July 31, 2014 / 9:34 PM / in 4 years

Fairfax Financial returns to second-quarter profit on investment gains

TORONTO (Reuters) - Fairfax Financial Holdings (FFH.TO), the Canadian property and casualty insurer run by investment authority Prem Watsa, said on Thursday it rebounded to profit in the second quarter from a year-earlier loss due to gains in its investment portfolio and stronger underwriting results.

Fairfax Financial Holdings Ltd. Chairman and Chief Executive Officer Prem Watsa speaks during the company's annual meeting in Toronto April 11, 2013. REUTERS/Aaron Harris

The Toronto-based company said it earned $363.7 million, or $16.15 a share, in the quarter. That compared with a year-before loss of $157.8 million, or $8.55 a share.

Fairfax, which has hedged the bulk of its stock portfolio since 2010, posted net investment gains of $409 million during the quarter as strength in its equity and bond investments more than offset losses from its equity hedges.

That compared with a net investment loss of $415.7 million in the second quarter of 2013.

Fairfax said in a statement that 85 percent of the stock portfolio is currently hedged.

Operating income from Fairfax’s insurance and reinsurance operations was $202.2 million in the quarter, up from $187.5 million a year earlier, due to improved underwriting.

Since taking over the company in 1985, Watsa has built a reputation as a shrewd investor with moves such as betting against the U.S. housing market and then reaping huge profits when the market collapsed five years ago.

Reporting by Cameron French; Editing by Peter Galloway

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