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PRSG Reports Second Quarter 2012 Results (7/31/12)

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Enterprising Investor Member Level  Tuesday, 07/31/12 10:08:26 AM
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PRSG Reports Second Quarter 2012 Results (7/31/12)

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

•GAAP net income available to common shares for the second quarter 2012 was $1.6 million, or $0.05 per diluted share, compared with GAAP net income available to common shares of $61.1 million, or $1.62 per diluted share, for the second quarter 2011.

•Economic Results for the second quarter 2012 were $9.2 million, or $0.29 per diluted share, compared with Economic Results of $5.4 million, or $0.14 per diluted share, for the second 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 $9.61 at June 30, 2012, compared with Economic Results book value per common share of $8.60 at December 31, 2011.

•At June 30, 2012, the notional principal of Primus Financial’s consolidated credit swap portfolio totaled $7.4 billion.

Buyback Authorization and Update

On July 26, 2012, the Company’s Board of Directors authorized an additional expenditure of up to $25 million for the purchase of the Company’s common shares and/or 7% Senior Notes due 2036. Purchases will be made at management’s discretion.

In the second quarter of 2012, Primus Guaranty purchased approximately 4.8 million of its common shares for an aggregate cost of approximately $34 million. Primus Guaranty also purchased $4 million (face value) of its 7% Senior Notes due 2036 at a cost of approximately $3.5 million.

During the second quarter of 2012, Primus Financial purchased $5.4 million (face value) of its Subordinated Deferrable Interest Notes at a cost of approximately $4.6 million.

Additional Information

A copy of this press release, the financial supplement, summary details of Primus Financial’s consolidated credit swap portfolio as of June 30, 2012, and a letter dated July 31, 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. Also available on the Web site are the results of the Company’s 2012 Annual General Meeting of Shareholders held on July 26, 2012.

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/20120731005937/en/Primus-Guaranty-Ltd.-Reports-Quarter-2012-Results

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