I’m thrilled to sit down with Simon Glairy, a renowned expert in the insurance and Insurtech sectors, with a deep focus on risk management and AI-driven risk assessment. With years of experience analyzing industry trends and financial performance, Simon offers unparalleled insights into the evolving landscape of insurance. Today, we’ll dive into Fairfax Financial’s impressive third-quarter results for 2025, exploring their financial growth, underwriting success, and the broader implications for the property and casualty insurance space. Our conversation will touch on key drivers behind their earnings, the significance of their book value increase, and the strategies fueling their operational efficiency.
How would you describe Fairfax Financial’s overall performance in the third quarter of 2025, and what stood out to you the most?
Fairfax Financial delivered a really solid performance in Q3 2025, with net earnings reaching $1.15 billion, up from $1.03 billion in the same quarter last year. What stood out to me was the consistency in their growth across multiple areas. Not only did they boost earnings, but their book value per share also saw a significant jump to $1,203.65, reflecting a 15.1% increase when adjusted for dividends. This kind of balanced growth signals a strong financial foundation, and it’s clear they’re managing both their investment and insurance operations effectively.
What do you think were the primary factors driving the increase in net earnings compared to last year?
The bump in net earnings from $1.03 billion to $1.15 billion can be attributed to a few key areas. Stronger underwriting in their property and casualty segment played a huge role, with underwriting profit rising to $540.3 million from $389.7 million. Additionally, investment income, particularly from interest and dividends, grew to $655.4 million. These gains, combined with a modest increase in profit from associates, helped push earnings higher despite some headwinds like losses from changes in discount rates.
Turning to book value per share, it reached an impressive $1,203.65 by the end of September 2025. Can you explain what this figure tells us about the company’s financial health?
Book value per share is essentially a snapshot of the company’s net worth on a per-share basis, and Fairfax’s climb to $1,203.65 is a strong indicator of robust financial health. It shows that the company’s assets, after accounting for liabilities, have grown substantially. The 15.1% increase, even after adjusting for the dividend paid earlier in the year, suggests they’re not just generating profits but also effectively reinvesting and growing their capital base. It’s a sign of stability and a buffer against potential risks in the volatile insurance market.
Let’s dive into the insurance operations. Net premiums written in the property and casualty segment grew by 2.1% to $6.56 billion. What’s fueling this growth in your view?
The growth in net premiums written to $6.56 billion reflects a strategic focus on retention and selective expansion. A big driver here is the increased retentions in US casualty lines, meaning Fairfax is keeping more of the premiums they write rather than ceding them to reinsurers. This approach allows them to capture more revenue directly. Even excluding contributions from Gulf Insurance, gross premiums written still rose by 3.1%, pointing to new business wins and modest rate hikes in specific segments, which shows they’re growing organically as well.
Underwriting profit in the same segment saw a big jump to $540.3 million. Can you walk us through what contributed to this improvement?
The leap in underwriting profit from $389.7 million to $540.3 million is a testament to better risk management and favorable conditions. Lower catastrophe losses were a significant factor—fewer large-scale claims meant less strain on their reserves. Additionally, higher business volumes helped spread costs over a larger base. However, this was partially offset by a drop in net favorable prior year reserve development, meaning they didn’t get as much of a boost from revising past loss estimates downward as they did previously. Still, the net effect was a strong gain in profitability.
The undiscounted combined ratio improved to 92.0% from 93.9%. Can you break down what this metric means and why this improvement matters?
The combined ratio is a critical measure in insurance—it shows the percentage of premiums that go toward claims and expenses. A ratio below 100% means the company is making an underwriting profit. Fairfax’s improvement to 92.0% from 93.9% indicates they’re becoming more efficient, spending less on claims and operating costs relative to the premiums they earn. This improvement matters because it reflects disciplined underwriting and better control over losses, which ultimately translates to higher profitability and a stronger competitive position.
Adjusted operating income for the property and casualty segment also rose to $1.34 billion. How did the various components come together to achieve this result?
The increase in adjusted operating income to $1.34 billion from $1.14 billion was driven by a combination of factors. Stronger underwriting, as we discussed, was a major contributor, bolstered by that $540.3 million in underwriting profit. On top of that, interest and dividend income within the segment grew, reflecting solid returns on their investment portfolio. There was also a slight uptick in profit from associates, which added to the overall figure. It’s a well-rounded result, showing strength across both core operations and investment activities.
What’s your forecast for the future of property and casualty insurance operations, given Fairfax’s recent performance trends?
Looking ahead, I’m cautiously optimistic about the property and casualty insurance space, especially for companies like Fairfax that have shown discipline and adaptability. Their focus on underwriting efficiency and retention strategies positions them well to capitalize on market opportunities, particularly in the US casualty lines where demand remains steady. However, challenges like potential increases in catastrophe losses due to climate risks or economic pressures affecting premium growth could temper progress. I expect Fairfax to continue leveraging technology and data analytics to refine their risk models, which could help sustain their combined ratio improvements and drive further growth in operating income over the next few quarters.
