PRIMUS

First Quarter 2014


HAMILTON, Bermuda--(BUSINESS WIRE)--May 12, 2014-- Primus Guaranty, Ltd. (“Primus Guaranty” or “the Company”) (OTC PINK:PRSG) today announced its financial results for the first quarter ended March 31, 2014.

  • GAAP net income available to common shares for the first quarter 2014 was $1.9 million, or $0.09 per diluted share, compared with GAAP net income available to common shares of $18.9 million, or $0.72 per diluted share, for the first quarter 2013.
  • Economic Results for the first quarter 2014 were $2.2 million, or $0.10 per diluted share, compared with Economic Results of $3.0 million, or $0.12 per diluted share, for the first quarter 2013.
  • GAAP book value per common share was $8.97 at March 31, 2014, compared with GAAP book value per common share of $8.89 at December 31, 2013. Economic Results book value per common share was $8.92 at March 31, 2014, compared with Economic Results book value per common share of $8.82 at December 31, 2013.
  • At March 31, 2014, the notional principal of Primus Financial Products, LLC (“Primus Financial”)’s consolidated credit swap portfolio totaled $3.0 billion, compared with $3.3 billion at December 31, 2013.

Additional Information

A copy of this press release, the Company’s financial supplement and the full year 2013 audited consolidated 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 12, 2014 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; and
  • A net adjustment in provision for credit default swaps on asset-backed securities (“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, distributions 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,
  2014   2013
 
Assets
Cash and cash equivalents $ 47,777 $ 27,512
Investments, at fair value 44,527 66,230
Restricted cash 107,802 106,580
Accrued interest and premiums 1,138 1,270
Unrealized gain on credit swaps, at fair value 1,141 1,981

Other assets (includes $697 and $822 at fair value as of March 31, 2014 and December 31, 2013, respectively)

  1,787   1,366
Total assets $ 204,172 $ 204,939
 
Liabilities and Equity
Liabilities
Accounts payable and accrued expenses $ 3,098 $ 4,447
Unrealized loss on credit swaps, at fair value 4,607 5,453

Other liabilities (includes $817 and $979 at fair value as of March 31, 2014 and December 31, 2013, respectively)

  1,111   1,281
Total liabilities $ 8,816 $ 11,181
 
Equity

Common shares, $0.08 par value, 62,500,000 shares authorized, 21,786,187 and 21,786,406 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively

1,743 1,743
Additional paid-in capital 116,621 116,629
Accumulated other comprehensive income 277 538
Retained earnings   76,715   74,848
Total equity $ 195,356 $ 193,758
Total liabilities and equity $ 204,172 $ 204,939
 
 
Primus Guaranty, Ltd.
Condensed Consolidated Statements of Operations (Unaudited)

(in thousands except per share amounts)

 

Three Months Ended
March 31,

2014   2013
 
Revenues
Net credit swap revenue $ 2,542 $ 20,308
Interest income 693 1,684
Other income   195   781
Total revenues   3,430   22,773
 
Expenses
Compensation and employee benefits 893 1,598
Professional and legal fees 217 319
Interest expense - 692
Other   443   551
Total expenses   1,553   3,160

 

Income from continuing operations before provision for income taxes

1,877 19,613
Provision for income taxes   23   19
Income from continuing operations, net of tax 1,854 19,594
Income from discontinued operations, net of tax   13   84
Net income 1,867 19,678
Less:
Distributions on preferred securities of subsidiary   -   772
Net income available to common shares $ 1,867 $ 18,906
 
Income per common share:
Basic:
Income from continuing operations $ 0.09 $ 0.72
Income from discontinued operations $ - $ -
Net income available to common shares $ 0.09 $ 0.72
Diluted:
Income from continuing operations $ 0.09 $ 0.72
Income from discontinued operations $ - $ -
Net income available to common shares $ 0.09 $ 0.72
 
Weighted average common shares outstanding:
Basic 21,786 26,126
Diluted 21,786 26,143
 
 
Primus Guaranty, Ltd.
Regulation G and Other Disclosure
Economic Results
March 31, 2014
(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; and

 A net adjustment 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,

2014 2013
GAAP Net income available to common shares $ 1,867 $ 18,906
Adjustments:
Change in unrealized fair value of credit swaps sold (gain) loss by Primus Financial (6 ) (15,957 )
Amortization of realized gains from the early termination of credit swaps sold by Primus Financial 1 2
Net adjustment in provision for CDS on ABS credit events upon termination or principal write-down of credit swaps   370     73  
Economic Results   $ 2,232     $ 3,024  
Economic Results earnings per GAAP diluted share $ 0.10 $ 0.12

 

Economic Results weighted average common shares - GAAP diluted

21,786 26,143
 
         
Economic Results Book Value per Share        
 
(in 000's except per share amounts)
March 31, December 31,
2014 2013
 
GAAP Shareholders' equity of Primus Guaranty, Ltd. $ 195,356 $ 193,758
Adjustments:
 
Accumulated other comprehensive (income) loss (277 ) (538 )
Unrealized fair value of credit swaps sold (gain) loss by Primus Financial 3,466 3,472
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 33,574 33,573
Provision for CDS on ABS credit events   (4,113 )   (4,483 )
Economic Results Shareholders' Equity   $ 194,432     $ 192,208  
 
Economic Results book value per share issued and outstanding $ 8.92 $ 8.82
 
GAAP book value per share issued and outstanding $ 8.97 $ 8.89
 
Common shares issued and outstanding 21,786 21,786
 

Source: Primus Guaranty, Ltd.

Primus Guaranty, Ltd.
Investor Relations
212-697-1992
investorrelations@primusguaranty.com