Fairfax Financial Holdings Limited

Good morning and welcome to Fairfax's 2025 fourth 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 questions 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 Derek Buglis. Derek, please begin.

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 CDAR+. 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 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 Hamla-Watsa, comment on investments, and Amy Shirk, 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 non-insurance 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 both value per share increased 20.5%, adjusted for $15 dividend to 1260 up from 1060 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 1060 615 per share. At December 31st, 2025, there were 20.9 million shares outstanding. And in the first six weeks of 2026, we purchased the further 131,000 shares at an average cost of $16.85 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 tenor 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 non-insurance consolidated income. On February 17th, 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 unaffected share price as of November 4th, 2025. The last trading day prior to Kennedy Wilson receiving and publicly disclosing the consortium's proposal. Fairfax is 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 McMoral 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 were 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 a quarter of our interest in including convertibles and warrants in the fourth quarter. Also contributing was CIB Bank, and Metlin Energy. 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. I've 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 pre-tax basis. This increase from $1.5 billion or $68 per share last year. In 2025, changes in discount rates resulted in a pre-tax 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 pre-tax 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 of 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 and specialty lines. Xenus 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 personalized business and in transportation. Their customer attentions 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 line, and marine business. On a net basis, BRIT's premium was up 4.2%, 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. Key, their premium was up 3.8%, primarily on property lines, offset by open market business. And our international insurance and reinsurance operations rose 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%. Airfax Asia led by Singapore Re, Colonnade in Eastern Europe, Bright Insurance in South Africa, our Ukrainian companies, ARX and Universala, and Polish Re all had double digit growth in the year. A very nice diversified platform that is growing profitably. Our international operations rate 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 strengths 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 discounted 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 of four and a half 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 companies, 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. Key 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. Key's results were affected by separation costs of 4.4 combined ratio points. Excluding these non-recurring costs, Key's combined ratio would have been in the low 90s, an excellent year for Key. 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. Grumman Forrester 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 Reeve. offset by elevated combined ratios at Fair First in Sri Lanka that were affected by Cyclone Ditwa late in the year and Falcon Thailand who suffered two 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 writes 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. Bright 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 molder business. And finally, golf 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 five times increase over the last five 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 for a benefit of 2.9 points on our combined ratio. This is compared to 594 million for 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, riding close to 33 billion in gross premium, producing record underwriting profit, and as we've said before, led by our exceptional management teams. 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 Hamblawatsa, to comment on our investment.