Primus Guaranty, Ltd. Reports Third Quarter 2012 Results

Before you go, we thought you'd like these...
Before you go close icon

Primus Guaranty, Ltd. Reports Third Quarter 2012 Results

HAMILTON, Bermuda--(BUSINESS WIRE)-- Primus Guaranty, Ltd. ("Primus Guaranty" or "the Company") (OTC PINK:PRSG) today announced its financial results for the third quarter ended September 30, 2012.

  • GAAP net income available to common shares for the third quarter 2012 was $108.2 million, or $3.84 per diluted share, compared with a GAAP net loss available to common shares of $283.1 million, or $7.76 per diluted share, for the third quarter 2011.
  • Economic Results for the third quarter 2012 were $3.5 million, or $0.12 per diluted share, compared with Economic Results of $10.2 million, or $0.28 per diluted share, for the third quarter 2011. The primary difference between GAAP net income and Economic Results is that changes in the fair value of Primus Financial Products, LLC ("Primus Financial")'s credit swap portfolio are not included in Economic Results.
  • Economic Results book value per common share was $9.85 at September 30, 2012, compared with Economic Results book value per common share of $8.60 at December 31, 2011.
  • At September 30, 2012, the notional principal of Primus Financial's consolidated credit swap portfolio totaled $5.8 billion.
  • Primus Guaranty redeemed the remaining $81.9 million (face value) of its 7% Senior Notes due 2036 at par on September 27, 2012. This resulted in an accelerated write-off of debt issuance costs of $2.3 million, which was recorded under "Interest expense" in the third quarter 2012.
  • Primus Guaranty purchased approximately 1.3 million of its common shares for an aggregate cost of approximately $9.6 million in the third quarter 2012.

Additional Information


A copy of this press release, the financial supplement and a letter dated November 2, 2012 to the shareholders from Richard Claiden, Chief Executive Officer, are available in the Investor Relations section of the Company's Web site at www.primusguaranty.com.

Economic Results

In managing its business and assessing its profitability from a strategic and financial planning perspective, the Company believes it is appropriate to consider both its U.S. GAAP net income (loss) available to common shares as well as certain non-GAAP financial measures called "Economic Results". We define Economic Results as GAAP net income (loss) available to common shares, adjusted as follows:

  • Unrealized gains (losses) on credit swaps sold by Primus Financial are excluded from GAAP net income (loss) available to common shares;
  • Realized gains from early termination of credit swaps sold by Primus Financial are excluded from GAAP net income (loss) available to common shares;
  • Realized gains from early termination of credit swaps sold by Primus Financial are amortized over the period that would have been the remaining life of the credit swap. The amortized gain is included in Economic Results;
  • A provision for credit default swaps on asset-backed securities ("CDS on ABS") credit events is included in Economic Results; and
  • A reduction in provision for CDS on ABS credit events, upon termination or principal write-down of credit swaps, is included in Economic Results.

The Company believes that quarterly fluctuations in the fair market value of Primus Financial's consolidated credit swap portfolio have little or no effect on the Company's business operations and that Economic Results provides a useful, alternative view of the Company's economic performance.

About Primus Guaranty

Primus Guaranty, Ltd. is a Bermuda company with offices in New York. Through its subsidiary, Primus Financial Products, LLC, the Company provides protection against the risk of default on primarily investment grade corporate and sovereign reference entities. Its common shares trade on the OTC Pink Tier of the OTC market. Investors can find Real Time Level 2 quotes and market information for the Company on www.otcmarkets.com.

Forward-Looking Statements

Some of the statements included in this press release and other statements Primus Guaranty may make, particularly those anticipating future financial performance, business prospects, operating strategies and plans, market performance, valuations and similar matters, are forward-looking statements that involve a number of assumptions, risks and uncertainties, which change over time. Any such statements speak only as of the date they are made, and Primus Guaranty assumes no duty to, and does not undertake to, update any forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements, and future results could differ materially from historical performance. For a discussion of the factors that could affect the Company's actual results please refer to the risk factors identified by the Company in, among other documents, its Annual Report on Form 10-K for the year ended December 31, 2011 and other filings previously made with the U.S. Securities and Exchange Commission.

 

Primus Guaranty, Ltd.

Condensed Consolidated Statements of Financial Condition (Unaudited)

(in thousands except share amounts)

       
September 30,December 31,
 2012

 

2011

 
Assets
Cash and cash equivalents$35,095$87,247
Investments (includes $257,144 and $341,485 at fair value
as of September 30, 2012 and December 31, 2011, respectively)257,144341,656
Restricted cash and investments142,100137,759
Accrued interest and premiums4,5915,725
Unrealized gain on credit swaps, at fair value326-
Debt issuance costs, net7343,444
Other assets (includes $3,119 and $7,424 at fair value as of
September 30, 2012 and December 31, 2011, respectively) 4,645 9,993
Total assets$444,635$585,824
 
Liabilities and Equity (deficit)
Liabilities
Accounts payable and accrued expenses$5,095$5,847
Unrealized loss on credit swaps, at fair value97,766457,939
Payable for credit events2,4581,985
Long-term debt76,800172,334
Other liabilities 2,955 3,211
Total liabilities$185,074$641,316
 
Equity (deficit)
Common shares, $0.08 par value, 62,500,000 shares authorized,
27,405,924 and 34,838,420 shares issued and outstanding at
September 30, 2012 and December 31, 2011, respectively2,1922,787
Additional paid-in capital212,904260,258
Accumulated other comprehensive income3,2551,086
Retained earnings (deficit) (36,917) (409,769)
Total shareholders' equity (deficit) of Primus Guaranty, Ltd181,434(145,638)
Preferred securities of subsidiary 78,127 90,146
Total equity (deficit) 259,561 (55,492)
Total liabilities and equity$444,635$585,824
 
 

Primus Guaranty, Ltd.

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands except per share amounts)

 
 Three Months Ended

September 30,

     Nine Months Ended

September 30,

2012    20112012    2011
 
Revenues
Net credit swap revenue (loss)$112,500$(283,404)$379,440$(136,297)
Interest income2,3082,4367,3577,616
Gain on retirement of long-term debt1572,0611,5824,821
Other income 815 153  1,005 771 
Total revenues 115,780 (278,754) 389,384 (123,089)
 
Expenses
Compensation and employee benefits1,4891,4435,3205,135
Professional and legal fees3597061,1572,202
Interest expense4,4051,4458,9494,558
Other 715 994  2,436 3,387 
Total expenses 6,968 4,588  17,862 15,282 
Income (loss) from continuing operations before provision
(benefit) for income taxes108,812(283,342)371,522(138,371)
Provision (benefit) for income taxes 75 -  97 11 
Income (loss) from continuing operations, net of tax108,737(283,342)371,425(138,382)
Income (loss) from discontinued operations, net of tax 52 919  3,558 3,457 
Net income (loss)108,789(282,423)374,983(134,925)
Less:
Distributions on preferred securities of subsidiary 601 682  2,131 2,343 
Net income (loss) available to common shares$108,188$(283,105)$372,852$(137,268)
 
Income (loss) per common share:
Basic:
Income (loss) from continuing operations$3.85$(7.79)$11.90$(3.76)
Income (loss) from discontinued operations$0.00$0.03 $0.11$0.09 
Net income (loss) available to common shares$3.85$(7.76)$12.01$(3.67)
Diluted:
Income (loss) from continuing operations$3.84$(7.79)$11.87$(3.76)
Income (loss) from discontinued operations$0.00$0.03 $0.11$0.09 
Net income (loss) available to common shares$3.84$(7.76)$11.98$(3.67)
 
Weighted average common shares outstanding:
Basic28,12036,47031,33037,411
Diluted28,18936,47031,40337,411

Note: Basic and diluted net income (loss) available to common shares for the nine months ended September 30, 2012 includes the impact of a $3.5 million gain that resulted from the purchase of $12.2 million (face value) Primus Financial preferred securities.

 
Primus Guaranty, Ltd.
Regulation G and Other Disclosure
Economic Results
September 30, 2012
(Unaudited)
 
In managing its business and assessing its profitability from a strategic and financial planning perspective, the Company believes it is appropriate to consider both its U.S. GAAP net income (loss) available to common shares as well as certain non-GAAP financial measures called "Economic Results". We define Economic Results as GAAP net income (loss) available to common shares, adjusted as follows:
 
 Unrealized gains (losses) on credit swaps sold by Primus Financial are excluded from GAAP net income (loss) available to common shares;

 Realized gains from early termination of credit swaps sold by Primus Financial are excluded from GAAP net income (loss) available to common shares;

 Realized gains from early termination of credit swaps sold by Primus Financial are amortized over the period that would have been the remaining life of

the credit swap. The amortized gain is included in Economic Results;


 A provision for CDS on ABS credit events is included in Economic Results; and

 A reduction in provision for CDS on ABS credit eve

Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners

Gift Finder Promo
More to Explore
Sun, Dec 04
Set Your Location
City, State, or Zip