Primus Guaranty, Ltd. Reports First Quarter 2013 Results

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,

2013

2012

Assets

Cash and cash equivalents

$

85,838

$

51,860

Investments, at fair value

157,734

213,107

Restricted cash and investments

103,923

144,077

Accrued interest and premiums

2,720

3,210

Unrealized gain on credit swaps, at fair value

71

721

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 value

27,075

43,682

Payable for credit events

840

1,280

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 outstanding

2,090

2,090

Additional paid-in capital

202,812

203,232

Accumulated other comprehensive income

1,705

2,723

Retained earnings

41,525

22,619

Total shareholders' equity of Primus Guaranty, Ltd

248,132

230,664

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,

2013

2012

Revenues

Net credit swap revenue

$

20,308

$

266,117

Interest income

1,684

2,548

Gain on retirement of long-term debt

-

328

Other income

781

38

Total revenues

22,773

269,031

Expenses

Compensation and employee benefits

1,598

1,887

Professional and legal fees

319

437

Interest expense

692

2,308

Other

551

813

Total expenses

3,160

5,445

Income from continuing operations before provision

for income taxes

19,613

263,586

Provision for income taxes

19

14

Income from continuing operations, net of tax

19,594

263,572

Income from discontinued operations, net of tax

84

377

Net income

19,678

263,949

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:

Basic

26,126

34,441

Diluted

26,143

34,519

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,

2013

2012

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 Financial

2

2

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

26,143

34,519

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,

2013

2012

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 Financial

27,004

42,961

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 Financial

33,569

33,567

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 outstanding

26,126

26,126



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

KEYWORDS: Bermuda Caribbean

INDUSTRY KEYWORDS:

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