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8-K - FORM 8-K - PRIMUS GUARANTY LTD | c24407e8vk.htm |
EX-99.2 - EX-99.2 - PRIMUS GUARANTY LTD | c24407exv99w2.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
PRIMUS GUARANTY, LTD. REPORTS THIRD QUARTER 2011
GAAP NET LOSS AVAILABLE TO COMMON SHARES OF $283.1 MILLION
AND
ECONOMIC RESULTS OF $10.2 MILLION
GAAP NET LOSS AVAILABLE TO COMMON SHARES OF $283.1 MILLION
AND
ECONOMIC RESULTS OF $10.2 MILLION
Hamilton, Bermuda November 8, 2011 Primus Guaranty, Ltd. (Primus Guaranty or the Company)
(NYSE:PRS) today announced its financial results for the third quarter ended September 30, 2011.
| GAAP net loss available to common shares for the third quarter 2011 was $283.1 million,
or $7.76 per diluted share, compared with GAAP net income available to common shares of
$229.0 million, or $5.72 per diluted share, for the third quarter 2010. GAAP net loss
available to common shares for the third quarter 2011 was substantially due to a net
unrealized mark-to-market loss of $293.3 million on Primus Financial Products, LLC (Primus
Financial)s consolidated credit swap portfolio. |
| Economic Results for the third quarter 2011 were $10.2 million, or $0.28 per diluted
share, compared with an Economic Results loss of $2.0 million, or $0.05 per diluted share,
for the third quarter 2010. Economic Results for the third quarter
2011 primarily comprised premium revenue of $9.9 million, interest income of $2.4 million, and gains on retirement
of debt of $2.1 million, partly offset by net operating costs of $3.1 million and financing
costs of $2.1 million. |
| Economic Results book value per common share was $8.20 at September 30, 2011, compared
with Economic Results book value per common share of $7.31 at December 31, 2010. |
| At September 30, 2011, the notional principal of Primus Financials consolidated credit
swap portfolio totaled $8.5 billion. |
Earnings
A copy of this press release and the financial supplement, including additional credit swap
portfolio and historical data, is available in the Investor Relations section of the Companys Web
site at www.primusguaranty.com. Also available on the Web site is a letter dated November 8, 2011
to the shareholders from Richard Claiden, Chief Executive Officer.
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 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 of credit swaps
is included in Economic Results. |
The Company believes that quarterly fluctuations in the fair market value of Primus Financials
consolidated credit swap portfolio have little or no effect on the Companys business operations
and that Economic Results provides a useful, alternative view of the Companys economic
performance.
About Primus Guaranty
Primus Guaranty, Ltd. is a Bermuda company with offices in New York. Through its subsidiary,
Primus Financial Products, LLC (Primus Financial), the Company provides protection against the
risk of default on primarily investment grade corporate and sovereign reference entities.
Forward-Looking Statements
Some of the statements included in this press release and other statements Primus Guaranty may
make, particularly those anticipating future financial performance, business prospects, growth and
operating strategies, market performance, valuations and similar matters, are forward-looking
statements that involve a number of assumptions, risks and uncertainties, which change over time.
Any such statements speak only as of the date they are made, and Primus Guaranty assumes no duty
to, and does not undertake to, update any forward-looking statements. Actual results could differ
materially from those anticipated in forward-looking statements, and future results could differ
materially from historical performance. For a discussion of the factors that could affect the
Companys actual results please refer to the risk factors identified from time to time in the
Companys SEC reports, including, but not limited to, Primus Guarantys Annual Report on Form 10-K,
as filed with the U.S. Securities and Exchange Commission.
2
Primus Guaranty, Ltd.
Condensed Consolidated Statements of Financial Condition (Unaudited)
Condensed Consolidated Statements of Financial Condition (Unaudited)
(in thousands except share amounts)
September 30, | December 31, | |||||||
2011 | 2010 | |||||||
Assets |
||||||||
Cash and cash equivalents |
$ | 107,299 | $ | 177,736 | ||||
Investments (includes $328,743 and
$288,815 at fair value as of
September 30, 2011 and December 31, 2010, respectively) |
328,914 | 288,985 | ||||||
Restricted cash and investments |
136,882 | 138,540 | ||||||
Accrued interest and premiums |
5,405 | 5,860 | ||||||
Unrealized gain on credit swaps, at fair value |
| 2,006 | ||||||
Debt issuance costs, net |
3,706 | 4,072 | ||||||
Other assets (includes $8,504 and $11,559 at fair value as of
September 30, 2011 and December 31, 2010, respectively) |
12,422 | 17,660 | ||||||
Total assets |
$ | 594,628 | $ | 634,859 | ||||
Liabilities and Equity |
||||||||
Liabilities |
||||||||
Accounts payable and accrued expenses |
$ | 4,285 | $ | 8,701 | ||||
Unrealized loss on credit swaps, at fair value |
546,266 | 395,164 | ||||||
Payable for credit events |
2,092 | 3,447 | ||||||
Long-term debt |
191,511 | 215,828 | ||||||
Restructuring liabilities |
36 | 3,729 | ||||||
Other liabilities |
3,357 | 6,025 | ||||||
Total liabilities |
747,547 | 632,894 | ||||||
Commitments and contingencies |
||||||||
Equity (Deficit) |
||||||||
Common shares, $0.08 par value, 62,500,000 shares authorized,
35,334,749 and 38,078,790 shares issued and outstanding at
September 30, 2011 and December 31, 2010, respectively |
2,825 | 3,046 | ||||||
Additional paid-in capital |
262,621 | 275,453 | ||||||
Accumulated other comprehensive income |
1,726 | 3,333 | ||||||
Retained earnings (deficit) |
(510,237 | ) | (372,969 | ) | ||||
Total
shareholders equity (deficit) of Primus Guaranty, Ltd. |
(243,065 | ) | (91,137 | ) | ||||
Preferred securities of subsidiary |
90,146 | 93,102 | ||||||
Total equity (deficit) |
(152,919 | ) | 1,965 | |||||
Total liabilities and equity |
$ | 594,628 | $ | 634,859 | ||||
3
Primus Guaranty, Ltd.
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands except per share amounts)
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands except per share amounts)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenues |
||||||||||||||||
Net credit swap revenue (loss) |
$ | (283,404 | ) | $ | 227,547 | $ | (136,297 | ) | $ | 125,369 | ||||||
Interest income |
2,436 | 3,674 | 7,616 | 9,914 | ||||||||||||
Gain on retirement of long-term debt |
2,061 | 752 | 4,821 | 8,185 | ||||||||||||
Other income |
153 | 2,513 | 771 | 2,645 | ||||||||||||
Total revenues |
(278,754 | ) | 234,486 | (123,089 | ) | 146,113 | ||||||||||
Expenses |
||||||||||||||||
Compensation and employee benefits |
1,443 | 4,036 | 5,135 | 13,162 | ||||||||||||
Professional and legal fees |
706 | 1,742 | 2,202 | 5,405 | ||||||||||||
Interest expense |
1,445 | 1,760 | 4,558 | 5,366 | ||||||||||||
Other |
994 | 1,851 | 3,387 | 5,351 | ||||||||||||
Total expenses |
4,588 | 9,389 | 15,282 | 29,284 | ||||||||||||
Income (loss) from continuing operations before provision
(benefit) for income taxes |
(283,342 | ) | 225,097 | (138,371 | ) | 116,829 | ||||||||||
Provision (benefit) for income taxes |
| 71 | 11 | 98 | ||||||||||||
Income (loss) from continuing operations, net of tax |
(283,342 | ) | 225,026 | (138,382 | ) | 116,731 | ||||||||||
Income (loss) from discontinued operations, net of tax |
919 | (19,622 | ) | 3,457 | (48,008 | ) | ||||||||||
Net income (loss) |
(282,423 | ) | 205,404 | (134,925 | ) | 68,723 | ||||||||||
Less: |
||||||||||||||||
Distributions on preferred securities of subsidiary |
682 | 732 | 2,343 | 2,444 | ||||||||||||
Net loss from discontinued operations attributable to
non-parent interests in CLOs |
| (24,355 | ) | | (60,876 | ) | ||||||||||
Net income (loss) available to common shares |
$ | (283,105 | ) | $ | 229,027 | $ | (137,268 | ) | $ | 127,155 | ||||||
Income (loss) per common share: |
||||||||||||||||
Basic: |
||||||||||||||||
Income (loss) from continuing operations |
$ | (7.79 | ) | $ | 5.90 | $ | (3.76 | ) | $ | 2.97 | ||||||
Income (loss) from discontinued operations |
$ | 0.03 | $ | 0.12 | $ | 0.09 | $ | 0.33 | ||||||||
Net income (loss) available to common shares |
$ | (7.76 | ) | $ | 6.02 | $ | (3.67 | ) | $ | 3.30 | ||||||
Diluted: |
||||||||||||||||
Income (loss) from continuing operations |
$ | (7.79 | ) | $ | 5.60 | $ | (3.76 | ) | $ | 2.80 | ||||||
Income (loss) from discontinued operations |
$ | 0.03 | $ | 0.12 | $ | 0.09 | $ | 0.32 | ||||||||
Net income (loss) available to common shares |
$ | (7.76 | ) | $ | 5.72 | $ | (3.67 | ) | $ | 3.12 | ||||||
Weighted average common shares outstanding: |
||||||||||||||||
Basic |
36,470 | 38,049 | 37,411 | 38,546 | ||||||||||||
Diluted |
36,470 | 40,042 | 37,411 | 40,737 |
4
Primus Guaranty, Ltd.
Regulation G and Other Disclosure
Economic Results
September 30, 2011
(Unaudited)
Regulation G and Other Disclosure
Economic Results
September 30, 2011
(Unaudited)
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 CDS on ABS credit events is included in Economic Results; and |
||
| A reduction in provision for CDS on ABS credit events upon termination of credit swaps is included in Economic
Results. |
The Company believes that quarterly fluctuations in the fair market value of Primus Financials
consolidated credit swap portfolio have little or no effect on the Companys business operations
and that Economic Results provides a useful, alternative view of the Companys economic
performance.
Economic Results per GAAP Diluted Share
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(in 000s except per share amounts) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
GAAP Net income (loss) available to common shares |
$ | (283,105 | ) | $ | 229,027 | $ | (137,268 | ) | $ | 127,155 | ||||||
Adjustments: |
||||||||||||||||
Change in
unrealized fair value of credit swaps sold (gain) loss by Primus Financial |
293,298 | (231,173 | ) | 153,108 | (163,346 | ) | ||||||||||
Amortization of realized gains from the early termination of credit
swaps sold by Primus Financial |
25 | 145 | 94 | 703 | ||||||||||||
Provision for CDS on ABS credit events |
| | (1,398 | ) | (2,374 | ) | ||||||||||
Reduction in provision for CDS on ABS credit events upon termination of credit
swaps |
| | 9,841 | 1,819 | ||||||||||||
Economic Results |
$ | 10,218 | $ | (2,001 | ) | $ | 24,377 | $ | (36,043 | ) | ||||||
Economic Results earnings (loss) per GAAP diluted share |
$ | 0.28 | $ | (0.05 | ) | $ | 0.65 | $ | (0.88 | ) | ||||||
Economic Results weighted average common shares GAAP diluted |
36,470 | 40,042 | 37,411 | 40,737 |
Economic Results Book Value per Share
September 30, | December 31, | |||||||
2011 | 2010 | |||||||
GAAP Shareholders equity (deficit) of Primus Guaranty, Ltd. |
$ | (243,065 | ) | $ | (91,137 | ) | ||
Adjustments: |
||||||||
Accumulated other comprehensive (income) loss |
(1,726 | ) | (3,333 | ) | ||||
Unrealized fair value of credit swaps sold (gain) loss by Primus Financial |
546,266 | 393,158 | ||||||
Realized gains from early termination of credit swaps sold by Primus Financial |
(33,574 | ) | (33,574 | ) | ||||
Amortized
realized gains from the early termination of credit swaps sold by Primus Financial |
33,537 | 33,443 | ||||||
Provision for CDS on ABS credit events |
(70,189 | ) | (68,791 | ) | ||||
Reduction in provision for CDS on ABS credit events upon termination of credit
swaps |
58,416 | 48,575 | ||||||
Economic Results Shareholders Equity |
$ | 289,665 | $ | 278,341 | ||||
Economic Results book value per share issued and outstanding |
$ | 8.20 | $ | 7.31 | ||||
GAAP book value per share issued and outstanding |
$ | (6.88 | ) | $ | (2.39 | ) | ||
Common shares issued and outstanding |
35,335 | 38,079 |
5
Primus Guaranty, Ltd.
GAAP Net Credit Swap Revenue (Loss)
September 30, 2011
(Unaudited)
GAAP Net Credit Swap Revenue (Loss)
September 30, 2011
(Unaudited)
GAAP Net Credit Swap Revenue (Loss)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(in 000s) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Net credit swap revenue (loss) components |
||||||||||||||||
Credit swaps sold single name (Primus Financial) |
||||||||||||||||
Net premium income |
$ | 6,241 | $ | 10,794 | $ | 20,498 | $ | 34,986 | ||||||||
Realized gains |
| | | | ||||||||||||
Realized losses |
| (13,706 | ) | (652 | ) | (40,002 | ) | |||||||||
Change in unrealized gains/(losses) |
(24,704 | ) | 78,437 | 17,355 | 79,981 | |||||||||||
Credit swaps sold tranches (Primus Financial) |
||||||||||||||||
Net premium income |
3,607 | 3,303 | 10,662 | 10,689 | ||||||||||||
Realized gains |
| | | | ||||||||||||
Realized losses |
| | (4,032 | ) | (35,000 | ) | ||||||||||
Change in unrealized gains/(losses) |
(268,978 | ) | 147,643 | (180,159 | ) | 72,350 | ||||||||||
Credit swaps undertaken to offset credit risk (Primus Financial) |
||||||||||||||||
Net premium income (expense) |
| (42 | ) | | (87 | ) | ||||||||||
Net realized gains (losses) |
| (1,017 | ) | 47 | (3,955 | ) | ||||||||||
Change in unrealized gains/(losses) |
| 1,533 | (59 | ) | 4,470 | |||||||||||
Credit swaps sold ABS (Primus Financial) |
||||||||||||||||
Net premium income |
46 | 79 | 129 | 212 | ||||||||||||
Realized gains |
| | | | ||||||||||||
Realized losses |
| (2,778 | ) | (9,841 | ) | (4,597 | ) | |||||||||
Change in unrealized gains/(losses) |
384 | 3,560 | 9,755 | 6,545 | ||||||||||||
Net credit swaps (PARC fund) |
| (259 | ) | | (223 | ) | ||||||||||
Net credit swap revenue (loss) |
$ | (283,404 | ) | $ | 227,547 | $ | (136,297 | ) | $ | 125,369 | ||||||
6