Primus Guaranty Reports First Quarter 2008 Financial Results

Business Wire,  May 6, 2008  

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GAAP revenues for the first quarter 2008 were negative $653.4 million, a decrease of $660.5 million from the year earlier quarter. The decline in GAAP revenues was substantially a result of increased unrealized mark-to-market losses on the portfolio of credit swaps, which was due to a widening in credit spreads. During the first quarter 2008, credit spreads widened substantially as the global credit markets experienced extremely difficult conditions, which led to greater volatility and a re-pricing of credit risk. The unrealized mark-to-market loss in Primus Financial was $686.8 million in the first quarter of 2008, compared with a loss of $21.3 million in the year earlier quarter.

Effective January 1, 2008, the Company adopted the accounting provisions of SFAS No. 157, Fair Value Measurements and SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities. The adoption of FAS 157 impacted the fair value calculation of derivative liabilities through the inclusion of an adjustment for non-performance risk as required under the standard.

First Quarter Operating and Financing Expenses

Our operating expenses were $10.0 million, excluding financing expenses, in the first quarter of 2008, compared with $10.0 million in the first quarter of 2007.

Financing costs, which include distributions on preferred shares and interest expense, were $6.7 million in the first quarter of 2008, compared with $6.8 million in the year earlier quarter. The lower financing costs are mainly attributable to lower short-term interest rates. During the first quarter of 2008, our auction rate debt and preferred securities continued to reset at the maximum rates. The company's outstanding debt and preferred securities is all long-term, with the first maturity in 2021.

Credit Swap Portfolio - Primus Financial

At March 31, 2008, Primus Financial's combined portfolio of credit swaps sold totaled $24.3 billion compared with $23.0 billion at December 31, 2007. The combined portfolio had a weighted average original premium of 44.8 basis points, a weighted average rating of A/A3, and an average remaining tenor of 3.6 years as of March 31, 2008.

Single Name Credit Swaps

At March 31, 2008, Primus Financial's portfolio of single name credit swaps sold totaled $19.5 billion, with a weighted average premium of 44.8 basis points and a weighted average credit rating of A-/Baa1, which represented 594 reference entities. In the first quarter 2008, new transaction volume for single name credit swaps sold was $1.2 billion, with a weighted average premium of 71.4 basis points, an average original tenor of 5.17 years, and a weighted average credit rating of A-/A3.

Bespoke Tranches

At March 31, 2008, Primus Financial's bespoke tranches sold totaled $4.7 billion, with a weighted average premium of 43.1 basis points and a weighted average rating of AA+/Aa1. We did not transact any new bespoke tranches during the first quarter of 2008.

Credit Swaps on Asset Backed Securities

At March 31, 2008, Primus Financial's portfolio of credit swaps sold on asset backed securities (CDS of ABS) totaled $75.0 million, with a weighted average premium of 144.2 basis points. We did not transact any new CDS of ABS during the first quarter of 2008.