Fairfax 2026

[Viking]

Here is a short article that estimates the impact on BVPS of share repurchases above book value. The size of the impact surprised me.  Hat tip to @SafetyinNumbers for bringing this topic up in the past. 

 

Share Buybacks, Book Value and Intrinsic Value

 

Warren Buffett has long argued that the economics of a share repurchase depend primarily on price.

 

When a company repurchases shares below intrinsic value, continuing shareholders benefit. Their ownership interest increases without requiring them to invest additional capital, increasing intrinsic value per share.

 

Book value is a separate question.

 

Buybacks below book value increase BVPS. Buybacks above book value decrease BVPS. Neither outcome tells investors whether value was created or destroyed. That depends on whether the shares were purchased below intrinsic value.

 

A good share buyback can therefore reduce book value per share while increasing intrinsic value per share.

 

The Emerging Story at Fairfax

 

This framework is becoming increasingly relevant for Fairfax.

 

Since 2018, the company has aggressively repurchased its shares. In recent years, a meaningful number of those shares have been purchased at a premium to book value—but clearly below management's assessment of intrinsic value.

 

The result is a growing divergence: Fairfax's buybacks are reducing reported BVPS while increasing intrinsic value per share.

 

Consider Q2 2026.

 

Fairfax appears to have repurchased approximately 675,000 shares for $1.08 billion, or roughly $1,600 per share. With BVPS of approximately $1,250 during the quarter, Fairfax paid about $350 per share above book value.

 

Premium to book value:

• $1,600 − $1,250 = $350 per share

Total premium paid:

• $350 × 675,000 = $236 million

Assuming approximately 19.95 million effective shares outstanding at quarter-end:

 

Estimated reduction in BVPS:

• $236 million ÷ 19.95 million = approximately $12 per share

In other words, Fairfax's Q2 share repurchases are estimated to have reduced reported BVPS by approximately $12 per share.

 

The estimated impact was approximately $10 per share in Q4 2025 and $8 per share in Q1 2026. Including Q2, share repurchases above book value may have reduced reported BVPS by approximately $30 per share over the past three quarters.

 

Yet because Fairfax purchased those shares below intrinsic value, continuing shareholders are economically better off.

 

The Impact on Traditional P/C Insurance Valuation

 

For P/C insurers, investors often focus on two closely related measures of performance: BVPS growth and ROE. Share repurchases above book value affect both.

 

BVPS declines. Fairfax is paying more than book value for each share it retires, reducing book value per remaining share.

 

ROE increases, all else equal. The buybacks reduce common equity. If earnings do not decline proportionately, Fairfax generates a higher return on a smaller equity base.

 

Value-creating buybacks can therefore make BVPS growth look weaker and ROE look stronger. Investors need to understand how capital allocation is affecting both measures.

 

Why It Matters

 

Book value remains an important metric for Fairfax, but it is becoming a less complete measure of value creation.

 

As Fairfax repurchases more shares above book value but below intrinsic value, reported BVPS will increasingly understate the economic benefit of those repurchases. This also complicates valuation: Fairfax can increase intrinsic value per share while reducing the book value investors use to calculate its price-to-book multiple.

 

This is an emerging story for Fairfax investors. The pace of buybacks has accelerated, and the cumulative impact on BVPS is becoming meaningful.

 

Buffett's framework provides the right lens: book value measures the accounting impact of a buyback; intrinsic value determines whether it created value.

 

For Fairfax shareholders, the gap between the two is becoming increasingly important.

 

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Appendix: A Partial Bridge from Book Value to Intrinsic Value

 

Book value is an accounting measure. Intrinsic value is an economic measure. The two are not the same.

 

One obvious adjustment for Fairfax is the excess of fair value over carrying value (FV over CV) of its market traded non-insurance associates and consolidated holdings. This is not a theoretical adjustment. The value is observable in publicly traded securities but is not fully reflected in Fairfax's reported common equity.

 

At June 30, 2026, the excess of FV over CV is estimated at approximately $4.1 billion, or $205 per share based on 19.95 million effective shares outstanding. Assuming a 15% tax rate (lower for capital gains), the after-tax value is approximately $175 per share.

 

If Fairfax reports BVPS of approximately $1,300 at June 30:

• Reported BVPS: $1,300
• After-tax excess of FV over CV: +$175
• Adjusted BVPS: $1,475

This is not an estimate of Fairfax's intrinsic value. It is simply one identifiable adjustment that provides a partial bridge from accounting book value toward economic value.

 

It also provides useful context for Fairfax's share repurchases. A buyback at $1,600 may represent a meaningful premium to reported book value, but only a modest premium to adjusted book value—and a discount to intrinsic value.

 

That is the key distinction. Fairfax is reducing book value per share to increase intrinsic value per share. As the pace of buybacks continues, understanding the difference between the two will become increasingly important for investors.

Edited 43 minutes ago by Viking

[djokovic1]

3 hours ago, SafetyinNumbers said:

Nice job! Different methodology for calculating intrinsic value than I use but they all end up in the same ball park. 

Thanks!

[Txvestor]

I asked chatGPT to construct this going back to 2017 since when's they've taken out almost 30% of their outstanding shares via buybacks. 
I would argue this divergence goes back to ever since the year the buyback started happening in earnest about 9yrs ago, once their equity hedges came off. This is evidenced by the fact that their earnings whether measured by total net earnings or EPS has grown despite all the capital ~$6B cumulatively allocated towards these buybacks. 
 

Year	Shares Repurchased (millions)	Total Cost (US$ millions)	Avg. Purchase Price	Year-end Book Value/Share	Avg. Purchase Price as % of BV
2017	~0.35	~150	~$430	~$450	96%
2018	~0.55	~250	~$455	~$455	100%
2019	~0.38	~170	~$447	~$484	92%
2020	~0.56	~215	~$385	~$525	73%
2021	~2.31	~1,240	~$537	~$674	80%
2022	~0.61	~398	~$652	~$752	87%
2023	~0.31	~276	~$890	~$940	95%
2024	1.347	1,588	$1,179	$1,060	111%
2025	1.007	1,625	$1,614	$1,260	128% Â

Edited 4 minutes ago by Txvestor

[Parsad]

23 minutes ago, Txvestor said:

I asked chatGPT to construct this going back to 2017 since when's they e taken out almost 30% of their outstanding shares via buybacks. 
I would argue this divergence goes back to ever since the year my back started happening in earnest about 9yrs ago, once their hedges came off. This is evidenced by the fact that their earnings whether measured by total net earnings or EPS has grown despite all the capital ~$6B cumulatively allocated towards these buybacks. 
 

Year	Shares Repurchased (millions)	Total Cost (US$ millions)	Avg. Purchase Price	Year-end Book Value/Share	Avg. Purchase Price as % of BV
2017	~0.35	~150	~$430	~$450	96%
2018	~0.55	~250	~$455	~$455	100%
2019	~0.38	~170	~$447	~$484	92%
2020	~0.56	~215	~$385	~$525	73%
2021	~2.31	~1,240	~$537	~$674	80%
2022	~0.61	~398	~$652	~$752	87%
2023	~0.31	~276	~$890	~$940	95%
2024	1.347	1,588	$1,179	$1,060	111%
2025	1.007	1,625	$1,614	$1,260	128% Â

 

Txinvestor, there is one more useful line you could add in there...percentage of total shares retired for that year.  So, that would indicate if they are paying up in terms of p/b, but buying in the same percentage of total shares outstanding. 

 

That would clearly indicate that they believe there is a long-term structural change in intrinsic value and a higher p/b is achieving the long-term return they want.  Cheers!