Most of us feel confident investing in fundamentally strong companies that stick to their long-term growth plans and continue to generate solid returns. Fairfax Financial Holdings (TSX:FFH) has been doing exactly that for decades. It focuses on running profitable insurance operations, compounding book value, and protecting shareholder capital. In 2025, those priorities are paying off once again. Let’s explore why Fairfax Financial stock has been outperforming the broader market by a wide margin for several years, as well as what could drive it even higher in the years ahead.
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A closer look at its business
If you don’t know it already, Fairfax Financial is a Toronto-based holding firm that operates through subsidiaries engaged in property and casualty insurance, reinsurance, life insurance, and a portfolio of non-insurance businesses.
After rallying by 260% over the last three years, FFH stock currently has a market cap of roughly $56.8 billion. At this market price, its annualized dividend yield sits near 1%, paid once a year.
This performance reflects the company’s ability to consistently grow its book value per share and deliver solid underwriting results, while making investment decisions that enhance long-term returns.
Fairfax’s solid financial performance
In the second quarter of 2025, Fairfax’s adjusted net profit jumped 57% YoY (year-over-year) to US$1.4 billion with the help of net gains on investments, which totalled US$952 million. Similarly, its property and casualty segment delivered an underwriting profit of US$426.9 million, up from US$370.4 million in the same period last year. Lower catastrophe losses and favourable reserve development contributed to this gain.
The company’s net premiums written also rose 4.8% YoY in the latest quarter to US$7.2 billion, backed by growth in reinsurance and casualty lines and higher retention.
Long-term focus keeps creating value
Fairfax has spent decades building its reputation for disciplined underwriting and value-oriented investing. At the end of the latest quarter, its investment portfolio stood at US$67.8 billion, with nearly 15% held in cash and short-term investments. Around 70% of its fixed income portfolio is in U.S. government and other sovereign bonds, which limits its credit risk while still earning a respectable yield.
Despite the ongoing macroeconomic challenges, the company continues to expand selectively. In May, it acquired a 33% stake in French specialty insurer Albingia for US$236.5 million, adding to its global insurance presence. It is also completing the purchase of The Keg Royalties Income Fund units it did not already own, further diversifying its non-insurance income streams.
Why Fairfax stock could still be a buy
In the long run, Fairfax expects to compound book value per share by 15% annually. While that goal may sound too ambitious, its historical growth rate of 18.7% since inception shows it is very much achievable when market and business conditions align.
While it’s true that FFH stock has rallied strongly over the last few years, its fundamentals suggest the story is far from over. The company’s underwriting profit remains solid, investment income is growing, and the balance sheet is conservatively managed. That’s why for investors seeking a mix of stability and upside, Fairfax stock offers exposure to a proven business model that has weathered countless economic cycles.
