Fairfax Financial (FFH.TO) receives Old York Operational Quality (AA) Rating for fiscal year 2025
(AA) | Financials | Property & Casualty Insurance
By: Old York Financial
A Private Principal Research Report
the verdict
Old York Financial has assigned Fairfax Financial (FFH.TO) an Operational Quality (AA) Rating. Fairfax is the "Canadian Berkshire," led by Prem Watsa's clinical focus on long-term book value compounding. 2025 was the best year in the firm's history, with record net earnings of $4.8 Billion ($213.78 per diluted share). It earns an (AA) because of its massive $70 Billion investment engine and record $1.8 Billion underwriting profit. While its capital allocation is Sovereign-tier, the complexity of its global "Run-off" segment and adverse reserve developments in latent hazard claims ($298.5 Million in 2025) keep it from reaching the (AAA) "Capital-Light" designation.
the old york analysis
owner earnings: the investment-led surplus In the Fairfax model, we look past the massive GAAP fluctuations to see the core cash generation from the $39.3 Billion float and the diversified "Non-Insurance" holdings.
2025 Adjusted Operating Income (P&C): $4.63 Billion (+) Consolidated Interest & Dividends: $2.57 Billion (+) Share of Profit from Associates: $0.57 Billion =
OLD YORK OWNER EARNINGS: $7.77 Billion
Analyst Note: Fairfax is currently operating at peak velocity. The firm is projecting consolidated operating income of ~$5 Billion annually for the foreseeable future. By keeping 12.8% of their $70 Billion portfolio in cash and short-term investments ($9.0 Billion), they maintain the "Dry Powder" to move on massive acquisitions like the $1.65 Billion Kennedy-Wilson take-private, without diluting the principal.
growth & market dominance
Gross Premiums Written (2025): $33.3 Billion (Up 2.3%).
Net Earnings (Record): $4.8 Billion (Up 23%).
Book Value Per Basic Share: $1,260.19 (Up 20.5%).
Analyst Note: Fairfax’s scale is world-class. With a $70 Billion investment portfolio, they are effectively a massive hedge fund that gets paid (via insurance premiums) to hold capital. Their "Non-Insurance" engine spanning retail, hospitality, and industrials contributed $397.4 Million in operating income, providing a structural diversity that pure-play insurers cannot match.
operational efficiency
Consolidated Combined Ratio (Undiscounted): 93.0%.
Operating ROE (Return on Equity): 17.1%.
Float Growth: 11.2% (To $39.3 Billion).
Analyst Note: Achieving a 93% combined ratio on $33 Billion in premiums is an elite feat of underwriting discipline. Fairfax is currently outperforming Markel on a margin basis. Watsa’s team is successfully "high-grading" their risk, choosing to let premium growth moderate to ensure record-breaking underwriting profits.
the fortress check
Capital Allocation: EXCELLENT. Fairfax repurchased 1,006,535 shares in 2025 for $1.6 Billion. This aggressive buyback at an average price of $1,615 well below the current intrinsic value trajectory is the ultimate signal of a "Principal-First" mindset.
The "Unrealized" Moat: The excess of fair value over carrying value for non-insurance associates and subsidiaries increased to $3.1 Billion at year-end. This is "hidden" equity ($150+ per share) that provides a massive margin of safety not fully captured on the balance sheet.
Solvency: FORTRESS. Despite $1.24 Billion in catastrophe losses in 2025, the firm still produced record earnings. Their holding company liquidity with $2.7 Billion in cash and marketable securities makes them effectively "un-killable" by any single market event.
final determination
Rating: Old York Quality (AA)
Classification: The Global Value-Investing Sovereign. Fairfax is the premier vehicle for Canadian principals seeking Buffett-style compounding. It receives a (AA) because of its record-breaking ROE and its position as a "Master Capital Allocator." For a principal, Fairfax is a "Deep Value" fortress that is finally being recognized by the broader market for its structural brilliance.
Disclaimer: Old York Financial operates privately as a principal and sells corporate advisory. Old York Financial is not an accountant, a financial advisor, a broker, an agent, a lawyer, or a portfolio manager. This report is for informational purposes only.
