UPDATE 1-Fairfax Financial profit rises 14 pct on underwriting
* Profit rises 14 pct on underwriting, hurt by hedging
* Fairfax CEO Watsa sees more equity market turmoil
* Insurer is biggest RIM shareholder
TORONTO, July 26 (Reuters) - Fairfax Financial, the Canadian property and casualty insurer run by contrarian investor Prem Watsa, said on Thursday its second-quarter profit rose 14 percent, helped by stronger underwriting results and hurt by lower investment gains.
The Toronto-based company said it earned $95.0 million, or $3.85 a share, in the second quarter, up from $83.3 million, or $3.40, a year earlier.
Underwriting profit was $34.8 million, up from a loss of $6.1 million a year earlier, when results were hurt by claims related to U.S. tornadoes.
All told, net premiums written by the company's insurance and reinsurance operations rose 14 percent to $1.57 billion.
But net investment gains fell to $71.5 million from $119.6 million, hit by unrealized investment losses related to the company's hedging strategy.
Fairfax CEO Watsa hedged the company's stock portfolio in 2010, convinced that global equity markets had further to fall.
"We continue to maintain our equity hedges as we remain very concerned about the economic outlook over the next few years," he said in a statement on Thursday.
Since taking over the company in 1985, Watsa 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.
Recently, Fairfax has built a substantial position in Research In Motion, and Watsa has taken a position on the BlackBerry maker's board. As of this week, Fairfax owns 9.9 percent of RIM, making it the company's largest shareholder.
Fairfax shares, which are down 13 percent year-to-date, closed at C$380.00 on the Toronto Stock Exchange on Thursday before the results were released.
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