Fairfax Financial Profit Rises on Investments

July 29, 2011

Fairfax Financial Holdings, which took a 9 percent stake in Bank of Ireland earlier this week, said Thursday its quarterly profit rose from a year earlier due mainly to increases in its stock and bond portfolios.

The Toronto-based firm, which deals in property and casualty insurance as well as reinsurance and investment management, earned $83.3 million, or $3.40 a diluted share, in the second quarter ended June 30. That compared with a profit of $23.7 million, or 87 cents a share, a year earlier.

Revenue rose to $1.76 billion from $1.39 billion.

Bank of Ireland said Wednesday that Fairfax was part of a group of investors making a €1.1 billion ($1.583 billion) investment in the bank, which helped to allow the lender avoid nationalization by the Irish government.

Fairfax was founded in 1985 by Prem Watsa, who remains chief executive. He has built a reputation as a shrewd contrarian investor by moves such as betting against the U.S. housing market in the last decade and reaping billions when the market collapsed.

“Despite the challenging insurance industry and investment environment, during the second quarter we recorded good operating results and essentially maintained our common shareholders’ equity and book value per share,” Watsa said in a release.

Fairfax’s debt to capital ratio was 27.1 percent at the end of the quarter, compared with 23.9 percent at Dec. 31.

Its cash position was $2.94 billion, compared with $3.02 billion at Dec. 31, while the book value per share fell 2 percent to $358.60 from Dec. 31.

The company earned $119.6 million in the quarter on its equity related investments and bonds, compared with net losses on investments of $29.3 million a year earlier.

Shares of Fairfax ended down 0.53 percent at C$370.03 [U.S. $387.90] Thursday. The company reported results after the market closed. The shares are down around 10.5 percent year to date.

The company is hosting a conference call on the results Friday morning.

[Figures are in U.S. dollars, unless otherwise indicated]

(Reporting by John McCrank; editing by Rob Wilson)

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