Primus Guaranty, Ltd. Reports First Quarter 2013 Results

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

Primus Guaranty, Ltd. Reports First Quarter 2013 Results

HAMILTON, Bermuda--(BUSINESS WIRE)-- Primus Guaranty, Ltd. ("Primus Guaranty" or "the Company") (OTC PINK: PRSG) today announced its financial results for the first quarter ended March 31, 2013.

  • GAAP net income available to common shares for the first quarter 2013 was $18.9 million, or $0.72 per diluted share, compared with GAAP net income available to common shares of $263.0 million, or $7.72 per diluted share, for the first quarter 2012. GAAP net income available to common shares for the first quarter 2013 substantially resulted from a net unrealized mark-to-market gain of $16.0 million on Primus Financial Products, LLC ("Primus Financial")'s credit swap portfolio.
  • Economic Results for the first quarter 2013 were $3.0 million, or $0.12 per diluted share, compared with Economic Results of $5.5 million, or $0.26 per diluted share, for the first quarter 2012. The primary difference between GAAP net income and Economic Results is that changes in the fair value of Primus Financial's credit swap portfolio are not included in Economic Results.
  • GAAP book value per common share was $9.50 at March 31, 2013, compared with GAAP book value per common share of $8.83 at December 31, 2012.
  • Economic Results book value per common share was $10.29 at March 31, 2013, compared with Economic Results book value per common share of $10.19 at December 31, 2012.
  • At March 31, 2013, the notional principal of Primus Financial's consolidated credit swap portfolio totaled $3.5 billion, compared with $4.1 billion at December 31, 2012.
  • During the first quarter of 2013, Primus Financial redeemed the remaining $57.7 million (face value) of its Subordinated Deferrable Interest Notes at par.

Additional Information


A copy of this press release, the Company's financial supplement and the 2012 Audited Financial Statements are available in the Investor Relations section of the Company's Web site at www.primusguaranty.com. Also available on the Web site is a letter dated May 6, 2013 to the shareholders from Richard Claiden, Chief Executive Officer.

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 reference entities. Its common shares trade on the OTC Pink Tier of the OTC market. Investors can find 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.

    

Primus Guaranty, Ltd.

Condensed Consolidated Statements of Financial Condition (Unaudited)

(in thousands except share amounts)

 
March 31,December 31,
20132012
 
Assets
Cash and cash equivalents$85,838$51,860
Investments, at fair value157,734213,107
Restricted cash and investments103,923144,077
Accrued interest and premiums2,7203,210
Unrealized gain on credit swaps, at fair value71721
Debt issuance costs, net-510
Other assets (includes $2,389 and $2,701 at fair value as of
March 31, 2013 and December 31, 2012, respectively) 8,443 4,019
Total assets$358,729$417,504
 
Liabilities and Equity
Liabilities
Accounts payable and accrued expenses$3,727$5,202
Unrealized loss on credit swaps, at fair value27,07543,682
Payable for credit events8401,280
Long-term debt-57,700
Other liabilities (includes $2,315 and $2,205 at fair value as of
March 31, 2013 and December 31, 2012, respectively) 2,700 2,721
Total liabilities$34,342$110,585
 
Equity
Common shares, $0.08 par value, 62,500,000 shares authorized,
26,125,564 shares issued and outstanding2,0902,090
Additional paid-in capital202,812203,232
Accumulated other comprehensive income1,7052,723
Retained earnings 41,525 22,619
Total shareholders' equity of Primus Guaranty, Ltd248,132230,664
Preferred securities of subsidiary 76,255 76,255
Total equity 324,387 306,919
Total liabilities and equity$358,729$417,504
 
    

Primus Guaranty, Ltd.

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands except per share amounts)

 
Three Months Ended

March 31,

20132012
 
Revenues
Net credit swap revenue$20,308$266,117
Interest income1,6842,548
Gain on retirement of long-term debt-328
Other income 781 38
Total revenues 22,773 269,031
 
Expenses
Compensation and employee benefits1,5981,887
Professional and legal fees319437
Interest expense6922,308
Other 551 813
Total expenses 3,160 5,445
Income from continuing operations before provision
for income taxes19,613263,586
Provision for income taxes 19 14
Income from continuing operations, net of tax19,594263,572
Income from discontinued operations, net of tax 84 377
Net income19,678263,949
Less:
Distributions on preferred securities of subsidiary 772 931
Net income available to common shares$18,906$263,018
 
Income per common share:
Basic:
Income from continuing operations$0.72$7.73
Income from discontinued operations$-$0.01
Net income available to common shares$0.72$7.74
Diluted:
Income from continuing operations$0.72$7.71
Income from discontinued operations$-$0.01
Net income available to common shares$0.72$7.72
 
Weighted average common shares outstanding:
Basic26,12634,441
Diluted26,14334,519
 

Note: Basic and diluted net income available to common shares for March 31, 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 ResultsMarch 31, 2013
(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 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.

    
       
Economic Results per GAAP Diluted Share      
 
(in 000's except per share amounts)Three Months Ended

March 31,

20132012
GAAP Net income available to common shares$18,906$263,018
Adjustments:
Change in unrealized fair value of credit swaps sold (gain) loss by Primus Financial(15,957)(259,629)
Amortization of realized gains from the early termination of credit swaps sold by Primus Financial22
Provision for CDS on ABS credit events(5)(324)
Reduction in provision for CDS on ABS credit events upon termination or principal write-down of credit swaps   78    2,395 
Economic Results  $3,024   $5,462 
 
Economic Results earnings per GAAP diluted share$0.12$0.26
Economic Results weighted average common shares - GAAP diluted
26,14334,519
 
Note: Economic Results earnings per GAAP diluted share for the year ended March 31, 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.
       
Economic Results Book Value per Share      
 
(in 000's except per share amounts)
March 31,December 31,
20132012
 
GAAP Shareholders' equity of Primus Guaranty, Ltd.$248,132$230,664
Adjustments:
 
Accumulated other comprehensive (income) loss(1,705)(2,723)
Unrealized fair value of credit swaps sold (gain) loss by Primus Financial27,00442,961
Realized gains from early termination of credit swaps sold by Primus Financial(33,574)(33,574)
Amortized realized gains from the early termination of credit swaps sold by Primus Financial33,56933,567
Provision for CDS on ABS credit events(70,900)(70,895)
Reduction in provision for CDS on ABS credit events upon termination or principal write-down of credit swaps   66,417    66,339 
Economic Results Shareholders' Equity  $268,943   $266,339 
 
Economic Results book value per share issued and outstanding$10.29$10.19
 
GAAP book value per share issued and outstanding$9.50$8.83
 
Common shares issued and outstanding26,12626,126



Primus Guaranty, Ltd.
Nicole Stansell, 212-697-1992
investorrelations@primusguaranty.com

KEYWORDS:   Bermuda  Caribbean

INDUSTRY KEYWORDS:

The article Primus Guaranty, Ltd. Reports First Quarter 2013 Results originally appeared on Fool.com.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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