Primus Guaranty, Ltd. Reports Fourth Quarter and Full Year 2013 Results

Primus Guaranty, Ltd. (“Primus Guaranty” or “the Company”) (OTC PINK:PRSG) today announced its financial results for the fourth quarter and full year ended December 31, 2013.

• GAAP net income available to common shares for the fourth quarter 2013 was $4.8 million, or $0.22 per diluted share, compared with GAAP net income available to common shares of $59.5 million, or $2.23 per diluted share, for the fourth quarter 2012.
• GAAP net income available to common shares for the full year 2013 was $52.2 million, or $2.17 per diluted share, compared with a GAAP net income available to common shares of $432.4 million, or $14.41 per diluted share, for the full year 2012. GAAP net income from continuing operations for the full year 2013 primarily was attributable to net credit swap revenue of $54.6 million, which included unrealized gains in the fair value of Primus Financial Products, LLC (“Primus Financial”)’s consolidated credit swap portfolio of $39.5 million. GAAP net income from continuing operations for the full year 2012 primarily was attributable to net credit swap revenue of $439.0 million, which included unrealized gains in the fair value of Primus Financial’s consolidated credit swap portfolio of $415.0 million.
• Economic Results for the fourth quarter 2013 were $2.6 million, or $0.12 per diluted share. Economic Results for the full year 2013 were $12.8 million, or $0.53 per diluted share. The primary difference between GAAP net income and Economic Results is that changes in the fair value of Primus Financial’s consolidated credit swap portfolio are not included in Economic Results. Economic Results for the fourth quarter of 2012 were $6.3 million, or $0.25 per diluted share. Economic Results for the full year 2012 were $24.4 million, or $0.93 per diluted share.
• GAAP book value per common share was $8.89 at December 31, 2013, compared with GAAP book value per common share of $8.83 at December 31, 2012. Economic Results book value per common share was $8.82 at December 31, 2013, compared with Economic Results book value per common share of $10.19 at December 31, 2012. The December 31, 2013 GAAP and Economic Results book value per common share reflect the $2.00 distribution per common share that was paid in the fourth quarter 2013.
• At December 31, 2013, the notional principal of Primus Financial’s consolidated credit swap portfolio totaled $3.3 billion, compared with $4.1 billion at December 31, 2012.

Additional Information

A copy of this press release, the Company’s financial supplement and details on Primus Financial’s credit swap portfolio as of December 31, 2013, are available in the Investor Relations section of the Company’s Web site at www.primusguaranty.com. Also available on the Web site is a letter dated February 18, 2014 to the shareholders from Richard Claiden, Chief Executive Officer, and, on the Tax Information page of the Investor Relations section, the PFIC annual information statement for the tax year ended December 31, 2013 and an estimate of the Company’s 2014 PFIC income.

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; and
• A net adjustment in provision for credit default swaps on asset-backed securities (“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.

About Primus Guaranty

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 reference entities. Its common shares trade on the OTC Pink Tier of the OTC market. Investors can find market information for the Company on www.otcmarkets.com.

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, operating strategies and plans, market performance, valuations, distributions 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.

Note: Basic and diluted net income available to common shares for the year ended December 31, 2012 includes the impact of a $3.8 million gain that resulted from the purchase of $14.1 million (face value) Primus Financial preferred securities.

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:

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.

Note: Economic Results earnings per GAAP diluted share for the year ended December 31, 2012 includes the impact of a $3.8 million gain that resulted from the purchase of $14.1 million (face value) Primus Financial preferred securities.