Content provided in partnership with

Business Services Industry

Primus Guaranty Reports First Quarter 2008 Financial Results

Business Wire, May 6, 2008

* Economic Results were $22.1 million and Economic EPS was $0.49 per share

* Economic book value was $9.58 per share and record Economic ROE was 21.0% in the first quarter 2008

* GAAP net loss was $670.1 million, substantially reflecting changes in the fair value of our credit swaps

* New credit swap transaction volume was $1.2 billion bringing the total portfolio at March 31, 2008 to $24.3 billion

* Credit protection premium income was $27.3 million, an increase of 48.4% from the first quarter 2007

Most Popular Articles in Business: Research and Markets : Tesco Plc - SWOT Framework Analysis; Do Us a Flavor - Ben & Jerry's Issues a Call for Euphoric New Flavors; eBay made easy: ready to start an eBay business? These 5 simple steps will ...; Katrina's lawsuit surge: a legal battle to force insurers to pay for flood ...; Wal-Mart's newest distribution center opened last month near the southwest ...; More »

HAMILTON, Bermuda -- Primus Guaranty, Ltd. ("Primus Guaranty" or "the company") (NYSE: PRS), a leading provider of credit protection, announced today a GAAP net loss of $670.1 million, or negative $14.85 per diluted share for the first quarter of 2008, compared with a GAAP net loss of $9.7 million, or negative $0.22 per diluted share for the first quarter of 2007.

The GAAP net loss in the first quarter of 2008 substantially reflects changes in the unrealized market value of the company's credit swap portfolio resulting from widening credit spreads.

Economic Results

In managing its business and assessing its growth and profitability from a strategic and financial planning perspective, the company believes it is appropriate to consider both its U.S. GAAP financial results as well as the impact on those results of fair value accounting and the early termination of credit swaps. Therefore, the company evaluates what its Economic Results would have been if it excluded from revenue the amounts of any unrealized gains and losses on Primus Financial's portfolio of credit swaps sold, any realized gains from terminations of credit swaps sold prior to maturity, although it amortizes those gains over the remaining original lives of the terminated contracts, except for credit swaps undertaken as investments and any provisions for credit events. Applying these adjustments to GAAP revenues will derive "Economic Results revenues". The company believes that quarterly fluctuations in the fair market value of its credit swap portfolio have little or no effect on the company's operations. Economic Results provide a useful, and more meaningful, alternative view of the company's performance and long-term trends in profitability.

During the first quarter of 2008, Economic Results were $22.1 million, or $0.49 per diluted share, compared with $13.2 million, or $0.30 per diluted share, in the first quarter of 2007.

Commenting on the company's performance, Primus Guaranty, Ltd. Chief Executive Officer Thomas Jasper noted, "During the quarter we generated record Economic Results and a record Economic Return on Equity. While I am pleased with these results, the overall credit market environment in the first quarter was challenging and for the most part it remains challenging. We continue to be focused on the long-term and we are committed to leveraging our people, our credit market expertise, our flexible business model and our strong capital position to further build shareholder value."

First Quarter Revenues

Economic Results revenues for the first quarter 2008 were $38.8 million, an increase of 29.3% from $30.0 million in the year-earlier quarter.

Primus Financial's premium income for the first quarter of 2008 was $27.3 million, compared with $18.4 million in the same period of 2007, an increase of 48.4%. The increase reflects the growth of Primus Financial's credit swap portfolio to $24.3 billion at the end of the first quarter 2008.

Realized credit mitigation costs from the Primus Financial portfolio of credit swaps sold were $2 thousand in the first quarter of 2008, compared with $993 thousand for the same period of the prior year. During the first quarter of 2008, the company also recorded an additional charge of $189 thousand in relation to the CDS of ABS.

During the fourth quarter of 2007, the company decided to discontinue Harrier Credit Strategies Master Fund LP ("Harrier") and unwound a significant portion of its portfolio. The remaining Harrier positions were closed in the first quarter of 2008, and the company realized a net trading gain of $711 thousand.

Asset management fees on our corporate investment grade synthetic Collateralized Swap Obligations (CSO) and Collateralized Loan Obligations (CLO) in the first quarter 2008 were $1.1 million, up from $661 thousand from the year earlier quarter. The increase was primarily due to fees related to Primus CLO II, Ltd., which commenced activity in July 2007.

Consolidated interest income for the first quarter of 2008 was $9.2 million, a decrease of $800 thousand from $10.0 million in the first quarter of 2007. The decrease was primarily the result of a decline in short-term investment rates. The average investment yield in the first quarter of 2008 decreased to 4.28%, from 4.95% in the same quarter of 2007. The average investment balances were $860 million for the first quarter of 2008, compared with $806 million in the same quarter of 2007. The increase in invested balances was principally due to the operating cash flows from business activities.

Business Services Industry

Primus Guaranty Reports First Quarter 2008 Financial Results

Business Wire, May 6, 2008

Find Research Guides for:

Find Featured Titles for: Business

Most Popular Articles in Business

Most Popular Publications in Business