Fairfax 2026

[SafetyinNumbers]

5 hours ago, djokovic1 said:

 

Thanks, if I had to guess I feel we may not have to wait more than 1-2 years of continued compounding. You never know when the inflection happens but when it happens it happens all of a sudden and everybody is then rushing to buy the momentum. Good news is, we don't need it to happen for great returns as that's on top of the 15%+ compounding.

What do you think the odds are the multiple goes above the recent high of 1.69x within 2 years? 
 

You could absolutely be right. I just don’t know if I should expect it. Right now most Canada institutional funds are likely overweight banks and underweight insurance in a big way. The banks are much bigger so if the capital flows reverse, FFH could have multiple expansion even if premium growth remains slow. It really depends on shareholders like us who sell based on valuation. It seems from this board there is a lot of supply at 1.5x. 

[SafetyinNumbers]

On 6/6/2026 at 4:15 PM, HoldForDearLife said:

That's underwriting a 95% CR, no? Not egregious, but that's not exactly a "nothing" assumption either in a softening market. If you were to underwrite at a 100% CR instead, you'd need the return on the equity portfolio to be around 8.0 % to offset the drop in underwriting income. 

 

That said, one of the many reasons I like Fairfax is that you're in no way dependent on terrific underwriting for the investment to make sense. If we go five years at a low 100s combined ratio, we're probably going to remain profitable and suffer less than competitors. We have the cash to survive a bad year with catastrophes. Compared to many other insurers with combined ratios in the low 80s, I do very much prefer "our expectations" over them. 

No, I think it’s about 97.5. Every combined ratio point is about 1% on pre-tax ROE. Last year head office and interest expense were about 2.5% assuming RBC is accurate..

 

 

Edited 6 hours ago by SafetyinNumbers

[SafetyinNumbers]

2 hours ago, Hamburg Investor said:

Comparing Fairfax's absolute CR today to prior years would indeed be misleading. Combined ratios move with the underwriting cycle. A 93% CR in a hard market is not the same as a 93% CR in a soft market. Agreed entirely.
 

But this analysis doesn't do that. It compares Fairfax to the average U.S. P&C insurer in the same year, every year from 2000 to 2024. The industry index experiences the same hard and soft markets as Fairfax. The comparison re-calibrates automatically each year:
 

"What did the average U.S. insurer achieve this year? How did Fairfax compare?"

This is a terrific analysis, thanks for sharing it. I have a variant perception on how Fairfax has managed its insurance operations. They built it by issuing expensive equity to buy cheap float. The float was cheap for a reason but these were still incredible deals even though the accounting makes it hard to appreciate.
 

Beginning in 2013, I think they were aggressive releasing reserves as the previous hard market had ended. This had the side benefit of increasing income to offset the hedges they had put on. I thought we would see more reserve releases by now this cycle and while they have increased, they don’t really need the income so my guess is they are trying to hold back.

 

I think the reason combined ratios jump after every insurance acquisition is because they prefer to have excess reserves and reduce taxes payable. It sacrifices short term income but benefits leverage and cash flow. You can see in the table above that their outperformance dwindled after they bought Allied in 2017 until 2021.

Further they have been investing in productivity gains so we might see some of those benefits show up during the next few years as well. I would be surprised if they don’t keep beating the industry by a wide margin. 

 

[villainx]

5 hours ago, Hamburg Investor said:

On the "Hard Market" Argument – I'd Genuinely Like to Understand It

 

I guess I wonder instead of versus average US PC insurer, a comparison against a couple of peer or above average PC insurer might be of value?  

 

[djokovic1]

7 hours ago, SafetyinNumbers said:

What do you think the odds are the multiple goes above the recent high of 1.69x within 2 years? 

 

I think quite high. The simple logic being 15%+ compounding should trade at 2x+ book. As I have said before, I think it's relatively unknown or under researched outside of Canada based on my experience talking to investors about it. No reason that should be the case. Just a matter of time.

 

Of course, a big cat year or bad equity performance (both possible in an individual year) can delay that multiple re-rating.