Fairfax Q3 2026 Earnings: Profit Fell on Marks, Not Rates
Fairfax Financial Holdings reported net earnings attributable to shareholders of US$929.6 million for the third quarter of 2026, down 19.3% from US$1,151.7 million a year earlier, with diluted earnings per share of US$43.32 against US$52.04. Operating income rose in all three of the buckets its sources-of-net-earnings table reports.
Fairfax reports in US dollars, as its release states in its opening note: “All dollar amounts in this news release are expressed in U.S. dollars except as otherwise noted.” Its shares trade on the TSX in Canadian dollars as FFH and in US dollars as FFH.U. Every figure below is in US dollars unless it is a share price, which is in Canadian dollars.
Against expectations, such as they are, the US$43.32 came in ahead of the US$39.89 that the single analyst estimate carried by Yahoo Finance looked for. Total income fell to US$11,348.8 million from US$11,851.4 million, a decline Fairfax attributes to “net losses on investments compared to net gains on investments in the comparative period, partially offset by growth in both insurance revenue and non-insurance revenue”. Insurance revenue itself rose 6.1% to US$8,767.8 million. What the quarter amounts to is a good operating three months, a bad one in equities and in one Indian insurance holding, and a transformational October.
Where the lost profit went
Fairfax prints a sources-of-net-earnings table in its third quarter results release, in the segment format it has used for years. In millions of US dollars:
| Line | Q3 2026 | Q3 2025 |
|---|---|---|
| Insurance service result (P&C) | 1,284.2 | 1,249.4 |
| Interest and dividends (P&C portfolios) | 587.6 | 586.3 |
| Share of profit of associates (P&C) | 263.5 | 216.6 |
| Other insurance operating expenses | (280.1) | (268.8) |
| Operating income, P&C insurance and reinsurance | 1,855.2 | 1,783.5 |
| Operating income, Life insurance and Run-off | 33.5 | 15.5 |
| Operating income, Non-insurance companies | 253.6 | 211.4 |
| Net finance income (expense) from insurance contracts and reinsurance contract assets held | 335.8 | (615.8) |
| Net gains (losses) on investments | (858.7) | 426.2 |
| Interest expense | (221.5) | (213.1) |
| Corporate overhead and other | 27.9 | (43.1) |
| Earnings before income taxes | 1,425.8 | 1,564.6 |
| Provision for income taxes | (328.9) | (318.9) |
| Net earnings | 1,096.9 | 1,245.7 |
| Attributable to shareholders of Fairfax | 929.6 | 1,151.7 |
| Attributable to non-controlling interests | 167.3 | 94.0 |
Caption: Change in each source of net earnings between the third quarter of 2025 and the third quarter of 2026, in millions of US dollars. Source: Fairfax Q3 2026 results release, sources of net earnings table, cross-checked to the Q3 2026 Interim Report p. 43.
Read as changes rather than levels, the quarter is not the one the headline suggests. The three operating buckets added US$131.9 million between them, P&C up US$71.7 million, the non-insurance companies up US$42.2 million and life and run-off up US$18.0 million, and corporate overhead and other swung US$71.0 million the right way. The bond line taken with the insurance-contract finance line beside it was US$168.2 million better than a year ago. What took the quarter was equities, where net gains of US$176.9 million replaced US$524.6 million, and the Other investment component, where unrealized losses on a single holding drove a US$153.8 million deterioration. Pre-tax earnings fell US$138.8 million, or 8.9%.
Earnings to shareholders fell more than twice as fast, and most of that gap is the last line of the table. US$167.3 million of profit went to non-controlling interests against US$94.0 million, an increase of US$73.3 million. Fairfax splits that figure in two, and almost all of the movement sits on one side: the minority share of its insurance and reinsurance companies barely moved, US$111.0 million against US$109.7 million, while the minority share of its non-insurance companies swung to a profit of US$56.3 million from a loss of US$15.7 million. The carrying value of those non-insurance minority interests rose to US$1,576.9 million from US$1,354.4 million over the nine months, after AGT’s March initial public offering left more of that business in other hands. That line is volatile rather than structural: across nine months the same non-insurance minority share is US$8.8 million against a loss of US$25.8 million, so the quarter’s US$56.3 million follows a first half that was negative. Most of what moved is how profitable those part-owned businesses were, with the AGT listing raising the minority stake from March onward.
The marks, and what rates actually cost
The prior-year column on the investment line is the explanation. In millions of US dollars:
| Net gains (losses) on investments | Q3 2026 | Q3 2025 |
|---|---|---|
| Equity exposures | 176.9 | 524.6 |
| Bonds | (827.7) | (44.3) |
| Other | (207.9) | (54.1) |
| Total | (858.7) | 426.2 |
Equities still made money, principally US$256.0 million of net gains on common stocks, partially offset by US$107.8 million of losses on equity total return swaps on Fairfax subordinate voting shares. They made far less than a year earlier, and once the bond line is read alongside the insurance-contract line that moves with it, that US$347.7 million reversal is the largest adverse swing in the quarter. The Other row “principally reflected net losses on preferred stocks of $257.9 million, primarily related to unrealized losses on the company’s investment in compulsory convertible preferred shares of Digit”.
Which leaves the bonds, where the US$827.7 million loss is the largest single component in the table and on its own misstates what rates cost Fairfax. The company says so directly: “The consolidated statement of earnings included a net loss of $148.4 million from the effects of changes in interest rates, which reflected net losses on bonds of $827.7 million, partially offset by a net benefit of $679.3 million on insurance contracts and reinsurance contract assets held.”
The mechanism is IFRS 17. An insurer’s claims liabilities are discounted, so when rates rise the market value of its bonds falls and the measured value of what it owes falls alongside, and Fairfax holds both sides. The offset is not exact, and it follows from owning assets and owing liabilities that respond to the same variable.
The year-over-year reading is what undoes the easy story. In the third quarter of 2025 the statement of earnings “included a net loss of $307.7 million from the effects of changes in interest rates”. On Fairfax’s own net measure, then, rates cost it US$148.4 million this quarter against US$307.7 million a year ago, an improvement of US$159.3 million. Rates were a smaller drag than they had been, not the reason earnings fell.
Of the US$827.7 million, US$664.8 million was unrealized and US$162.9 million realized on sales and settlements. Both run through net earnings, which is how a reported profit moves on prices rather than on cash, and our guide to how to read financial statements covers where those movements sit. The losses “principally reflected net losses on U.S. treasuries as a result of increases in interest rates during the quarter”, on a portfolio with an average term to maturity of 3.1 years and 77% in U.S. treasury and other government bonds. A mark-to-market loss on a short government bond held to maturity unwinds mechanically toward par as the bond matures, and the proceeds are reinvested at whatever rate prevails then. Those portfolios are large: US$73.3 billion at the insurance and reinsurance companies, excluding Fairfax India’s US$2.0 billion. Interest and dividends across the group came to US$668.7 million in the quarter, against US$655.4 million a year earlier.
The accident year was profitable before any reserve release
Underwriting profit was US$523.9 million against US$540.3 million, on an undiscounted consolidated combined ratio of 92.5% against 92.0%. A combined ratio is the share of premium consumed by claims and expenses, so under 100% means the book made money before a cent of investment return. The basis matters: Fairfax publishes the ratio both undiscounted and on the discounted IFRS 17 basis, where the same book came in at 81.7% against 81.5%. Every ratio here is the undiscounted one, which is the basis its accident-year decomposition is built on. Fairfax uses the discounted figure elsewhere, including in its segment commentary, so the basis has to travel with the number.
On that basis Fairfax’s interim report puts the accident year at 94.7% against 93.6%, so business written in the current year was profitable on its own, before any release from reserves set in earlier years. Those releases did more work than last year, not less: US$155.5 million and 2.2 points against US$111.2 million and 1.6 points, taking the reported figure from 94.7% to 92.5%. Catastrophes cost US$224.7 million and 3.2 points, against US$150.0 million and 2.2 points.
Fairfax attributes the slip in underwriting profit to “higher catastrophe losses at Northbridge from severe weather events across Canada and higher attritional loss experience and underwriting expenses at Odyssey Group, partially offset by improved underwriting results at the other companies within the Global Insurers and Reinsurers reporting segment.” The interim report puts a market cycle behind the second half of that: Odyssey’s higher attritional losses were “principally attributable to reinsurance property lines of business, reflecting softening market conditions”, and the company “remains focused on disciplined underwriting, which is particularly important when markets are softening.”
Across nine months the underwriting picture is better than the quarter’s. Underwriting profit of US$1,364.1 million against US$1,064.1 million is up 28%, on an undiscounted combined ratio improving to 93.2% from 94.5%. Fairfax’s own caution about reading any single quarter is that its results “have been (and are expected to continue to be) significantly affected by net gains or losses on investments, the timing of which are not predictable”. The investment side over nine months says the same thing the quarter does, at scale: net losses of US$475.7 million against net gains of US$2,434.3 million a year earlier, and earnings to shareholders of US$3,018.0 million against US$3,534.1 million, down 14.6%. The marks are not a one-quarter comparative problem.
Fairfax’s Canadian book was hit harder than Intact, and it mattered less
The other large Canadian-headquartered property and casualty writer reported the same severe-weather quarter on the same day. Intact Financial’s third quarter showed net income down 35% and underwriting income down 38%, with its combined ratio rising to 94.0% from 89.8% on Intact’s own measure and catastrophes taking 10.7 points of it. Against Fairfax’s 3.2 points, that is what diversification looks like when Canadian weather arrives.
One subsidiary down, the comparison is less flattering. Northbridge is Fairfax’s Canadian book, and its undiscounted combined ratio deteriorated 7.6 points to 94.5% from 86.9%, with underwriting profit falling to US$28.9 million from US$72.8 million on net premiums written of US$495.2 million, down 4.6%, a fall Fairfax attributes “primarily due to softening in its commercial lines of business and an exited travel insurance fronting book”. Northbridge’s undiscounted ratio deteriorated by 7.6 points, against 4.2 points for Intact’s consolidated book on Intact’s own measure, so the Canadian subsidiary moved further than the whole of its Canadian-headquartered rival did. What differed is that Northbridge sits inside a global book rather than being the whole company, and at the consolidated level the ratio moved 0.5 points, from 92.0% to 92.5%.
One contrast still favours Fairfax on quality. Intact’s favourable prior year development equalled its entire underwriting income for the quarter, so its current year made nothing on its own, where Fairfax’s accident year was profitable before any release. Beyond the ratios the comparison should not be pushed. Intact reports in Canadian dollars and Fairfax in US dollars. Fairfax’s figures, Northbridge’s 94.5% included, are its own undiscounted measures rather than figures struck identically to Intact’s, and Intact’s 94.0% covers its whole book rather than its Canadian operations alone.
Gross premiums grew faster than net, for a reason Fairfax names
Gross premiums written rose 9.3% to US$8,936.9 million while net premiums written rose 5.4% to US$6,907.0 million. The gap has a named cause. Gross growth came from the International Insurers and Reinsurers segment, up 27.1%, “particularly at Gulf Insurance which entered a fully ceded, large marine war insurance contract during the third quarter”. Fully ceded, in the company’s own word, means the risk was passed to reinsurers, so the contract lifted the gross line without adding to the net line that carries exposure.
Net growth was broader than that one contract, coming from what Fairfax calls “disciplined growth across all our reporting segments”, with volumes up at Brit and Allied World in the Global segment and the International segment’s own net premiums rising 13.2%, “primarily at Fairfax Asia, Gulf Insurance and Fairfax Latin America, as the companies continue to grow where pricing and terms remained attractive”.
Book value, the US$5.1 billion outside it, and the buyback
Book value per basic share was US$1,349.15 at September 30, 2026 against US$1,260.19 at December 31, 2025. Fairfax reports that as an increase per basic share of 7.1% over the nine months, or 8.4% once the US$15.00 per share dividend paid in the first quarter is added back.
Caption: Book value per share in US dollars at each fiscal year end. Source: Fairfax 2025 Annual Report, Fairfax Corporate Performance table, p. 3. The table’s footnotes restate 2021 and 2022 for the adoption of IFRS 17 on January 1, 2023, so the five years sit on a consistent basis.
Across the four years from the end of 2021 to the end of 2025 the figure compounded at about 18.6% a year, against the 15% annual rate Fairfax names as its long-run objective in the glossary to this quarter’s report. The nine-month gain is below that annual pace on either basis.
Book value is also not the whole of what Fairfax owns. The excess of fair value over carrying value of its investments in non-insurance associates and market traded consolidated non-insurance subsidiaries, “which is not reflected in the company’s book value per basic share”, rose to US$5.1 billion from US$3.1 billion at December 31, 2025, US$3.6 billion of it in Eurobank. The company calls it a pre-tax excess. On 19,947,166 shares it is roughly US$256 a share of pre-tax value outside the book value figure, by our arithmetic.
That bears on the buyback. Over nine months Fairfax bought 1,086,435 subordinate voting shares for cancellation at a cost of US$1,771.8 million, against 541,794 shares for US$856.8 million in the same period of 2025, and the common stock effectively outstanding fell 6.5% year over year to 19,947,166 from 21,328,705. US$1,771.8 million over 1,086,435 shares works out at about US$1,631 a share. The company prints the same figure itself, at US$1,630.87 a share. That is 1.21 times book value as it stood on September 30 and 1.29 times the US$1,260.19 book value the year opened at, and it is the question the 2025 annual report addresses when Prem Watsa writes that “our intrinsic value is way above our book value now”. Holding company cash and investments stood at US$1,935.3 million against US$2,724.9 million at December 31, 2025, across the nine months in which that US$1,771.8 million went out on buybacks. The dividend itself did not move: Fairfax pays once a year in the first quarter, US$15.00 a share in each of 2026 and 2025, and announced no change with these results.
October, and the Digit holdings on both sides of it
On October 14, 2026 Fairfax was selected by the Government of India as the “Strategic Buyer” for a 60.72% equity interest in IDBI Bank, and it “proposes to acquire the equity interest in IDBI Bank for approximately $5.6 billion (approximately 528.8 billion Indian rupees)”. Nothing is signed: the company states that binding definitive agreements have not been entered into for the stake or for the contributions proposed to help pay for it. Watsa said the company is “very excited to be selected”.
How Fairfax proposes to pay is where the quarter and the deal meet. The price is to be satisfied through a proposed combination of available cash, existing credit sources, potential asset sales and “the potential contribution, at market prices, of the company’s interests in” Digit and IIFL Capital. Fairfax’s Digit holdings sit on both sides of this quarter. The interim report records net losses of US$258.0 million on its compulsory convertible preferred shares of Digit, and the company is separately proposing to contribute Digit interests toward the price of an Indian bank. Those are related holdings in the same group rather than one instrument, and the filing does not set a value on what would be contributed. What it does say is that any contribution would be made at market prices, which makes what the market will pay for Digit a live question for Fairfax shareholders in a way it was not before October.
Also after quarter end, Fairfax entered agreements on October 7 with Wittington Investments for the Boots retail operations in the UK and Ireland, Boots Opticians, the No7 Beauty Company and Boots’ Thailand and franchised businesses, at a total purchase price of approximately US$8.9 billion inclusive of assumed debt, of which Fairfax “has committed to provide up to approximately $2.3 billion”. It is not buying Boots outright: “the company expects to own 50% of the equity of Boots and Wittington will have operational control”. It also completed the sale of its Eurolife life insurance operations to Eurobank, from which it expects a pre-tax gain of about US$200 million in the fourth quarter.
Set against those two commitments, roughly US$7.9 billion between them, the holding company itself holds US$1,935.3 million of cash and investments, a further US$2.4 billion at fair value of investments in associates and consolidated non-insurance companies, and the undrawn US$2.0 billion revolver. It is not the only source. Fairfax notes that dividends from its insurance and reinsurance subsidiaries “totaled $1,119.5 for the nine months ended September 30, 2026, of the maximum available of $4,065.9 in 2026”, figures in millions of US dollars, and Boots in particular is not expected to be carried at the holding company at all. Its own statement is that “in 2027 the company’s announced investment in Boots is expected to be made through the insurance and reinsurance subsidiaries and the company’s proposed investment in IDBI Bank is expected to be made with a combination of available cash, existing credit sources, potential asset sales and potential investment contributions.” A holder looking past this quarter is watching that sentence rather than these marks.
What the quarter leaves a Fairfax holder with
FFH.TO closed at C$2,488.86 on Tuesday, November 3, 2026, against a previous close of C$2,490.61, effectively flat at a fall of 0.07%, and the reaction to the results is still pending. Price data is Yahoo Finance, as at that close. Over the last eight quarters the stock’s average move in the session after results has been +0.4%, positive in four of the eight, with its 30-day move positive in five and its 90-day move in six. The TradingView chart for FFH shows the price action directly.
On its own figures, the quarter reads this way. Operating income rose across all three buckets, the current accident year of underwriting made money before reserve releases, nine-month underwriting profit is up 28% on an improving combined ratio, and the netted cost of interest rates was less than half what it was a year ago. The decline came from equity gains reverting from a strong comparative, unrealized losses on one Indian holding, and a swing to profit at the part-owned businesses whose minority holders take a share of it.
What it leaves open: net premium growth of 5.4% into markets the company itself describes as softening, Northbridge’s 7.6 point deterioration in the Canadian book, a buyback priced between 1.21 and 1.29 times a book value that itself excludes US$5.1 billion of pre-tax value the company quantifies, and a proposed US$5.6 billion bank purchase that is not yet signed and whose funding may run partly through Digit interests valued at whatever the market says when the time comes.
Disclaimer: The content on bestcanadianstocks.ca is for informational and entertainment purposes only and does not constitute financial advice. Past performance is not indicative of future results. Always consult a qualified financial advisor before making investment decisions. Every Fairfax Financial figure in this article is the company’s own and is cited to the document it came from. The quarter’s results, the sources-of-net-earnings table, the three-way split of net gains and losses on investments, the two statements of the net effect of interest-rate changes, the fixed income portfolio composition, premium growth, the holding company position and the excess of fair value over carrying value come from Fairfax Financial Holdings Limited’s third-quarter 2026 news release of November 3, 2026. The income statement, Total income, the undiscounted and discounted combined ratios, the accident-year decomposition, prior year reserve development, catastrophe losses, the Northbridge figures, the share counts and buybacks, the subsequent-events detail on IDBI Bank, Boots and IIFL Capital, and the 15% book value objective come from the Q3 2026 Interim Report for the three and nine months ended September 30, 2026, cited to PDF page throughout. The five-year book value series and the two Prem Watsa quotations come from the 2025 Annual Report, the Fairfax Corporate Performance table on page 3 and the shareholders’ letter on pages 8 and 25. Intact Financial’s figures are Intact’s own, taken from our own third-quarter 2026 coverage of its release. Yahoo Finance supplies only the November 3, 2026 closing price and the eight-quarter record of price moves after results. The change decomposition, the 19.3% and 8.9% declines, the 6.1% rise in insurance revenue, the US$159.3 million and US$168.2 million rate comparisons, the roughly US$1,631 average buyback price and the 1.21 to 1.29 times book range it spans, the roughly US$256 a share outside book value and the 18.6% compound growth are our own arithmetic on the company’s published figures and are labelled as ours where they appear. Fairfax reports in US dollars; its shares trade on the TSX in Canadian dollars as FFH and in US dollars as FFH.U, and the two are never mixed.
