Earnings call transcript: Fairfax Financial surpasses Q1 2025 expectations

Fairfax Financial Holdings reported impressive first-quarter results for 2025, significantly surpassing analysts’ expectations. The company achieved an earnings per share (EPS) of $42.70, well above the forecasted $29.27. Revenue also exceeded predictions, coming in at 8.47 billion dollars against an expected 8.36 billion dollars. According to InvestingPro, the company maintains a "FAIR" overall financial health score of 2.26 out of 5, with particularly strong marks in profit and relative value metrics. Despite substantial losses from California wildfires, Fairfax’s stock price rose by 1.71 points, or 0.08%, in after-hours trading, closing at 2,154.01 dollars.

Key Takeaways

• Fairfax Financial’s EPS exceeded expectations by 45.9%.
• Revenue growth was driven by a 5% increase in gross premiums.
• Strong investment performance with net gains of 1.6 billion dollars.
• The company maintained profitability despite significant catastrophe losses.
• Stock price increased slightly, reflecting investor confidence.

Company Performance

Fairfax Financial demonstrated robust performance in Q1 2025, with net earnings climbing to 946 million dollars, a notable rise from 777 million dollars in the same period last year. The company reported a consolidated investment return of 2.7% and an increase in interest and dividend income to 607 million dollars. InvestingPro data shows the company has maintained dividend payments for 24 consecutive years, with a current dividend yield of 4.15%. Despite the challenges posed by California wildfires, Fairfax achieved an underwriting profit of 97 million dollars, underscoring its resilience and effective risk management.

Financial Highlights

• Revenue: 8.47 billion dollars, up from 8.36 billion dollars forecasted.
• Earnings per share: 42.70 dollars, exceeding the 29.27 dollars forecast.
• Net gains on investments: 1.6 billion dollars.
• Book value per share: 1,080 dollars, adjusted for a 15-dollar dividend.
• Gross premiums: Increased by 5% to 8.4 billion dollars.

Earnings vs. Forecast

Fairfax Financial’s EPS of 42.70 dollars was a substantial 45.9% above the forecasted 29.27 dollars, marking a significant earnings beat. The revenue of 8.47 billion dollars also surpassed expectations by 110 million dollars, reflecting effective operational strategies and strong market demand.

Market Reaction

Following the earnings announcement, Fairfax Financial’s stock experienced a modest increase of 1.71 points, or 0.08%, closing at 2,154.01 dollars. This movement suggests a cautious yet positive investor sentiment, as the stock remains near its 52-week high, indicating confidence in the company’s future prospects. InvestingPro analysis indicates the stock is currently fairly valued based on their proprietary Fair Value model. For deeper insights, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers, covering this and 1,400+ other top US stocks.

Outlook & Guidance

Fairfax Financial remains optimistic about its international operations’ long-term growth, particularly in Asia, where premiums rose by 16%. The company is focused on conservative reserve setting and is well-positioned to capitalize on market opportunities throughout 2025. Future guidance projects continued growth in gross premiums and investment returns.

Executive Commentary

Peter Clark, President and COO, emphasized the strength of Fairfax’s decentralized operations, stating, "Through our decentralized operations, our insurance and reinsurance companies continue to thrive." Wade Burton, Chief Investment Officer, remarked on Fairfax’s resilience, noting, "The worse it gets, the better they will perform over the long run."

Risks and Challenges

• Catastrophe losses from events like wildfires remain a significant risk.
• Global trade uncertainties could impact related segments.
• Market volatility may affect investment returns.
• Regulatory changes in key markets could pose challenges.
• Currency fluctuations may impact international operations.

Q&A

During the earnings call, analysts inquired about Fairfax’s strategy for handling wildfire losses and potential acquisitions. Executives expressed confidence in their risk management approach and mentioned the possibility of buying out minority interests in subsidiaries like Odyssey and Allied.

Full transcript - Fairfax Financial Holdings Ltd (FFH) Q1 2025:

Conference Operator: Good morning, and welcome to Fairfax’s twenty twenty five first quarter results conference call. Your lines have been placed in a listen only mode. The presentation, we will conduct listen mode. 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 Clark with opening remarks from mister Derek Bulas. Derek, please begin.

Derek Bulas, Unknown Executive, Fairfax Financial: Good morning, and welcome to our call to discuss Fairfax’s twenty twenty five first quarter 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 law. I’ll now turn the call over to our President and COO, Peter Clark.

Thank you, Derek. Good morning, and welcome to Fairfax’s twenty twenty five first quarter conference call. I plan to give you some highlights and then pass the call to Wade Burton, our President and Chief Investment Officer of Hambla Wassa to comment on investments and then Amy Schirke, our Chief Financial Officer, to provide some additional financial details. I’m very pleased to welcome Amy, who is joining us on our first conference call. We had a strong start to 2025 with net earnings of $946,000,000 in the first quarter, up from $777,000,000 in the quarter of twenty twenty four.

Operating income from our insurance and reinsurance companies adjusted to a non discounted basis and before risk margin was $686,000,000 in the first quarter of twenty twenty five, down from $977,000,000 in the first quarter of twenty twenty four. The decrease was from lower underwriting income due to California wildfire losses of $692,000,000 Despite the significant catastrophe losses in the quarter, $781,000,000 in total, our insurance and reinsurance operations produced an underwriting profit of 97,000,000 Our interest and dividend income was $6.00 $7,000,000 in the quarter, up from $590,000,000 in the first quarter of twenty twenty four, while our share of the profits of associates was flat at 129,000,000 Net gains on investments were very strong in the quarter at just over $1,000,000,000 All in, our book value per share increased to 1,080 in the first quarter of twenty twenty five, up by 3.5% adjusted for our $15 dividend. Our insurance and reinsurance companies are in great shape writing over $33,000,000,000 of annualized premium worldwide. We benefit greatly from our scale, diversification and exceptional talent and experience of our long serving presidents and teams that run our insurance and reinsurance companies, and nothing was more evident than that than this quarter.

I will now give you some additional detail on the components of our net earnings for the quarter. Our consolidated investment return was strong in the first quarter with a return of 2.7%, driven by increased interest and dividend income, stable profits of associates and strong net gains on investments. Consolidated interest and dividend income of $6.00 $7,000,000 was up 2.8% year over year, benefiting from a growing investment portfolio, partially offset by lower interest on the mortgage portfolio. Profits of associates of $129,000,000 in the quarter continues to be driven by Eurobank and Poseidon Corp, offset by losses on the waterfront from mark to market unrealized losses in its portfolio. In the quarter, we had net gains on investments of $1.6 driven by gains on our equity exposure of $780,000,000 gains on our bond portfolio of $388,000,000 primarily from U.

S. Treasuries due to the decrease in interest rates in the first quarter, and that was partially offset by losses on other investments of $112,000,000 primarily reflecting unrealized losses on our preferred shares and Digit. The net gains of $779,000,000 on our equity and equity related holdings were driven by realized gains and unrealized mark to market gains on Orla Mining, Sigma, our Fairfax TRS, offset by unrealized losses on IIFL Finance, Cleveland Cliffs and Kennedy Wilson. In the first quarter, we sold our position in Sigma and realized a gain of $179,000,000 Our original cost was $41,000,000 We have always said, and please remember, our net gains or losses on investments only make 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 $10.80 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 first quarter, the fair value of these securities is in excess of carrying value by $1,400,000,000 an unrealized gain position or $66 per share on a pretax basis. This is after realizing a gain on Sigma of $179,000,000 which was sold in the first quarter of twenty twenty five. In the first quarter, net earnings included $120,000,000 net unrealized gains due to decreasing interest rates in the period. This consisted of unrealized gains on our bond portfolio of $388,000,000 which I previously mentioned, offset by the negative impact of the decrease in interest rates on our insurance and reinsurance contracts held of $268,000,000 For the first quarter of twenty twenty four, this number was a net loss of 127,000,000 Our insurance and reinsurance businesses wrote 8,400,000,000.0 of gross premium in the first quarter of twenty twenty five, up 5% versus the first quarter of twenty twenty four.

Our North American insurance segment increased gross premiums by $138,000,000 in the first quarter of twenty twenty five or 6.7% over the first quarter of twenty twenty four. Crum and Forthurt continued to grow its specialty business with double digit growth of 12.8%, driven by its accident and health business, commercial and executive segment and surplus and specialty lines. Northbridge was up 1.9% in Canadian dollars, reflecting continued strong customer retention and continued rate increases, while Zenith premiums were down 1.8% over the first quarter of twenty twenty five due to the continued competitive workers’ compensation market. Our global insurer and reinsurer segment was up 7.8% with gross premiums of $4,700,000,000 in the first quarter of twenty twenty five over the first quarter of twenty twenty four. Allied World premium was up 7.8% in the quarter with growth premiums of almost $2,200,000,000 Their Reinsurance segment was up 17% from new and renewal business and reinstatement premium from the California wildfires.

Its global markets insurance premium was up 6% primarily from new business, while its North American insurance segment was down 2.1% primarily from the competitive program and cyber market. Odyssey Group’s premiums were up 7.9% in the quarter with gross premiums written at $1,500,000,000 Its reinsurance business was a driver of the growth, primarily in The United States, and it also benefited from the reinstatement premium on the California wildfire losses. Hudson premium was down with actions taken on its crop and health care lines of business. Gross gross premium was 781,000,000, up 7.4% in the first quarter of twenty twenty five versus the first quarter of twenty twenty four, primarily driven by increases in the Reinsurance segment and Property and Specialty business. Like Allied World and Odyssey, Brit also had additional premium in the first quarter from reinstatement premiums.

Beginning in 2025, fee insurance, and algorithmic follow on Lloyd’s syndicate developed within Brit was the was officially separated from Brit. He will operate as a stand alone company and will be reported separately going forward. With annual premiums approaching $1,000,000,000 Key was requiring more of Brits resources. And with a different business model, it was thought it would be beneficial for Brits and Key to split. In the first quarter of twenty twenty five, Key wrote $2.00 $4,000,000 of premium, up 9.5% from the first quarter of twenty twenty four.

Our international insurance and reinsurance operations gross premiums were 1,500,000,000.0 down 5.1% in the first quarter of twenty twenty five versus the first quarter of twenty twenty four. The decrease was driven by the nonrenewal of a significant contract at Gulf insurance that had been experiencing diminishing performance. On a net written premium basis, premium was up 7.7% as the effect of the nonrenewal had much less effect on a net basis. Excluding golf insurance, our international operations gross premiums were up 8% with Fairfax Asia up 16% driven by Singapore Re, while Bright and Polish Re also had strong growth in the quarter, up 1516%, respectively. Our international operations now make up approximately 20% of our total growth premium, and the long term prospects of our international operations are excellent and will be a significant source of growth over time, driven by excellent management teams, underpenetrated insurance markets and strong local economies.

The big driver affecting our underwriting results in the quarter was the California wildfire losses. In the quarter, we recorded $692,000,000 of net losses from the fires, which was within the range we previously disclosed on our year end conference call. The majority of the losses came from the reinsurance operations at Odyssey, Allied and Brit. The losses were absorbed by the first quarter cat margin and underwriting income, resulting in a consolidated combined ratio of 98.5% in the quarter. The ability to withstand such a large catastrophe loss in a quarter while still producing an underwriting profit in the quarter demonstrates the strength and scale of our insurance and reinsurance operations.

Our global insurers and reinsurers posted a combined ratio of just over 100%, which included the majority of our catastrophe consolidated catastrophe losses of in the quarter. Dollars $748,000,000 out of total catastrophe losses of $781,000,000 were within the global inter and reinsurer segment. Allied World had a combined ratio of 95.7, which included 15.3 points of catastrophe losses. BRIC’s combined ratio was 97.6 with 21.4 points of catastrophes. Key was 98.3 with eight points of cat, and Odyssey had the largest losses on the California wildfires posting a one zero five point eight combined ratio and included 29 points of catastrophe losses.

Our North American insurers had a combined ratio of 95.5 for the first quarter led by Northbridge with combined ratio of 92.1. Grumforter had an underwriting income of 50,000,000 or a combined ratio of 95.4, while Zenith, our workers’ compensation specialist, who are feeling the effects of multiple years of price decreases in the workers’ comp space had an elevated combined ratio of 106.3, representing an underwriting loss of $11,000,000 Our international operations delivered a combined ratio of 96.7 for the quarter. Fairfax Asia had a great start to the year with a combined ratio of 93.6 with all its companies producing an underwriting profit except for Falcon Thailand. Falcon Thailand had a combined ratio of 105.3, adversely affected by nine points of losses from the devastating earthquake in Myanmar that also affected Thailand. Latin America had a strong quarter with each of their companies coming in under 95%, producing a consolidated combined ratio of 94.1.

Column Aid, who writes business across Eastern Europe, had another great quarter at 91.3, and Bright in South Africa posted a 96.2. Gulf Insurance, the largest company in our international operations, had a combined ratio of 99.4 in the first quarter, negatively affected by the large losses in the quarter and the expense drag from the loss of a large contract in its Kuwait operations. We were confident they will return to their historical sub-ninety five underwriting results going forward. In the first quarter, our insurance and reinsurance companies recorded favorable reserve development of $219,000,000 for a benefit of 3.5 points on our combined ratio. Each of our major segments recorded favorable reserve development with releases primarily coming property business.

We are focused on setting our ongoing reserves at conservative levels, especially on long tail lines. Through our decentralized operations, our insurance and reinsurance companies continue to thrive, writing over $33,000,000,000 in annualized gross premium, strong underlying margins, and as we 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 2025. I will now pass the call to Wade Burton, our President and Chief Investment Officer of Ambula Wassa, to comment on our investments. Thank you, Peter, and good morning.

There’s volatility in stock markets, bond markets, the economy. The good news is Fairfax has historically benefited from volatility. And to end the first quarter of twenty twenty five, we think our stock and bond portfolios are in great shape for the environment we’re in. Here’s why. Starting with our $48,000,000,000 fixed income portfolio, 33,000,000,000 is in government treasuries with what we think is the right duration to lock in a significant amount of interest income, but short enough that we can capture the opportunity if rates move up.

Duration is three point three years, and book yield is 5.1%. Government bonds are the safest, most liquid, easiest to sell securities, and they are 70% of our fixed income portfolio. Second, out of the $69,000,000,000 investment portfolio, we have $5,900,000,000 invested in mark to market stocks, less than 10% of the total. And we think our stocks are, for the most part, cheap, financially sound and well positioned to weather any storm. Third, our associated and consolidated investments are carried at $10,000,000,000 so 14% of the total investment portfolio.

This includes 2,400,000,000.0 in Eurobank and 1,900,000,000.0 in Poseidon. Eurobank is very sound and cheap and run by a great CEO in Fukien Teradias, who also has a great team supporting him, including his right hand man, Kostas Sathabir. Greece is growing much faster than the EU average and has an outstanding government in place. Poseidon is a financial and operating company in the shipping business with long term contracts backed by financially strong customers with outstanding balance sheets. We believe we have great visibility into the earnings of these two holdings, which are almost 40% of associates and consolidated investments.

And like Fairfax itself, both companies generate a lot of capital. In 2024, net income of Eurobank was €1,500,000,000 and net income of Poseidon, six hundred million US dollars. A reminder, we own 32% of Eurobank and 43% of Poseidon. Both also have the same mindset as Fairfax in terms of benefiting from volatility. The worse it gets, the better they will perform over the long run.

Our outstanding investment team is on the lookout for opportunities and watching our investments closely. There is much apparent uncertainty coming from the tariff negotiations, and many companies are struggling with constantly changing numbers, tough to buy and price products with tariffs changing day to day. We’ve looked at our universe of investing companies under this view of uncertainty and think all will thrive over the long run. Our long term investment horizon and lack of call on our capital is a huge advantage in uncertain times. Lastly, we have a lot of cash.

We have $2,000,000,000 cash in investments at the holding company. We also have $8,000,000,000 in cash and short term treasuries at our operating companies. So to summarize, between the cash, the durability and capital production of our investee companies, the small percent of our portfolio in mark to market stocks and our very safe and high earning fixed income portfolio, we think we are in good shape to weather these uncertain times and then take advantage of them. I will now pass it over to Amy Schirk, our CFO.

Amy Schirke, Chief Financial Officer, Fairfax Financial: Thank you, Wade. I’ll begin my comments by discussing the impact changes in interest rates had on our consolidated statement of earnings in the first quarter of twenty twenty five, and specifically, the effects it had on discounting of prior year net losses on claims and our fixed income portfolio. Net earnings of $946,000,000 in the first quarter of twenty twenty five included a net benefit of $120,000,000 reflecting the effects of decreases in interest rates during the quarter, which was comprised of net gains on bonds of $388,000,000 primarily unrealized, that was partially offset by a net loss reported on insurance contracts and reinsurance contracts held of $268,000,000 Comparatively, net earnings of $777,000,000 in the first quarter of twenty twenty four included a net loss of $127,000,000 reflecting increases in interest rates, which was comprised of net losses on our bond portfolio of 319,000,000, primarily unrealized that was partially offset by a net benefit on insurance contracts and reinsurance contracts held of a hundred 92,000,000. When you compare the year over year change on a pretax basis, the changes in interest rates resulted in an approximate $250,000,000 movement in our pretax earnings. With the adoption of IFRS 17 generally, an increased decrease in interest rates will result in a decreased increase to the carrying value of both the company’s fixed income portfolio and net liability for incurred claims for insurance contracts.

While the change to the carrying value of each will not necessarily be equal in magnitude, when there is movement in interest rates, the impact on our company’s net earnings is mitigated. Please refer to Page 31 of the MD and A within the company’s interim consolidated financial statements for the first quarter of twenty twenty five for a table that presents the company’s total effects of discounting and risk adjustment on our net insurance liabilities and the effects of changes in interest rates on the company’s bond portfolio set out in a format the company believes assist in understanding the company’s net exposure to interest rate risk. A few comments on our noninsurance companies during the quarter. Noninsurance companies reported an operating loss in the first quarter of twenty twenty five of 41,000,000 compared to an operating income of 17,000,000 in the first quarter of twenty twenty four. Excluding non cash impairment charges recorded at Boat Rocker in relation to its recently announced strategic transaction with Blue Ant and certain members of the Boat Rocker management, the noninsurance companies reported stronger operating income in the first quarter of twenty twenty five compared to the first quarter of twenty twenty four, principally reflecting increased operating income at the restaurants and retail operating segment, primarily related to the consolidation of Sleep Country on 10/01/2024, and higher business volumes at Recipe.

A few comments on transactions within the quarter. On 03/23/2025, Boat Rocker entered into definitive agreements whereby Blue Ant will become a public company via a reverse takeover of Boat Rocker, pursuant to which Boat Rocker will acquire all shares of Blue Ant by exchanging 1.25 Boat Rocker shares for each share of Blue Ant. Concurrently, Boat Rocker will sell certain of its production and distribution assets to a privately owned company controlled by certain members of Boat Rocker’s management. As a result, Boat Rocker recorded impairment charges in the first quarter of twenty twenty five. Closing of the transaction is subject to various conditions and is expected to be in the second quarter of twenty twenty five.

Upon closing, the company expects to apply the equity method of accounting to its investment in the surviving company. On 03/28/2025, the company sold its equity interest in Sigma, a water and wastewater infrastructure business that the company accounted for under the equity method of accounting for a total consideration of 327,000,000 comprised of cash consideration of 284,000,000 and a retained ownership interest in Sigma through a new limited partnership interest of 16.1% with a fair value of 43,000,000 at closing. As a result, the company recorded a realized gain of a hundred and 79,000,000 in its consolidated statement of earnings and classified its 16.1% retained ownership interest at fair value through profit and loss. And during the first quarter, Recipe repurchased and canceled its common shares not owned by Fairfax, which increased Fairfax’s ownership interest in Recipe from 84 to 100%. Recipe increased its borrowings by a hundred and 32,000,000 to partially fund this repurchase.

Subsequent to 03/31/2025, on 04/21/2025, Quest spun off two of its subsidiaries in a noncash distribution to its shareholders. The company received one equity share of each of Digitized Solutions and Blue Spring Enterprises for every equity share of Quest is held. The company has recorded its investments in Digitized and Blue Spring at their respective fair values on the date of spin off, and we expect to apply the equity method of accounting to each and will continue to apply the equity method of accounting to our remaining investment in Quest. Digitide and Blue Spring are expected to become publicly listed in India during the second quarter of twenty twenty five. I will close with a few comments on our financial condition.

Maintaining an emphasis on financial soundness, at 03/31/2025, the company held $2,100,000,000 of cash and investments at the holding company, had 200,000,000 of its 2,000,000,000 unsecured revolving credit facility drawn to supplement short term holding company liquidity. And the holding company also continues to own additional investments and associates and consolidated non insurance companies with a fair value of approximately 1,700,000,000.0. Holding company cash and investments support the company’s decentralized structure and enable the company to deploy capital efficiently to its insurance and reinsurance operation. At 03/31/2025, the excess of fair value over carrying value of investments in non insurance associates and market traded consolidated non insurance subsidiaries was 1,400,000,000.0 compared to 1,500,000,000.0 at 12/31/2024. The pretax pretax excess of $1,400,000,000 is not reflected in the company’s book value per 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 25.3% at 03/31/2025 compared to 24.8% at 12/31/2024, primarily reflecting the company’s $200,000,000 draw on our revolving credit facility and redemption of all of Series F, E, M and M preferred shares, partially offset by increased shareholders’ equity. The preferred shares were redeemed for 419,000,000 Canadian or 291,000,000 US dollars, and we recognized a 61,000,000 foreign exchange gain in equity. Common shareholders’ equity increased by 356,000,000 to 23,300,000,000.0 at 03/31/2025 from 23,000,000,000 at 12/31/2024, primarily reflecting net earnings attributable to shareholders of Fairfax of 946,000,000 and other comprehensive income of a hundred and 11,000,000, primarily related to unrealized foreign currency translation gains, net of hedges as a result of strengthening of foreign currencies against The US Dollar. This was partially offset by payments of common and preferred share dividends of 353,000,000 and purchases of 205,610 subordinate voting shares for cancellation for cash consideration of 289,000,000 or US $1,406.49 per share. And lastly, book value per basic share was $1,080.38 at 03/31/2025 compared to $1,059.60 at 12/31/2024, representing an increase per basic share in the first quarter of twenty twenty five of 3.5% adjusted for the $15 per share common dividend we paid in the first quarter.

That concludes my remarks for the first quarter of twenty twenty five. I will now turn the call back over to Peter. Thank you.

Derek Bulas, Unknown Executive, Fairfax Financial: Thank you, Amy. We are now happy to take on any questions you might have.

Conference Operator: Thank you very much. If you would like to ask a question, please press 1. Please unmute your phone and record your name clearly when prompted. Your name is needed to introduce your question. If you care to withdraw your request, press 2.

So, again, please press 1. Our first question is from Nick Prieb with CIBC Capital Markets. Sir, your line is open.

Nick Prieb, Analyst, CIBC Capital Markets: Okay. Thanks. I was just wondering if you could talk in a bit more detail about how Poseidon might be impacted by the disruption in global trade. Like, my understanding is that the business of their customer base is highly sensitive to global trade flows, specifically shipment of goods between China and The U. S.

And I recognize the contracts are long duration, but does lower shipping demand translate to lower charter rates at renewal and lower residual values for container ships sold in the secondary market. Like, I’m wondering if you could just help us better understand what the primary risks are of that business if trade flows do slow dramatically between China and The US.

Derek Bulas, Unknown Executive, Fairfax Financial: Yeah. No. No. Thanks, Nick, for that question. And, no, we’re quite we’re quite excited about the the process of Poseidon.

Like you said, they have long term fixed contracts in place for for many, many years, and they have, you know, new production coming on board. And talking to the management team, they’re quite confident that the the tariffs will not have and uncertainty, economic uncertainty around the world will not have any significant effect on their business. So the management team is outstanding and by locking in these contracts was a huge plus for them. So we’re very excited about the prospects of the pricing. Next question, please.

Conference Operator: Our next is from Steven Boland with Raymond James. Your line is open.

Derek Bulas, Unknown Executive, Fairfax Financial: Morning. I just wanna talk a little bit about California. When you see these events and the and the magnitude of losses, does this make you wanna revisit your reinsurance coverage wire or why not? Thanks for the question. No.

Yeah. The California wildfires was it was a significant significant event, and, you know, we think probably close to a $40,000,000,000 industry loss. And we take most of our exposure on the reinsurance side, cat exposure that is, and we like it that way. We like it that it’s, in our minds, it’s easier to control. We know what limits we have outstanding, and our companies do a really, really good job, you know, measuring their exposure and make sure it’s within their risk tolerances.

So an event this size, you know, the loss we had was well within our, you know, risk appetite and in the range we expected. But if you look at the underlying results, you know, in the quarter, after a significant event like this, we were still able to produce, you know, a hundred million dollar underwriting profit, which, again, just shows the strength of and scale of of our insurance and reinsurance operations globally. Next question, please.

Conference Operator: Our next is from Tom MacKinnon with BMO Capital. Your line is now open.

Derek Bulas, Unknown Executive, Fairfax Financial: Yeah. Thanks. Good morning. You’re with lots of holdco cash here. Just wondering if how you would prioritize deployment of it here with the you’re buying in some press, Would you look at buying in the remainder here?

Buying in some minority interest. You’ve done some. Would you look at buying in more and buying back stock? So if you could remind us of your priorities there and any comments. Thanks.

No. Thanks for the question, Tom. And you’re exactly right. You laid out a lot of the capital allocation decisions that we look at. Number one is our financial strength.

And as we’ve defined it is, you know, we wanna keep that cash in our total securities in the holding company. We wanna make sure we have no short term maturities, debt maturities, so nothing significant for three years. And then we’d like to have that $2,000,000,000 credit facility. So that’s how we look at financial strength and then well capitalized insurance companies. Second thing, we have about $500,000,000 of preferred shares that are coming up at the end of the year.

We’re going to look at that. We took out our preferred shares in the first quarter and late in December. On the acquisition side, as we said before, we’re not interested in any major acquisitions, but we do have minority interest in Odyssey and Allied that, you know, companies that we know really, really well performing very, very well. So over time, we’d like to buy buy back those minority positions. And then we still think our stock price is is very good value, and and we’ll continue to buy back our shares, but not at the expense of our our financial strength.

Next question, please.

Conference Operator: Thank you very much. As I have no further questions, I would like to turn it back to management for any closing remarks.

Derek Bulas, Unknown Executive, Fairfax Financial: Well, if there are no further questions, thank you for joining us on our first quarter twenty twenty five conference call. Thank you, Fran.

Conference Operator: Yes, we are concluded. Thank you, everyone, for your participation. Please disconnect at this time.

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