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Fairfax Financial Holdings (FFH) is “hitting on all cylinders” after third quarter results that showed a strengthening balance sheet and an uptick in profitability, said Morningstar analyst Bill Bergman. The Toronto-based insurance conglomerate earns high praise and a target price increase — from US$275 a share to US$292 a share — from Morningstar.

“Underwriting profitability continued to rise in all subsidiaries, runoff operations have actually been profitable, and investment results are leading its industry,” Mr. Bergman said.

The U.S.-based analyst also points to rising liquidity and a conservative investment portfolio.

Fairfax’s history of uneven profits and troublesome purchases makes for a slight hint of caution from Mr. Bergman. But overall, the insurer has put years of “acquisition-digestion problems” behind it, and “at the right margin of safety, we’d recommend Fairfax for investors who don’t mind a few choppy waves.”

FFH 1-yr chart:

Source: Morningstar Sees Fairfax Financial "Hitting On All Cylinders"