Fairfax Financial Holdings yesterday reported an increase in fourth-quarter profit thanks to gains related to credit default swaps.

Fairfax, which owns stakes in property and casualty insurance companies in North America and Asia, said it earned US$563.6 million, or US$30.15 a share, in the three months ended Dec. 31. That was up from US$159.1 million, or US$8.45 a share, a year earlier.

Fairfax said its revenue was US$2.4 billion, up from US$1.6 billion in the same quarter a year earlier. The fourth quarter saw net gains of US$705.2 million related to credit default swaps.

For the year, Fairfax posted a profit of US$1,095.8 million, or US$58.38 per share, reflecting record investment income as well as increased underwriting profit generated by the company’s insurance and reinsurance operations.

“Our results in 2007 were the best in our twenty-two year history,” said Prem Watsa, chairman and CEO in a release. “As a result of exceptional performance by our operating and investment teams, we achieved record earnings in excess of US$1 billion, driven by US$281 million of underwriting profit produced by our insurance and reinsurance operations and record investment income, resulting in a 49% increase in our book value per share to US$230.01. Also, we ended the year with almost US$1 billion in cash and marketable securities at the holding company.”

The stock closed at $313.01 on the Toronto Stock Exchange on Thursday, down 50¢.

Fairfax released its results after the market close.