Fairfax Financial (TSE:FFH) executives said fiscal 2025 delivered the strongest results in the company’s history, highlighted by record underwriting income and record interest and dividend income, alongside strong investment gains and contributions from associates and non-insurance subsidiaries.
Record earnings and book value growth
President and COO Peter Clarke said Fairfax earned $4.8 billion after tax in 2025, calling it “the best year in our history.” Results included record underwriting income of $1.8 billion and record interest and dividend income of $2.6 billion. Clarke also cited operating income from insurance and reinsurance operations on an undiscounted basis and before risk margin of $4.6 billion.
Looking ahead, Clarke reiterated the company’s view that consolidated operating income for the next number of years could be $5 billion, comprised of $1.5 billion of underwriting profit, $2.5 billion of interest and dividend income, and $1 billion from associates and non-insurance consolidated income, while emphasizing there are “no guarantees.”
Underwriting results, catastrophe losses, and reserves
Fairfax reported a strong fourth quarter underwriting performance with a Q4 combined ratio of 88.6, producing $753 million of underwriting profit. For the full year, the combined ratio was 93.0 on a discounted basis, producing record underwriting profit of $1.8 billion. Catastrophe losses totaled $1.2 billion, adding 4.8 points to the combined ratio, driven primarily by the California wildfires in Q1, Hurricane Melissa in Q4, and other losses.
The company recorded $752 million of favorable reserve development in 2025, a benefit of 2.9 points on the combined ratio, marking the 19th consecutive year of favorable reserve development. Clarke said runoff operations strengthened reserves by $298 million, primarily related to latent liabilities amid continued increases in litigation activity.
Asked about the underwriting profit outlook, management reiterated a target of $1.5 billion, noting the past two years have run higher but emphasizing conservatism and the company’s ability to absorb catastrophe losses as its premium base has expanded.
Premium trends and pricing environment
Fairfax’s insurance and reinsurance businesses wrote $33.3 billion of gross premium in 2025, an all-time high, up 2.3% year over year. North American insurance gross premiums increased 5.3%, while global insurers and reinsurers increased 2.4% to $17.6 billion. International operations wrote $6.4 billion versus $6.5 billion in 2024; management attributed the decline primarily to Gulf Insurance due to lower health insurance business in Kuwait, noting that excluding Gulf, international premiums were up nearly 8%.
In the Q&A, Clarke said pricing continued to soften in Q4, making growth “a little more challenging,” but stressed the group’s focus on underwriting discipline rather than top-line expansion. He described overall price increases in the “low single-digit” range, with higher increases in casualty lines and declines in property, D&O, and cyber. He said property catastrophe reinsurance was seeing the most pricing pressure, though coming off very strong margins.
Management highlighted that softer growth can free up capital for allocation, including share buybacks, buying minority interests in subsidiaries, and investing in associates and non-insurance businesses.
Investments: strong gains, conservative fixed income posture, and a new equity holding
Clarke said Fairfax generated an investment return of 9.3% in 2025, driven by stable interest and dividend income, associate earnings, and strong net gains on equity exposures. Net gains on investments were $3.2 billion, including $3.0 billion of gains on equity exposures, $385 million of unrealized gains on bonds (primarily U.S. Treasuries due to declining rates), offset by $440 million of foreign exchange losses. Clarke noted net gains can fluctuate significantly over time.
President and CIO of Hamblin Watsa Wade Burton said investment portfolios ended the quarter at $74.9 billion, with $50 billion in fixed income and $24.9 billion in stocks, associates, LPs, and preferreds. Burton said the fixed income portfolio was earning a 5% yield, with short duration and mostly government bonds, reflecting a “playing it safe” stance amid uncertainty around inflation and low spreads.
Burton said Fairfax added Under Armour as a new holding, outlining the company’s history, a period of restructuring and “lean years” from 2017 through 2025, and the return of founder Kevin Plank as CEO in 2024. Burton said Fairfax believes the company has the balance sheet and discipline to execute a turnaround over the long run.
Capital, transactions, and tax-rate commentary
CFO Amy Sherk said non-insurance companies reported operating income of $397 million for the full year, up from $241 million in 2024, despite a primarily non-cash impairment at Boat Rocker Media of $109 million before deconsolidation on August 1. She attributed the increase primarily to the acquisition of Sleep Country (contributing $92 million) and the consolidation of Peak Achievement (contributing $103 million) in 2025.
Share of profit from associates was $816 million in 2025, down from $956 million in 2024, which Sherk attributed primarily to the consolidation of Peak Achievement and the sale of Stelco. She cited major 2025 contributions from Eurobank ($474 million) and Poseidon ($287 million), partially offset by losses including Watsa Fund III and Fairfax India’s investment in Sanmar Chemicals.
On Eurolife, Sherk said Fairfax classified $3.4 billion of assets and $3.6 billion of liabilities as held for sale at year-end related to the proposed sale of Eurolife life operations to Eurobank. The current estimated pretax gain on closing is approximately $350 million, and the transaction is expected to close in Q2 2026, subject to definitive agreements and customary conditions. In response to a question, management said most of the associated interest and dividend income impacts would be reflected in the life and runoff segment, while noting Fairfax expects to receive approximately $950 million for the life business and later redeploy the capital.
Management also discussed a post-year-end transaction involving Kennedy Wilson. Clarke said a consortium led by Kennedy Wilson CEO Bill McMorrow and Fairfax has agreed to acquire the company for $10.90 per share in cash, a 46% premium to Kennedy Wilson’s unaffected share price as of November 4, 2025. Fairfax has committed funding up to $1.65 billion for the purchase price, redemption of certain preferred shares, and expenses. The deal is expected to close in Q2 2026, subject to shareholder approvals and other conditions, with McMorrow retaining effective control and Fairfax holding a majority economic interest.
On taxes, Sherk said Fairfax still views an effective tax rate of 22% to 25% as an appropriate range going forward, while noting 2025’s lower rate reflected unique items, including significant unrealized mark-to-market gains in India attracting a lower capital gains rate and impacts related to global minimum tax (Pillar Two) developments.
About Fairfax Financial (TSE:FFH)
Fairfax Financial is a holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and the associated investment management.
