Fairfax Financial Holdings Limited: Financial Results for the Second Quarter

Executive Summary

• Fairfax Financial Holdings reported net earnings of $1,436.7 million ($61.61 per diluted share) for Q2 2025, a significant increase from $915.4 million ($37.18 per diluted share) in Q2 2024, driven primarily by increased net gains on investments.
• The company’s property and casualty insurance and reinsurance operations generated an adjusted operating income of $1,130.0 million, with a consolidated combined ratio of 93.3% on an undiscounted basis.
• Net gains on investments totaled $952.0 million, largely due to $800.4 million in gains on common stocks, including significant unrealized gains on equity exposures.

Key Details

• Net Earnings: $1,436.7 million for Q2 2025 ($61.61 diluted EPS); compared to $915.4 million ($37.18 diluted EPS) in Q2 2024.
• Book Value: $1,158.47 per basic share at June 30, 2025, up 10.8% from $1,059.60 at Dec 31, 2024 (adjusted for the $15/share dividend paid in Q1 2025).
• Insurance Operations (P&C and Reinsurance):
  • Adjusted Operating Income: $1,130.0 million (Q2 2025) vs. $1,119.4 million (Q2 2024).
  • Underwriting Profit: $426.9 million (undiscounted), up from $370.4 million in Q2 2024.
  • Combined Ratio: 93.3% (undiscounted), improved from 93.9% in Q2 2024.
  • Gross Premiums Written: $9,176.3 million (up 2.6% YoY), driven by new business in reinsurance and casualty lines.
  • Net Premiums Written: $7,257.1 million (up 4.8% YoY), reflecting increased retentions.
  • Prior Year Reserve Development: Net favorable development of $163.2 million (vs. $131.8 million in 2024).
  • Catastrophe Losses: $140.1 million (vs. $164.2 million in 2024).
• Investment Performance:
  • Net Gains on Investments: $952.0 million in Q2 2025 (vs. $241.6 million in Q2 2024).
  • Equity Exposures: Net gain of $800.4 million, comprising $547.9 million from equity total return swaps on Fairfax subordinate voting shares and $213.2 million from common stocks.
  • Bonds: Net gain of $74.8 million, primarily from U.S. treasuries.
  • Other: Net gain of $76.8 million, including $358.0 million unrealized gain on Digit compulsory convertible preferred shares, offset by $270.0 million in losses on foreign currency contracts.
  • Portfolio Holdings: Insurance and reinsurance companies held $67.8 billion in portfolio investments (excluding Fairfax India), with $10.0 billion in cash and short-term investments (14.8%).
• Associates and Other Income:
  • Share of Profit of Associates: $130.7 million (Q2 2025), including $104.6 million from Eurobank and $68.5 million from Poseidon, offset by a $59.5 million loss from Waterous Energy Fund.
  • Interest and Dividends: $666.3 million consolidated (up from $614.0 million in 2024).
• M&A and Corporate Actions:
  • Albingia Acquisition: Acquired 33.0% equity interest in Albingia SA for $236.5 million (€209.7 million) on May 13, 2025.
  • Keg Fund Acquisition: Agreed to acquire remaining units of The Keg Royalties Income Fund for Cdn$18.60 per unit (~$151 million), expected to close in Q3 2025.
  • Debt Issuance: Completed $900.0 million unsecured senior notes offering on May 20, 2025 ($500M at 5.75% due 2035; $400M at 6.50% due 2055).
  • Credit Facility: Extended $2.0 billion unsecured revolving credit facility expiry from July 17, 2029, to July 16, 2030.
  • Share Buybacks: Purchased 256,650 subordinate voting shares for cancellation at an aggregate cost of $360.9 million.
  • Spin-offs: Digitide Solutions Limited and Bluspring Enterprises Limited commenced public trading in India on June 11, 2025; Fairfax holds a 34.75% equity interest in each.
• Balance Sheet Metrics:
  • Total Debt to Total Capital Ratio (excluding non-insurance): Increased to 25.9% at June 30, 2025, from 24.8% at Dec 31, 2024.
  • Excess Fair Value over Carrying Value: Increased to $2.4 billion from $1.5 billion at Dec 31, 2024, driven by market value increases in Eurobank.
  • Holding Company Cash: Held just over $3.0 billion in cash and marketable securities.

Notable Quotes

• "In the second quarter of 2025 our property and casualty insurance and reinsurance operations produced adjusted operating income of $1,130.0 million... reflecting continued strong underwriting performance and robust interest and dividend income." — Prem Watsa, Chairman and Chief Executive Officer
• "As we have said in the past, we expect our common stock positions to perform well over the long term, but our net gains will fluctuate from quarter to quarter." — Prem Watsa, Chairman and Chief Executive Officer