Fairfax Financial Holdings Limited: Financial Results for the Year Ended December 31, 2024

Fairfax Financial Holdings Limited (TSX: FFH and FFH.U) has announced 2024 fiscal year net earnings of $3,874.9 million ($160.56 net earnings per diluted share after payment of preferred share dividends) compared to fiscal year 2023 net earnings of $4,381.8 million ($173.24 net earnings per diluted share after payment of preferred share dividends). Book value per basic share at December 31, 2024 was $1,059.60 compared to $939.65 at December 31, 2023 (an increase of 14.5% adjusted for the $15 per common share dividend paid in the first quarter of 2024).

“2024 produced record underwriting profit of $1.8 billion and a consolidated combined ratio of 92.7%. Our property and casualty insurance and reinsurance operations achieved record adjusted operating income of $4.8 billion and operating income of $6.5 billion including the benefit of discounting, net of a risk adjustment on claims, reflecting strong underwriting performance and interest and dividends, and continued favourable results from share of profit of associates. Gross premiums written grew by 12.6% or $3.6 billion to $32.5 billion and net premiums written grew by 11.6%, primarily reflecting the acquisition of Gulf Insurance in 2023, which added $2.7 billion in gross premiums written and $1.6 billion in net premiums written. Excluding Gulf Insurance gross premiums written were up 3.1% and net premiums written were up 4.5%.

“Our net gains on investments of $1.1 billion were principally comprised of net gains on common stocks of $1.9 billion, partially offset by mark to market net losses on bonds of $0.7 billion, and our annual interest and dividend income increased to $2.5 billion.

“Our book value per basic share included a net loss of $477 million, or $22 per share, in comprehensive income related to unrealized foreign currency losses net of hedges due to the significant strengthening of the U.S. dollar against many currencies around the world, primarily in the fourth quarter of 2024. We view these unrealized foreign currency movements as market fluctuations similar to unrealized gains or losses on our equity holdings.

“During the year we purchased 1,346,953 subordinate voting shares for cancellation for cash consideration of approximately $1.6 billion, or $1,179 per share.

“We remain focused on being soundly financed and ended 2024 in a strong financial position with $2.5 billion in cash, marketable securities and investments in the holding company, and an additional $2.0 billion, at fair value, of investments in associates and consolidated non-insurance companies owned by the holding company,” said Prem Watsa, Chairman and Chief Executive Officer.

The table below presents the sources of the company’s net earnings in a segment reporting format which the company has consistently used as it believes it assists in understanding Fairfax:

The table below presents the insurance service result for the property and casualty insurance and reinsurance operations reconciled to underwriting profit, a key performance measure used by the company and the property and casualty industry in which it operates. The reconciling adjustments are (i) other insurance operating expenses as presented in the consolidated statement of earnings, (ii) the effects of discounting of losses and ceded losses on claims recorded in the period, and (iii) the effects of the risk adjustment and other.

Highlights for fiscal year 2024 (with comparisons to fiscal year 2023 except as otherwise noted, and excluding the effects of IFRS 17 when discussing the combined ratio and adjusted operating income) include the following:

• Net premiums written by the property and casualty insurance and reinsurance operations increased by 11.6% to a record $25.3 billion from $22.7 billion, while gross premiums written increased by 12.6%, primarily reflecting the consolidation of Gulf Insurance on December 26, 2023 which contributed $1.6 billion to net premiums written and $2.7 billion to gross premiums written in 2024, and continued growth across most operating companies.
• The consolidated undiscounted combined ratio of the property and casualty insurance and reinsurance operations improved to 92.7%, producing a record underwriting profit of $1,791.4 million, while absorbing higher catastrophe losses of $1,099.3 million (representing 4.5 combined ratio points), compared to an undiscounted combined ratio of 93.2% and an underwriting profit of $1,522.2 million in 2023. The increase in underwriting profitability reflected growth in business volumes and higher net favourable prior year reserve development, with a benefit of $593.6 million or 2.4 combined ratio points (2023 – $309.6 million or 1.4 combined ratio points).
• Adjusted operating income (which excludes the benefit of discounting, net of a risk adjustment on claims) of the property and casualty insurance and reinsurance operations increased by 20.9% to a record $4,761.1 million from $3,938.5 million, reflecting the best year in the company’s history for both underwriting profit and interest and dividends, and continued strong results from share of profit of associates.
• The consolidated statement of earnings included a net loss of $529.9 million (2023 – a net benefit of $496.0 million) reflecting the effects of increases in discount rates during the year, which was comprised of net losses on bonds of $731.3 million, partially offset by a net benefit on insurance contracts and reinsurance contracts held of $201.4 million. Of the $529.9 million net loss in 2024, $437.7 million was incurred in the fourth quarter (2023 – a net benefit of $326.7 million).
• Float of the property and casualty insurance and reinsurance operations increased by 5.9% to $35.4 billion at December 31, 2024 from $33.4 billion at December 31, 2023.
• Operating loss of the Life insurance and Run-off operations was $92.1 million compared to an operating loss of $144.6 million in 2023, principally reflecting lower net adverse prior year reserve development at Run-off of $221.1 million in 2024 (2023 – $259.4 million) on an undiscounted basis, primarily related to latent hazard claims, construction defects and workers’ compensation.
• Consolidated interest and dividends increased significantly from $1,896.2 million to a record $2,511.9 million (comprised of interest and dividends of $2,224.6 million (2023 – $1,654.7 million) earned by the investment portfolios of the property and casualty insurance and reinsurance operations, with the remainder earned by life insurance and run-off, non-insurance companies and corporate and other). At December 31, 2024 the company’s insurance and reinsurance companies held portfolio investments of $62.9 billion (excluding Fairfax India’s portfolio of $1.9 billion), of which $7.6 billion was in cash and short term investments representing 12.1% of those portfolio investments.
• Consolidated share of profit of associates of $956.3 million (comprised of $745.1 million earned in the property and casualty insurance and reinsurance operations investment portfolio, with the remainder earned in life insurance and run-off, non-insurance companies and corporate and other), principally reflected share of profit of $515.0 million from Eurobank, $212.6 million from Poseidon (formerly Atlas) and $57.0 million from Peak Achievement (principally reflecting its sale of Rawlings Sporting Goods), partially offset by share of loss of $72.7 million from Sanmar Chemicals Group.
• Net gains on investments of $1,067.2 million (net losses on investments of $403.2 million in the fourth quarter) consisted of the following:

• Net gains on equity exposures of $1,859.0 million in 2024 was primarily comprised of net gains on common stocks and equity derivatives, a realized gain on the disposition of Stelco of $343.7 million and a remeasurement gain on consolidation of Peak Achievement of $203.4 million.

  The company recorded net gains of $1,033.5 million (fourth quarter of 2024 – $341.9 million) on equity total return swaps on Fairfax subordinate voting shares. During the fourth quarter of 2024 the company closed out derivative contracts on 203,800 Fairfax subordinate voting shares with an original notional amount of $68.5 million (Cdn$88.9 million). At December 31, 2024 the company continued to hold equity total return swaps on 1,760,355 Fairfax subordinate voting shares with an original notional amount of $664.0 million (Cdn$846.1 million) or $377.19 (Cdn$480.62) per share.

  Net losses on bonds of $731.3 million primarily reflected net unrealized losses on U.S. treasuries and U.S. treasury bond forward contracts, Brazilian government bonds and corporate and other bonds, principally due to the increase in interest rates in the fourth quarter of 2024.

  Net losses on other of $60.5 million principally reflected unrealized losses of $154.3 million on the company’s holdings of Digit compulsory convertible preferred shares, which was partially offset by dividends received in the fourth quarter of 2024 of $112.3 million that were recorded within interest and dividends in the consolidated statement of earnings.

• The company’s fixed income portfolio is conservatively positioned with effectively 71% of the fixed income portfolio invested in government bonds, 19% in high quality corporate bonds, primarily short-dated, and 10% in first mortgage loans.
• Interest expense of $649.0 million (inclusive of $55.7 million on leases) was primarily comprised (other than leases) of $456.6 million incurred on borrowings by the holding company and the insurance and reinsurance companies and $136.7 million incurred on borrowings by the non-insurance companies (which are non-recourse to the holding company).
• Provision for income taxes of $1,375.6 million with an effective tax rate of 24.4% increased from $813.4 million with an effective tax rate of 13.8% in 2023, principally reflecting lower benefit from the tax rate differential on income and losses outside Canada including the effects of new Pillar Two global minimum taxes, lower non-taxable investment income and changes to capital gains tax rates in India that increased deferred income tax expense. The provision for income taxes in 2023 also reflected a benefit for the change in tax rate for deferred income taxes primarily related to deferred income tax assets recognized as a result of new tax laws in Bermuda.
• On December 13, 2024 the company purchased the remaining shares of Brit from Brit’s minority shareholder, increasing the company’s ownership interest in Brit from 86.2% to 100.0%.
• During the fourth quarter of 2024 the company completed two significant acquisitions and commenced consolidating each entity in its Non-insurance companies reporting segment at the respective acquisition dates:
  • On October 1, 2024 the company acquired all of the issued and outstanding common shares of Sleep Country Canada Holdings Inc. (“Sleep Country”) for purchase consideration of $880.6 million (Cdn$1.2 billion). Sleep Country is a specialty sleep retailer with a national retail store network and multiple e-commerce platforms.
  • On December 20, 2024 the company increased its equity interest in Peak Achievement Athletics Inc. (“Peak Achievement”) to 100.0% by acquiring the 42.6% equity interest owned by Sagard Holdings Inc. and the 14.8% equity interest owned by other minority shareholders for purchase consideration of $765.0 million. The company was required to remeasure its existing equity accounted investment in Peak Achievement to its fair value of $325.7 million upon consolidation and recorded a pre-tax gain of $203.4 million in net gains on investments in the consolidated statement of earnings, which reflected Peak Achievement being now carried at approximately 8.5 times free cash flow. Peak Achievement is engaged in the design, manufacture and distribution of performance sports equipment and related apparel and accessories for ice hockey, roller hockey and lacrosse, under brands such as Bauer Hockey, Cascade Lacrosse and Maverik Lacrosse.
  • These and other smaller acquisitions resulted in an increase to goodwill and intangible assets of $2.3 billion and to non-recourse debt of $1.2 billion during the year.
• The excess of fair value over carrying value of investments in non-insurance associates and market traded consolidated non-insurance subsidiaries increased to $1,480.5 million at December 31, 2024 from $1,006.0 million at December 31, 2023, with $396.6 million of that increase related to publicly traded Eurobank. The excess of fair value over carrying value at December 31, 2024 no longer includes an unrealized gain of $351.9 million on Stelco as it was realized in the fourth quarter of 2024. Subsequent to December 31, 2024, on January 23, 2025 the company sold 80.0 million shares or an approximate 2.2% equity interest in Eurobank for gross proceeds of $190.8 million (€183.5 million, that was received by the holding company), which decreased the company’s equity interest to 32.3% and will result in the recognition of a realized gain of approximately $40 million in the consolidated statement of earnings in the first quarter of 2025. The sale was a mandatory technical adjustment to the company’s significant equity interest in Eurobank and does not reflect in any way the company’s view on Eurobank’s valuation or long-term prospects.
• The company’s total debt to total capital ratio, excluding non-insurance companies, increased to 24.8% at December 31, 2024 from 23.1% at December 31, 2023, primarily reflecting increased total debt (principally the issuance of $1.0 billion principal amount of senior notes due 2054), partially offset by increased common shareholders’ equity.
• On November 22, 2024 the company completed an offering of aggregate Cdn$700.0 million principal amount of unsecured senior notes, comprising Cdn$450 million of 4.73% unsecured senior notes due 2034 and Cdn$250 million of 5.23% unsecured senior notes due 2054. A portion of the aggregate net proceeds were used to redeem all of the company’s Series C and Series D preferred shares on December 31, 2024.
• During 2024 the company purchased 207,974 of its subordinate voting shares for treasury at a cost of $240.4 million and 1,346,953 subordinate voting shares for cancellation at a cost $1,588.4 million, or $1,179.24 per share.
• Subsequent to December 31, 2024:
  • On January 1, 2025 the company acquired a 50.0% equity interest in Blizzard Vacatia Equity Partners LLC (“Blizzard Vacatia”). The company’s total cash investment of $835.0 million was principally comprised of a senior secured loan, preferred shares and a mortgage-backed loan. Blizzard Vacatia, through its subsidiaries, is engaged in the development, sales, marketing and rental of timeshare resorts.
  • During the fourth quarter of 2024 the company entered into an agreement to purchase an approximate 33% equity interest in Albingia SA (“Albingia”) for purchase consideration of approximately $216 million (€209 million). Closing of the transaction is subject to regulatory approvals and is expected to be in the second quarter of 2025. Albingia is a French insurance company that writes specialty property and casualty insurance.

At December 31, 2024 there were 21,668,466 (December 31, 2023 – 23,003,248) common shares effectively outstanding.

Consolidated balance sheet, earnings and comprehensive income information, together with segmented premium and combined ratio, prior year reserve development and catastrophe loss information, follow and form part of this news release.

As previously announced, Fairfax will hold a conference call to discuss its 2024 year-end results at 8:30 a.m. Eastern time on Friday February 14, 2025. The call, consisting of a presentation by the company followed by a question period, may be accessed at 1 (800) 369-2143 (Canada or U.S.) or 1 (312) 470-0063 (International) with the passcode “FAIRFAX”. A replay of the call will be available from shortly after the termination of the call until 5:00 p.m. Eastern time on Friday, February 28, 2025. The replay may be accessed at 1 (888) 325-4187 (Canada or U.S.) or 1 (203) 369-3403 (International).

Fairfax Financial Holdings Limited is a holding company which, through its subsidiaries, is primarily engaged in property and casualty insurance and reinsurance and the associated investment management.