Insurance holding company Fairfax Financial Holdings Ltd. said on Thursday quarterly net income jumped 85% as investment gains outweighed catastrophe losses in its underwriting business.

The company said profit was US$467.6 million, or US$25.27 a diluted share, in the quarter ended Sept. 30, compared with US$253.2 million, or US$13.47 a share in the same 2007 period.

Fairfax owns a majority stake in Toronto-based insurer Northbridge Financial Corp., and other property and casualty insurers in the United States and Asia.

The consolidated combined ratio of its various insurance and reinsurance operations was 115.5%,

Underwriting results included US$256.9 million of net catastrophe losses related to Hurricanes Ike and Gustav, the company said.

But its net gains on investments surged.

Investment gains in the latest quarter were US$856.8 million, against gains of US$363.6 million in the 2007 third quarter.

Specifically, the company booked gains of US$651.8 million related to short positions in stocks and equity indexes and US$531.6 million related to credit default swaps. These were partly offset by US$176.7 million of “other than temporary: impairments on stock and bond investments, and net losses on bonds of US$158 million.