PRIMUS GUARANTY, LTD. REPORTS THIRD QUARTER 2010 FINANCIAL RESULTS
November 11, 2010
Hamilton, Bermuda – November 11, 2010 – Primus Guaranty, Ltd. (“Primus Guaranty” or “the Company”) (NYSE:PRS) today announced its financial results for the third quarter ended September 30, 2010.
§ GAAP net income available to common shares for the third quarter 2010 was $229.0 million, or $5.72 per diluted share, compared with GAAP net income available to common shares of $461.5 million, or $11.14 per diluted share, for the third quarter 2009. GAAP net income available to common shares for the third quarter 2010 was primarily attributable to a net unrealized mark-to-market gain of $231.1 million on Primus Financial Products, LLC (“Primus Financial”)’s consolidated credit swap portfolio.
§ Economic Results for the third quarter 2010 were $(2.0) million, or $(0.05) per diluted share, and mainly comprise $14.2 million of premium income, $3.4 million of asset management fees, a $17.5 million termination payment by Primus Financial to Lehman Brothers Special Financing Inc. and $3.9 million of interest income. Economic Results for the third quarter 2009 were $(9.6) million, or $(0.23) per diluted share, and mainly comprise $21.9 million of premium income, $1.3 million of asset management fees, $21.5 million of net realized losses from credit mitigation activities within Primus Financial’s portfolio of credit swaps and $1.2 million of interest income.
§ Economic Results book value per common share was $7.61 at September 30, 2010, compared with $8.48 at December 31, 2009. The decline in Economic Results book value per share was primarily attributable to portfolio repositioning transaction and termination payments by Primus Financial in 2010.
§ At September 30, 2010, Primus Asset Management (“PAM”) managed $3.3 billion of third party assets. CypressTree Investment Management, LLC, a subsidiary of PAM (“CypressTree”), managed or sub-advised $2.8 billion of collateralized loan obligations (CLOs) at September 30, 2010. As announced on September 22, 2010, the Company has entered into a binding letter of intent to sell CypressTree to Commercial Industrial Finance Corp.
§ At September 30, 2010, the notional principal of Primus Financial’s consolidated credit swap portfolio totaled $11.8 billion.
Buyback Authorization
- The Company’s Board of Directors has authorized an additional expenditure of up to $10 million of available cash for the purchase of the Company’s common shares and/or 7% Senior Notes. Purchases will be made at management’s discretion. Approximately $18.9 million is currently available under the buyback program, including the additional $10 million authorization.
Consolidation of CLOs under Management
- Effective January 1, 2010, the Company adopted ASC Topic 810, Consolidation, which required it to consolidate the assets, liabilities, revenues and expenses of the CLOs under its management. Although these CLOs are consolidated, the assets of the CLOs are not available to the Company for general operations or in satisfaction of the Company’s debt obligations. The Company does not have any rights to or ownership of these assets. Similarly, the Company does not have any obligation to settle the liabilities of the CLOs. The Company has no contractual obligation to fund or provide other financial support to any CLO. As a result of the adoption of ASC Topic 810, Consolidation, the Company established an “appropriated retained earnings from CLO consolidation” account in the equity section of the condensed consolidated statement of financial condition as required under the standard.