Q2 2026 Fairfax Financial Holdings Ltd Earnings Call

Fran: Good morning, and welcome to Fairfax's 2026 Q2 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 question 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 Clarke, with opening remarks from Mr. Derek Bulas. Mr. Bulas, please begin.

Speaker #1: 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 question to one.

Speaker #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 Clarke, with opening remarks from Mr. Derek Bulas.

Speaker #1: Mr. Bulas? Please begin.

Speaker #2: Good morning, and welcome to our call to discuss FAIRFAX's second-quarter 2026 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.

Derek Bulas: Good morning, and welcome to our call to discuss Fairfax's 2026 Q2 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 SEDAR+. 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 Clarke.

Speaker #2: 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 SEDAR+.

Speaker #2: 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 Clarke.

Speaker #3: Thank you, Derek. Good morning and welcome to FAIRFAX's 2026 second-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 Hamble Watsa, to comment on investments, and Amy Sherk, our chief financial officer, to provide some additional financial details.

Peter Clarke: Thank you, Derek. Good morning and welcome to Fairfax's 2026 Q2 conference call. I plan to give you some highlights and then pass the call to Wade Burton, our President and Chief Investment Officer of Hamblin Watsa, to comment on investments, and Amy Sherk, our Chief Financial Officer, to provide some additional financial details. We had another strong quarter with operating income from our insurance and reinsurance companies, adjusted to an undiscounted basis and before risk margin of $1.1 billion in Q2 2026. Underwriting income was solid at $459 million, up from $427 million in Q2 2025. Interest and dividend income was $737 million, up from $660 million. Our profits of associates were $43 million, down from $131 million in Q2 2025.

Speaker #3: We had another strong quarter, with operating income from our insurance and reinsurance companies, adjusted to an undiscounted basis and before risk margin, of $1.1 billion in the second quarter of 2026.

Speaker #3: Underwriting income was solid at 459 million, up from 427 million in the second quarter of 2025. Interest in dividend income was 737 million, up from 660 million; and our profits of associates were 43 million, down from 131 million in the second quarter of 2025.

Speaker #3: In addition to our strong operating income, we also had strong net investment gains, 769 million in the quarter. As we have always said, we expect investment gains to perform well over the long term, but they do fluctuate from quarter to quarter.

Peter Clarke: In addition to our strong operating income, we also had strong net investment gains, $769 million in the Q2. As we have always said, we expect investment gains to perform well over the long term, but they do fluctuate from quarter to quarter. Our net earnings for the Q2 were $1.4 billion and $2.1 billion for the H1. All in, our book value per share at the end of the Q2 was $1,304, up 4.8% from year-end 2025, adjusted for our $15 dividend. During the quarter, we purchased 680,000 shares for cancellation for $1.1 billion, or $1,601 per share. We closed two significant transactions in the Q2 2026. The sale of half our position in Poseidon for $1.9 billion, a pre-tax realized gain of $838 million, and we continue to hold the remaining half of our original position.

Speaker #3: Our net earnings for the second quarter were 1.4 billion, and 2.1 billion for the first 6 months. All-in, our book value per share at the end of the second quarter was 1,304, up 4.8 percent from year-end 2025, adjusted for our $15 dividend.

Speaker #3: During the quarter, we purchased 680,000 shares for cancellation, for 1.1 billion, or 1,601 per share. We closed two significant transactions in the second quarter of 2026: the sale of half our position in Poseidon for 1.9 billion—a pre-tax realized gain of 838 million—and we continue to hold the remaining half of our original position.

Speaker #3: In June, with a consortium led by Bill McMorrow, we closed a privatization of Kennedy Wilson. We have been partners with Bill and his team for more than 15 years and have collaborated on more than $8 billion of real estate transactions over that time.

Peter Clarke: In June, with a consortium led by Bill McMorrow, we closed the privatization of Kennedy Wilson. We have been partners with Bill and his team for more than 15 years and have collaborated on more than $8 billion of real estate transactions over that time. We are very excited about the continued opportunities going forward, and a big welcome to Bill and his team. In the quarter, we also announced the privatization of Andrew Peller Limited. The Peller family has been a leading name in wine in Canada for generations, and we are very pleased to partner with John Peller, Paul Dutkowski, their Chief Executive Officer, and the rest of the team. We expect this transaction to close in the Q3 2026. Also in June, Sleep Country announced the acquisition of Sleep Number, a US manufacturer and retailer of mattresses.

Speaker #3: We are very excited about the continued opportunities going forward, and a big welcome to Bill and his team. In the quarter, we also announced a privatization of Andrew Peller Limited.

Speaker #3: The Peller family has been a leading name in wine in Canada for generations, and we are very pleased to partner with John Peller, Paul Duckowski, their chief executive officer, and the rest of the team.

Speaker #3: We expect this transaction to close in the third quarter of 2026. Also in June, Sleep Country announced the acquisition of Sleep Number, a U.S. company.

Speaker #3: Manufacturer and retailer of mattresses. Stuart Schaefer and his team have done an outstanding job working through this acquisition, and at the closing of the transaction, Sleep Country will be the world's second-largest sleep retailer with over 800 locations across Canada and the United States.

Peter Clarke: Stuart Shafer and his team have done an outstanding job working through this acquisition. At the closing of the transaction, Sleep Country will be the world's second-largest sleep retailer, with over 800 locations across Canada and the United States. Amy will provide some additional financial details on each of these transactions later. With the conflict in Iran, members of the Fairfax family are once again, and unfortunately, facing difficult and dangerous circumstances. GIG Management, Gulf, is ensuring that all employees in the Gulf region have the support they need to stay safe, which remains our first priority. While the duration of the conflict remains uncertain, Gulf continues to operate as usual under very challenging conditions, and related losses have been minimal. Our thoughts and prayers are with our employees at Gulf. I will now give you some additional detail on the components of our net earnings for the Q2.

Speaker #3: Amy will provide some additional financial details on each of these transactions later. With the conflict in Iran, members of the Fairfax family are once again, and unfortunately, facing difficult and dangerous circumstances.

Speaker #3: GIG management, Gulf, is ensuring that all employees in the Gulf region have the support they need to stay safe, which remains our first priority.

Speaker #3: While the duration of the conflict remains uncertain, Gulf continues to operate as usual under very challenging conditions, and related losses have been minimal. Our thoughts and prayers are with our employees at Gulf.

Speaker #3: I will now give you some additional detail on the components of our net earnings for the quarter. Our consolidated investment return was 2 percent, driven by interest and dividend income, strong net gains on investments, partially offset by lower profits of associates.

Peter Clarke: Our consolidated investment return was 2%, driven by interest and dividend income, strong net gains on investments, partially offset by lower profits of associates. Consolidated interest and dividend income of $737 million was up 11% year-over-year, benefiting from a growing investment portfolio and increasing government yields. Profits of associates of $43 million in the Q2 was lower by $88 million from a year ago, driven by Helios Fairfax Partners' carrying value being lowered to its market price and from mark-to-market losses on the Waterous Fund. We continue to be very excited about the long-term prospects of both those companies. Our other underlying associate companies continue to perform very well.

Speaker #3: Consolidated interest and dividend income of $737 million was up 11 percent year over year, benefiting from a growing investment portfolio and increasing government yields.

Speaker #3: Profits of associates of 43 million in the quarter was lower by 88 million from a year ago, driven by Helio's FAIRFAX partners carrying value being lowered to its market price and from mark-to-market losses on the waterist fund.

Speaker #3: We continue to be very excited about the long-term prospects of both those companies. Our other underlying associate companies continue to perform very well. Net gains on investments of $769 million were driven by gains on our equity exposures, including the realized gain on our sale of half of our position in Poseidon, offset by mark-to-market losses on our investment in Orla, and unrealized losses on our bond portfolio.

Peter Clarke: Net gains on investments of $769 million were driven by gains on our equity exposures, including the realized gain on our sale of half of our position in Poseidon, offset by mark-to-market losses on our investment in Orla and unrealized losses on our bond portfolio, primarily from U.S. Treasuries due to the increase in interest rates in Q2. More on investments from Wade. As mentioned in previous quarters, our book value per share of $1,304 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 Q2, the fair value of these securities is in excess of carrying value by $4.4 billion, an unrealized gain position, or $220 per share on a pre-tax basis.

Speaker #3: Primarily from U.S. Treasuries due to the increase in interest rates in the second quarter. More on investments from Wade. As mentioned in previous quarters, our book value per share of $1,304 does not include unrealized gains or losses in our equity-accounted investments, and our consolidated investments which are not mark-to-market.

Speaker #3: At the end of the second quarter, the fair value of these securities is in excess of carrying value by 4.4 billion, and unrealized gain position, or 220 dollars per share, on a pre-tax basis.

Speaker #3: This is a significant increase from a year ago, at $110 per share, and at year-end 2025, at $150 per share. In the second quarter, net earnings included a $103 million unrealized loss due to increasing interest rates in the quarter.

Peter Clarke: This is a significant increase from a year ago at $110 per share, and at year-end 2025 at $150 per share. In Q2, net earnings included $103 million unrealized loss due to increasing interest rates in the quarter. This consisted of unrealized losses on our bonds of $122 million, offset by the increase in discount under IFRS 17 on our insurance and reinsurance reserves held of $19 million. For Q2 2025, this number was a net gain of $120 million. This is a swing of over $220 million this quarter versus last quarter 2025. Our insurance and reinsurance businesses wrote $9.4 billion of gross premium in Q2 2026. That is up 4.1% versus Q2 2025. Our North American Insurance segment's gross premium was up 3.5%, or $81 million.

Speaker #3: This consisted of unrealized losses on our bonds of 122 million, offset by the increase in discount under IFRS 17 on our insurance and reinsurance reserves held of 19 million.

Speaker #3: For the second quarter of 2025, this number was a net gain of $120 million. This is a swing of over $220 million, quarter over quarter versus last quarter of 2025.

Speaker #3: Our insurance and reinsurance businesses wrote 9.4 billion of gross premium in the second quarter of 2026. That is up 4.1 percent versus the second quarter of 2025.

Speaker #3: Our North American insurance segments' gross premium was up 3.5%, or $81 million. Crum & Forster's premium was up 5.6%, primarily from its accident and health business, while premium was down across its excess and surplus segment, commercial lines, and at Seneca due to softening market conditions.

Peter Clarke: Crum & Forster's premium was up 5.6%, primarily from its accident and health business, while premium was down across its excess and surplus segment, commercial lines, and at Seneca due to softening market conditions. Zenith's increased premium, $18 million or 10%, primarily from its expanding large account workers' compensation segment and through earned pricing increases. While Northbridge's gross premium was down 2.9% in Canadian dollars, reflecting a competitive marketplace. Our Global Insurer and Reinsurer segment was up 2.8%, with gross premiums of $5.1 billion in Q2 2026. Brit's gross premium was $947 million, up 5% in Q2 2026 versus Q2 2025, with the majority of the growth from the recent expansion of its Brit Re platform in Bermuda. Odyssey Group's premiums were up 3.1%, with gross premium of $1.8 billion.

Speaker #3: Zenith increased premium by $18 million, or 10 percent, primarily from its expanding large account workers' compensation segment and through earned pricing increases. While Northbridge's gross premium was down 2.9 percent, in Canadian dollars, reflecting a competitive marketplace.

Speaker #3: Our global insurer and reinsurer segment was up 2.8 percent, with gross premiums of $5.1 billion in the second quarter of 2026. For its gross premium, it was $947 million, up 5 percent in the second quarter of 2026 versus the second quarter of 2025, with the majority of the growth from the recent expansion of its BritRe platform in Bermuda.

Speaker #3: Odyssey Group's premiums were up 3.1 percent, with gross premium of 1.8 billion. Insurance premiums increased in its crop and healthcare business, while Odyssey's U.S.

Peter Clarke: Insurance premiums increased in its crop and healthcare business, while Odyssey's U.S. and Latin American reinsurance business was down to softening rate environment. Allied World premium was flat in the quarter with gross premiums of $2.1 billion. Their global markets division was up 9%, while its reinsurance segment was flat and its North American insurance premium was down 3% due to the competitive pricing. Ki, developed within Brit, is in its second year operating as a standalone business. Ki's gross premium was up 15% in Q2 2026, driven by property treaty offset by open market North American business. Our international insurance and reinsurance operations gross premiums were $2 billion, up 8.2% in Q2 2026, benefiting from strong underlying growth and favorable movements of foreign exchange. Fairfax Asia was up 26%, Brit was up 16%, Latam 11%, and Gulf Insurance Group up 5.4%.

Speaker #3: The Latin American reinsurance business was down due to a softening rate environment. Allied World premiums were flat in the quarter, with gross premiums of $2.1 billion. Their Global Markets division was up 9 percent, while its reinsurance segment was flat, and its North American insurance premium was down 3 percent due to competitive pricing.

Speaker #3: Key, developed within Brit, is in its second year operating as a standalone business. Key's gross premium was up 15 percent in the second quarter of 2026, driven by property treaty, offset by open market North American business.

Speaker #3: And our international insurance and reinsurance operations gross premiums were 2 billion, up 8.2 percent in the second quarter of 2026, benefiting from strong underlying growth and favorable movements of foreign exchange.

Speaker #3: FAIRFAX Asia was up 26 percent, Bright was up 16 percent, LATAM 11 percent, and Gulf Insurance up 5.4 percent. Offsetting this growth was Colonnade down 8 percent, and Polish Re down 2 percent.

Peter Clarke: Offsetting this growth was Colonnade down 8% and Polish Re down 2%. International operations currently account for about 21% of our overall gross premium. 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 93.1% in Q2, with underwriting income of CAD 459 million, compared to a 93.3% combined ratio and underwriting income of CAD 427 million in Q2 2025. All our major insurance and reinsurance segments continue to post strong results with good underlying margins while remaining disciplined in a softening insurance market, especially in North America. For comparable purposes, our IFRS 17 combined ratio was 81.9% compared to 84.1% a year ago. Our global insurers and reinsurers posted a combined ratio of 92% and underwriting profit of CAD 289 million.

Speaker #3: International operations currently account for about 21 percent of our overall gross premium. Looking ahead, these operations offer strong long-term potential for sustained growth, thanks to skilled management teams, emerging insurance markets, and robust local economies.

Speaker #3: Our combined ratio was 93.1 in the second quarter, with underwriting income of $459 million, compared to a 93.3 combined ratio and underwriting income of $427 million in the second quarter of 2025.

Speaker #3: All our major insurance and reinsurance segments continue to pose strong results with good underlying margins, while remaining disciplined in a softening insurance market, especially in North America.

Speaker #3: For comparable purposes, our IFRS 17 combined ratio was 81.9 percent, compared to 84.1 percent a year ago. Our global insurers and reinsurers posted a combined ratio of 92 percent and underwriting profit of $289 million.

Speaker #3: Allied World led the way with a combined ratio of 90.2. Odyssey's combined ratio was 93.6. Brit had a combined ratio of 94.6, and Key had an outstanding quarter with a combined ratio of 81.5, benefiting from favorable reserve movements.

Peter Clarke: Allied World led the way with a combined ratio of 90.2%. Odyssey's combined ratio was 93.6%. Brit had a combined ratio of 94.6%, and Ki had an outstanding quarter with a combined ratio of 81.5%, benefiting from favorable reserve movement. Our North American insurers had a combined ratio of 94.1% for Q2. Northbridge had another great quarter with a combined ratio of 89%. Crum & Forster had underwriting income of CAD 54 million or a combined ratio of 95.5%, while Zenith, our workers' compensation specialist, after a couple of years of above 100% combined ratios, posted a small underwriting profit at 98%. Our international operations delivered a combined ratio of 95.2% for the quarter, with underwriting income of CAD 55 million and all our international segments producing underwriting income. Colonnade in Eastern Europe had an excellent combined ratio of 87.7%.

Speaker #3: Our North American insurers had a combined ratio of 94.1 for the second quarter. Northbridge had another great quarter, with a combined ratio of 89. Crum & Forster had underwriting income of $54 million, or a combined ratio of 95.5, while Zenith, our workers' compensation specialist, after a couple of years of above-100 combined ratios, posted a small underwriting profit at 98 percent.

Speaker #3: Our international operations delivered a combined ratio of 95.2 for the quarter, with underwriting income of $55 million, and all our international segments producing underwriting income.

Speaker #3: Call and aid in Eastern Europe had an excellent combined ratio of 87.7, Bright continues to produce strong results with a combined ratio of 94, and FAIRFAX Asia had a combined ratio of 94.6, led by Singapore Re at 87.3.

Peter Clarke: Brit continues to produce strong results with a combined ratio of 94%, and Fairfax Asia had a combined ratio of 94.6%, led by Singapore Re at 87.3%. Gulf Insurance, the largest company under international operations, had a combined ratio of 99.3% in Q2, notwithstanding the difficult conditions from the war in Iran. In Q2, our insurance and reinsurance companies recorded favorable reserve development of CAD 152 million or a benefit of 2.3 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 of business. Through our decentralized operations, our insurance and reinsurance companies continued to produce strong results, writing annualized gross premium of over CAD 34 billion, with underlying margins remaining attractive in the main, in spite of softening rates.

Speaker #3: Gulf Insurance, the largest company in our international operations, had a combined ratio of 99.3 in the second quarter, notwithstanding the difficult conditions from the war in Iran.

Speaker #3: In the second quarter, our insurance and reinsurance companies recorded favorable reserve development of 152 million, or a benefit of 2.3 points on our combined ratio.

Speaker #3: 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 of business.

Speaker #3: Through our decentralized operations, our insurance and reinsurance companies continue to produce strong results. Writing annualized gross premium of over 34 billion, with underlying margins remaining attractive in the main, in spite of softening rates.

Speaker #3: In many lines, it has become more competitive but we benefit from our size and scale and, more importantly, we have exceptionally long-term management teams that are all focused on the bottom line and have the experience to manage the cyclical nature of our insurance business.

Peter Clarke: In many lines, it is becoming more competitive. We benefit from our size and scale, and more importantly, we have exceptionally long-term management teams that are all focused on the bottom line and have the experience to manage the cyclical nature of our insurance business. Our long-term approach enables our companies to stay disciplined, patient, and focused on profitability rather than top-line growth targets. I will now pass the call to Wade Burton, our President and Chief Investment Officer of Hamblin Watsa, to comment on our investments.

Speaker #3: Our long-term approach enables our companies to stay disciplined, patient, and focused on profitability, rather than top-line growth targets. I will now pass the call to Wade Burton, our president and chief investment officer of Hamle Watsa, to comment on our investments.

Speaker #1: Thank you, Peter, and good morning. Our investment portfolio ended the second quarter of 2026 at 77.3 billion, fixed income made up 52.3 billion, common and preferred stocks, including our TRS and real estate, came to 13.4 billion, and associate and consolidated investments ended the quarter at 11.6 billion.

Wade Burton: Thank you, Peter, and good morning. Our investment portfolio ended the Q2 2026 at $77.3 billion. Fixed income made up $52.3 billion. Common and preferred stocks, including our TRS and real estate, came to $13.4 billion, and associate and consolidated investments ended the quarter at $11.6 billion. Within that fixed income portfolio, $8.5 billion was cash and short-term bonds, mainly US T-bills. $32 billion was in government bonds, $6.1 billion in corporate bonds, and $5.6 billion in mortgages. Credit quality remains outstanding. Over 75% is in government bonds, with the remainder in high-quality corporates and first mortgages. Duration is 2 years, and the yield is 5%. We continue to earn good money on a safe, liquid fixed income portfolio. There are many moving parts in today's economic picture.

Speaker #1: Within that fixed income portfolio, $8.5 billion was cash and short-term bonds, mainly U.S. Treasury bills; $32 billion was in government bonds; $6.1 billion in corporate bonds; and $5.6 billion in mortgages.

Speaker #1: Credit quality remains outstanding. Over 75 percent is in government bonds, with the remainder in high-quality corporates and first mortgages. Duration is two years, and the yield is 5 percent.

Speaker #1: We continue to earn good money on a safe, liquid fixed income portfolio. There are many moving parts in today's economic picture: a new, unproven Fed chair in Kevin Warsh, healthy but stable inflation, heavy fiscal spending, large deficits, the Iran war, tariffs, and steady wage and goods inflation.

Wade Burton: A new unproven Fed Chair in Kevin Warsh, healthy but stable inflation, heavy fiscal spending, large deficits, the Iran war, tariffs, and steady wage and goods inflation. One thing we're confident of, the days of zero, and in many cases, negative rates are behind us. The risk is tilted toward inflation running higher than expected, which favors our high-quality, short-duration fixed income portfolio. Within the $25 billion equity and equity-like portfolio, where our target return is 15%, we have $9.9 billion in common stocks, $6.6 billion in associates, and $4.2 billion in consolidated. Associates are investments like Eurobank and Poseidon, where we don't hold a controlling stake. Consolidated investments are where we do hold a controlling stake. We also hold $4.4 billion in preferred shares, insurance associates, real estate, and derivatives, primarily our Fairfax TRS, which Peter's already covered.

Speaker #1: One thing we're confident of: the days of zero and, in many cases, negative rates are behind us. The risk is tilted toward inflation running higher than expected, which favors our high-quality, short-duration fixed income portfolio.

Speaker #1: Within the $25 billion equity and equity-like portfolio, where our target return is 15 percent, we have $9.9 billion in common stocks, $6.6 billion in associates, and $4.2 billion in consolidated.

Speaker #1: Associates are investments like Eurobank and Poseidon, where we don't hold a controlling stake. Consolidated investments are where we do hold a controlling stake. We also hold $4.4 billion in preferred shares, insurance associates, real estate, and derivatives, primarily our Fairfax TRS, which Peter's already covered.

Speaker #1: The vast majority of everything we own in our equity portfolio has three main threads: we like the people running the businesses, the companies are financially sound, and we're carrying them at values where we believe we can earn our 15 percent return.

Wade Burton: The vast majority of everything we own in our equity portfolio has three main threads. We like the people running the businesses. The companies are financially sound, and we're carrying them at values where we believe we can earn our 15% return. Judged on these main criteria, the equity and equity-like portfolio is in a very strong position. The overall pricing of the portfolio is cheap. By that I mean either the stock trades cheaply as a publicly traded common stock, or we're carrying the consolidated investment at conservative values. More importantly, our lineup of partners and CEOs has never been better. From Kevin Plank at Under Armour, David Sokol at Poseidon, Fokion Karavias at Eurobank, Evangelos Mytilineos at Mytilineos, and Adam Waterous at Greenfire and Strathcona Resources, just to name a few. All world-class partners focused on making money for our shareholders.

Speaker #1: Judged on these main criteria, the equity and equity-like portfolios are in a very strong position. The overall pricing of the portfolio is cheap; by that, I mean either the stock trades cheaply as a publicly traded common stock, or we're carrying the consolidated investment at conservative values.

Speaker #1: But more importantly, our lineup of partners and CEOs has never been better. From Kevin Plank at Under Armour, David Sokol at Poseidon, Bekihan Karavis at Eurobank, Evangelos Mylonas at MetLine, and Adam Waterous at GreenFire and Strathcona Resources, just to name a few.

Speaker #1: All world-class partners, focused on making money for our shareholders. Last, a word on AI and software companies. First AI: we've become heavy users of AI inside our company, and it's added real multiples to our analytical productivity.

Wade Burton: Last, a word on AI and software companies. First, AI. We've become heavy users of AI inside our company, and it's added real multiples to our analytical productivity. That's good news. Second, software companies. We've studied a number of software companies that AI may put at risk. We haven't yet found one where we can point with certainty to long-term earnings power. That makes it impossible to land on an intrinsic value we have confidence in. Even though many software company prices have come down a lot, none have come down enough for us to invest. With that, I'll turn the call over to our CFO, Amy Sherk.

Speaker #1: That's good news. Second, software companies: we've studied a number of software companies that AI may put at risk. We haven't yet found one where we can point with certainty to long-term earnings power.

Speaker #1: That makes it impossible to land on an intrinsic value we have confidence in. So even though many software company prices have come down a lot, none have come down enough for us to invest.

Speaker #1: And with that, I'll turn the call over to our CFO, Amy Sherk.

Speaker #3: Thank you, Wade. I'll begin my comments by discussing some of our key transactions. On May 29, 2026, the company sold 23.1 percent of its 45.3 percent equity interest in Poseidon for cash consideration of $28.30 per share, or aggregate proceeds of $1.9 billion, which decreased the company's equity interest to 22.2 percent.

Amy Sherk: Thank you, Wade. I'll begin my comments by discussing some of our key transactions. On 29 May 2026, the company sold 23.1% of its 45.3% equity interest in Poseidon for cash consideration of $28.30 per share or aggregate proceeds of $1.9 billion, which decreased the company's equity interest to 22.2%. Accordingly, the company recorded a realized gain of $838 million in the consolidated statement of earnings. The company continues to apply the equity method of accounting to the retained portion of its investment in Poseidon. On 16 June 2026, all of the outstanding common shares of Kennedy Wilson not already owned by the company and certain senior executives of Kennedy Wilson, who together with the company form the consortium, were acquired by Kena Bidco, a newly formed holding company established by the consortium.

Speaker #3: Accordingly, the company recorded a realized gain of $838 million in the consolidated statement of earnings. The company continues to apply the equity method of accounting to the retained portion of its investment in Poseidon.

Speaker #3: On June 16, 2026, all of the outstanding common shares of Kennedy Wilson not already owned by the company and certain senior executives of Kennedy Wilson, who together with the company form the consortium, were acquired by Kona Bidco, a newly formed holding company established by the consortium.

Speaker #3: Kona Bidco acquired the common shares of Kennedy Wilson for $10.90 per share in cash, funded principally by $1.3 billion of acquisition financing obtained by Kona Bidco.

Amy Sherk: Kena Bidco acquired the common shares of Kennedy Wilson for $10.90 per share in cash, funded principally by $1.3 billion of acquisition financing obtained by Kena Bidco. Concurrently, the company invested cash of $400 million and also contributed its existing holdings in Kennedy Wilson preferred and common shares into Kena Bidco. For Kena Bidco mandatorily redeemable preferred shares with a fair value of $716 million, which the company has classified as bonds, and Kena Bidco common shares with a fair value of $145 million, which the company has recorded as an investment in associates. Although the company received a majority economic interest through its Kena Bidco investments, it does not have control over Kena Bidco or Kennedy Wilson. Accordingly, the company has concluded that it has significant influence over Kena Bidco and has commenced applying the equity method of accounting to its indirect equity interest in Kennedy Wilson.

Speaker #3: Concurrently, the company invested cash of $400 million and also contributed its existing holdings in Kennedy Wilson preferred and common shares into Kona Bidco, for Kona Bidco mandatorily redeemable preferred shares with a fair value of $716 million, which the company has classified as bonds, and Kona Bidco common shares with a fair value of $145 million, which the company has recorded as an investment in associates.

Speaker #3: Although the company received a majority economic interest through its Kona Bidco investments, it does not have control over Kona Bidco or Kennedy Wilson. Accordingly, the company has concluded that it has significant influence over Kona Bidco and has commenced applying the equity method of accounting to its indirect equity interest in Kennedy Wilson.

Speaker #3: During the second quarter, the company closed out derivative contracts on 418,795 Fairfax subordinate voting shares with an original notional amount of $132 million, or C$172 million, and received cash of $517 million from its derivative counterparty upon settlement.

Amy Sherk: During Q2, the company closed out derivative contracts on 418,795 Fairfax subordinate voting shares with an original notional amount of $132 million or CAD 172 million, and received cash of $517 million from its derivative counterparty upon settlement. At 30 June 2026, the company continues to hold equity total return swaps on just over 1.3 million Fairfax subordinate voting shares with an original notional amount of $532 million or $396.59 per share. That's CAD 674 million or CAD 502.68 per share. The following transactions are expected to close in H2. On 14 June 2026, the company formed a consortium with John Edward Enterprises Inc., or JEEI, and the company entered into an agreement to acquire all voting and non-voting shares of Andrew Peller Limited, not already owned by JEEI, for approximately $233 million or CAD 330 million.

Speaker #3: At June 30, 2026, the company continues to hold equity total return swaps on just over 1.3 million Fairfax subordinate voting shares, with an original notional amount of $532 million, or $396.59 per share.

Speaker #3: That's $674 million Canadian, or $502.68 Canadian per share. The following transactions are expected to close in the second half of the year: on June 14, 2026, the company formed a consortium with John Edwards Enterprises, Inc., or JEEI, and the company entered into an agreement to acquire all voting and non-voting shares of Andrew Peller Limited not already owned by JEEI for approximately $233 million, or $330 million Canadian.

Speaker #3: Together with JEEI's shares, the consortium, which the company expects to consolidate, will own 100 percent of the equity of Andrew Peller Limited. Closing of the transaction is subject to shareholder regulatory and other conditions, and is expected to be in the third quarter of 2026.

Amy Sherk: Together with JEEI's shares, the consortium which the company expects to consolidate will own 100% of the equity of Andrew Peller Limited. Closing of the transaction is subject to shareholder, regulatory, and other conditions and is expected to be in Q3 2026. On 12 June 2026, Sleep Country entered into an agreement to acquire the assets and assume certain liabilities of Sleep Number, a US manufacturer and retailer of premium adjustable mattresses. Sleep Country will acquire Sleep Number for purchase consideration of approximately $530 million, as determined through a Chapter 11 court-supervised bidding process that has now been approved. The purchase consideration will be funded by additional Sleep Country borrowings as described in Note 11 of our Q2 interim report, Closing of this transaction is subject to customary conditions and is expected to be today.

Speaker #3: On June 12th, 2026, Sleep Country entered into an agreement to acquire the assets and assume certain liabilities of Sleep Number, a U.S. manufacturer and retailer of premium-adjustable mattresses, Sleep Country will acquire Sleep Number for purchase consideration of approximately 530 million as determined through a Chapter 11 court-supervised bidding process that has now been approved.

Speaker #3: The purchase consideration will be funded by additional Sleep Country borrowings, as described in Note 11 of our Q2 interim report. Closing of this transaction is subject to customary conditions and is expected to be today.

Speaker #3: On May 7th, 2026, FAIRFAX India entered into an investment agreement with IFL Capital and its existing promoters to increase the company's equity interest in IFL Capital through a series of transactions to a minimum of 51 percent for aggregate consideration of approximately 417 million or 39.3 billion Indian rupees.

Amy Sherk: On 7 May 2026, Fairfax India entered into an investment agreement with ISL Capital and its existing promoters to increase the company's equity interest in ISL Capital through a series of transactions to a minimum of 51% for aggregate consideration of approximately INR 417 million or 39.3 billion Indian rupees. Closing of the transaction is subject to customary closing conditions, including regulatory approvals, and is expected to be in the latter half of 2026. Also, on 6 May 2026, the company entered into definitive agreements on its previously announced transaction with Eurobank, pursuant to which Eurobank will acquire the company's 80% equity interest in the life insurance operations of Eurolife for cash consideration of approximately EUR 930 million or 813 million euro. The company will continue to maintain its 80% equity interest in Eurolife General, the property and casualty insurance business operated by Eurolife.

Speaker #3: Closing of the transaction is subject to customary closing conditions, including regulatory approvals and is expected to be in the latter half of 2026. Also, on May 6th, 2026, the company entered into definitive agreements on its previously announced transaction with Eurobank, pursuant to which Eurobank will acquire the company's 80 percent equity interest in the life insurance operations of Eurolife for cash consideration of approximately 930 million or 813 million euro.

Speaker #3: The company will continue to maintain its 80 percent equity interest in Eurolife General, the property and casualty insurance business operated by Eurolife, and concurrently, the company will purchase a 45 percent equity interest in Eurobank's Cyprus non-life insurance company, ERB Insurance, for cash consideration of approximately $68 million, or €59 million.

Amy Sherk: Concurrently, the company will purchase a 45% equity interest in Eurobank's Cyprus non-life insurance company, ERBA, for cash consideration of approximately EUR 68 million or 59 million euro, with an option to acquire the remainder of ERBA in the future. The proposed transactions are subject to regulatory approval and customary closing conditions and are expected to close in Q3 2026. Now a few comments on our non-insurance companies results in Q2 and H1 2026. Non-insurance companies reported operating income of USD 194 million in Q2 2026 compared to USD 126 million in Q2 2025. This primarily reflected higher operating income in our other segment due to improved operating income at a majority of the operating companies and at Fairfax India, principally driven by increased share of profit of associates.

Speaker #3: With an option to acquire the remainder of ERBA in the future. The proposed transactions are subject to regulatory approval and customary closing conditions, and are expected to close in the third quarter of 2026.

Speaker #3: Now a few comments on our non-insurance companies' results in the second quarter and first six months of 2026. Non-insurance companies reported operating income of 194 million in the second quarter of 2026 compared to 126 million in the second quarter of 2025.

Speaker #3: This primarily reflected higher operating income in our other segment due to improved operating income at a majority of the operating companies and at Fairfax India, principally driven by increased share of profit of associates.

Speaker #3: Non-insurance companies reported operating income of $231 million in the first six months of 2026, compared to $85 million in the first six months of 2025, primarily reflecting higher operating income in the other segment, principally driven by non-recurring, non-cash impairment charges recorded by Boat Rocker in the first six months of 2025, prior to its deconsolidation on August 1, 2025.

Amy Sherk: Non-insurance companies reported operating income of USD 231 million in H1 2026 compared to USD 85 million in H1 2025, primarily reflecting higher operating income in the other segment, principally driven by non-recurring non-cash impairment charges recorded by Boat Rocker in H1 2025 prior to its deconsolidation on 1 August 2025.

Speaker #3: Looking at our share of profit from investments in associates in the second quarter and first six months of 2026, consolidated share of profit of associates of $43 million in the second quarter of 2026 principally reflected share of profit of $108 million from Eurobank, $33 million from the company's reduced share of Poseidon, all partially offset by a write-down of $92 million of Helios FAIRFAX Partners to its fair value.

Amy Sherk: Looking at our share of profit from investments in associates in Q2 and H1 2026, consolidated share of profit of associates of USD 43 million in Q2 2026, principally reflected share of profit of USD 108 million from Eurobank, USD 33 million from the company's reduced share of Poseidon, all partially offset by a write-down of USD 92 million of Helios Fairfax Partners to its fair value and share of loss of USD 46 million from Waterous Energy Fund III, a limited partnership investment that recorded unrealized mark-to-market losses on a publicly traded common stock holding.

Speaker #3: And share of profit of profit sorry, share of loss of 46 million from Waters Energy Fund III, a limited partnership investment that recorded unrealized mark-to-market losses on a publicly traded common stock holding.

Speaker #3: The consolidated share of profit of associates of $414 million in the first six months of 2026 principally reflected the share of profit of $237 million from Eurobank, $109 million from Poseidon, and $71 million from Waters Energy Fund III, partially offset by a write-down of $92 million for Helios FAIRFAX Partners to its fair value.

Amy Sherk: Consolidated share of profit of associates of $414 million in H1 2026, principally reflected share of profit of $237 million from Eurobank, $109 million from Poseidon, and $71 million from Waterous Energy Fund III, partially offset by a write-down of $92 million of Helios Fairfax Partners to its fair value. I will close with a few comments on our financial condition. Maintaining an emphasis on financial soundness, at 30 June 2026, the company held $2.3 billion of cash and investments at the holding company, has access to our $2 billion unsecured revolving credit facility and an additional $2.2 billion at fair value of investments in associates and market-traded consolidated non-insurance companies. Its $2 billion unsecured revolving credit facility was undrawn.

Speaker #3: I will close with a few comments on our financial condition. Maintaining an emphasis on financial soundness at June 30th, 2026, the company held 2.3 billion of cash and investments at the holding company, has access to our 2 billion unsecured revolving credit facility, and additional and an additional 2.2 billion at fair value of investments in associates and market-traded consolidated non-insurance company.

Speaker #3: Its 2 billion dollar unsecured revolving credit facility was undrawn. At June 30th, the excess of fair value over carrying value of investments in non-insurance associates and market-traded consolidated non-insurance subsidiaries was 4.4 billion, compared to 3.1 billion at December 31st, 2025, with the increased excess, principally related to the company's investment in publicly traded Eurobank and the remaining shares held in Poseidon.

Amy Sherk: At 30 June, the excess of fair value over carrying value of investments in non-insurance associates and market-traded consolidated non-insurance subsidiaries was $4.4 billion, compared to $3.1 billion at 31 December 2025, with the increased excess principally related to the company's investment in publicly traded Eurobank and the remaining shares held in Poseidon. The pre-tax excess of $4.4 billion is not reflected in the company's book value per share but is regularly reviewed by management as an indicator of investment performance. The company's total debt to total capital ratio, excluding non-insurance companies, increased to 28% at 30 June 2026 compared to 26.2% at 31 December 2025, reflecting increased total debt, principally from issuances partially offset by redemptions of unsecured senior notes and decreased common shareholders' equity.

Speaker #3: The pre-tax excess of $4.4 billion is not reflected in the company's book value per share, but is regularly reviewed by management as an indicator of investment performance.

Speaker #3: The company's total debt-to-total capital ratio, excluding non-insurance companies, increased to 28 percent at June 30th, 2026, compared to 26.2 percent at December 31st, 2025, reflecting increased total debt, principally from issuances, partially offset by redemptions of unsecured senior notes, and decreased common shareholders' equity.

Speaker #3: Common shareholders' equity decreased by 234 million to 26 billion at June 30th, 2026, primarily reflecting purchases of just 1.1 million subordinate voting shares for cancellation for consideration of 1.7 billion or 1,630.61 per share, payments of common share dividends of 329 million and other comprehensive loss of 276 million primarily related to unrealized foreign currency translation losses net of hedges due to the strengthening of the U.S.

Amy Sherk: Common shareholders' equity decreased by $234 million to $26 billion at 30 June 2026, primarily reflecting purchases of just 1.1 million subordinate voting shares for cancellation for consideration of $1.7 billion or $1,630.61 per share, payments of common share dividends of $329 million and other comprehensive loss of $276 million, primarily related to unrealized foreign currency translation losses, net of hedges, due to the strengthening of the US dollar against various currencies. The company views these unrealized foreign currency movements as market fluctuations similar to unrealized gains or losses on its equity and fixed income portfolios, partially offset by net earnings attributable to shareholders of Fairfax of $2.1 billion.

Speaker #3: ...dollar against various currencies. The company views these unrealized foreign currency movements as market fluctuations, similar to unrealized gains or losses on its equity and fixed-income portfolios, partially offset by net earnings attributable to shareholders of Fairfax of $2.1 billion.

Speaker #3: In closing, book value per basic share was $1,304.39 at June 30, 2026, compared to $1,260.19 at December 31, 2025, representing an increase per basic share in the first six months of 2026 of 4.8 percent, adjusted to include the $15 per share dividend paid in the first quarter of 2026.

Amy Sherk: In closing, book value per basic share was $1,304.39 at 30 June 2026, compared to $1,260.19 at 31 December 2025, representing an increase per basic share in H1 2026 of 4.8%, adjusted to include the $15 per share dividend paid in Q1 2026. That concludes my remarks, and I will now turn the call back over to Peter. Thank you.

Speaker #3: That concludes my remarks, and I will now turn the call back over to Peter. Thank you.

Speaker #1: Thank you, Amy. We are now happy to take on any questions you might have.

Peter Clarke: Thank you, Amy. We are now happy to take on any questions you might have.

Speaker #2: Thank you. We'll now begin the question-and-answer session. If you would like to ask a question, please press star one. Please unmute your phone and record your name clearly when prompted.

Fran: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one. Please unmute your phone and record your name clearly when prompted. Your name is needed to introduce your question. To withdraw that request, you may press star two. Our first question now is from Scott Fletcher with CIBC. Your line is open.

Speaker #2: Your name is needed to introduce your question. To withdraw that request, you may press star 2. And our first question now is from Scott Fletcher with CIBC, your line is open.

Speaker #1: Good morning, Scott.

Peter Clarke: Good morning, Scott.

Speaker #4: Hi. Good morning, and thanks for taking the question this morning. There's been a lot of commentary across the insurance sector this quarter just around continued softening in property lines, and that softening spreading out into the casualty lines as well.

Scott Fletcher [Director of Research: Hi. Good morning. Thanks for taking the question this morning. There has been a lot of commentary across the insurance sector this quarter just around continued softening in property lines. That softening spreading out into the casualty lines as well. Just curious if you are seeing a broadening out of the softening market, whether in the primary reinsurance or the reinsurance businesses. Should we expect any changes to premium growth or combined ratios going forward to reflect that softening?

Speaker #4: Just curious if you're seeing a broadening out of the softening market, whether in the primary insurance or the reinsurance businesses, and should we expect any changes to premium growth or combined ratios going forward to reflect that softening?

Speaker #1: Thanks, Scott. You know, in the second quarter, we continued to see the, like, similar trends that we have reported in the last number of years.

Peter Clarke: Thanks, Scott. In Q2, we continued to see similar trends that we have reported in the last number of years. Softening across many of our companies, especially in North America and particularly in the property market. We may see some coming into casualty. Generally, it's really on the property side, and it's making it challenging for our companies to grow. There's really now a focus on the bottom line that companies are looking to optimize their portfolios. They put more weight on the higher margin business and pull back on the less attractive business. As we said before, we benefit greatly from our diversified operations by product and by geography. For example, our international operations continue to grow at a very good clip, where there's less pricing pressure. Our international segment, as I said earlier, was up 8%, and that's for the international segment.

Speaker #1: We're seeing softening across many of our companies, especially in North America and particularly in the property market. We may see some coming into casualty, but generally, it's really on the property side, and it's making it challenging for our companies to grow.

Speaker #1: And there's really now a focus, you know, on the bottom line—companies are looking to optimize their portfolios. They put more weight on the higher-margin business and pull back on the less attractive business.

Speaker #1: But as we said before, we benefit greatly from our diversified operations—by product and by geography. So, for example, our international operations continue to grow at a very good clip.

Speaker #1: Where there's less pricing pressure, our international segment, as I said earlier, was up 8 percent. And that's for the international segment. I should point out that some of our larger companies—Allied World, Odyssey Group, Brit—they also have significant international books of business.

Peter Clarke: I should point out that some of our larger companies, Allied World, Odyssey Group, and Brit, they also have significant international books of business. When we look at our international segment on its own, that now makes up about 20% of our total business. If we look at all the international business, including the others, that's probably closer to 35% and growing. We have that flexibility, and we benefit from the diversification. Also, just to point out, as I said, the property business is the most under pricing pressure. In aggregate, property makes up only about 35% of our total business, our total premium. Again, we benefit from the diversification across all our lines of business. Thank you for the question. Next question, please.

Speaker #1: So, when we look at our international segment on its own, that now makes up about 20 percent of our total business. But if we look at all the international business—including the others—that's probably closer to 35 percent, and growing.

Speaker #1: So we have that flexibility, and we benefit from the diversification. Also, just to point out, as I said, the property business is the most under pricing pressure.

Speaker #1: And in aggregate property, it makes up only about 35 percent of our total business, our total premium. So again, we benefit from the diversification across all our lines of business.

Speaker #1: Thank you for the question, and next question, please.

Speaker #2: And that is from Bart Jarski with RBC Capital Markets. Your line is open. One moment, please. Small delay. Bart, your line is open. Mr. Jarski.

Fran: That is from Bart Jaworski with RBC Capital Markets. Your line is open. One moment, please. Small delay.

Peter Clarke: Morning, Bart.

Fran: Bart, your line is open, Mr. Jaworski. His line is out of queue. Our next is from Tom MacKinnon with BMO Capital Markets. Your line is open.

Speaker #2: His line is out of queue. Our next is from Tom McKinnon with BMO Capital Markets. Your line is open.

Speaker #5: Yeah, thanks very much. Can you hear me?

Tom MacKinnon: Yeah, thanks very much. Can you hear me?

Speaker #2: Yes, sir.

Fran: Yes, sir.

Speaker #1: We can hear you. Yep.

Peter Clarke: We can hear you. Yep.

Speaker #5: Yep, super. Notice that in the quarter you sold nearly a quarter of the TRS on the FAIRFAX stock. Does what are the takeaways with respect to that?

Tom MacKinnon: Yep, super. Notice that in the quarter you sold nearly a quarter of the TRS on the Fairfax stock. What are the takeaways with respect to that? Does that mean you think the stock is not as attractive right now where it sits? If so, why would you continue to buy back the stock? Comments around that. Thanks.

Speaker #5: Do you does that mean you think the stock is not as attractive right now, where it sits, and if so, why do you why would you continue to buy back the stock?

Speaker #5: So comments around that, thanks.

Speaker #1: Right. No. No, of course. So we still we're still, you know, we think we're still buying our stock back. You can see we bought back almost a million shares in the quarter, so we think it's still remains undervalued.

Peter Clarke: Right. No, of course. We're still buying our stock back. You can see we bought back almost 1 million shares in the quarter, so we think it still remains undervalued. It's just the TRS. We entered into it in 2020, and it's been an outstanding investment for us. We had a cumulative gain so far of about $2.5 billion over that time period. As Amy Sherk said, and you said, we took off approximately 24% of the position in the quarter, but we still hold a significant position at about 1.3 million shares. We believe it's a very attractive long-term position and investment for us over time. Thank you for the question. Next question, please.

Speaker #1: It's just the TRS, you know, we entered into it in 2020, and it's been an outstanding investment for us. We had a cumulative gain so far of about 2.5 billion over that time period.

Speaker #1: As Amy said, and as you mentioned, we took off approximately 24% of the position in the quarter, but we still hold a significant position at about 1.3 million shares.

Speaker #1: And we believe you know, it's a very attractive long-term position and investment for us over time. Thank you for the question, and next question, please.

Speaker #2: Thank you. James Gloin with National Bank Capital Market. Your line is now open.

Fran: Thank you. Jaeme Gloyn with National Bank Capital Markets, your line is now open.

Speaker #6: Yeah, thanks. Just a question on the bond portfolio. As it's constructed today, with previous mortgages, that I believe you got from Kennedy Wilson and now the Kennedy Wilson investment is treated as a bond.

Jaeme Gloyn: Yeah, thanks. Just a question on the bond portfolio as it's constructed today with previous mortgages that I believe you got from Kennedy Wilson, and now the Kennedy Wilson investment is treated as a bond. It seems like there's a pretty good chunk that's tied up in real estate exposed to, let's say, income-producing investments. Maybe talk us through that thought process, that strategy, and how you got comfortable with taking on this level of risk tied to real estate.

Speaker #6: It seems like there's a pretty good chunk that's tied up in real estate exposed let's say income-producing investments. So maybe talk us through that thought process, that strategy, and, you know, how you got comfortable with taking on, you know, this level of risk tied to real estate.

Peter Clarke: Sure, Jamie. If we look, as Wade Burton said, our fixed income portfolio is approximately $53 billion, and over 75% of that is in government bonds. We are very pleased where we are from a duration standpoint as well. We have a lot of flexibility in our portfolio, and especially on the fixed income portfolio. In regards to real estate, as I said earlier, we've had a 15-year relationship with Bill and the Kennedy Wilson team, and they've produced outstanding results for us through mortgages, real estate, and that's something that we don't have in-house. When the opportunity to privatize the company with Bill and the team, and they'll operate as normal, completely separate from Fairfax. We thought it was a great long-term investment for us, and we're very comfortable where we are on our exposure to real estate mortgages, et cetera. Thank you for the question.

Speaker #1: Sure, Jamie. So if we look, you know, as Wade said, our fixed income portfolio is approximately 53 billion dollars. And over 75 percent of that is in government bonds.

Speaker #1: And we, you know, we're very pleased where we are from a duration standpoint as well. So we have a lot of flexibility in our portfolio and especially on the fixed income portfolio.

Speaker #1: In regards to real estate, as I said earlier, we've had a 15-year relationship with Bill and the Kennedy Wilson team, and they've produced outstanding results for us through mortgages and real estate, and that's something that we don't have in-house.

Speaker #1: So we you know, when the opportunity to privatize the company, with Bill and the team, and they will operate as normal, completely separate from FAIRFAX, we thought it was a great long-term investment for us.

Speaker #1: And we're very comfortable where we are on our exposure to real estate, mortgages, et cetera. Thank you for the question. Next question, please.

Peter Clarke: Next question, please.

Speaker #2: We have another from Bart Jarski with RBC Capital Markets. Sir, your line is open.

Fran: We have another from Bart Jaworski with RBC Capital Markets. Sir, your line is open.

Speaker #5: Great. Good morning. Thanks, everyone. Sorry about earlier. I'm managing a couple calls. Thanks for taking the question. I just wanted to ask about profit for associates.

Bart Jaworski: Great. Good morning. Thanks, everyone. Sorry about earlier. I'm managing a couple of calls. Thanks for taking the question. I just wanted to ask about profit for associates. I know there's a couple of one-timers this quarter, but I think if you normalize for that, it's still looking light relative to the $1 billion of guidance. Maybe walk us through, is that still a good number to think about? If so, what are the pieces that give you confidence to get there? Thanks.

Speaker #5: So I know there's a couple one-timers this quarter, but I think if you normalize for that, it's still looking light relative to the billion dollars of guidance.

Speaker #5: And so, maybe walk us through: is that still a good number to think about? And if so, what are the pieces that give you confidence to get there?

Speaker #5: Thanks.

Speaker #1: No, thanks, Bart. Yeah, no, you're right. You know, it can fluctuate our associate income quarter to quarter. We had a couple one-offs this quarter.

Peter Clarke: No, thanks, Bart. Yeah, no, you're right. It can fluctuate our associate income quarter to quarter. We had a couple of one-offs this quarter. We are still very high on all the companies we own in that bucket, and the potential, we think, going forward is very strong. In regards to guidance, we really don't like to give guidance, we've sort of in the past said we think we have about $1 billion of income from associates and our consolidated investments. If you look at both of those combined, I think we're actually running quite above that number we previously gave maybe at year-end or at our annual meeting. Thank you for the question and next question, please.

Speaker #1: But we are still very high on all the companies. We own in that bucket, and the potential we think going forward is very strong.

Speaker #1: In regards to guidance, we really don't you know, like to give guidance, but we've sort of in the past said we think we have about a billion dollars of income from associates and our consolidated investments.

Speaker #1: So if you look at both of those combined, I think we're actually running quite above that number. We previously gave maybe a year-end or at our annual meeting.

Speaker #1: So thank you for the question, and next question, please.

Speaker #2: Next question is from Benjamin Sanderson, a private investor and your line is open.

Fran: Next question is from Benjamin Sanderson, a private investor, and your line is open.

Speaker #7: Hey, good morning, Peter. Good morning, Wade. Thanks for thanks for the call. Question on the right side of the balance sheet. Specifically, flow and your use of leverage that you may have planned.

Benjamin Sanderson: Hey, good morning, Peter. Good morning, Wade.

Peter Clarke: Good morning.

Benjamin Sanderson: Thanks for the call. Question on the right side of the balance sheet, specifically float and your use of leverage that you may have planned. When I look at the right side, the entire cost, including interest expense, is still negative. Float grew maybe something in the order of $400 million this quarter. Two questions. On float, over what time interval do you want us thinking about or tracking float growth or shrinkage? Then two, I think you guys added $1 billion-ish of leverage at pretty attractive rates, not much above government bonds. Would you add more, and under what circumstances? I'll keep it at that, thanks again, guys.

Speaker #7: So I want to look at the right side—the entire cost, including interest expenses—is still negative. And float grew maybe something in the order of $400 million this quarter.

Speaker #7: So two questions. On float, over what time interval do you want us thinking about or tracking float growth or shrinkage? And then, two, I think you guys added like a billion-ish dollars of leverage at pretty attractive rates, not much above government bonds.

Speaker #7: Would you add more and under what circumstances? I'll keep it at that, and thanks again, guys.

Speaker #1: Thank no, thanks for the question. Just your first question on the float. Yeah, float is as we said many, many times, is very important and is probably one of the most important things in our business model.

Peter Clarke: No, thanks for the question. Just your first question on the float. Yeah, float is, as we've said many times, is very important and is probably one of the most important things in our business model. Really we take a long-term approach, is we've compounded float at very high levels over the past 40 years, and that's what we're focused on. Not in any one quarter or any one year for that matter, but over time, we look to build that float and then Prem Watsa invests the proceeds of that. Again, our insurance companies are performing extremely well, so the cost of that float is positive. We had over $400 million of underwriting profit in the quarter. On the leverage side, over the last number of years or last couple of years, we have done a number of debt issues.

Speaker #1: And really, we take a long-term approach is we've compounded float at a very high levels over the past 40 years. And that's what we're focused on, not in any one quarter or any one year for that matter, but over time we look to build that float and then handle what's invests to proceeds of that.

Speaker #1: And again, you know, our insurance companies are performing extremely well, so the cost of that float is positive. And we had over $400 million of underwriting profit in the quarter.

Speaker #1: On the leverage side, you know, over the last number of years, or last couple of years, we have done a number of debt issues.

Speaker #1: Primarily, what we've done is we've taken out our preferred shares at much more economically beneficial terms and rates, and we've replaced them with 30-year debt.

Peter Clarke: Primarily what we've done is we've taken out our preferred shares at much more economically beneficial terms and rates, and we replaced it with 30-year debt. Preferred shares had not previously been in our leverage ratios. Now this 30-year debt is. That's ticked up a little bit. We want to be opportunistic. We don't want any maturities for three years, so we like to refinance our debt. Thank you for the question. Next question please.

Speaker #1: So that's where we are, and preferred shares had not previously been in our leverage ratios. Now this 30-year debt is, so that's ticked up a little bit.

Speaker #1: And, you know, we want to be opportunistic. And we always we don't want any maturities for three years. So we like to refinance our debt.

Speaker #1: But thank you for the question. And next question, please.

Speaker #2: Thank you. As a reminder, if you do have a question, please press star 1 to get into queue. And my next now is from James Gloin with National Bank Capital Markets.

Fran: Thank you. As a reminder, if you do have a question, please press star one to get into queue. My next now is from Jaeme Gloyn with National Bank Capital Markets. Your line is open.

Speaker #2: Your line is open.

Speaker #4: Yeah, thanks. I just wanted to go to the interest and dividend income—you know, pretty nice step up this quarter. Was there anything one-timey in that, or is that considered a new run rate for interest and dividends?

Jaeme Gloyn: Thanks. I just wanted to go to the interest and dividend income. Pretty nice step up this quarter. Was there anything one-time in that, or is that considered a new run rate for interest and dividends?

Peter Clarke: Thanks for the question, Jaeme. It was a very nice step up, I think about 11% this quarter versus a year ago. I think a lot has to do with it as our investment portfolio grows. We continue to invest those additional funds at fairly good rates. Our run rate is about 5%. It's a combination of the portfolio getting bigger and the government rates have been up. As bonds mature, we've been reinvesting at higher rates. The combination of the two, I don't think there's anything unusual in there in the quarter. Thank you for the question. Next question, please.

Speaker #1: Thanks for the question, Jamie. Yeah, no, it was a very nice step up, I think, about 11 percent this quarter versus a year ago.

Speaker #1: Really, I think a lot has to do with it. As you know, as our investment portfolio grows, we continue to invest those additional funds.

Speaker #1: At fairly good rates. You know, our run rate is about 5%. So it's a combination of the portfolio getting bigger and, you know, government rates have been up.

Speaker #1: So, as you know, bonds mature and we've been reinvesting at higher rates. So, the combination of the two—I don't think there's anything unusual in there in the quarter.

Speaker #1: Thank you for the question. Next question, please.

Speaker #2: Ruby Longheed, private investor. Your line is open.

Fran: Ruby Longheed, private investor. Your line is open.

Speaker #8: Thank you. Thank you for the call. Very informative and excited about the future of FAIRFAX. You've mentioned a couple of times in the call about Helios FAIRFAX partnership corporation.

Ruby Longheed: Thank you. Thank you for the call. Very informative, and excited about the future of Fairfax. You've mentioned a couple of times in the call about Helios Fairfax Partners Corporation and the continued decline in the market value, despite there's been an increase in the book value. I know it's very hard to look at this like there's lots of thin, there's thin liquidity. It'd be interesting for me, all the private companies in the portfolio, trying to value private companies in an emerging market must be exceedingly challenging. Could you give any idea about what your belief is about the intrinsic value of the fund or the potential of the holding and why perhaps how do you educate people to really see this differently inside your portfolio? Thank you.

Speaker #8: And the continued decline in the market value, despite there’s been an increase in the book value. And I know it’s very hard to look at this—like, there’s lots of thin, there’s thin liquidity. It’d be interesting for me, all the private companies in the portfolio—trying to value private companies in an emerging market must be exceedingly challenging.

Speaker #8: But could you give any idea about what your belief is about the intrinsic value of the fund or the potential of the holding and why perhaps like how do you educate people to really see this differently inside your portfolio?

Speaker #8: Thank you.

Speaker #1: No, thanks for your question. And you're right. In the quarter, we reduced our carrying value down to the market value, as it's been running lower for a number of quarters.

Peter Clarke: No, thanks for your question. You're right. In the quarter, we reduced our carrying value down to the market value as it's been running lower for a number of quarters. There's an excellent team running Helios Fairfax Partners. They cleaned up some of the investments from the past, and we are really excited for the prospects going forward. The reduction in the quarter was really just an accounting exercise. We're still very high on Helios.

Speaker #1: But you know, there's an excellent team running Helios Fairfax Partners. They cleaned up some of the investments from the past, and we are really excited for the prospects going forward.

Speaker #1: The reduction in the quarter was really just an accounting exercise, and we're still very, very high on Helios.

Speaker #8: Any guidance on intrinsic value?

Ruby Longheed: Any guidance on intrinsic value?

Speaker #1: No, we don't give guidance on that. We, you know, we leave that for you guys to come up with. Thank you for the question.

Peter Clarke: No, we don't give guidance on that. We leave that for you guys to come up with. Thank you for the question.

Speaker #2: Thank you. Our next question now is from Stephen Bolen with Raymond James. Your line is open, sir.

Fran: Thank you. Our next question now is from Stephen Boland with Raymond James. Your line is open, sir.

Speaker #5: Morning. I might have missed your opening comments, Peter. Just in terms of what's going on in Europe with the wildfires, can you talk a little bit about exposure there?

Stephen Boland: Morning. I might have missed your opening comments up here. In terms of what's going on in Europe with the wildfires, can you talk a little bit about exposure there? It seems to be continuing to get more and more material across a bunch of different countries. Thanks.

Speaker #5: As it seems to be continuing to get more and more material across a bunch of different countries. Thanks.

Speaker #1: Yeah, obviously, there's nothing in our numbers in the second quarter. And to date, we haven't seen a lot. We're watching it very closely, but really have nothing to report on that at this stage.

Peter Clarke: Yeah, obviously there's nothing in our numbers in the Q2. To date, we haven't seen a lot. We're watching it very closely, but really have nothing to report on that at this stage. We've also had a lot of wildfires in Canada, unfortunately, it's in places that there's not a lot of insured property. Again, our Northbridge has not been affected by that either. I think in Canada in particular, they're starting to get these fires under control with a little bit of help from the weather. We'll likely have more to report on that in the Q3. Thank you for your question. Next question, please.

Speaker #1: We've also had a lot of wildfires in Canada, and unfortunately, it's in places where there's not a lot of insured property. So again, our Northbridge has not been affected by that either.

Speaker #1: And I think that we're in Canada, in particular, they're starting to get these fires under control, with a little bit of help from the weather.

Speaker #1: So we'll likely have more to report on that in the third quarter. Thank you for your question. Next question, please.

Speaker #5: Thank you.

Stephen Boland: Thanks, Peter.

Speaker #2: Yes, I have no further questions at this time. I would like to turn it back to management for any closing remarks.

Fran: I have no further questions at this time, I would like to turn it back to management for any closing remarks.

Speaker #1: Well, Fran, if there are no other further questions, thank you for joining us on our second quarter 2026 conference call. Thank you again, Fran.

Peter Clarke: Well, Fran, if there are no other further questions, thank you for joining us on our Q2 2026 conference call. Thank you again, Fran.

Speaker #2: Oh, thank you so very much. And thank you everyone for your participation. As we are concluded, please go ahead and disconnect. Thank you so very much.

Fran: Oh, thank you so very much. Thank you everyone for your participation, as we are concluded. Please go ahead and disconnect. Thank you so very much.