70 to 80 dollar range in as winners. And this is only FV/CV. There might be a little pet insurer here and another asset there, that we just realize with the quarterly earnings reports. If it's not as big as the pet insurance business in 2022 was, my best guess is, that they don't have to inform the public (but I am not sure - when do they have to write a press release - is there a specific number or such thing?!).

My best guess is, that directionally who voted between 40 dollar and 69/79 dollar was betting on "no materially hidden assets flow into earnings this quarter", while a lot of the ones betting above 70/80 dollar were thinking just the opposite. At least that's true for me. (... and I was wrong...  )

Am I correct, that "not really surprises" get more chances in the Q4s, as e. g. reserves flow into earnings only in q4?! Any other hidden assets, that we'll only see in Q4s?

Edited August 1, 2025 by Hamburg Investor

[value_hunter]

I thought we have one of the best quarters. But stock price dropped 6% since earning report. Did anyone expect this?