February 17, 2011 / 10:14 PM / in 7 years

UPDATE 2-Fairfax Financial takes loss on investments

* Q4 EPS loss of $18.43 vs year-before profit of $1.65

* Investment loss of $683.9 mln, mainly on bonds (Adds details. In U.S. dollars unless noted)

TORONTO, Feb 17 (Reuters) - Fairfax Financial Holdings (FFH.TO) said on Thursday it fell to a fourth-quarter loss as its stock and bond portfolios were hurt by rising interest rates and a decision to hedge investments.

The Toronto-based property and casualty insurer lost $364.6 million, or $18.43 a share, in the quarter ended Dec. 31. That compared with a profit of $79.4 million, or $1.65 a share, in the year-before period.

Analysts polled by Thomson Reuters I/B/E/S had expected, on average, a loss of $4.43 a share.

The loss was due to $683.9 million in mark-to-market losses on investments.

The company’s portfolio of municipal bonds took heavy losses as interest rates rose late in the year, while Fairfax also missed out on stock gains due to its decision to hedge its portfolio, Fairfax Chief Executive Prem Watsa said in a statement.

Watsa, who founded the company in 1985, has been dubbed “Canada’s Warren Buffett” for his past investment wins, including betting against the U.S. housing market and reaping billions when the market collapsed in 2007.

Revenue fell to $866.6 million from $1.4 billion, as the investment losses offset stronger gross and net premiums written.

Fairfax’s total debt to total capital ratio was 23.8 percent at the end of the quarter, compared with 23.0 percent a year earlier.

The company’s cash position was $1.5 billion.

$1=$0.985 Canadian Reporting by Cameron French; editing by Rob Wilson

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