Fairfax 2026

[Viking]

40 minutes ago, Hoodlum said:

https://www.newswire.ca/news-releases/agt-food-and-ingredients-inc-files-preliminary-prospectus-for-initial-public-offering-of-common-shares-843361023.html

 

Well it looks like we will finally get a look under the hood at AGT. Fairfax took the company private in 2018. It has been quietly percolating away for the past 7 years…
 

Perhaps this also partly answers the question: is Fairfax looking to become a conglomerate like BRK? Answer: No

 

I like this proposed transaction from a couple of angles:

• Disclosure it will provide: we will find out what this asset is worth and what Fairfax’s stake is valued at.
• Surfaces value: my guess is FV exceeds CV.
• Provides some cash that Fairfax will be able to reinvest.

My guess is AGT’s business has some volatility attached to it. Making it a smaller position in Fairfax’s portfolio appeals to me. 

Edited January 31 by Viking

[SafetyinNumbers]

59 minutes ago, Hsmpanl said:

Has Fairfax ever traded at or anywhere close to these multiples in its 40 year history? Not arguing that intrinsic value could be in that range, just the conclusion should be to continually buy Fairfax, and Fairfax should be plowing every dollar into buybacks if it has traded at that kind of discount for decades.

Yes but not since the late 1990s. Back then investment:equity leverage was a lot higher because they were buying float cheap. It’s arguable given that underwriting income now more than covers off financing and head office expenses that the stock’s price to book should be its investment:equity ratio. Investors would pay NAV if HWIC’s “balanced fund” was an ETF so it’s not that different on a look through basis except the FFH investor gets paid to make the investment instead of paying fees. 

I think they have been doing exactly that on the buyback while not constraining their insurance subsidiaries from growing premiums when returns are high. They have retired a third of the shares since 2017 if the TRS are netted out. It’s safe to say that anything that competes for capital has to have a high expected return to compete with the stock. What else have they done at the holdco besides buy back stock and do few tuck in insurance acquisitions in the last few years? In the case of GIG, they even deferred the payments so they had more cash for buybacks.
 

 

 

[SafetyinNumbers]

4 minutes ago, Viking said:

Well it looks like we will finally get a look under the hood at AGT. Fairfax took the company private in 2018. It has been quietly percolating away for the past 7 years… Does anyone have a clue what the company might be worth today? Or what it is carried at on Fairfax’s books? 
 

Perhaps this also partly answers the question: is Fairfax looking to become a conglomerate like BRK? Answer: No

 

I like this proposed transaction from a couple of angles:

• Disclosure it will provide: we will find out what this asset is worth and what Fairfax’s stake is valued at.
• Surfaces value: my guess is FV exceeds CV.
• Provides some cash that Fairfax will be able to reinvest.

My guess is AGT’s business has some volatility attached to it. Making it a smaller position in Fairfax’s portfolio appeals to me. 

The preliminary prospectus:

 

https://www.sedarplus.ca/csa-party/viewInstance/resource.html?node=W9412&drmKey=c8b63edc47939e95&drr=ss74448464219de0a3d7da86aaf7aca7873cfbaaac6c3fae0a33fec7669f2397eafd6505ddc423949092a408d904db218fux&id=0c11f8b7998bcd9693e7357d325f6d7a21c53697d3d58290

[Hoodlum]

10 minutes ago, Viking said:

Well it looks like we will finally get a look under the hood at AGT. Fairfax took the company private in 2018. It has been quietly percolating away… Does anyone have a clue what the company might be worth today? Or what it is carried at on Fairfax’s books? 
 

Perhaps this also partly answers the question: is Fairfax looking to become a conglomerate like BRK? Answer: No

 

I like this proposed transaction from a couple of angles:

• Disclosure it will provide: we will find out what this asset is worth and what Fairfax’s stake is valued at.
• Surfaces value: my guess is FV exceeds CV. Probably by a lot.
• Provides some cash that Fairfax will be able to reinvest.

My guess is AGT’s business has some volatility attached to it. Making it a smaller position in Fairfax’s portfolio appeals to me. 

My understanding is that Canada had a record year for Legume crops, so that would help with 2025 sales. The sales of the railway last January was also expected to help increase cash flow. Now we are seeing an improving environment for tariffs (China and soon India) which will help with 2026 margins.  AGT Food is also a much more globally diversified company than they were when taken private in 2018, with China/India/US accounting for just 28% of sales in 2024. 
 

Edited January 31 by Hoodlum

[dartmonkey]

14 hours ago, SafetyinNumbers said:

It’s safe to say that anything that competes for capital has to have a high expected return to compete with the stock. What else have they done at the holdco besides buy back stock and do few tuck in insurance acquisitions in the last few years?

Do you think they really expect Recipe or Sleep Country or Peak to return 15% ? Leveraged, sure, but I would think FFH has a higher expected return than these acquisitions. I would love to see them really get serious about reducing share count. If Singleton is their North Star, it’s going to take many lifetimes to get there at the current rate. 

[roundball100]

17 hours ago, Munger_Disciple said:

 

I don't know; too many unknown & unknowable factors can drive the average ROE over the next 5 years. Interest rates, whether there are cat/super cat losses, whether there is a dislocation in the markets (which can open up opportunities) etc. 

What I can say for sure is that I am happy to own both. I consider Berkshire the ultimate "sleep well at night" stock. And I expect Fairfax to be riskier but one that can potentially (as opposed to guaranteed) compound book at a higher rate than Berkshire (by a couple of percentage points, am delighted if it is more). Size is the limiting factor for Berkshire but then Greg can buyback a lot of stock and/or put the cash pile to work if there is a huge dislocation in the economy/markets. 

As a common challenge we regularly face is the ambiguity of the word "riskier", as different people use it to mean quite distinct things ... leading to strong differences of opinion even if there is fundamental agreement.  To oversimplify, one definition of "risky" is "chance to permanently lose 100% (or a substantial fraction) of your invested capital".  Another is "subject to short-term volatility, i.e., big drops/jumps in price (but over medium to long term, quite safe)".   Might we be talking at cross-purposes here?

[SafetyinNumbers]

1 hour ago, dartmonkey said:

Do you think they really expect Recipe or Sleep Country or Peak to return 15% ? Leveraged, sure, but I would think FFH has a higher expected return than these acquisitions. I would love to see them really get serious about reducing share count. If Singleton is their North Star, it’s going to take many lifetimes to get there at the current rate. 

I think they do expect to earn a 15% return on their equity investments and that there is some margin of safety built in. Certainly expectations for the equity portfolio are a lot lower. 
 

I think there is some confusion about investments made at the holdco level and investments made at the insurance subsidiaries level. The buybacks compete at the holdco level for capital. 

[Viking]

2 hours ago, dartmonkey said:

Do you think they really expect Recipe or Sleep Country or Peak to return 15% ? Leveraged, sure, but I would think FFH has a higher expected return than these acquisitions. I would love to see them really get serious about reducing share count. If Singleton is their North Star, it’s going to take many lifetimes to get there at the current rate. 

 

Taking out 24% of effective share outstanding over the past 8 years looks 'serious' to me. That has to put them in 1% of companies out there (in terms of buybacks). 

 

At the same time they were able to dramatically grow their P/C insurance business. 

 

And make some pretty outstanding investments: Orla being just the latest example. 

 

It will be interesting what they do on the buyback front moving forward. If they continue to hold the FFH-TRS my guess is they will continue to be aggressive. 

[mananainvesting]

I really want them to reinvest capital where they find the highest return!

[Viking]

Fairfax Financial’s Business Model

 

This post is the third in our series discussing Fairfax's business model. Below are links to the first two posts:

 

1. An Overview of Fairfax's business model: 

• https://thecobf.com/forum/topic/21600-fairfax-2026/page/14/#findComment-660399

2. How it has changed over 40 years:

• https://thecobf.com/forum/topic/21600-fairfax-2026/page/12/#findComment-658839

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An Income-Stream View of a Long-Term Capital Compounding Machine

 

Seeing the Full Picture

 

To better understand Fairfax, it helps to look at the company in different ways.

 

Most investors analyze Fairfax through the lens of a traditional P/C insurance company. That framework misses the essence of the business. In this post, we instead view Fairfax through its six income streams—the underlying sources that drive reported earnings and long-term growth in economic (intrinsic) value.

 

This framework does three important things:

1. It connects Fairfax’s business model directly to its income statement and balance sheet
2. It highlights how Fairfax differs fundamentally from conventional P/C insurers
3. It explains why Fairfax is uniquely positioned to continue compounding capital at above-average rates of return

Seen this way, Fairfax is not simply an insurer. It is a capital compounding platform with multiple, reinforcing earnings engines.

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The Six Income Streams

 

Fairfax’s results are driven by six distinct income streams. Five are accounting streams that appear directly on the income statement. The sixth is an economic adjustment that captures value creation not yet recognized in reported earnings.

 

Together, these six streams map cleanly to Fairfax’s three business engines.

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Accounting Income Streams (1 – 5)

 

The first five income streams are reflected in reported earnings.

 

Engine 1: Insurance

 

1. Underwriting profit

 

Engine 2: Investments

 

2. Interest and dividend income

3. Share of profit of associates

 

Engine 3: Non-Insurance Operating Companies

 

4. Non-insurance consolidated companies

 

Crosses All Three Engines

 

5. Investment gains (arising from insurance, investments and non-insurance operating companies)

 

As Warren Buffett has long emphasized, accounting earnings are a useful starting point—but on their own, they are incomplete.

 

To understand what Fairfax is really earning, we need to go one step further.

---

 

Beyond Accounting: The Economic Adjustment (Hidden Value)

 

Fairfax discloses a key measure of value creation that does not flow through reported earnings:

 

6. Annual change in excess of fair value over carrying value (FV – CV) for associate and consolidated companies

 

This represents value that has already been created but not yet recognized in accounting results. Importantly, it is not an abstract estimate – it is data is supplied directly by Fairfax, making it transparent and easy to track.

 

This measure does not capture all of the hidden value Fairfax creates each year. But it is a meaningful and conservative starting point. Critically, this hidden value will become a material source of future reported earnings as it is realized through investment gains.

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Mapping Income Streams to Business Engines

 

The chart below matches Fairfax’s three business engines to its six income streams:

 

Business engines: 

1. Insurance
2. Investments
3. Non-insurance operating companies 

 

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Fairfax vs. Traditional P/C Insurers

 

Viewing Fairfax through income streams makes one thing immediately clear: this is not a conventional P/C insurance company.

 

Traditional P/C Insurers

 

Most P/C insurers rely on just two income streams:

1. Underwriting profit (~45%)
2. Interest income (~55%)

That is essentially the entire economic model. It is optimized to smooth volatility (not return).

 

Fairfax Financial

 

Fairfax’s economic results are driven by six income streams: 

 

1.     Underwriting profit (~22%)

2.     Interest and dividend income (~34%)

3.     Share of profit of associates (~14%)

4.     Non-insurance consolidated companies (~6%)

5.     Investment gains (~19%)

6.     Hidden value (~6%)

 

This diversification of earnings sources fundamentally changes how the business behaves—and how it should be analyzed compared to peers. It is optimized to exploit volatility (and per share value creation over the long term).

---

 

Where Many Analysts (and Investors) Go Wrong

 

Most analysts continue to view Fairfax through the lens of a traditional P/C insurer. As a result, they focus primarily on two income streams: underwriting and interest income.

 

That approach fails for two reasons:

• It ignores four income streams, composing roughly 44% of Fairfax’s earnings power
• It misses the most important driver of long-term results: capital allocation

For Fairfax, the insurance cycle is not the primary determinant of long-term performance. Capital allocation is.

 

In soft insurance markets, capital does not remain trapped in the insurance silo. It shifts—toward equities, private businesses, credit, or other opportunities—allowing Fairfax to continue compounding capital at attractive rates.

 

This business model closely resembles Berkshire Hathaway’s structure in the 1980s and 1990s. Did soft insurance markets impair Berkshire’s ability to compound capital during that period? Clearly not.

 

There is an important lesson here for investors and analysts evaluating Fairfax today.

 

Because Fairfax does not fit the conventional model, many commonly drawn conclusions about the company should be treated with skepticism. This persistent misunderstanding contributes to share-price volatility—and that volatility creates opportunity, both for long-term investors and for Fairfax itself through disciplined share repurchases.

Edited January 31 by Viking

[ValueNation]

47 minutes ago, Viking said:

This persistent misunderstanding contributes to share-price volatility—and that volatility creates opportunity, both for long-term investors and for Fairfax itself through disciplined share repurchases.

Thanks as always for your great insights, @Viking

 

I have been thinking recently about this idea of the market misunderstanding FFH. As a long term shareholder, I have trust in the management team and the direction they are taking FFH, but does the thesis for shareholders going forward require the market to also gain this kind of trust? What do you perceive of the chance that the market never develops this trust or always discounts FFH for its past missteps (or for an inordinate time period)?

 

Or is it that the market will have no choice but see the results and eventually pay the multiples that FFH deserves given its ongoing record?

[djokovic1]

2 hours ago, ValueNation said:

What do you perceive of the chance that the market never develops this trust or always discounts FFH for its past missteps (or for an inordinate time period)?

 

Or is it that the market will have no choice but see the results and eventually pay the multiples that FFH deserves given its ongoing record?

Shareholders are fine regardless if they keep compounding at 15%+ which includes buying back shares till the multiple re-rates to a fairer multiple (in my opinion 2x+ book). I still have a strong view that lot of investors (and analysts) don’t get it or pass before going deeper.

[Viking]

3 hours ago, ValueNation said:

…does the thesis for shareholders going forward require the market to also gain this kind of trust?

@ValueNation, great question. The short answer is no. And that is because Fairfax is currently trading at a very low valuation - starting point matters a lot. My math says the stock is trading at P/BV multiple of 1.3 x (my estimate of 2025YE). That does not include hidden value (I get all that for free). My guess is they are poised to deliver ROE of +15% over each of next 5 years (with some volatility).

 

If Fairfax was trading at a premium valuation to the market and other P/C insurers then I might be thinking more about what Mr. Market is thinking. 
 

A big reason I like Fairfax so much right now is they are generating record earnings. And they think their stock is cheap - they are buying back a meaningful amount of shares each year.

 

As @djokovic1 points out, as long as Fairfax continues to execute well (+15% ROE) and continues to vacuum up shares, I think shareholders will do very well. Multiple expansion simply becomes icing on the cake. 
—————

Having said that, I do think Fairfax will be volatile. This will be driven by lots of different, often unrelated factors. Some make sense to me. Others, not so much.

 

External fears:

• Soft insurance market
• Lower interest rates
• Material stock market sell off

Internal (company specific) fears:

• Perception Fairfax has a low quality insurance franchise
• Dislike of Fairfax’s equity portfolio (in general)
• Dislike of new big equity purchase (look at all the chatter a small purchase like UA is getting…)

On the other hand we are also going to get upside surprises:

 

External

• Interest rates moving materially higher
• Equity markets continue their bull run

Internal 

• Strong insurance performance
• Strong equity performance
• Hidden value getting surfaced (like sale of Eurolife in Q1). 
• Eurobank - this getting marked to market sill be a material event
• BIAL IPO (via anchorage) will likely be material

The other important factor is if you are a short term or long term investor.

 

The beauty of Fairfax today (business model + management) is they are positioned to be able to benefit from whatever happens moving forward. This is especially true for long term investors (who are able to ride out short term volatility). 

Edited January 31 by Viking

[SafetyinNumbers]

24 minutes ago, Viking said:

Having said that, I do think Fairfax will be volatile.

I think about this a lot. My theory has been the dips below 1.5x book value will be shallow as we lost value sellers on the way up every time and they are available to buy the dips (A lot of you are part of this bucket!). The company also seems to be active with the buyback when the stock is trading below 1.5x book which provides another source of demand. We just lost a chunk of the remaining closet momentum investors who waited for BMO to ring the bell so that source of supply is diminished. I’m sure there are sector shorts also which clouds the supply / demand picture. It will be interesting if we see big multiple contraction on earnings in a few weeks. The buybacks actually reduce BVPS growth so the forward multiple should increase all else being equal but I’m not expecting that to happen for a while.

[yesman182]

4 hours ago, Viking said:

For Fairfax, the insurance cycle is not the primary determinant of long-term performance. Capital allocation is.

You think capital allocation is more important than underwriting? Seems like low cost float should be priority number 1. 

[Viking]

50 minutes ago, yesman182 said:

You think capital allocation is more important than underwriting? Seems like low cost float should be priority number 1. 

Fairfax is going to earn well over $25 billion over the next 5 years. What they do with that pile of money (capital allocation) will have a much bigger impact on the company that whether their CR is 94% or 95%. 
 

Underwriting is important - ideally it needs to be sub-100%. So your cost of float is better than free. 

[SafetyinNumbers]

1 hour ago, Viking said:

Fairfax is going to earn well over $25 billion over the next 5 years. What they do with that pile of money (capital allocation) will have a much bigger impact on the company that whether their CR is 94% or 95%. 
 

Underwriting is important - ideally it needs to be sub-100%. So your cost of float is better than free. 

Agree 100% but underwriting is just another form of capital allocation. Fairfax grew premiums the fastest when the market was hard and slowed sooner than the rest as parts softened. Every insurance policy is a bet. When it’s a hard market the odds are in the insurers favour and that’s when they want to bet as much capital as they can on premium growth. When it softens, Fairfax takes dividends out of the insurance subsidiaries to use for buybacks or insurance acquisitions including minority interests. The capital is chasing the best returns.

[dartmonkey]

4 hours ago, Viking said:

Internal (company specific) fears:

• Perception Fairfax has a low quality insurance franchise
• Dislike of Fairfax’s equity portfolio (in general)
• Dislike of new big equity purchase (look at all the chatter a small purchase like UA is getting…)

Count me as one who is perplexed by this investment. First, it is a $400m investment, more than one percent of the whole company, and while it may be #9 among investments, it is not like Eurobank or Orla which has gotten there because of its performance, it’s that amount invested, comparable to the size of another investment in a struggling company with a fruity name that I try to forget. 

 

With an insurance company I love and which they know intimately, available at less than 8 times earnings, I just can’t understand why they are putting a penny into a struggling retailer. Watsa praises Henry Singleton, a CEO who bought back 90% of his company’s shares. At the current rate, how many decades will it take for Fairfax to do the same? Why not plough into this opportunity, instead of buying back 2-3% a year?

[djokovic1]

2 hours ago, SafetyinNumbers said:

Agree 100% but underwriting is just another form of capital allocation. Fairfax grew premiums the fastest when the market was hard and slowed sooner than the rest as parts softened. Every insurance policy is a bet.

Exactly what I was going to say. Great underwriting is the same as great investing and great capital allocation. This was one of my big insights when studying Fairfax. If you trust them on investing and capital allocation , you can also trust them on underwriting well.

[djokovic1]

1 hour ago, dartmonkey said:

With an insurance company I love and which they know intimately, available at less than 8 times earnings, I just can’t understand why they are putting a penny into a struggling retailer. Watsa praises Henry Singleton, a CEO who bought back 90% of his company’s shares. At the current rate, how many decades will it take for Fairfax to do the same? Why not plough into this opportunity, instead of buying back 2-3% a year?

Agree with this. They likely see something we don’t from the outside. But knowing what I know, I would rather have that capital go to buybacks.

[Viking]

Just now, djokovic1 said:

Exactly what I was going to say. Great underwriting is the same as great investing and great capital allocation. This was one of my big insights when studying Fairfax. If you trust them on investing and capital allocation , you can also trust them on underwriting well.

 

That wasn’t the case pre-2010. And I’m not sure people thought that way from 2010 to 2020 (because trust was low on investments/capital allocation). Trusting them on investing, capital allocation and underwriting - the trifecta - that is new. And I don’t think it is consensus - I wholeheartedly agree with it (trust). 
 

My guess is it will take Fairfax a couple more years to re-built trust. And even then, the company will probably be on a short leash with many investors (lack of trust is probably responsible for driving part of the current sell off). 

[Maverick47]

1 hour ago, Viking said:

My guess is it will take Fairfax a couple more years to re-built trust. And even then, the company will probably be on a short leash with many investors (lack of trust is probably responsible for driving part of the current sell off). 

@Viking I think this is one of the ways in which understanding the human element of the marketplace can help us understand how a mispricing of a security can be more than just a short term event.  Human beings tend to learn most powerfully from our mistakes.  I’ve heard behavioral psychologists estimate that a loss is felt roughly 2 and a half times more keenly than an equivalent sized gain (loss aversion).  
 

On balance, this is a good trait for fiduciaries to have, since the key to successful capital compounding is to avoid bankruptcy.

 

But individuals, once burned on a given security, don’t often give it a fair “second chance” to be a significant part of their future portfolio.  I know I’ve been guilty of this in my own experience.  I paid too high a price for Walmart, for example, and suffered through a decade or more of sideways price movement before I bailed on the position altogether.  After I liquidated my position, I stopped following the company, and never considered investing in it again.  And then I missed out on a potential sizeable future gain.
 

 Similarly, a coworker was sharing with me (about 15 or 20 years ago)his disappointment with his Microsoft investment, which had gone nowhere for over a decade after having been purchased at a relatively rich valuation in the late 1990’s.  He was disgusted, and was throwing in the towel on it altogether.

 

I didn’t have such baggage, and was beginning to be interested in the security after the Great Financial Crisis, when it was selling for an attractive PE ratio of around 10.  My relatively small investment in the company paid off rather well including a repricing of the PE ratio.  But my coworker was never able to bring himself to purchase it for himself after having been burned so badly before he sold his own position.

In this regard, I think of too many investment market participants as acting like the cat Mark Twain spoke about, which was burned on a hot stove.  He said the cat “never sat on a hot stove again…but never sat on a cold one either.”

Very few investors who suffered market pain and bailed on Fairfax in the lost decade up to 2020 are likely to be willing or emotionally able to give it a second look.

 

I confess that my own experience during that timeframe was not great, but my position in the stock was less than 10% of my portfolio, and I rationalized continuing to own it as a hedge against the possibility of deflation, so was willing to ignore the poor performance and never bailed on the stock completely.  
 

It was Prem’s $150 million vote of confidence and reading a lot of your own analysis of the company that rekindled my interest in the company, but I have to think that many of the folks who invested in the company and then sold out completely before 2020 are not likely to be giving it a second look today. 
 

If true, that may be another reason that the company will be able to repurchase their own shares at relatively favorable levels below intrinsic value for years to come.  And that would be a good thing.    In the Mark Twain analogy, it just may be the stove that once was hot, burning lots of cats, then was cold, and now may be in an extended period of warming up again.
 

 

 

Edited February 1 by Maverick47

[UK]

2 hours ago, dartmonkey said:

With an insurance company I love and which they know intimately, available at less than 8 times earnings, I just can’t understand why they are putting a penny into a struggling retailer. Watsa praises Henry Singleton, a CEO who bought back 90% of his company’s shares. At the current rate, how many decades will it take for Fairfax to do the same? Why not plough into this opportunity, instead of buying back 2-3% a year?

But a. had not they bought back their shares at some ~8 annualised in the 3q, when the price was good to do this and b. with FFH liquidity, are not there a limit of how much they can buyback, without affecting the price? What would be a reasonable upper limit in your view?

[Txvestor]

13 hours ago, Viking said:

 

Taking out 24% of effective share outstanding over the past 8 years looks 'serious' to me. That has to put them in 1% of companies out there (in terms of buybacks). 

 

At the same time they were able to dramatically grow their P/C insurance business. 

 

And make some pretty outstanding investments: Orla being just the latest example. 

 

It will be interesting what they do on the buyback front moving forward. If they continue to hold the FFH-TRS my guess is they will continue to be aggressive. 

Well you can't completely give them credit for both increasing the size of the P/C business and buying back shares.
Because as I recollect it, they issued close to 5M shares to execute the Allied World purchase. The majority of the buybacks they've done to date have served to undo that share issuance. 

Edited February 1 by Txvestor

[djokovic1]

2 hours ago, Viking said:

That wasn’t the case pre-2010. And I’m not sure people thought that way from 2010 to 2020 (because trust was low on investments/capital allocation). Trusting them on investing, capital allocation and underwriting - the trifecta - that is new

good point, agreed, it is an evolved Fairfax.