The Dutch Investors Sep 18, 2026 1h 13m 52m saved
With Asheef Lalani, a private investor who spent eight years on UBS's proprietary desk and has followed Fairfax Financial for five years
Fairfax Financial ended 2025 with about $3,600 of investments behind every share. The stock, Asheef Lalani said, was trading near $1,630.
Berkshire Hathaway and Markel buy good businesses and then hold them almost regardless of price. Fairfax backs the person running the business and sells when that person decides the time has come.
"Well, I feel, you know, I'm levered long, so I borrowed money to buy Fairfax."
Lalani qualified as a chartered accountant, then spent ten years at UBS, the last eight of them running a long-short book on the proprietary desk until the Volcker rule closed that kind of desk down. He has managed his own capital since 2012, sits on two mining-company boards, and said Fairfax is about 45% of his assets, down from 60% at its peak.
The full interview is covered here so you can skip it. 73 minutes of audio, 21 minutes of reading.
Here are the 15 arguments that matter.
Key Takeaways
Anyone can write insurance; the constraint is that you may not learn for years that you priced it wrong Which is why Lalani says the only durable advantage in the business is culture
Fairfax pays its people on profitability rather than premium growth, while the market rewards the opposite
Keeping bond duration short before 2022 left Fairfax with capital to write business when rivals were nursing losses
Ki, the algorithmic Lloyd's underwriter part-owned with Blackstone, went from zero premiums to $1B in 5 years
Eurobank is marked at roughly 10% of carrying value but contributes over $25 a share of Fairfax's ~$200 of earnings
The Bangalore airport is held at about 10 times trailing cash flow while an Indian peer is discussed at 35 times
Lalani counts $8–10B of gains sitting on the balance sheet unrecognized, and treats them as future return on equity
The share count has gone from 28M to 20M, funded partly by total-return swaps and a Dutch tender
Four separate valuation methods land between $3,000 and the mid-$3,000s a share
The whole of last year's underperformance was multiple contraction, from 1.7 times book down to 1.25
His explanation for the discount is market structure, not the business: money now chases relative returns and momentum
1. From Prop Desk to Fairfax
Lalani studied math and accounting at the University of Waterloo, qualified as a chartered accountant at PwC, then joined UBS, where he spent two years between equity research and equity sales and eight more on the proprietary desk in what he called the fundamental investment group, running a long-short portfolio on value principles. He left in 2012, when the Volcker rule stopped banks putting customer deposits behind proprietary bets, and has run his own money since. Two corporate board seats followed: a gold royalty company in 2023 and Mako Mining last year, both controlled by Wexford Capital.
He had avoided Fairfax for nearly two decades on the grounds that it was a black box. What changed his mind in 2021 was a friend, Charlie Fischer, pointing out that the investment portfolio had performed through late 2020 and early 2021 while the stock had not followed, leaving a gap between book value and price. He bought it as a trade and then kept it, which he framed as part of a deliberate effort to hold winners longer than his prop-desk training allowed.
2. What Fairfax Underwrites
Fairfax writes commercial rather than personal lines: property, casualty and specialty risks rather than personal auto or home. Lalani put the split at about 35% property, with casualty around 55% of the total and specialty making up the rest. Roughly 35% of the book is international once the overseas books of the larger subsidiaries are counted, spread across Canada, Europe, the United States, Asia and South America, which he said makes it more global than the peers it gets compared with. Growth has now reached the point where he described Fairfax as a top-20 global insurer, and he said Markel and Berkshire compete with it across every line, though both are weighted to Europe and North America.
3. The Moat Is the Culture
Asked what protects the insurance business, Lalani said nothing does, structurally. Capital is the only entry requirement, and the feedback loop on pricing is years long.
Bad insurance pricing does not show up for years
And depending on the type of insurance you write, you may not find out for years that you wrote it at a bad price, right?
Asheef Lalani
What follows from that, in his telling, is that the advantage has to be behavioral. Fairfax executives stay roughly two decades, he said, and the pay structure points them at the right number.
Pay is tied to profit, not to premium growth
And the incentive schemes are tied not to revenue growth, but to profitability, which is really important in the insurance business.
Asheef Lalani
He then drew the consequence for the share price: the market values revenue growth above most things, so a company run for underwriting profit can trade away from what it is worth for long stretches.
4. A Hard Market Turning Soft
The hard market ran for almost five years, from 2020 to 2025, and Lalani said Fairfax grew fastest at the start of it because it had kept bond duration very short while rates were near zero. When rates rose, competitors who had matched their bond duration to their claims duration took the hit in book value and could not write as much as they would have liked.
Rivals matched bond duration to claims and paid for it in 2022
And when rates went up in 2022, a lot of the competitors had matched their duration of their bond portfolio with the duration of their claims.
Asheef Lalani
Four years on, he said, those bonds have matured, the losses have washed out, capital is repaired and interest rates are higher, so more capital is chasing premium. Two quiet hurricane seasons have done the rest. His read is that property is softer than casualty, that parts of casualty are soft too, and that Fairfax's mix and its international exposure let it keep growing anyway. The host put the combined ratio in the low 90s for the last year; Lalani did not dispute it.
5. Kinsale's Different Edge
The host raised Kinsale, which runs a combined ratio in the 80s and sometimes the mid-70s. Lalani, who has met the chief executive in group settings and described himself as a fan, said the advantage there is not culture but machinery.
Kinsale's advantage is its technology stack and small ticket sizes
Their edge really comes from their technology stack and their ability to write smaller ticket sizes or premiums
Asheef Lalani
Smaller policies handled by more productive underwriters let Kinsale select better risks and attach tighter terms, he said, which shows up in the combined ratio and then in return on equity. The market pays for it: he noted Kinsale trades at a valuation multiples higher than Fairfax's, and later that it sits above four times book value.
6. Ki, the AI Underwriter
Fairfax's technology answer is spread across subsidiaries rather than imposed from the top. Lalani described Fairfax Digital Services, run by a former consultant, as an internal provider selling systems work to the group's insurance companies, and said the expense ratio fell as premiums took off before the company began deliberately spending some of that back on technology.
The sharper example is Ki, which began inside Brit in the UK and now stands alone. Lalani put Fairfax's stake at somewhere between 20% and 40%, with Blackstone holding the rest, and described it as an algorithmic follow-only operation on the Lloyd's market.
Ki grew from zero premiums to $1B in 5 years
And that business has grown from you know zero in premiums to a billion in premiums in 5 years. So phenomenal growth.
Asheef Lalani
He contrasted that with Lemonade, the name investors usually reach for when they want technology and insurance in the same sentence. Ki, he said, was profitable quickly, is profitable now, is still investing in technology, and passes what it learns back to the rest of the group. He also said Fairfax uses AI aggressively inside the company without investing in it as a theme, and contrasted that with Berkshire buying Google stock.
7. The Eurobank Question
The host argued that Eurobank, bought during the Greek debt crisis, has done its job and that better risk-reward exists elsewhere. Lalani disagreed on valuation grounds first.
Eurobank still trades at about 10 times earnings
You know, despite the tremendous performance we've seen, it still only trades at about 10 times earnings.
Asheef Lalani
He said it still forecasts a high-teens return on equity, does not trade at a large premium to book, pays dividends and buys back stock. Because Fairfax sits near the 33% ceiling on foreign ownership of a Greek bank, it is obliged to sell into those buybacks, so roughly half the earnings come back each year and carrying value rises slowly even as fair value climbs.
On the position's weight, he said Eurobank is marked at about 10% of the carrying value of Fairfax's investments, some $2.7bn to $2.8bn out of $25bn to $26bn of equity investments, and about double that on a fair-value basis. Because the stake sits above 20% and below 50%, Fairfax equity-accounts it, which puts Eurobank's profits straight into Fairfax's.
Eurobank alone carries over $25 a share of Fairfax earnings
Given the size of the investment it contributes, you know, over $25 a share of earnings a year out of Fairfax's earnings which are, you know, if you look at analyst expectations are around, you know, 190 to $200 dollar per share US of earnings.
Asheef Lalani
That, he said, is the hard part about selling: the earnings would have to be replaced. He expects Fairfax to sell when the bank's chief executive judges the moment right, on the same logic it applies everywhere, and thinks a sale to another European bank is plausible given the Greek, Bulgarian and Cypriot franchise. He also flagged talk in India that Fairfax is close to completing a purchase of IDBI Bank at around 1.3 times book, with a return on equity he put at 15% to 20% depending on the measure, which could reduce the appetite for Greek banking exposure.
8. Fairfax India's Airport
Fairfax set up Fairfax India in 2015 so minority investors could follow it into the country, with a handful of lead investors; Lalani said his understanding is that Fidelity was among them and still owns 20 million shares, around 15% of the company. The vehicle charges performance fees.
The headline asset is the Bangalore airport, part of which sits in a subsidiary called Anchorage alongside a direct stake held by an Ontario pension fund. The plan has always been to float it.
The airport IPO has been 5 years coming
And the plan is to IPO that asset and it has been the plan for 5 years and it hasn't happened yet
Asheef Lalani
The delay has frustrated anyone who bought for a quick gain, he said, while the airport itself has kept growing. Fairfax carries it at about 10 times trailing cash flow. For a comparison he pointed at the Indian airport operator across the table.
An Indian peer is being discussed at 35 times EBITDA
There's some speculation that Adani who's another airport operator the biggest airport operator in India is looking to raise capital for its airports
Asheef Lalani
The figure attached to that talk is about 35 times, which he called remarkable; his own reasonable assumption is 20 to 25 times. With new terminals, capacity expansion and international passengers growing faster than domestic ones, and international passengers being the more profitable kind, he said the equity value of the whole airport could plausibly move from the roughly $3bn it is carried at to something closer to $12bn. Fairfax India's 69% is marked at about $2.1bn today.
He gave the mechanism behind the gap as deliberate conservatism.
Fairfax marks its own assets with aggressive discount rates
And so it uses very aggressive discount rates and low terminal growth rates
Asheef Lalani
A listing, he said, forces the position to be marked to market, which is how the gap between book value and intrinsic value finally closes rather than keeps widening.
9. Gains Not on the Books
Asked for hidden value, Lalani said he treats the portfolio the way he treats his own: a collection of options with margin of safety and long right tails. He gave three examples and a total.
Poseidon, half of which Fairfax sold earlier this year at 2830 against a carrying value of $1,550 for what remains. He expects the rest to go next year, probably higher
Greenfire Resources, held through the Waterous Fund 3 limited partnership and currently running a rights issue that Fairfax is funding. He owns the shares directly too and thinks the business could double in a year
The consolidated non-insurance companies, marked at under $4bn against revenues he put nearer $8bn, with Fairfax India and the airport inside that number
Ki, where he reads the shareholder agreement with Blackstone as pointing to an eventual listing, and notes Blackstone's fund life is six or seven years and the investment is already six years old
Adding those up, he said it is not hard to reach $8bn to $10bn of gains that the balance sheet does not carry, and that the right way to think about them is as future return on equity as the portfolio turns over. Even if nothing is sold, a listing makes the carrying value visible.
10. Prem Watsa at 41 Years
Prem Watsa has run Fairfax for 41 years, a number the host and Lalani corrected upward together. Lalani has spoken to him at annual meetings without claiming any deep relationship, and made the case for him on two grounds. The first is that the name itself was a statement of method.
The name is the strategy: fair, friendly acquisitions
Fairfax stands for fair friendly acquisitions
Asheef Lalani
Fairfax does no hostile deals, he said, and four decades of that has compounded a network as surely as it has compounded book value. The second ground is philanthropy: Watsa chairs the Horatio Alger Society of Canada, which supports students from single-parent, low-income or troubled homes into university from as early as age 16.
Compounding applies to the philanthropy too
It's applying the power of compounding you know, to the philanthropy side as well, which I think is really powerful.
Asheef Lalani
He added that he has never heard anyone who works for Watsa speak badly of him, and that Watsa has used the company to argue that capitalism can be run in a way that benefits society.
11. Buybacks and Leverage
Lalani's structural point about Fairfax is that it carries more investment leverage than its two obvious comparisons.
Investments run close to 3 times shareholders' equity
So, when you look at the investments per share and you compare it to book value, right, or shareholders equity it's a ratio of pretty close to 3:1.
Asheef Lalani
Before any underwriting profit, he said, a shareholder is getting three times the return of a diversified balanced fund, two-thirds bonds and one-third equities. In a hard market the way to keep that leverage up is to write more business; in a soft market that would be a mistake, so the lever becomes the share count.
Capital allocation has been a 5-year clinic
Fairfax has been putting on a clinic on capital allocation for the past five, you know, five years, even longer if you really stretch it out.
Asheef Lalani
The mechanics he listed were total-return swaps on Fairfax's own stock, once covering almost 2 million shares and now about 1.3 million; the sale of a minority stake in Odyssey, structured so that instruments treated as equity behave more like preferred shares, which funded the Dutch tender offer of November 2021; and minority interests in Allied World and Odyssey that Fairfax has the right to buy back, plus a class of Ki shares carrying an 8% preferred return.
The share count has fallen from 28M to 20M
Fairfax has taken the share count down from you know 28 million a few years ago to 20 million now.
Asheef Lalani
Buybacks in the first half of this year ran slightly ahead of last year's and have since paused, he said, but he expects them to continue while the valuation stays low. He made the same observation about Markel, Berkshire and Kinsale, all generating excess capital in a soft market and all buying stock; the difference, in his account, is that Fairfax has more places to put money at above 15% returns.
12. Succession After Watsa
Fairfax has published its plan, and Lalani said it splits a job Watsa currently does alone.
The chairmanship and the CEO role get split
So the plan is to you know split the chairmanship and the CEO role.
Asheef Lalani
The chairman will be Ben Watsa
The new chairman will be his son Ben Watsa and Ben is a very accomplished money manager in his own right.
Asheef Lalani
Ben Watsa runs an India fund called Marval, whose five-year return Lalani believed was the best of any Canadian hedge fund as of some point last year, and invests in what Lalani called a quality style. His job as chairman will be to hold the culture rather than to pick investments. The chief executive role goes to Peter Clark, currently president and chief operating officer, with more than 25 years at the company; Lalani noted Watsa has already dropped off the quarterly conference calls, which Clark now runs with the chief financial officer and Wade Burton, the chief investment officer at Hamblin Watsa. A nine-person investment committee sits behind the bigger decisions.
He then drew a distinction between how Fairfax invests and how its peers do.
He calls the method expected-value investing
I call it expected value investing, which is what I practice or how I describe what I do
Asheef Lalani
That means judging the range of possible outcomes and their probabilities and buying when the risk-reward is skewed, rather than screening for a type of business.
Markel and Berkshire work deterministically instead
They tend to use a more what I call deterministic approach as opposed to probabilistic.
Asheef Lalani
The practical difference, he said, is that a probabilistic approach lets Fairfax make a great deal of money in gold equities, or back a startup AI insurance underwriter, or buy an Indian property-and-casualty insurer like Go Digit, none of which a quality-growth buyer would touch.
13. Four Ways to Value It
Lalani said the single most useful number for an outside investor is investments per share, because it shows how much investment leverage a buyer is getting. He then walked four methods that he said triangulate.
Investments per share. At the end of 2025 it was around $3,600 in US dollars, against a long-run return on the investment portfolio he put a little over 7%, about 7.3% since inception.
The discount on investments per share is more than half
Okay so it's 3600 we trade at you know 1630 or something. So, there's a really big discount, right?
Asheef Lalani
Precision does not matter much at that spread, he said: a business still growing and trading at more than a 50% discount to intrinsic value is usually a buy.
Float plus book value. He credited this one to Buffett's answers on float at Berkshire's annual meetings, and stressed the precondition: it only works if the underwriting is genuinely good, because a bad insurer can lose its float.
Float plus book gets to about $3,300
The float per share is pretty close to 2,000 and the book value is about 1,300.
Asheef Lalani
Price to earnings. Fairfax earned around $200 a share last year and consensus is around $200 again.
A market multiple on Fairfax's earnings is $3,000
What I suggest is that what most people consider a fair market multiple is like 15 times earnings.
Asheef Lalani
Because Fairfax earns an above-market return on equity, he said, 15 times is itself a margin of safety, and it produces roughly $3,000 a share on consensus numbers.
Price to book, via return on equity. Lalani credited an investor named John Fox with the shortcut.
Divide the return on equity by 7 to get a fair price-to-book
His rule of thumb is to take your ROE and divide by seven
Asheef Lalani
On a 17.5% return on equity that gives about two and a half times book, which on Fairfax puts the value in the mid-$3,000s. He was candid about where the rule breaks: it is forgiving of a low-return business, implying 1.3 times book for a 10% return, and it under-credits a business compounding at 30%. He also pushed back on the idea that book value is irrelevant for an insurer, arguing that what matters is the return earned on the book, and using Kinsale's 25% return on equity and four-times-book valuation as the demonstration.
14. The Earnings Power Math
Asked about the company's own non-standard measure of operating income, Lalani rebuilt the number from parts. Fairfax has given soft guidance of about $5bn of pre-tax income. A 95 combined ratio on $30bn of premiums produces around $1.5bn of underwriting profit. The bond portfolio is a little over $50bn earning a little over a 5% coupon, with last quarter's run rate close to $735m, which he said points to roughly $3bn next year. Associates and consolidated companies, where Fairfax owns more than 20% or more than 50%, have been guided at north of $1bn, with more volatility in that line than in interest income.
All of that, he said, is before gains, which nobody can time. His argument is that the gains are more reliable than they used to be, because far more of the portfolio is now under Fairfax's control and the company decides when to turn it over. He also made the case that the bond book is an option: duration is about two years with an average maturity of three, which locks in the interest income, and leaves Fairfax free to move into equities if credit spreads widen or markets fall. The more volatile the world is, he said, the higher Fairfax's return on equity ends up.
15. Why It Trades Cheap
Asked what would make Fairfax a bad investment, Lalani said that if he could name it he would not hold 45% of his assets in the stock, and noted that the multiple, not the business, is what has hurt him.
The underperformance was all multiple contraction
So the underperformance has entirely come from multiple contraction, right?
Asheef Lalani
The multiple peaked around 1.7 times trailing book value in July 2025 and has since fallen to about 1.25 times. His explanation is about who is buying, not what they are buying.
Investors switched to relative returns after the crisis
I think what's changed in the market structure since the GFC is that investors are much more focused on relative returns.
Asheef Lalani
He described the sequence as he saw it from equity research before 2008: allocators now question a manager the moment performance lags a benchmark, cheap cloud computing made factor analysis easy, the value factor stopped working and momentum took over. Fairfax does not screen as quality on quant definitions because its earnings are not predictable, and the analyst range is wide enough to make that obvious. So the simple answer for a lot of funds is to avoid it. He added that the five years of multiple expansion, from 0.7 times book to 1.7, were driven by premium growth and rising interest income, which are momentum signals; when both slowed about a year ago, the same money left.
Canadian money went to the banks instead
And the bank index had a tremendous performance and money was pulled out of the insurers.
Asheef Lalani
Fairfax was one of the better-performing Canadian insurers, he said, and still nowhere near the banks, which is what matters to anyone measured against a Canadian index over a short horizon. His own base case is framed the other way.
He puts the odds of 15% book-value growth at 90%
Well, that's probably a 90% chance that they do better than the 15%, you know, book value per share growth over the next, you know, 5 years, 10 years.
Asheef Lalani
He allowed that it might be as high as 25% a year, and said he monitors for the case changing. He also said the record is long enough to argue from.
The record is 40 years of compounding at 19%
Fairfax has had, you know, a 40 plus year history of compounding 19%.
Asheef Lalani
Every part of the business is working at once
And right now I think we're at a really special point because it seems like you know, every part of the business is working.
Asheef Lalani
Bonus Insights
A longer soft market means more stock bought back
I could see us easily going up to over two times, two and a half times book
Asheef Lalani
Lalani's view is that a soft market that drags on is not bad news for a holder, because it means more shares retired cheaply before the cycle turns. He expects multiple expansion on the next hard market of the kind Fairfax got on the last one.
Fewer shares left when the momentum buyers return
Because when all the momentum investors come back, there'll be a lot less shares available for them to buy.
Asheef Lalani
The host supplied the episode's one piece of trivia: Prem Watsa admired Benjamin Graham enough to name his son Ben. Lalani's own reading recommendation was part three of the book on Fairfax, where the influences on the company's investment style are set out, and he named Henry Singleton, Phil Fisher, Peter Cundill, John Templeton and Buffett among them. Singleton's record of shrinking Teledyne's share count is the one he tied directly to what Fairfax is doing now. He also said the philosophy includes no ego, which is what lets the company take ideas from other people.
Asked where to find his work, Lalani said he posts on Twitter as BROWNMARUBOZU, is on LinkedIn, and rarely writes on his Substack. He said he tries to answer every question and does not criticize other people's investments, on the grounds that people critiquing his usually do not know the position well.
Lalani's bottom line is that Fairfax is a levered, globally diversified investment portfolio sitting under a profitable insurer, that four independent methods put its value between $3,000 and the mid-$3,000s a share, and that the reason a reader can buy it at 1.25 times book is that most active money is now measured against a benchmark rather than against intrinsic value.
Products, Companies & Tools Mentioned
Fairfax Financial Holdings (The subject: a top-20 global insurer with investments running close to three times shareholders' equity, trading at 1.25 times book against four valuation methods that put it above $3,000 a share)
Eurobank (Bought in the Greek debt crisis, marked at about 10% of carrying value, contributing over $25 a share of earnings, and forced to sell into its own buyback by the 33% foreign-ownership cap)
Fairfax India (Set up in 2015 with outside investors and a performance fee; the Bangalore airport stake is the reason to own it)
Ki Insurance (Algorithmic follow-only underwriter on the Lloyd's market, spun out of Brit, 20–40% Fairfax and the rest Blackstone, from zero to $1B of premiums in five years)
Blackstone (Ki's majority owner, and the reason Lalani expects a listing: the fund holding the stake is already six years in)
Lloyd's of London (The market Ki writes into)
Kinsale Capital Group (The counter-example: an edge built on a technology stack and small ticket sizes rather than culture, a 25% return on equity and over four times book)
Markel and Berkshire Hathaway (Competitors across every line, carrying less investment leverage, and buying rather than selling — what Lalani calls a deterministic approach)
Brit (The Lloyd's business Ki started inside before spinning out)
Lemonade (The technology-insurance comparison Lalani rejects, because Ki was profitable almost immediately)
IDBI Bank (Indian bank Fairfax is said to be close to buying at about 1.3 times book on a 15–20% return on equity)
Greenfire Resources (Held through the Waterous Fund 3 partnership and now raising equity; Lalani owns it directly and thinks it can double)
Go Digit (The Indian property-and-casualty insurer he uses as an example of a bet no quality-growth buyer would make)
Teledyne (Henry Singleton's share-count record, the precedent Fairfax's buybacks are measured against)
Poseidon (Half the stake sold this year at 2830 against a $1,550 carrying value on the remainder, with the rest expected to go next year)
Hamblin Watsa (Fairfax's in-house investment manager, running a portfolio Lalani put at $75bn to $78bn under a nine-person investment committee)
Mako Mining (One of the two Wexford Capital-controlled boards Lalani sits on)
Books & Resources Mentioned
The Fairfax Way – David Thomas (Both men recommend it; Lalani's favorite section is part three, on the influences behind the company's investment style)
Fairfax's annual reports and shareholder letters (What the host read alongside the book before recording)
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