Fairfax Financial (TSE:FFH) reported third-quarter 2026 net earnings of $930 million as strong insurance underwriting and income from investments offset losses on its bond portfolio caused by rising interest rates.
Operating income from the company’s insurance and reinsurance businesses rose to $1.4 billion from $1.3 billion a year earlier, measured on an undiscounted basis and before risk margin, President and Chief Operating Officer Peter Clarke said. Net earnings for the first nine months of 2026 were $3 billion.
Book value per share reached $1,349.15 at September 30, up 8.4% from the end of 2025 when adjusted to include the $15-per-share dividend paid in the first quarter.
Investment losses offset income gains
Fairfax recorded net investment losses of $859 million in the quarter, compared with gains of $426 million a year earlier. Clarke attributed much of the loss to unrealized declines in the bond portfolio, principally U.S. Treasuries, as interest rates rose. The result also included a $258 million unrealized loss on preferred shares in Digit Insurance.
Those losses were partly offset by $177 million of gains on equity exposures. Interest and dividend income increased to $669 million from $655 million, while Fairfax’s share of profits from associates rose to $378 million from $305 million.
Clarke said the quarter’s earnings included a net $148 million unrealized loss from higher interest rates: $828 million in bond losses partly offset by a $679 million increase in the discount applied to insurance and reinsurance reserves under IFRS 17.
Fairfax’s investment portfolio totaled $78.8 billion at quarter-end, including $53.1 billion in fixed income, said Wade Burton, president and chief investment officer of Hamblin Watsa. The fixed-income portfolio had a duration of just over two years and more than $8.3 billion in cash and short-term bonds, he said.
Burton said the portfolio was positioned to benefit if rates remained elevated, while having locked in substantial interest income for the next few years if inflation and rates fell.
Premium growth led by international operations
Gross premiums written by Fairfax’s insurance and reinsurance businesses rose 9.3% to $8.9 billion. The combined ratio, a measure of claims and expenses relative to premiums, was 92.5%, compared with 92% a year earlier. Underwriting income was $524 million, down from $540 million.
International operations generated $1.9 billion in gross premiums, up 27.1%. Clarke said a significant portion of the increase came from higher rates on Gulf Insurance’s marine business associated with the conflict involving Iran. Most of that business was not retained, so it affected gross premiums but not net premiums. Excluding the marine business, international gross premiums rose 13%.
Clarke said Gulf Insurance continued to operate under challenging conditions and that related losses had been minimal. He said employee safety remained management’s first priority.
Fairfax continued to see softening markets across many businesses, especially North American property and reinsurance, including property catastrophe coverage, Clarke said in response to an analyst’s question. Casualty lines generally continued to see single-digit rate increases, depending on the business.
The company recorded $156 million of favorable reserve development during the quarter, reducing the combined ratio by 2.2 percentage points. Its insurers are conducting full actuarial reserve reviews in the fourth quarter, Clarke said.
Acquisitions and planned transactions
During the quarter, Sleep Country completed its $523 million acquisition of Sleep Number assets and certain liabilities, while Fairfax acquired an 80% controlling interest in Andrew Peller for $239 million. Sleep Country financed its transaction internally, Clarke said.
After quarter-end, Fairfax completed the sale of its Eurolife life operations to Eurobank for approximately $906 million. Chief Financial Officer Amy Sherk said the approximately $200 million pretax gain will be included in fourth-quarter results.
Fairfax also was selected by the Indian government as the strategic buyer of a 60.7% stake in IDBI Bank for approximately $5.6 billion. Asked about reported union opposition to the takeover, Clarke declined to elaborate, saying the transaction had not closed and was awaiting regulatory approval.
In another pending deal, Fairfax agreed to partner with Wittington to acquire certain Boots Group operations for approximately $8.9 billion, including assumed debt. Fairfax has committed up to approximately $2.3 billion and expects to own 50% of the equity, with Wittington holding operational control. The transaction is expected to close in the first quarter of 2027, subject to customary conditions.
Separately, Recipe agreed to acquire Greece-based food service business Evergood for estimated gross consideration of approximately $350 million, including assumed borrowings. Sherk said Recipe would fund the deal, which is subject to regulatory approval and other customary conditions.
Capital position
Sherk said Fairfax held $1.9 billion in cash and investments at the holding company at quarter-end and had an undrawn $2 billion revolving credit facility. The debt-to-capital ratio, excluding non-insurance companies, was 27.3%, down from 28% at June 30 but up from 26.2% at the end of 2025.
The fair value of certain equity-accounted investments and consolidated non-insurance holdings exceeded their carrying value by $5.1 billion before tax, an excess not reflected in book value per share, Sherk said.
Clarke said the company reviews capital positions across its insurers in the fourth quarter. With premium growth slowing after several years of expansion, some businesses are generating excess capital that could support additional dividends to the holding company, he said.
About Fairfax Financial (TSE:FFH)
Fairfax Financial is a holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and the associated investment management.
