Primus Guaranty Issues Results
Bermuda-based Primus Guaranty, Ltd. today [Feb.16] announced its financial results for the fourth quarter and full year ended December 31, 2011.
- GAAP net income available to common shares for the fourth quarter 2011 was $100.5 million, or $2.84 per diluted share, compared with GAAP net income available to common shares of $128.3 million, or $3.30 per diluted share, for the fourth quarter 2010. GAAP net income available to common shares for the fourth quarter 2011 substantially resulted from a net unrealized mark-to-market gain of $88.3 million on Primus Financial Products, LLC ‘s credit swap portfolio.
- GAAP net loss available to common shares for the full year 2011 was $(36.8) million, or $(1.00) per diluted share, compared with GAAP net income available to common shares of $255.5 million, or $6.33 per diluted share, for the full year 2010. GAAP net loss from continuing operations for the full year 2011 primarily was attributable to net credit swap revenue of $(39.0) million, which included unrealized losses in the fair value of Primus Financial’s credit swap portfolio of $(64.8) million. GAAP net income from continuing operations for the full year 2010 primarily was attributable to net credit swap revenue of $267.8 million, which included unrealized gains in the fair value of Primus Financial’s credit swap portfolio of $296.5 million.
- Economic Results for the fourth quarter 2011 were $12.4 million, or $0.35 per diluted share. Economic Results for the full year 2011 were $36.8 million, or $1.00 per diluted share. The primary difference between GAAP net income and Economic Results is that changes in the fair value of Primus Financial’s credit swap portfolio are not included in Economic Results. Economic Results for the fourth quarter 2010 were $(4.8) million, or $(0.12) per diluted share. Economic Results for the full year 2010 were $(40.8) million, or $(1.01) per diluted share.
- Economic Results book value per common share was $8.60 at December 31, 2011, compared with Economic Results book value per common share of $7.31 at December 31, 2010.
- At December 31, 2011, the notional principal of Primus Financial’s consolidated credit swap portfolio totaled $8.1 billion.
Other Information
Effective December 27, 2011, Primus Guaranty’s counterparty exercised its right to terminate the $75 million notional principal interest rate swap.
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 US 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;
- Â 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.
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.
