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Fairfax profits from turmoil

By admin - Posted on February 22nd, 2008
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Fairfax Financial Holdings Ltd., which has just cashed in on a huge bet against the U.S. bond market, has laid down a wager that the credit crunch will hit Europe with a similar force.

The insurance firm yesterday revealed a 2007 profit of $1.1-billion (U.S.), more than quadruple the previous year's results, thanks to its investment in credit default swaps (CDS), which rise in value when market conditions deteriorate. Fourth-quarter profit more than tripled to $564-million.

But Fairfax chairman and chief executive officer Prem Watsa is also setting his sights across the Atlantic. Fairfax has invested about $60-million in European CDS in the belief that the lending problems that have struck UBS AG, Credit Suisse Group and other financial institutions may grow more serious.

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