Fitch Affirms Fairfax's Ratings; Outlook Stable

Published: 2026-04-21 06:45:17 ET FFH.TO

Published on 04/21/2026 at 06:45 am EDT

Fitch Ratings has affirmed Fairfax Financial Holdings Limited's (Fairfax) senior debt rating at 'BBB+' and preferred stock rating at 'BBB-'.

Fitch has also affirmed Fairfax's Long-Term Issuer Default Rating (IDR) at 'A-'. The Rating Outlook is Stable.

Key Rating Drivers

Business Profile Favorable: Fitch considers the overall business profile of Fairfax to be favorable compared to other U.S. and Canadian (re)insurance organizations. This ranking aligns with Fitch's 'aa-' Insurer Financial Strength (IFS) credit factor score. Fairfax's competitive positioning is favorable with a substantive business franchise and a larger operating scale, with total net premiums written (NPW) of USD26.6 billion in 2025 and shareholder equity of USD30.9 billion at Dec. 31, 2025. Fitch considers Fairfax's business risk profile to be moderate, with favorable diversification.

Favorable Financial Performance: Fairfax's financial performance and earnings are strong, although at times volatile due to investments and catastrophe loss events. Fitch expects any potential losses from the Iran conflict to be limited. Fairfax posted favorable net income of USD4.9 billion in 2025 following USD3.9 billion in 2024. Earnings in 2025 were driven by record underwriting income, increased interest and dividend income, USD0.8 billion profit of associates, and a sizable USD3.2 billion in net investment gains primarily from equities (USD3.0 billion) as well as bonds (USD0.4 billion) due to the decline in interest rates, partially offset by foreign currency losses (USD0.4 billion).

Underwriting Profitability Continues: Fairfax has achieved underwriting profitability for the past eight years. The company posted a consolidated combined ratio (undiscounted) of 93.0% for 2025, which included 4.8 points in catastrophe losses. These losses were mainly from the California wildfires (2.8 points) and Hurricane Melissa. This is up slightly from the 92.7% combined ratio for 2024 which included 4.5 points of catastrophe losses, primarily from Hurricane Milton, Hurricane Helene, Canadian events and Dubai floods. Favorable reserve development benefited the 2025 combined ratio by 2.9 points, compared to 2.4 points in 2024.

Strong Capitalization: Fitch views Fairfax's capitalization as strong, providing a cushion against underwriting, reserve and investment risks. Fitch believes that Fairfax uses a reasonable level of operating leverage, with a NPW to shareholders' equity ratio of less than 1.0x in 2025. In addition, Fairfax achieved a 'Strong' score in Fitch's Prism Global capital model.

Financial Leverage Relatively High: Fairfax's financial leverage ratio (FLR) is a relatively high 30.9% at Dec. 31, 2025. Excluding non-insurance company borrowings (and noncontrolling interests of the non-insurance companies), which is nonrecourse to Fairfax, the FLR reduces to 26.4% at YE 2025. In February 2026, the company issued CDN$400 million of 4.4% senior notes due 2036 and an additional CDN$250 million of its 5.10% senior notes due 2055. Pro forma for the issuances, the FLR increases slightly to 31.6%.

Sizable Holding Company Cash: Fairfax continues to maintain a sizable amount of holding company cash and investments of USD2.5 billion as of Dec. 31, 2025, excluding assets pledged for derivative obligations, up from USD2.3 billion at Dec. 31, 2024. Fitch believes this provides Fairfax with a sufficient cushion to address potential cash flow shortages at subsidiaries and liquidity to service its debt.

Strong Fixed-Charge Coverage: Fairfax's fixed-charge coverage, excluding net gains and losses on investments, has been strong in recent years at 5.4x in 2025, 7.2x in 2024 and 6.6x in 2023, driven by favorable operating earnings. When factoring in the substantial holding company cash, fixed-charge coverage is more robust at 8.3x in 2025, 10.6x in 2024 and 9.6x in 2023.

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

Combined ratios (undiscounted) of 95% or worse, or below-average investment performance;

FLR maintained above 32% on a consolidated basis or above 28% excluding non-recourse debt;

A decline in the holding company's cash position to less than $1 billion, while continuing to maintain an elevated FLR;

Sizable adverse reserve development;

Significant acquisitions that reduce financial flexibility.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

Combined ratios (undiscounted) in the low 90s or better;

FLR maintained at or below 25% on a consolidated basis or at or below 21%, excluding non-recourse debt;

Maintaining a 'Very Strong' Prism score;

Flat to favorable reserve development.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.