Fairfax Financial TSE: FFH reported a strong start to fiscal 2026, with President and COO Peter Clarke highlighting higher operating income and improved underwriting results during the company’s first-quarter earnings call. Clarke said operating income from Fairfax’s insurance and reinsurance companies—adjusted to an undiscounted basis and before risk margin—was CAD 1.2 billion, up from CAD 686 million in the first quarter of 2025.
Clarke said underwriting income totaled CAD 382 million, while interest and dividend income was CAD 561 million and profits of associates were CAD 271 million. Net earnings for the quarter were CAD 696 million.
Book value, buybacks, and planned second-quarter transactions
Fairfax’s book value per share at quarter-end was 1,250, which Clarke said was up 0.5% from year-end 2025 on an adjusted basis that includes the company’s CAD 15 dividend. During the quarter, Fairfax repurchased 375,000 shares for cancellation, spending CAD 631 million.
Management also discussed several transactions expected to close in the second quarter of 2026. Clarke said the company expects to close the sale of half of its position in Poseidon for CAD 1.9 billion, with an estimated pre-tax gain of approximately CAD 837 million. Fairfax also expects to close the sale of Eurolife’s life operations for approximately CAD 935 million with an estimated pre-tax gain of approximately CAD 350 million.
Chief Financial Officer Amy Sherk added that Fairfax announced agreements to sell an aggregate equity interest of approximately 23.1% of Poseidon for proceeds of about CAD 1.9 billion, and following the sale Fairfax expects to retain about 22.2% ownership and continue applying the equity method of accounting. Sherk also said Fairfax continues to classify CAD 3.3 billion of assets and CAD 3.5 billion of liabilities related to Eurolife’s life operations as held for sale as of March 31, 2026.
On Kennedy Wilson, Clarke said a special committee accepted a CAD 10.90 per share take-private offer from a consortium including Fairfax and CEO Bill McMorrow, representing a 46% premium to the pre-offer trading price, and that Fairfax is awaiting regulatory and shareholder approvals. Sherk said Fairfax has committed to provide up to CAD 1.65 billion of funding to the consortium, principally to fund the cash purchase price.
Investment results swing on bond mark-to-market losses
Clarke said Fairfax recorded net losses on investments of CAD 386 million in the quarter, primarily due to mark-to-market losses on bonds, compared with net gains of CAD 1.1 billion in the prior-year quarter. He attributed the bond losses primarily to U.S. Treasuries as interest rates increased during the first quarter. Clarke also cited losses on equity exposures of CAD 82 million, partially offset by other net gains of CAD 60 million, mainly foreign exchange gains offset by mark-to-market losses on preferred shares in Digit.
Clarke said the net loss on equity and equity-related holdings reflected unrealized losses on the Fairfax TRS of CAD 342 million, offset by net gains on Orla and Strathcona. He reiterated that investment gains and losses “only make sense over the long term” and can fluctuate materially quarter-to-quarter.
Hamblin Watsa President and Chief Investment Officer Wade Burton said investment performance “continues to be excellent,” noting equities were up 2.9% in the quarter and bonds were up 0.3%. Burton said Fairfax ended the quarter with CAD 49.8 billion in fixed income investments and CAD 26.6 billion in equity and equity-exposed investments.
Burton described the fixed income portfolio as “safe and earning strong interest income,” emphasizing its conservative positioning. He said the fixed income holdings include CAD 5.6 billion in mortgages, CAD 6 billion in corporates that are “very short-term” and mainly investment grade, and CAD 38.2 billion in government bonds and treasuries. He said portfolio duration is 2.2 years, average maturity is three years, and yield is approximately 5%. Burton also stated Fairfax has “zero traditional private credit exposure.”
Clarke and Sherk both highlighted that Fairfax’s book value per share does not include certain unrealized gains. Clarke said the fair value of equity-accounted investments and consolidated investments not marked to market exceeded carrying value by CAD 3.9 billion, or CAD 190 per share on a pre-tax basis, up from CAD 67 per share a year earlier and CAD 150 per share at year-end 2025.
Premium growth led by international operations; combined ratio improved
Fairfax wrote CAD 8.7 billion of gross premium in the quarter, up 4.1% year-over-year. Clarke said North American Insurance gross premiums were essentially flat, declining by CAD 18 million, as markets softened. He said Crum & Forster premiums fell 2.7%, Northbridge declined 4.8% in Canadian dollars (down 0.4% in U.S. dollars), while Zenith premiums rose 10% due to earned rate increases and new workers’ compensation business.
In the global insurer and reinsurer segment, gross premiums increased 2.5% to CAD 4.8 billion. Clarke said Allied World’s premiums rose 3.7%, Odyssey’s premiums declined 1.2%, and Brit’s gross premium increased 3.8% (or 6.8% excluding California wildfire reinstatement premium in the prior year). Clarke said more than half of Brit’s growth came from expansion of its Brit Re platform in Bermuda, while Ki—Brit’s algorithmic follow-on Lloyd’s syndicate—grew gross premiums 11.7% and announced it is adding a fifth capacity partner starting in the second quarter.
International insurance and reinsurance operations increased gross premiums 16.4% to $1.7 billion, aided by underlying growth and foreign exchange movements, with Clarke citing Gulf up 30% and Fairfax Central and Eastern Europe up 17%. Clarke said international operations represent about 20% of overall gross premiums and offer “strong long-term potential for sustained growth.”
Fairfax’s consolidated combined ratio improved to 94.1%, compared with 98.5% in the first quarter of 2025. Clarke said the key driver was lower catastrophe losses—about 1.8 combined ratio points versus 12.7 points in the prior-year quarter, which included California wildfire losses—partially offset by lower prior-year favorable development. Fairfax recorded favorable reserve development of $86 million, equating to a benefit of 1.3 points on the combined ratio, with each major segment reporting favorable development.
By segment, Clarke reported combined ratios of 92.5% for global insurers and reinsurers, 96% for North American insurers, and 95.8% for international operations. He noted Zenith’s combined ratio was 103.7%, improving from 106.3% a year earlier.
Management commentary on market conditions, Gulf, and Poseidon
During Q&A, Clarke said Fairfax’s subsidiaries require little top-down instruction as pricing softens, emphasizing underwriting discipline and a long-term approach. “Underwriting profit is the focus,” Clarke said, adding that if pricing becomes inadequate, reducing premium is “totally fine.”
Responding to questions on Gulf, Clarke said the unit’s 2025 premiums were down because it lost a large health contract in Kuwait at the end of 2024. He said Gulf is expanding again in accident and health “coming into 2026 off a lower base,” which contributed to higher net retention.
On the Poseidon sale, Clarke said Fairfax first invested around 2018 and described the investment as generating a compounded annual return of 25%. He said Fairfax is “very happy” to retain the remaining 22% stake after selling about half the position, adding that its partner sought to increase ownership.
Clarke also addressed reserve development, saying the first quarter is typically not a major period for reserve actions, as Fairfax conducts its “thorough reserve analysis” primarily in the fourth quarter.
Separately, Clarke noted that amid conflict in Iran, Fairfax’s Gulf Insurance Group management was focused on employee safety in the region. He said losses related to the conflict had been “minimal” and the company continued to operate as usual under difficult conditions.
Sherk concluded by outlining holding company liquidity and leverage. She said Fairfax held CAD 2.5 billion of cash and investments at the holding company and had CAD 300 million drawn on a CAD 2 billion unsecured revolving credit facility. Sherk said the consolidated total debt-to-total-capital ratio (excluding non-insurance companies) increased to 27.8% from 26.2% at year-end, reflecting debt issuance and lower common shareholders’ equity. She also cited unrealized foreign currency translation losses, net of hedges, tied to a stronger U.S. dollar.
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.
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