* Fourth-quarter EPS $19.62 vs $30.15
* Revenue falls to $2.18 billion, from $2.41 billion
* Consolidated combined ratio 118.6 pct (Adds quotes, details. In U.S. dollars unless noted)
TORONTO, Feb 19 (Reuters) - Insurance holding company Fairfax Financial Holdings Ltd (FFH.TO) said on Thursday quarterly profit fell from a year ago when it posted gains on credit default swaps.
While its profit fell, Fairfax said it logged record investment gains in 2008.
Toronto-based Fairfax said net income was $346.8 million, or $19.62 a diluted share, in the fourth quarter ended Dec. 31, compared with $563.6 million, or $30.15 a share in the comparable period in 2007.
Fairfax said revenue fell to $2.18 billion, from $2.41 billion.
Analysts had expected earnings of $12.92 a share on revenue of $1.57 billion, according to Reuters Estimates.
The company said net gains on investments were $816.5 million in the fourth quarter and $2.72 billion in 2008, compared with $947.0 million and $1.64 billion for the comparable periods in 2007.
Despite "challenging industry and economic conditions," the company's results are the best in its 23-year history, Prem Watsa, Fairfax's chief executive, said in a statement.
"They've had a very impressive performance from an investment standpoint," said Jeff Fenwick, analyst at Cormarck Securities.
"They're using their gains to strengthen their balance sheet and look for future investment opportunities."
Fairfax's consolidated combined ratio, a measure of profitability, for its various insurance and reinsurance operations was 118.6 percent.
For the year, net premiums written fell to $4.3 billion from $4.5 billion.
Fairfax has posted big investment gains over much of last year due in part to the rising value of credit default swaps in its portfolio.
Credit default swaps are contracts that shift bond-default risk between two investors, or allow investors and speculators to bet on the direction of credit markets.
Shares of Fairfax, which has insurance operations in Canada, the United States and Asia, closed down 1.8 percent at C$371.51 on the Toronto Stock Exchange on Thursday.
$1=$1.25 Canadian Reporting by Jennifer Kwan; editing by Rob Wilson