Fairfax Financial Holdings Ltd. (TSX:FFH) has reported a big increase in net earnings in the first quarter, reflecting gains in its investment portfolio and improved underwriting results from its insurance businesses.

The Toronto-based property and casualty insurer, which has operating companies in the United States and Canada, said its net income was US$784.6 million or $35.72 per diluted share in the three months ended March 31.

That compared with net earnings of US$161.6 million or $7.12 per diluted share in the year earlier period.

The quarter included $389.9 million realised gains on its investments. It also recognized $616.2 million in unrealized gains, which reflect the increased market value of investments that weren’t sold during the quarter.

Fairfax’s unrealized gains — which can vary widely from quarter-to-quarter because of market volatility — were reduced by $81.7 million from hedges on Fairfax’s equity investments, which are designed to custion the company from market declines.

“We are maintaining our defensive equity hedges as we remain concerned about the financial markets and the economic outlook,” Fairfax chief executive Prem Watsa said in a statement Thursday.

“We continue to be soundly financed, with quarter-end cash and marketable securities in the holding company in excess of $1.1 billion.”

During the quarter, Fairfax invested an additional US$250 million in convertible debt issued by BlackBerry Ltd. — a type of security that pays interest but can be exchanged for shares of the smartphone company. Fairfax led an investment group that injected $1 billion into BlackBerry last fall, including US$250 million from Fairfax.

Fairfax also announced during the quarter that it had paid about $12.8 million to acquire more shares of Torstar Corp. (TSX:TS.B), the media company that publishes the Toronto Star and other newspapers as well as Harlequin books. It owned nearly 23 per cent of Torstar as of March 20 after increasing its holdings by about 3.4 per cent.

The company’s insurance and reinsurance operations produced $190.8 million of operating income, excluding net gains or losses on investments, up from $158.1 million in 2013. Net premiums written by the insurance and reinsurance operations increased by 0.4 per cent to $1.611 billion compared to $1.606 billion in 2013.