August 1, 2013 / 9:36 PM / in 6 years

Fairfax Financial takes quarter loss on bond investments

TORONTO (Reuters) - Fairfax Financial Holdings Ltd (FFH.TO), the Canadian property and casualty insurer run by investment guru Prem Watsa, on Thursday reported a second-quarter loss due to losses on its bond portfolio.

The Toronto-based company posted a net loss of $157.8 million, or $8.55 a share, for the quarter ended June 30. That compared with a year-before profit of $93.7 million, or $3.79 a share.

The company took a $495.8 million net loss on its bond investments, as fixed-income prices dropped sharply during the quarter. This was partially offset by a $70.5 million gain on equity investments.

All told, the net loss from investments was $415.7 million, compared with a year-before gain of $71.5 million. Underwriting profit during the quarter was $83.9 million.

Fairfax Chief Executive Officer Watsa hedged the company’s stock portfolio in 2010, convinced that global equity markets had further to fall.

“We are maintaining our defensive equity hedges due to our concerns about the financial markets and the economic outlook,” Watsa said in a statement.

Since taking over the company in 1985, Watsa has built a reputation as a shrewd investor by moves such as betting against the U.S. housing market in the last decade and reaping huge profits when the market collapsed.

In June, Fairfax said it would raise its stake in Greek real estate firm Eurobank Properties EUPr.AT to 42 percent from 19 percent.

Reporting by Cameron French; Editing by Richard Chang and Carol Bishopric

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