Fairfax Financial Holdings Ltd. reported a net loss in the first quarter as investments shed value in volatile markets.

The loss for the quarter ended March 31 was US$60.4 million, or US$3.55 a diluted share, the Toronto-based insurance holding company said Thursday.

That compared with net earnings of US$631.8 million, or US$33.78 a share, in the comparable period in 2008.

Fairfax said revenue fell to US$1.28 billion from US$2.37 billion.

Fairfax says the company’s insurance and reinsurance operations generated increased underwriting profit and interest and dividend income in the first quarter compared with a year ago.

The year-over-year decline in earnings primarily arose due to the US$1,072.5 million net investment gains earned in the first quarter of 2008 compared to net losses of US$153 million on investments in the first quarter of 2009.

“We are pleased that, in a difficult environment, we have maintained our disciplined underwriting standards, and our insurance and reinsurance operations have produced a consolidated combined ratio of 98.7% in the first quarter,” said Prem Watsa, Chairman and CEO, in a release.

“As to our investments, our increased focus on high quality common stocks reflects our view that these should provide excellent returns over the long term, though the volatility of the markets may result in lumpy quarters and even years. Principally as a result of the lower market value of our investments at March 31, our book value declined by US$23 per share during the first quarter. Yet if our investments were valued as of the end of last week (at April 24), then our book value, based on that factor alone, would have increased since March 31 in excess of US$30 per share,” Watsa said.

IE