Fairfax Financial Holdings Limited

Good morning and welcome to Fairfax's 2026 First 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 1 on your phone keypad. For time's sake, we ask that you limit your questions to 1. 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 Vigilis. Derek, you may begin.

Good morning, and welcome to our call to discuss Fairfax's 2026 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 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 2026 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 Hamlawasa, to comment on investments, and Amy Shirk, our Chief Financial Officer, to provide some additional financial details. We had a great start to 2026 with operating income from our insurance and reinsurance companies adjusted to an undiscounted basis and before risk margin of $1.2 billion in the first quarter of 2026, up from $686 million in the first quarter of 2025. All components of our operating income were strong and up significantly from the first quarter of 2025. Underwriting income was $382 million, interest and dividend income of $561 million, and our profits of associates were $271 million. In the quarter, we had net losses on investments of $386 million, primarily mark-to-mark losses on bonds. versus net gains on investments of $1.1 billion in the first quarter of 2025. That's the swing of almost $1.5 billion quarter over quarter. As we have always said, we expect investment gains to perform well over the long term, but will fluctuate quarter to quarter. Our net earnings for the first quarter of 2026 were $696 million, And all in, our book value per share at the end of the first quarter was $1,250, up half a percent from year-end 2025, adjusted for our $15 dividend. During the quarter, we purchased 375,000 shares for cancellation for $631 million. We expect to close two significant transactions in the second quarter of 2026, the sale of half our position in Poseidon for $1.9 billion, a pre-tax gain of approximately $837 million, and the sale of EuroLife Life Operations for approximately $935 million for a pre-tax gain of approximately $350 million. In February of 2026, the special committee of Kennedy Wilson accepted the $10.90 per share offer from Bill McMorrow and us to take the company private, a 46% premium to the price it traded prior to the offer. We are awaiting regulatory and shareholder approvals. We expect to close the transaction sometime in the second quarter. The conflict in Iran, unfortunately, members of the Fairfax family again find themselves in harm's way. GIG management is ensuring all employees in the Gulf region have the support that they need to stay safe, and this is our first priority. It is still uncertain how long this will last, but Gulf continues to operate as usual under these most difficult conditions, and losses related to this conflict have been minimal. Our thoughts and prayers are with all the 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 0.8%, driven by interest and dividend income, strong profits of associates, offset by net losses on investments, again, primarily on mark-to-market losses on our bonds. Consolidated interest and dividend income of $662 million, was up 9% year-over-year, benefiting from our growing investment portfolio. Profits of associates of $371 million in the quarter was driven by Eurobank, the Waterus Energy Fund, and Poseidon. Our associate companies continue to post very solid, stable results. In the quarter, we had net losses on investments of $386 million, from mark-to-mark losses on our bond portfolio, primarily from U.S. Treasuries due to the increase in interest rates in the first quarter, and losses on equity exposures of $82 million, offset by other net gains of $60 million, primarily gains on foreign exchange, offset by mark-to-mark losses on our preferred shares and digits. The net loss of $82 million on our equity and equity-related holdings were driven by unrealized losses on Fairfax TRS of $342 million, offset by net gains on Orla and Strathcona. As I said earlier, 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 i mentioned in previous quarters our book value per share of 1250 does not include unrealized gains or losses in our equity accounted investments and our consolidated investments which are not marked a market at the end of the first quarter the fair value of these securities is in excess of carrying value by 3.9 billion an unrealized gain position or $190 per share on a pre-tax basis. This is a significant increase from a year ago at $67 per share and year-end 2025 at $150 per share. In the first quarter, net earnings included 184 million unrealized loss due to increasing interest rates in the quarter. This consisted of unrealized losses on our bonds of $364 million, as I previously mentioned, offset by the increase in discount under IFRS 17 on our insurance and reinsurance reserves of $180 million. For the first quarter of 2025, this number was a net gain of $120 million. Our insurance and reinsurance businesses wrote $8.7 billion of gross premium in the first quarter of 2026, up 4.1% versus the first quarter of 2025. Our North American insurance segment's gross premium was relatively flat year over year, decreasing $18 million, or less than 1%, from the first quarter of 2025 due to a softening insurance market. Crum Forster's premium was down 2.7%, driven by its surplus and specialty segment and Seneca's property business, offset by increases in its accident and health business. Northbridge's gross premium was down 4.8% in Canadian dollars, reflecting a competitive marketplace. In U.S. dollars, its premium was down only 0.4%. due to the strengthening of the Canadian dollar. Venus premiums were up 10% for the first quarter of 2026, due to earned rate increases and new business in workers' compensation. Our global insurer and reinsurer segment was up 2.5%, with gross premiums of $4.8 billion in the first quarter of 2026. over the first quarter of 2025. Ally World's premium was up 3.7% in the quarter, with gross premiums of $2.2 billion. The reinsurance segment was up 10.4% from new and renewal business, most notably crop, while its global insurance premium was down 2.6%, primarily from its North American insurance segment, offset by growth in its global market segment. Odyssey's premiums were down 1.2% in the first quarter of 2026, with gross premium written of $1.5 billion. Its U.S. reinsurance business was the driver of the decrease, primarily due to property treaty reflecting reinstatement premiums from the first quarter of 2025 on the California wildfire losses that did not reoccur in 2026. Its insurance business at Hudson and New Line was relatively flat. Brits gross premium was $810 million, up 3.8% in the first quarter of 2026 versus the first quarter of 2025. Excluding California wildfire reinstatement premium, in the first quarter, gross premium was up 6.8% Over half the growth came from the recent expansion of its BRITRE platform in Bermuda. Key, the algorithmic follow-on Lloyd Syndicate developed within BRIT, is in its second year operating as a standalone business. Key's gross premiums was up 11.7% in the first quarter of 2026, driven by property treaty, casualty business, offset by open market North American property. Key announced in the first quarter it is adding a fifth capacity partner to its platform that will begin in the second quarter of 2026. Our international insurance and reinsurance operations gross premiums were $1.7 billion, up 16.4% in the first quarter of 2026 versus the first quarter of 2025. benefiting from high single-digit underlying growth and favorable movements of foreign exchange. Gulf was up 30% in the quarter, Bright up 28%, Fairfax-Latam 9%, and Fairfax Central and Eastern Europe up 17%. Fairfax Asia gross premiums was up 3% year-over-year, and on a net basis was up 31%, with reduced sessions due to a new reinsurance program implemented in 2026. International operations currently account for about 20% of our overall gross premiums. Looking ahead, these operations offer strong long-term potential for sustained growth, thanks to skilled management teams, emerging insurance markets, and robust local economies. Our combined ratio was 94.1 in the first quarter with underwriting income of $382 million compared to 98.5 combined ratio and underwriting income of $97 million in the first quarter of 2025. The big driver of the difference year over year was lower catastrophe losses in the first quarter of 2026 with approximately 1.8 combined ratio points versus 12.7 points on the combined ratio in the first quarter of 2025, primarily from the California wildfire losses. This was offset by lower prior year favorable development in the quarter over last year. Our global insurers and reinsurers posted a combined ratio of 92.5. Odyssey Group led the way with a combined ratio of 91.1. Brits combined ratio was 93. Allied World had a combined ratio of 93.4. And Keys combined ratio was 94.7. That included 3.8 points of separation costs. Our North American insurers had a combined ratio of 96% for the quarter. Northbridge had a combined ratio of 94.1. Crum and Forster had underwriting income of $52 million for a combined ratio of 95.5, while Zenith, our workers' compensation specialist, who are dealing with the effects of multiple years of price decreases in the workers' compensation space, although this is reversing, had an elevated combined ratio of 103.7, trending down from the first quarter of 2025 of 106.3. Our international operations delivered a combined ratio of 95.8 for the quarter, with underwriting income of 46 million, with all our international segments producing underwriting income. Colonnade in Eastern Europe had an excellent combined ratio of 89.8. Bright continues to produce strong results with a combined ratio of 94.9. And Fairfax Asia had a combined ratio of 96.3. led by Singapore Re at 85. Golf Insurance, the largest company in our international operations, got off to a good start in 2026 with a combined ratio of 95.9 in the first quarter, notwithstanding the difficult conditions from the war in Iran. In the first quarter, our insurance and reinsurance companies recorded favorable reserve development of 86 million, or a benefit of 1.3 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. Through our decentralized operations, our insurance and reinsurance companies continue to produce strong results, writing annualized gross premium of over 33 billion with underlying margins remaining attractive in the main, in spite of softening rates. In certain lines, it is becoming more competitive, but we benefit from our size and scale, and more importantly, we have exceptional long-term management teams that are all focused on the bottom line and have the experience to manage the typical nature of the insurance business. I will now pass the call to Wade Burton, our President and Chief Investment Officer of HamlaWASA, to comment on our investments.