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PRSG Reports First Quarter 2012 Results (5/08/12)

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Enterprising Investor Member Level  Tuesday, 05/08/12 09:09:59 AM
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PRSG Reports First Quarter 2012 Results (5/08/12)

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, 2012.

•GAAP net income available to common shares for the first quarter 2012 was $263.0 million, or $7.72 per diluted share, compared with GAAP net income available to common shares of $84.7 million, or $2.21 per diluted share, for the first quarter 2011. GAAP net income available to common shares for the first quarter 2012 substantially resulted from a net unrealized mark-to-market gain of $259.6 million on Primus Financial Products, LLC (“Primus Financial”)’s credit swap portfolio.

•Economic Results for the first quarter 2012 were $5.5 million, or $0.26 per diluted share, compared with Economic Results of $8.7 million, or $0.23 per diluted share, for the first quarter 2011. 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.

•Economic Results book value per common share was $8.98 at March 31, 2012, compared with Economic Results book value per common share of $8.60 at December 31, 2011.

•At March 31, 2012, the notional principal of Primus Financial’s consolidated credit swap portfolio totaled $7.8 billion.

Buyback Authorization and Update

On May 1, 2011, the Company’s Board of Directors has authorized an additional expenditure of up to $50 million for the purchase of the Company’s common shares and/or 7% Senior Notes. Purchases will be made at management’s discretion.

In the first quarter of 2012, Primus Guaranty purchased approximately 1.4 million of its common shares for an aggregate cost of approximately $8.4 million. Primus Guaranty also purchased $735 thousand (face value) of its 7% Senior Notes due 2036 at a cost of approximately $576 thousand.

During the first quarter of 2012, Primus Financial purchased an aggregate of $12.2 million (face value) of its preferred securities at a cost of approximately $8.5 million. Primus Financial also purchased $1 million (face value) of its Subordinated Deferrable Interest Notes at a cost of $800 thousand.

Earnings

A copy of this press release and the financial supplement 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 8, 2012 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 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.

http://www.businesswire.com/news/home/20120508006250/en/Primus-Guaranty-Ltd.-Reports-Quarter-2012-Results

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