Transcript: Fairfax Finl Hldgs Q2 2026 Earnings Conference Call

Fairfax Finl Hldgs (TSX: FFH ) released second-quarter financial results and hosted an earnings call on Friday. Read the complete transcript below. APIs provide real-time access to earnings call transcripts and financial data. Visit to learn more.

4 billion. Underwriting income increased to $459 million, while interest and dividend income grew to $737 million. 9 billion, resulting in a realized gain of $838 million, and the privatization of Kennedy Wilson with a consortium. Fairfax also announced the upcoming privatization of Andrew Peller Ltd.

and Sleep Country's acquisition of Sleep Number. 4 billion. 1, indicating efficient underwriting practices. The international segment showed strong growth, particularly in Asia and LATAM.

Investment portfolio returns were positive, with net gains of $769 million driven by equity exposures. However, there were mark-to-market losses on bonds due to rising interest rates. The company maintains a conservative investment strategy with a focus on high-quality, short-duration fixed income assets. Management highlighted the resilience of Gulf Insurance amid the conflict in Iran, noting minimal related losses.

The company remains focused on long-term growth through strategic partnerships and disciplined underwriting. Full Transcript OPERATOR Good morning and welcome to Fairfax Finl Hldgs' 2026 Second Quarter Results conference call. Your lines have been placed in a listen-only mode. After the presentation, we will conduct a question and answer session.

At that time, to ask a question, please press star one on your phone keypad. For time's sake, we ask that you limit your question to one. 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 Mr. Derek Beulis. Mr. Beulis, please begin.

Derek Beulis Good morning and welcome to our call to discuss Fairfax Finl Hldgs' 2026 second 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. Peter Clark, President and COO Thank you, Derek. Good morning and welcome to Fairfax Finl Hldgs' 2026 second 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 Hamblin Watsa, to comment on investments, and to Amy Shirk, our Chief Financial Officer, to provide some additional financial details.

1 billion in the second quarter of 2026. Underwriting income was solid at $459 million, up from $427 million in the second quarter of 2025. Interest and dividend income was $737 million, up from $660 million, and our profits of associates were $43 million, down from $131 million in the second quarter of 2025. In addition to our strong operating income, we also had strong net investment gains, $769 million in the quarter.

As we have always said, we expect investment gains to perform well over the long term, but they do fluctuate from quarter to quarter. 1 billion for the first six months. 8% from year-end 2025, adjusted for our $15 dividend. 1 billion, or $1,601 per share.

9 billion, a pre-tax realized gain of $838 million, and we continue to hold the remaining half of our original position. In June, with a consortium led by Bill McMorrow, we closed the privatization of Kennedy Wilson. We have been partners with Bill and his team for more than 15 years and have collaborated on more than $8 billion of real estate transactions over that time. We are very excited about the continued opportunities going forward and a big welcome to Bill and his team.

In the quarter, we also announced the privatization of Andrew Peller Ltd. The Peller family has been a leading name in wine in Canada for generations and we are very pleased to partner with John Peller, Paul Duke Dykowski, their Chief Executive Officer, and the rest of the team. We expect this transaction to close in the third quarter of 2026. S.

manufacturer and retailer of mattresses. Stuart Schaefer and his team have done an outstanding job working through this acquisition and at the closing of the transaction, Sleep Country will be the world's second largest sleep retailer with over 800 locations across Canada and the United States. Amy will provide some additional financial details on each of these transactions later. With the conflict in Iran, members of the Fairfax family are once again, and unfortunately, facing difficult and dangerous circumstances.

Gulf Insurance Group is ensuring that all employees in the Gulf region have the support they need to stay safe, which remains our first priority. While the duration of the conflict remains uncertain, Gulf continues to operate as usual under very challenging conditions and related losses have been minimal. Our thoughts and prayers are with our employees at Gulf. I will now give you some additional detail on the components of our net earnings for the quarter.

Our consolidated investment return was 2%, driven by interest and dividend income and strong net gains on investments, partially offset by lower profits of associates. Consolidated interest and dividend income of $737 million was up 11% year over year, benefiting from a growing investment portfolio and increasing government yields. Profits of associates of $43 million in the quarter was lower by $88 million from a year ago, driven by Helios Fairfax Partners' carrying value being lowered to its market price and from mark-to-market losses on the Waterous Fund.

We continue to be very excited about the long-term prospects of both those companies; our other underlying associate companies continue to perform very well. S. Treasuries due to the increase in interest rates in the second quarter. More on investments from Wade.

As mentioned in previous quarters, our book value per share of $1,304 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 second quarter. 4 billion—an unrealized gain position, or $220 per share on a pre-tax basis. This is a significant increase from a year ago at $110 per share and at year-end 2025 at $150 per share. In the second quarter, net earnings included a $103 million unrealized loss due to increasing interest rates in the quarter.

This consisted of unrealized losses on our bonds of $122 million offset by the increase in discount under IFRS 17 on our insurance and reinsurance reserves held of $19 million. For the second quarter of 2025, this number was a net gain of $120 million. This is a swing of over $220 million this quarter versus last quarter 2025. 1% versus the second quarter of 2025.

5% or $81 million. 6%, primarily from its accident and health business, while premium was down across its excess and surplus segment, commercial lines, and at Seneca due to softening market conditions. 9% in Canadian dollars reflecting a competitive marketplace. 1 billion in the second quarter of 2026.

Brit's gross premium was $947 million, up 5% in the second quarter of 2026 versus the second quarter of 2025, with the majority of the growth from the recent expansion of its Brit Re platform in Bermuda. 8 billion. S. and Latin American reinsurance business was down due to a softening rate environment.

1 billion. Their Global Markets division was up 9%, while its reinsurance segment was flat and its North American insurance premium was down 3% due to the competitive pricing. Ki, developed within Brit, is in its second year operating as a standalone business. Ki's gross premium was up 15% in the second quarter of 2026, driven by property treaty, offset by open market North American business.

2% in the second quarter of 2026, benefiting from strong underlying growth and favorable movements of foreign exchange. 4%. Offsetting this growth was Colonnade, down 8%, and Polish Re down 2%. International operations currently account for about 21% of our overall gross premium.

Looking ahead, these operations offer strong long-term potential for sustained growth thanks to skilled management teams, emerging insurance markets, and robust local economies. 3 combined ratio and underwriting income of $427 million in the second quarter of 2025. All our major insurance and reinsurance segments continue to post strong results with good underlying margins while remaining disciplined in a softening insurance market, especially in North America. 1% a year ago.

Our global insurers and reinsurers posted a combined ratio of 92% and underwriting profit of $289 million. 2. 6. 5, benefiting from favorable reserve movements.

1 for the second quarter. Northbridge had another great quarter with a combined ratio of 89. 5, while Zenith, our workers' compensation specialist, after a couple years of above-100 combined ratios, posted a small underwriting profit at 98%. 2 for the quarter, with underwriting income of $55 million and all our international segments producing underwriting income.

7. 3. 3 in the second quarter, notwithstanding the difficult conditions from the war in Iran. 3 points on our combined ratio.

Each of our major segments recorded favorable reserve development. We are focused on setting our ongoing reserves at conservative levels, especially on long-tail lines of business. Through our decentralized operations, our insurance and reinsurance companies continue to produce strong results writing annualized gross premium of over $34 billion, with underlying margins remaining attractive in the main in spite of softening rates in many lines.

It is becoming more competitive, but we benefit from our size and scale and, more importantly, we have exceptionally long-term management teams that are all focused on the bottom line and have the experience to manage the cyclical nature of our insurance business. Our long-term approach enables our companies to stay disciplined, patient, and focused on profitability rather than top-line growth targets. I will now pass the call to Wade Burton, our President and Chief Investment Officer of Hamblin Watsa, to comment on our investments. Wade Burton, President and Chief Investment Officer, Hamblin Watsa Thank you, Peter, and good morning.

3 billion. 3 billion. 6 billion. S.

6 billion in mortgages. Credit quality remains outstanding. Over 75% is in government bonds, with the remainder in high-quality corporates and first mortgages. Duration is two years and the yield is 5%.

We continue to earn good money on a safe, liquid fixed income portfolio. There are many moving parts in today's economic picture: a new, unproven Fed chair in Kevin Warsh, healthy but stable inflation, heavy fiscal spending, large deficits, the Iran war, tariffs, and steady wage and goods inflation. One thing we're confident of: the days of zero and, in many cases, negative rates are behind us. The risk is tilted toward inflation running higher than expected, which favors our high-quality, short-duration fixed income portfolio.

2 billion in consolidated. Associates are investments like Eurobank and Poseidon, where we don't hold a controlling stake. Consolidated investments are where we do hold a controlling stake. 4 billion in preferred shares, insurance associates, real estate, and derivatives, primarily our Fairfax TRS, which Peter's already covered.

The vast majority of everything we own in our equity portfolio has three main threads: we like the people running the businesses, the companies are financially sound, and we're carrying them at values where we believe we can earn our 15% return. Judged on these main criteria, the equity and equity-like portfolio is in a very strong position. The overall pricing of the portfolio is cheap. By that I mean either the stock trades cheaply as a publicly traded common stock, or we're carrying the consolidated investment at conservative values.

But more importantly, our lineup of partners and CEOs has never been better—from Kevin Plank at Under Armour, David Sokol at Poseidon, Fakian Karavias at Eurobank, Evangelos Middle and Metlin, and Adam Watras at Greenfire and Strathtona Resources, just to name a few. All world-class partners focused on making money for our shareholders. Last, a word on AI and software companies. First, AI.

We've become heavy users of AI inside our company and it's added real multiples to our analytical productivity. That's good news. Second, software companies. We've studied a number of software companies that AI may put at risk.

We haven't yet found one where we can point with certainty to long-term earnings power that makes it impossible to land on an intrinsic value we have confidence in. So even though many software company prices have come down a lot, none have come down enough for us to invest. With that, I'll turn the call over to our CFO, Amy Shirk. Amy Shirk, CFO Thank you, Wade.

I'll begin my comments by discussing some of our key transactions. 2%. Accordingly, the company recorded a realized gain of $838 million in the consolidated statement of earnings. The company continues to apply the equity method of accounting to the retained portion of its investment in Poseidon.