Fairfax Financial Holdings Limited (OTC:FRFHF) Q4 2025 Earnings Call Transcript

Fairfax Financial Holdings Limited (OTC:FRFHF) Q4 2025 Earnings Call Transcript February 20, 2026

Operator: Good morning, and welcome to Fairfax’s 2025 Fourth Quarter Results Conference Call. [Operator Instructions] Today’s conference is being recorded. If you have any objections, you may disconnect at this time. Your host for today’s call is Peter Clarke with opening remarks from Derek Bulas. Derek, please begin.

Derek Bulas: Good morning, and welcome to our call to discuss Fairfax’s 2025 year-end results. This call may include forward-looking statements. Actual results may differ perhaps materially from those contained in such forward-looking statements as a result of a variety of uncertainties and risk factors, the most foreseeable of which are set out under risk factors in our base shelf prospectus, which has been filed with Canadian securities regulators and is available on SEDAR+. Fairfax disclaims any intention or obligation to update or revise any forward-looking statements, except as required by applicable securities laws. I’ll now turn the call over to our President and COO, Peter Clarke.

Peter Clarke: Thank you, Derek. Good morning, and welcome to Fairfax’s 2025 Fourth Quarter and Year-End Conference Call. I plan to give you some highlights and then pass the call to Wade Burton, our President and Chief Investment Officer of Hamblin Watsa to comment on investments; and Amy Sherk, our Chief Financial Officer, to provide some additional financial details. 2025 was the best year in our history. We earned $4.8 billion after taxes, the most ever, with record underwriting income of $1.8 billion and record interest and dividend income of $2.6 billion. We also had strong contributions from investments in associates, our noninsurance consolidated investments and net gains on investments. Operating income from our insurance and reinsurance operations on an undiscounted basis and before risk margin was again very strong at $4.6 billion.

We have many sources of income, and they all performed very well this year. Our book value per share increased 20.5% adjusted for our $15 dividend to $1,260, up from $1,060 at December 31, 2024, an increase of approximately $200 per share. Last year, we purchased for cancellation just over 1 million shares at an average cost of $1,615 per share. At December 31, 2025, there were 20.9 million shares outstanding. And in the first 6 weeks of 2026, we purchased a further 131,000 shares at an average cost of $1,685 per share. Our insurance and reinsurance companies are in great shape, writing over $33 billion of premium worldwide. We continue to benefit from our scale and diversification through our decentralized insurance operations supported by the deep expertise and long tenure of our presidents and the leadership teams across our insurance and reinsurance businesses.

As we have said before, we can see our consolidated operating income for the next number of years at $5 billion, of course, no guarantees, and this consists of $1.5 billion of underwriting profit, interest and dividend income of $2.5 billion and $1 billion income from our associates and noninsurance consolidated income. On February 17, 2026, it was announced Kennedy Wilson entered into a definitive merger agreement pursuant to which they will be acquired in an all-cash transaction by a consortium led by Bill McMorrow, Chairman and Chief Executive Officer of Kennedy Wilson; certain other senior executives and together with Fairfax. Under the merger agreement, the consortium will acquire all outstanding shares of Kennedy Wilson not already owned by members of the consortium for $10.90 per share in cash.

The per share purchase price represents a 46% premium to Kennedy Wilson’s unaffective share price as of November 4, 2025. The last trading day prior to Kennedy Wilson receiving and publicly disclosing the consortium’s proposal. Fairfax has committed to provide the consortium with funding up to an aggregate amount of $1.65 billion, which is the amount necessary to fund the cash purchase price and the redemption of certain preferred shares and other expenses. Bill McMorrow will have effective control and will continue to lead and have ultimate responsibility for the company while Fairfax will have a majority economic interest in the company. The transaction is subject to customary closing conditions, including shareholder approvals and is expected to close in the second quarter of 2026.

I will now give you some additional detail on the components of our net earnings for the year. Our investment return for 2025 was outstanding with a return of 9.3%, driven by very stable interest and dividend income and associate earnings and a very strong year on net gains on our equity investments. Consolidated interest and dividend income of $2.6 billion was up $62 million year-over-year, benefiting from a growing investment portfolio offset by lower interest rates and decreased dividend income, primarily from a one-off dividend from Digit Insurance from its IPO in 2024. Net gains on investments of $3.2 billion for the year, we’re one of the highest ever in our history, driven by gains on our equity exposures of $3 billion, unrealized gains on our bond portfolio of $385 million, primarily from U.S. treasuries due to the decrease in interest rates during the year, offset by foreign exchange losses of $440 million, much of which was offset by foreign currency translation gains recorded in other comprehensive income.

Net gains of $3 billion on our equity and equity-related holdings were driven by realized gains and unrealized mark-to-market gains on investments with our major contributors being our Fairfax TRS, Orla Mining, a position we sold about half of our common shares or 1/4 of our interest including convertibles and warrants in the fourth quarter. Also, contributing with CIB Bank and Metlen Energy. We have always said, and please remember, our net gains or losses on investments only makes sense over the long-term and will fluctuate from quarter-to-quarter or for that matter, year-to-year. More on investments from Wade. As mentioned in previous quarters, our book value per share of $1,260 does not include unrealized gains or losses in our equity accounted investments and our consolidated investments, which are not mark-to-market.

At the end of the year, the fair value of these securities is in excess of carrying value by $3.1 billion, an unrealized gain position or $150 per share on a pretax basis. This increased from $1.5 billion or $68 per share last year. In 2025, changes in discount rates resulted in a pretax loss of $59 million, with net gains on bonds of $385 million offset by a loss on net reserves of $444 million. This compares to a pretax loss of $530 million in 2024 with bond losses of $731 million offset by a benefit of $201 million on net reserves. Our insurance and reinsurance businesses wrote $33.3 billion of gross premium in 2025, an all-time high, up 2.3% or $750 million versus 2024. Our North American Insurance segment increased gross premiums by $468 million in 2025 or 5.3%.

Crum & Forster had growth of 9.5%, driven by its accident and health business and surplus in specialty lines. Zenith premiums were up 6.5% year-over-year due to positive rate in workers’ compensation business, primarily in California, its complementary P&C business and new business in its large account segment. Northbridge’s premiums were down 2.6% in Canadian dollars with planned reductions in its personal lines business and in transportation. Their customer retentions continue to remain strong, benefiting from strong customer service. Our global insurer and reinsurer segment, gross premium was up 2.4%, with gross premiums of $17.6 billion in 2025, up $412 million year-over-year. Brit’s gross premium was up 3.8% for the year primarily from Brit Re and growth in high-margin classes, including property, financial lines and marine business.

On a net basis, Brit’s premium was up 4.2% and retaining a greater share of profitable business. Allied World was up 3.3% for the year with gross premiums of $7.4 billion, with each of their operating segments growing with the reinsurance segment up 6.5%, its global markets up 4.7% and North American insurance was up 1%. Odyssey Group’s premiums were flat in 2025 with gross written premium of $6.3 billion. Its insurance business was down 4.8% principally from targeted decreases at Hudson in its crop and financial lines of business, while reinsurance was up 3.9%, mainly property business, in the United States, including reinstatement premiums from the California wildfires. Ki, their premium was up 3.8%, primarily on property lines, offset by open market businesses.

And our international insurance and reinsurance operations gross premium $6.4 billion in 2025 versus $6.5 billion in 2024. The decline was primarily from Gulf Insurance due to the decrease in health insurance business in its operations in Kuwait. Excluding Gulf Insurance, our international operations premiums were up almost 8%. Fairfax Asia, led by Singapore Re, Colonnade in Eastern Europe, Bryte Insurance in South Africa, our Ukrainian companies, ARX and Universalna and Polish Re all had double-digit growth in the year. A very nice diversified platform that is growing profitably. Our international operations write a significant amount of premium at $6.4 billion. This is bigger than the whole of Fairfax only 15 years ago. We continue to be excited about the prospects for our international operations, and we expect it will be a significant source of growth over time, driven by excellent management teams that are more and more collaborating among themselves and leveraging the strength of Fairfax.

On the underwriting front, we had a very strong end to the year with a fourth quarter combined ratio of 88.6% producing an underwriting profit of $753 million. Focusing on the full year, our combined ratio was 93.0% on an undiscounted basis, producing record underwriting profit of $1.8 billion. The combined ratio included catastrophe losses of $1.2 billion, adding 4.8 combined ratio points, primarily from the California wildfires in the first quarter of 2025, Hurricane Melissa in the fourth quarter and other attritional losses. This compares to a combined ratio of 92.7%, underwriting profit of just under $1.8 billion and catastrophe losses up 4.5 points in 2024. As our premium base has expanded and with the benefits of diversification, we expect to be able to absorb significant catastrophe losses within our underlying underwriting profit.

For the full year 2025, our global insurers and reinsurers posted a combined ratio of 92.1%, led by Allied World with a combined ratio of 89.3% and an underwriting profit for Allied of $546 million, the largest underwriting profit among all our companies. Odyssey Group had another solid year, producing a combined ratio of 93.8% with underwriting income of $375 million. These results include 11 points of catastrophe losses, primarily from the California wildfire losses in the first quarter of 2025. Of all our company’s Odyssey felt the effects of catastrophe losses the most this year, not unexpected. Brit continues to produce excellent results with $183 million of underwriting profit and a third year in a row of sub-95 combined ratio at 92.7%.

Ki had a combined ratio of 95.7% with an underwriting profit of $33 million in its first full year reporting as a separate company from Brit. These results were affected by separation costs of 4.4 combined ratio points excluding these nonrecurring costs, the combined ratio would have been in the low 90s, an excellent year for Ki. Our North American insurers had a combined ratio of 93.8% in 2025, very similar to its combined ratio in 2024. Northbridge had the lowest combined ratio of all our major companies with an 88.7% and underwriting income of $238 million. Crum & Forster continues to grow profitably with a combined ratio of 94.8% and an all-time record underwriting profit for them at $236 million. Zenith, our workers’ compensation specialist had a combined ratio of 102% managing multiple years of price decreases in that line of business, although now trending in the right direction.

Our international operations delivered a combined ratio of 94.7% for the year. Fairfax Asia led the way with a combined ratio of 90.3%, led by Singapore Re, offset by elevated combined ratios at Fairfirst in Srilanka that were affected by Cyclone Ditwah late in the year and Falcon Thailand who suffered 2 major catastrophes in the year. Our operations in South America had an excellent year at 94.5% combined with all its operations producing underwriting profit led by Southbridge in Chile and Fairfax Brazil. Colonnade who write business across Eastern Europe had a great year with underwriting profit of $23 million, more than double the previous year and Polish Re had an excellent year with record underwriting profit and a combined ratio of 94.5%.

Bryte in South Africa, for the second year in a row, posted a combined ratio below 95% at 92.2%. Eurolife’s non-life operations in Greece had a small underwriting profit at 100.5%, reflecting a very competitive environment, especially in its motor business. And finally, Gulf insurance was back to underwriting profitability in 2025 with a combined ratio of 96.5% and underwriting profit of $53 million. Our international operations diversified across the globe wrote $6.4 billion of gross premium and produced $219 million of underwriting profit. This is a 5x increase over the last 5 years. You can see why we are very excited about our international operations. For the year, our insurance and reinsurance companies recorded favorable reserve development of $752 million or a benefit of 2.9 points on our combined ratio.

This is compared to $594 million or the benefit of 2.4 points in 2024. This is the 19th consecutive year our insurance and reinsurance operations have had favorable reserve development, amounting over that time period cumulatively to $6.9 billion. We have a strong reserving philosophy and are focused on setting our ongoing reserves at conservative levels, especially on long tail lines of business. Offsetting this, our runoff operations strengthened reserves by $298 million as part of their annual actuarial reserve process. The strengthening related primarily to latent liabilities due to the continued increases in litigation activity. Through our decentralized operations, our insurance and reinsurance companies continue to thrive writing close to $33 billion in gross premium, producing record underwriting profit and as we’ve said before, led by our exceptional management team.

Our companies are positioned very well to continue capitalizing on their opportunities in their respective markets in 2026. I will now pass the call to Wade Burton, our President and Chief Investment Officer of Hamblin Watsa to comment on our investment.

Wade Burton: Thank you, Peter. Good morning. Our investment portfolios ended the quarter at USD 74.9 billion. Of the $74.9 billion, $50 billion was invested in fixed income and $24.9 billion stocks, investment in associates, LPs and preferreds. The $50 billion in fixed income is earning a very nice yield of 5% despite being very short duration and mostly invested in government bonds. We’re playing it safe with spreads at lows and uncertainty around inflation numbers, yet earning good money while we do that. We’re keeping a close eye on inflation, treasury actions, fed funds rate, GDP growth and corporate profitability, both in the U.S. and globally. If there’s one thing our fixed income group has proven is that it has the ability to act quickly when the time is right.

It’s really a core competitive advantage throughout our investment group. When we feel the time is right, we will act. For now, we’re playing it safe in fixed income. All of our top holdings on the $24.9 billion of equity and equity-like investments had good years in 2025. Eurobank, Atlas, Recipe, Fairfax India, Metlen, Sleep Country, EXCO peak achievements are all in great shape, all earning their cost of capital and all beautifully run by people we like and trust. These top holdings are a very large percentage of our equity and equity-like investments and they’re making our jobs easy. We’ve added a new stock to our portfolios. The company is called Under Armour, headed and run by Kevin Plank. Kevin, as a youth was a college level football player and saw an opportunity to make better athletic wear for under equipment.

He started Under Armour in his garage in 1996. By 2001, revenues were $50 million, 2005, they were $280 million and in 2017, the company reached $5 billion in sales, profits every year through 2017. 2017 through 2025 were what we would call the lean years. restructuring charges, new CEOs, lawsuits increased SKUs, lower product prices and lower margins. The stock went from as high as in the $50s to as low as in the $4s. Kevin stepped down as CEO in 2020; and finally, took back the role of CEO in 2024. He is refocusing the company on product development, marketing and brand development and reducing SKUs. This is exactly the right plan for the long run. costly and lumpy, and the stock market sometimes doesn’t have the patience for that. We can see that they have the balance sheet, the focus and the discipline to turn the company around.

And at Fairfax, we focus on the long run. So the lumpiness creates an opportunity for us to take advantage of. With a founder, we are so excited to have running this business. Lastly, you will have seen post year-end 2025 we are taking our long-time partner, Kennedy Wilson Private, buying out minority shareholders at $10.90 a share. Three points on this. One, we have had a long-standing and very profitable relationship with Bill McMorrow, Matt Windisch and the team at Kennedy Wilson from mortgages to LP investments to investments in their shares. Two, Kennedy Wilson has world-class capabilities underwriting real estate. Having this capability in-house at Fairfax has a huge long-term benefit for Fairfax shareholders. Three, the cultural fit between Kennedy Wilson and Fairfax is outstanding.

Over the last 16 years, we developed a deep-seated friendship built on respect and openness and striving for excellence, all while treating people well. Overall, 2025 was an outstanding year on the investment side and we are in great shape to weather any coming storms and to take advantage of opportunities. And with that, I will pass it to Amy Sherk, our CFO.

Amy Sherk: Thank you, Wade. I’ll begin my comments by discussing our noninsurance company results in the fourth quarter and full year of 2025. Noninsurance companies reported an operating income of $101 million in the fourth quarter of 2025 compared to $150 million in the fourth quarter of 2024. Operating income of the noninsurance companies increased to $397 million in the full year of 2025 from $241 million in 2024 despite a primarily noncash impairment charge recorded at Boat Rocker Media of $109 million in 2025 before the company deconsolidated Boat Rocker on August 1. The increase in operating income in 2025 primarily reflected the acquisition of Sleep Country on October 1, 2024, and the consolidation of Peak Achievement on December 20, 2024, which recorded operating income of $92 million and $103 million, respectively, in the full year of 2025.

Looking at our share of profit from investments in associates in the first — in the fourth quarter and full year of 2025, we continue to report strong consolidated share of profit of associates of $252 million in the fourth quarter of 2025 principally related to share of profit of $123 million from Eurobank, $70 million from Poseidon and $34 million from EXCO Resources. In the full year of 2025, consolidated share of profit of associates was $816 million, principally reflecting share of profit of $474 million from Eurobank, $287 million from Poseidon, $55 million from Go Digit and $53 million from EXCO Resources, partially offset by share loss of $65 million from Waterous Fund 3 and $45 million from Fairfax India’s investment in Sanmar Chemicals.

The decreased share of profit of associates of $816 million in 2025 compared to $956 million in 2024, primarily reflected the company’s consolidation of Peak Achievement on December 20, 2024, and its sale of Sigma on March 28, 2025. Peak Achievement and Sigma contributed $57 million and $34 million, respectively, to our share of profit of associates in the full year of 2024. A few comments on our transactions for the quarter. Pursuant to the company’s previously announced proposed sale of its Eurolife Life operations to Eurobank, at December 31, 2025, the company had classified assets of $3.4 billion and liabilities of $3.6 billion related to Eurolife Life operations as held for sale in our consolidated balance sheet. The current estimated pretax gain on closing is approximately $350 million.

Prior to closing, the company will purchase certain investments held by the Eurolife Life operations which will affect the game ultimately realized on the sale. The proposed transactions are subject to entry into definitive agreements and customary closing conditions and are expected to close in the second quarter of 2026. Subsequent to December 31, 2025, on February 5, 2026, AGT filed an amended and restated preliminary prospectus with Canadian Securities regulatory authorities for a proposed CAD 460 million initial public offering and secondary offering of its common shares of $425 million as a treasury issuance and $35 million in the secondary sale with an expected price range between CAD 26 and CAD 30 per common share. Both Fairfax and AGT’s CEO are not selling any common shares in the offering.

Subsequent to AGT’s initial public offering, the company expects to have directly or indirectly an equity interest in AGT of approximately 51% to 53%. A few words on our IFRS 17 results. The company’s consolidated statement of earnings in the fourth quarter and full year of 2025 were also impacted by changes in interest rates and specifically the effects it had on discounting on prior year net losses on claims and our fixed income portfolio. Net earnings of $1.2 billion and $4.8 billion in the fourth quarter and full year of 2025 included a net benefit of only $9 million and a net loss of $59 million, reflecting the effects of changes in interest rates during the quarter and for the full year of 2025. The net benefit in the fourth quarter comprised of a net benefit on insurance contracts and reinsurance contracts held of $42 million and net losses on bonds of $34 million.

The net loss for the full year was comprised of a net loss on insurance contracts and reinsurance contracts held of $444 million and net gains on bonds of $385 million. Comparatively, net earnings of $1.2 billion and $3.9 billion in the fourth quarter and full year of 2024 included net losses of $438 million and $530 million, respectively, reflecting the changes — the effects of changes in interest rates. The net losses in the fourth quarter and full year of 2024 comprised of net losses on bonds of $1.1 billion and $731 million, partially offset by the net benefits of insurance contracts and reinsurance contracts held of $613 million and $201 million, respectively. When you compare the year-over-year change in interest rates on a pretax basis for the quarter and year, the changes resulted in an approximate $446 million and $471 million positive movement in our pretax earnings.

This demonstrates our general expectation that our interest rate risk is now partially mitigated. I will close with a few comments on our financial condition. Maintaining an emphasis on financial soundness at December 31, 2025, the company held $2.7 billion of cash and investments at the holding company, had access to our $2 billion unsecured revolving credit facility, an additional $2.2 billion at fair value of investments in associates and consolidated noninsurance companies owned by the holding company. Holding company cash and investments support the company’s decentralized structure and enable the company to deploy capital efficiently to its insurance and reinsurance companies. At December 31, 2025, the excess of fair value over carrying value of investments in noninsurance associates and market-traded consolidated noninsurance subsidiaries was $3.1 billion compared to $1.5 billion at December 31, 2024, with $1.4 billion of that increase related to an increase in the publicly traded market price of Eurobank.

The pretax excess of $3.1 billion is not reflected in the company’s book value per basic share, but is regularly reviewed by management as an indicator of investment performance. The company’s total debt to total capital ratio, excluding noninsurance companies, increased to 26.2% at December 31, 2025, compared to 24.8% at December 31, 2024. This primarily reflected increased total debt and redemption of the company’s Series E, F, G, H and M preferred shares, partially offset by increased common shareholders’ equity. On the redemption of our Canadian dollar-denominated preferred shares in 2025, we recognized a gain of $187 million in equity on the favorable foreign exchange movement. Common shareholders’ equity increased by approximately $3.3 billion to $26.3 billion at December 31, up from $23 billion at December 31, 2024, primarily reflecting net earnings attributable to shareholders of Fairfax of $4.8 billion and other comprehensive income of $425 million, primarily related to unrealized foreign currency translation gains net of hedges, as a result of the strengthening of foreign currencies against the U.S. dollar, partially offset by purchases of just over 1 million subordinate voting shares for cancellation for a cash consideration of $1.6 billion or $1,614.69 per share.

And payments of common and preferred share dividends totaling $368 million. Subsequent to December 31, 2025, the company has purchased another 130,573 of its subordinate voting shares for cancellation at an aggregate cost of $220 million or $1,684.70 per share. In closing, book value per basic share was $1,260 at December 31, 2025, compared to $1,060 at December 31, 2024, representing an increase per basic share in the full year of 2025 at 20.5% adjusted for our $15 per common share dividend paid in the first quarter. That concludes my remarks, and I will now turn the call back to Peter.

Peter Clarke: Thank you, Amy. We are now happy to take any questions that you might have. Denise?

Q&A Session

Operator: [Operator Instructions] Our first question comes from Stephen Boland with Raymond James.

Stephen Boland: Just maybe discussion around some of the premium declines we saw Q4 over Q4 softness, competition within certain business lines? And is there any difference between what you’re seeing in North America and the global insurers?

Peter Clarke: Sure. Thanks, Stephen. In the fourth quarter, we continue to see softening rates across our companies and that’s making it a little more challenging to grow. But as we said in the past, all our companies are focused on underwriting profit and discipline. We have no incentives to grow the top line throughout the group. But we do benefit greatly from our diversified operations by geography and by product. And the wide variety of the markets and segments of our — that our companies participate in allow us to grow in more attractive areas while curtailing activity and more and less attractive ones. This is a significant strength for us. At a high level, we saw price increases in the low single-digit level with higher price increases in the casualty lines and declines in property, D&O and cyber.

The property catastrophe business, especially on the reinsurance side, we are seeing the most pressure on pricing, but again, that’s coming from very strong margins. In Canada, in Northbridge, we’ve seen pricing up about 2% in the year. You may know, we — the personal lines are probably up closer to 9%, 10%, but that’s not a big part of our business. Crum & Forster is about 5.5%. Odyssey with more of their premium coming from the reinsurance side, it’s flat to 2% — and then in Lloyd’s, we’re seeing probably the most pricing pressure at Brit and Ki pricing is down about 5%. And then Allied World, they’re about flat or up 1%. On the international side, it varies across the group. But in a lot of those markets, the pricing tends to be a little less cyclical than in the North American market.

But one thing, though, when our pricing — when pricing levels aren’t there, premium isn’t growing. This frees up capital for us, and then capital allocation becomes very important. Historically, we have allocated capital very well, and we continue to have many attractive opportunities to deploy it. This includes buying back our own stock, as we’ve said before, buying minority interest in our own companies or investing as we have been in very good companies, our associates and our noninsurance consolidated companies like a Sleep Country or a Peak. So — we think we have a lot of great opportunity. As I said, the market, we still see softening. But within Fairfax, we have many different sources of earnings, and we can benefit from that.

Operator: Next question comes from Tom MacKinnon with BMO Capital Markets.

Tom MacKinnon: I asked this question maybe a little over a year ago, but sort of the tax rate outlook going forward. And the answer I got was between ’22 and ’25. Now in 2024, it was 24%, but in 2025, it was 18%. So I’ll ask the question again about a tax rate outlook going forward and why the — why was 2025 different than sort of that outlook you provided a little more than a year ago. And what is your outlook for it going forward?

Peter Clarke: Yes, there’s a lot of activity on the tax side and our tax people in Canada and the United States have been extremely busy you might have known as the Pillar Two tax that has been coming through. And in Canada, we have the EFILE taxes. But Amy, do you want to comment a little bit more on the specifics.

Amy Sherk: Sure. Thanks, Peter, and thanks for the question, Tom. We would continue to give the advice that was given last year, which is an appropriate range for our effective tax rate every year going forward. This year, we had something going through that were unique. One of them would be that we had some significant unrealized mark-to-market gains in India. And those gains attract the capital gains rate that is significantly lower than the 26.5% statutory rate here in Canada. So that was a big driver. There has also been a lot of action by domestic governments in terms of introducing their own minimum tax rate. And with that come some tax impact here in Canada when we look at our global minimum tax or Pillar Two tax. So those were really the big drivers this year that lowered our tax rate. But I think the advice provided last year still remains to be true.

Peter Clarke: Thanks, Amy. Yes. As you know, Tom, we’re right across the world. So it really depends where our earnings come from, and that can affect the ultimate tax rate that we pay. Next question please.

Operator: That comes from Bart Dziarski with RBC Capital Markets.

Bart Dziarski: Great. And my question, I guess. So your underwriting income for the year was about $1.8 billion. That’s 2 years in a row now of $1.8 billion. I know you’ve got the 1.5-plus guidance. So just how are you thinking about that guidance going forward? I heard your commentary around the softening pricing but we’re also seeing your earnings through the cat losses and you’ve got favorable releases. So putting it all together, I just wanted to your outlook there on the underwriting income guide.

Peter Clarke: Sure. Yes. No, we’re still — we still target $1.5 billion of underwriting profit. That’s what we’re looking for. You’re right. In the last 2 years, it’s been a little higher than that 1 point — a little less than $1.8 billion in 2024, a little more than $1.8 billion in 2025. But generally speaking, the cat losses have also been relatively benign or as expected. We haven’t had any major catastrophes. With that said, with our premium base the way it is, we are able to absorb significant amount of catastrophes now versus, if you look 10, 15 years ago. But we’re just trying to be conservative. We think our reserves are extremely strong. We just came through a hard market. And as I said in my opening remarks, we’ve had 19 years of favorable reserve development.

I think that we have a great process in place for setting our reserves throughout the group. It’s all done at the local levels with oversight at the Fairfax holding company and good process in place. So I think the $1.5 billion is a good point. Next question please.

Operator: The next question comes from Jaeme Gloyn with National Bank Capital Markets.

Jaeme Gloyn: Just wanted to go back to the premium growth discussion and maybe get a little bit more nuance on 2 particular business lines. So one would be the Odyssey Group down in the fourth quarter, 10%. And then the offset would be Crum & Forster, up 27% in the fourth quarter on gross premiums written. Can you sort of dig into those 2? Is this a little bit more as to what was driving some of those results either new business or on nonrenewed accounts, something like that, that could be driving some more outsized performance than just price.

Peter Clarke: Sure. And I think when you look at it, if you look at our premium volume by quarter, typically, Jaeme, the fourth quarter is by far the lowest. The first quarter is usually the highest when we write most of our business. So you’re coming off a smaller base. So we don’t put a lot of — we don’t look a lot on a quarter-to-quarter basis. But for Crum & Forster, premium was up, and it’s really on their specialty lines of business, which are less price-sensitive. And in Crum, it’s really the A&H division there — they’ve been growing. They’ve — through Gary McGeddy, they have an outstanding specialty there, and they’ve been growing not only in the United States, but taking their A&H business internationally. So that’s a big driver there.

On Odyssey, it would probably — it’s more on the reinsurance side. Again, it’s a fourth quarter, not a kind of business is written. It’s more 1/1. And so any fluctuations there make the percentage change little emphasize. So I would say those are the 2 main things. Next question, please.

Operator: That comes from Daniel Baldini with Oberon Asset Management.

Daniel Baldini: Thanks for the wonderful results. So with that said, my question is there any end in sight to these losses from the runoff business? You’ve disclosed them separately for, I believe, the last 10 years. And when I add them up, it comes to almost $1.6 billion. Now I understand that there are reserves associated with this business, and they produce investment gains. But I can’t imagine that when you sort of entered into these deals, you expected losses of this magnitude. So a little bit of color there would be great.

Peter Clarke: Sure. Good question. A lot of these liabilities, we inherited through acquisitions back in the late ’90s, early 2000s. And they’re really latent liabilities. There are asbestos environmental pollution claims. And we have a specialized team that we’ve segregated these claims, and they’re focused on it. We would — I would say, personally, they’re best-in-class. They’ve been managing these liabilities for a long time. But they’re very difficult claims. And as — in the United States, it’s very litigious, and there is continuing, especially on the asbestos front, some of these claims are 30, 40 years old, and we’re — we look at them every year. Typically, you can’t use general actuarial techniques to come up with the reserves. So it’s a matter of reacting to what happens.

Operator: Please stand by. The conference will continue in just 1 moment. We did have a technical issue.

Peter Clarke: Hi, Denise.

Operator: Yes, sir, you may continue. Thank you.

Peter Clarke: Sorry about that. We had a small disconnection, but we’re ready to take more questions. Next question please.

Operator: The next question comes from David Erb with Merrion Investment Management.

David Erb: You have — Fairfax has roughly $1 billion investment in Fairfax India at current pricing, I believe. And within Fairfax India, roughly half the portfolio is the airport investment BIAL. There’s been a little bit of discussion historically about taking BIAL getting in a public listing. And I’m just curious if you could provide an update on that progress.

Peter Clarke: Sure. No. I think that’s more of a Fairfax India question. But yes, the Bangalore Airport is a significant investment for Fairfax India. And one, obviously, we’re very excited about I know they are in the process of having conversations with the regulators and — but there’s not a lot more that I can say on the IPO process. Thank you, though, for the question and next question please.

Operator: Next question is from Tom MacKinnon with BMO Capital Markets.

Tom MacKinnon: Yes. With respect to the Eurolife transaction, $3.4 billion in assets, I assume then are not part of your general fund anymore. Do I have that correct? And where would we see — presumably, you’re making investments, interest and dividend income on those assets? So where would we see the — would there be a decline in interest and dividend income going forward with respect to losing those $3.4 billion in assets? And where would that be? Would that be in your interest in dividend income? Or would that be in your — I’m just trying to figure out what line would that be in your life and runoff business. Where would that show up?

Peter Clarke: So the majority of that would be in our life and runoff business. The P&C business is remaining with us. So that’s going to continue. And Tom, we’re going to get approximately $950 million for the Life business. And eventually, we’ll deploy that and that will create earnings off that as well. But generally speaking, yes, it’s the interest and dividend income will come off the life and runoff segment. Amy, anything to add?

Amy Sherk: The only thing I would add is that held-for-sale accounting means that we just have one line on our balance sheet for the held for sale assets in one line for the held-for-sale liabilities. And we continue to mark-to-market those investments and record any income earned on those investments until the transaction is closed.

Peter Clarke: Thank you, Amy, and thank you, Tom. Next question please.

Operator: Next question comes from Jaeme Gloyn with National Bank Capital Markets.

Jaeme Gloyn: Just wanted to go back to the capital deployment and you mentioned you had capital freed up here with the stock market. So buybacks have been fairly active over Q4 and now year-to-date. So maybe talk through how you’re looking at buybacks in the next few months here through 2026. The timing of that minority interest and you can just refresh that? And what does the total return swap, how does that factor into your capital deployment plans?

Peter Clarke: Sure. Well, I guess, like I said, with the premiums flattening off, it does produce — it can produce excess capital at our insurance operations that would produce more dividends up to the holding company. First and foremost, our financial strength that we always said is that’s our #1 key, and that’s to have significant cash in the holding company. We don’t want any long-term — any debt maturities for the foreseeable future and then our line of credit. So financial strength is #1. Number 2 is, like you said, we’ve been buying back our own stock at these prices, we think we’re pleased to do that. We always look at what the intrinsic value is, and that factors into our capital allocation decision-making. On the Fairfax TRS, we’ve always said that, that’s an investment.

We continue to believe it’s a very good investment. So we continue to hold that. And buying back Allied and Odyssey, I think, again, both companies, we know very well. They’re both performing exceptionally well. So we’d like to do that over time as well. And so those are really the things we’re looking at today, always subject to change, of course, Jaeme. But thank you. And next question please.

Operator: The next question comes from Bart Dziarski with RBC Capital Markets.

Bart Dziarski: Maybe a question for Wade on the investment book. So we’re seeing quite a dislocation in markets today. And so are you thinking about maybe shifting some of the positions, taking advantage and being opportunistic in this environment? I’d love to get some color on that.

Wade Burton: I guess I would say we have a very robust skilled investment team, and we’re constantly looking at all securities. We underwrite for 15%. And as you say, I mean, you’re talking about the software and AI, but we’re working very hard. And anytime we uncover any opportunities, we will act. So that’s what I’d say. We’re watching it all very closely, as you can imagine.

Peter Clarke: Thank you, Bart. Next question please.

Operator: Next question comes from [ Dio Kerathalas ] with a private investor.

Unknown Attendee: How are you balancing share repurchases versus holding company liquidity? And what valuation trigger would make you significantly more aggressive on buybacks?

Peter Clarke: That’s a difficult question. Again, we always — we discussed it internally all the time. We have many options, right, that with excess capital, with excess dividends coming up. And all I really can say at these prices today, we continue to buy back our stock. We did a significant amount last year. And — but going forward, things change, and we just — we are constantly evaluating that and very difficult to put a number on it. But thank you for your question. And we’ll take one more question, please.

Operator: And the final question does come from Benjamin Graham Sanderson, he’s an individual investor.

Unknown Attendee: New shareholders still getting aligned with the way you guys think loving it so far. You guys seem like risk of masters and I’m very much enjoying reading back your history and current actions going forward. Question is a very broad one. What currently are the biggest systemic risk you see to the Fairfax system and both in insurance and investments, how are you approaching that to mitigate them? And specifically, how does that relate to the Kennedy Wilson partnership? How does that partnership derisk the system, if at all?

Peter Clarke: No. Thank you very much. Yes. No, I think there’s — there’s 2 things in this business, and it’s the — we have the insurance operations. And what we’ve built over the last 40 years, I think is quite substantial, very difficult to replicate. We have essentially 25 separate insurance companies writing $33 billion across the globe. And but — and some of the best insurance professionals running these companies, on average, our CEOs and Presidents have almost 20 years’ experience and that includes last year, we had a succession of 5 separate CEOs that went seamlessly. We always concerned on the insurance side, on the catastrophe exposure, which we monitor constantly and of course, reserves. And again, we have a very strong track record on the reserving side.

On the investment side, we’ve had a long-term track record there. I think the investment philosophy of value investing serves us very well with protection on the downside and that’s been a significant strength over time. On Kennedy-Wilson, we’re just — we have a 12-year or 16-year I guess, relationship with Kennedy-Wilson. They’ve effectively managed our real estate and mortgage business over that time period and has provided us with outstanding returns. And we don’t have that capability, at least that size and scale in-house. So we’re very excited of what they bring to the table and looking very forward to working with them going forward. So thank you for your question. And if there’s no more questions, I’ll pass it back to Denise.

Operator: That does conclude today’s conference call. We appreciate all of you dialing in for this call. Have a wonderful day and weekend. You may disconnect. Thank you.

Peter Clarke: Thanks.