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Primus Guaranty, Ltd. (“Primus Guaranty” or “the Company”) (OTC PINK:PRSG) today announced its financial results for the third quarter ended September 30, 2012.
GAAP net income available to common shares for the third quarter 2012 was $108.2 million, or $3.84 per diluted share, compared with a GAAP net loss available to common shares of $283.1 million, or $7.76 per diluted share, for the third quarter 2011.
Economic Results for the third quarter 2012 were $3.5 million, or $0.12 per diluted share, compared with Economic Results of $10.2 million, or $0.28 per diluted share, for the third 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 $9.85 at September 30, 2012, compared with Economic Results book value per common share of $8.60 at December 31, 2011.
At September 30, 2012, the notional principal of Primus Financial’s consolidated credit swap portfolio totaled $5.8 billion.
Primus Guaranty redeemed the remaining $81.9 million (face value) of its 7% Senior Notes due 2036 at par on September 27, 2012. This resulted in an accelerated write-off of debt issuance costs of $2.3 million, which was recorded under “Interest expense” in the third quarter 2012.
Primus Guaranty purchased approximately 1.3 million of its common shares for an aggregate cost of approximately $9.6 million in the third quarter 2012.
A copy of this press release, the financial supplement and a letter dated November 2, 2012 to the shareholders from Richard Claiden, Chief Executive Officer, are available in the Investor Relations section of the Company’s Web site at
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.