Fairfax Financial Holdings Ltd swung to a profit in the third quarter, as the insurance holding company posted big gains on credit-default swaps and higher underwriting profit.

After markets closed Thursday, Fairfax reported it earned US$253.2 million, or US$13.47 a diluted share, in the third quarter ended September 30.

That compared with a loss of US$359.2 million, or US$20.41 a share, in the same 2006 period.

Fairfax, which has interests in property and casualty insurance companies in North America and Asia, said its results included net gains on investments of US$356.9 million, up from US$20.9 million a year earlier, due to net realized gains on sales of credit default swaps as well as mark-to-market gains on swaps.

Operating income, which excludes gains on investments, increased 32% to US$229 million.

It said underwriting profit at its insurance and reinsurance businesses rose to US$62 million, from US$23.8 million in the 2006 third quarter.

Net premiums written in the quarter declined almost 7% to US$1.15 billion, which the company said reflected increasingly competitive conditions in the global insurance and reinsurance markets.

Fairfax owns a majority of Northbridge Financial Corp and stakes in U.S. insurer Crum & Forster and in reinsurer Odyssey Re Holdings Corp.

Northbridge Financial, which reports in Canadian dollars, said on Thursday that its third-quarter earnings jumped to $53.9 million, or $1.06 a share, from $30.9 million, or 61¢ a share, in the same 2006 period.

Northbridge also said it may buy back up to 2.48 million of its shares, subject to regulatory approval, starting Nov. 6. That would represent about 5% of Northbridge’s 50 million shares outstanding.