* Insurer posts profit despite expectations of loss
* Underwriting, investment gains, drive results
* CEO Watsa maintains equity hedges
TORONTO, May 2 (Reuters) - Fairfax Financial Holdings Ltd , the Canadian property and casualty insurer run by investment guru Prem Watsa, unexpectedly rebounded to a profit in the first quarter, helped by strong underwriting results and investment gains.
The Toronto-based company said on Thursday it earned $161.6 million, or $7.12 a share, in the fourth quarter. That compared with a year-before loss of $2.6 million, or 76 cents a share.
Analysts had expected Fairfax Financial Holdings Ltd to post a loss of 5 cents a share, according to Thomson Reuters I/B/E/S.
Operating profit from Fairfax's insurance and reinsurance operations rose to $158.1 million from $102.1 million. Investment gains were $9.4 million, compared with a year-before loss of $40.9 million.
Fairfax Chief Executive Officer Watsa hedged the company's stock portfolio in 2010, convinced that global equity markets had further to fall, and he said in a statement on Thursday the company is not altering its position.
"We are maintaining our defensive equity hedges as we remain concerned about the financial markets and the economic outlook," he said.
Shares of Fairfax rose C$5.69 to C$408.49 on the Toronto Stock Exchange on Thursday. The results were released after markets closed.