Primus Guaranty reports Fourth Quarter Net Income of $13.7 million, or

    Business Editors

    HAMILTON, Bermuda--(BUSINESS WIRE)--Feb. 9, 2005--Primus Guaranty, Ltd. ("Primus Guaranty") (NYSE: PRS), a leading provider of credit protection, today announced net income of $13.7 million, or $0.31 per diluted share for its fourth quarter 2004, compared with $14.8 million, or $0.44 per diluted share for the fourth quarter of 2003. The quarterly net income for fourth quarters 2004 and 2003 include net realized and unrealized gains of $10.1 million and $14.3 million respectively for the periods. The weighted average common diluted shares outstanding was 44.4 million in the fourth quarter 2004, compared with 34 million in the same period of 2003. As previously discussed, the company incurred a one-time expense in the fourth quarter 2004 of $3.3 million, or $0.08 per diluted share, due to the accelerated vesting of employee restricted stock and options as a result of its initial public offering. In the same period for 2003 there was a non-recurring expense of $3.2 million, or $0.09 per diluted share, related to the accelerated amortization of software costs.
    "2004 was a very successful and exciting year for Primus, highlighted by our initial public offering and listing on the NYSE in the third quarter. There are a number of other achievements that I am pleased with, including achieving significant growth in our economic results and exceeding our portfolio growth targets for the year. Our portfolio grew to approximately $10.5 billion at year-end despite a challenging spread environment for a number of months during the year", said Thomas Jasper, Chief Executive Officer. "Additionally, in the fourth quarter, we marketed our second credit swap asset management transaction in which we manage a portfolio of credit default swaps on behalf of third parties. Our expanding asset management business is indicative of the company's ability to leverage its core expertise, maximizing the talents of the Primus team.
    In 2005, our focus will be on continuing the profitable growth of our core business of selling credit protection, capturing additional opportunities in the asset management area and finding new areas of growth that complement our strategy and core competencies."

    Results for quarter ended December 31, 2004

    Net income for the quarter ended December 31, 2004 was $13.7 million, a decrease of $1.1 million from the same quarter in 2003. Total revenues increased by $251 thousand to $24.8 million, whereas total expenses were $1.1 million higher in the fourth quarter of 2004. Details of the changes in revenues and expenses are provided below.
    Net credit swap revenue, which comprises net premiums earned, as well as realized and unrealized gains and losses on the swap portfolio, decreased 9.3% to $21.6 million in the fourth quarter of 2004 from $23.8 million for the same period in 2003. The decline is primarily attributable to lower realized gains from the termination of swaps sold and unrealized losses on the portfolio of credit swaps purchased for investment purposes. These declines are partly offset by higher net premium income.
    Reflecting growth in the company's credit swap portfolio, premiums earned on credit swaps sold increased 25.4% to $11.9 million in the fourth quarter of 2004 from $9.5 million for the same period in 2003. Premium expense on credit swaps purchased as short-term investments was $400 thousand in the fourth quarter of 2004, an increase of $381 thousand from the fourth quarter of 2003. The significant increase in premium expense on credit swaps purchased was due to increased size of notional and full quarter activity, as the strategy was launched during the fourth quarter of 2003.
    Realized gains on the portfolio of credit swaps sold were $173 thousand in the fourth quarter of 2004, compared with realized gains of $3.2 million in the fourth quarter of 2003. Realized losses on the portfolio of credit swaps sold were $348 thousand in the fourth quarter of 2004, of which $339 thousand was attributable to credit mitigation activity, compared with $50 thousand in the fourth quarter of 2003. Net realized gains on the portfolio of credit swaps purchased for short-term investment purposes were $123 thousand for the fourth quarter of 2004 compared to $28 thousand in the same period of 2003.
    Fourth quarter unrealized gains of $11.2 million on credit swaps sold were up 2.2% compared to the fourth quarter of 2003 unrealized gains of $10.9 million, as premiums levels at the end of 2004 contracted to levels similar to those prevailing on December 31, 2003. The portfolio of credit swaps purchased as short-term investments experienced an unrealized loss of $1 million in the fourth quarter of 2004, compared with a $23 thousand gain for the fourth quarter of 2003.
    Interest income for the fourth quarter of 2004 was $2.3 million compared with $702 thousand for the same quarter in 2003. This was due to the increase in our average invested balances and higher investment yields. Average balances were $422 million for the fourth quarter 2004, compared with $256 million in same quarter for 2003. The increase was attributable to the IPO proceeds of approximately $110.7 million, proceeds from the issuance of $75 million of subordinated deferrable interest notes in July 2004, together with the retention of cash earnings over the period. The average investment yield increased to 2.20% in the fourth quarter of 2004, up 111 basis points from an average of 1.09% in the fourth quarter of 2003. The increase in yield was primarily due to increases in short-term market interest rates.
    Credit swap asset management fees for the fourth quarter 2004 were $12 thousand. There were no such fees in 2003, as the asset management initiative was launched in 2004. Asset management fees are earned ratably over the life of the contract, which is generally 5 years, and an additional contingent fee would be received at the end of the contract if certain pre-agreed success conditions are met.
    Total operating expenses, excluding financing costs, were $10 million for the fourth quarter 2004, compared with $9.5 million in the fourth quarter of 2003. The total operating expenses of $10 million include the one-time expense of $3.3 million, or $0.08 per diluted share, which is attributable to the accelerated vesting of employee restricted stock and options as a result of the initial public offering.
    Compensation expenses were $6.7 million in the fourth quarter of 2004, compared with $3.6 million in the same period of 2003. The increase in expenses was attributable to higher expenses associated with the accelerated vesting of employee restricted stock and options. Other operating expenses for the fourth quarter of 2004 were similar to the expenses in the same quarter of 2003, except for an additional expense of $3.2 million that was recorded in the fourth quarter of 2003, for the accelerated amortization of software that was no longer in use.
    Financing costs, comprising distributions on preferred shares and interest expense, were $1.1 million in the fourth quarter of 2004, compared with $489 thousand in the fourth quarter of 2003. The increase in financing costs was primarily attributable to the interest expense associated with the issuance of $75 million of subordinated deferrable interest notes in July 2004 coupled with an increase in market interest rates during the fourth quarter of 2004.

    Results for year ended December 31, 2004

    Net income for the year ended December 31, 2004 was $23.7 million, compared with $78.5 million in 2003. Total revenues for 2004 were $53.8 million, compared with $106.1 million in 2003. Total expenses, including financing costs, were $30.0 million in 2004, compared with $27.8 million in 2003. Details of the changes in revenues and expenses are provided below.
    Net credit swap revenue, which comprises premiums earned, as well as realized and unrealized gains and losses on the swap portfolio, decreased 53.8% to $47.7 million in 2004 from $103.3 million for the same period in 2003. The decrease is mostly attributable to a decline in unrealized gains on credit swaps sold, which were $1.9 million in 2004, compared with $46.5 million in 2003. Unrealized losses in the portfolio of credit swaps purchased as short-term investments were $2.2 million in 2004; the unrealized gains in 2003 were $23 thousand.
    Premiums earned on credit swaps sold increased 11.2% to $43.5 million in 2004 from $39.1 million for the same period in 2003. The increase was primarily due to the growth in the portfolio of credit swaps sold to $10.5 billion at December 31, 2004 from $6.3 billion at the end of 2003. Premium expense on credit swaps purchased as short-term investments was $927 thousand in 2004, an increase of $908 thousand from 2003 full year expense of $19 thousand. The primary reason for the increase in premium expense is the fact that the strategy of purchasing credit swaps for short-term investments was adopted in the fourth quarter of 2003 and only a partial year's expense was recognized in 2003.
    Realized gains on the portfolio of credit swaps sold were $5.5 million in 2004, compared with $18.3 million in 2003. In 2004, realized losses on the portfolio of credit swaps sold were $1.1 million, of which $886 thousand was attributable to credit mitigation activity, compared with $264 thousand in 2003. Net realized gains on the portfolio of credit swaps purchased for short-term investment purposes were $1.1 million for full year 2004 compared with $28 thousand in 2003.
    Interest income increased to $4.9 million in 2004 from $2.6 million in 2003, primarily due to the increased in average investment balances and higher average investment yields. Average balances were $372 million for full year 2004, compared with $241 million in 2003. The increase was attributable to the issuance of $75 million of subordinated deferrable interest notes in July 2004, together with the retention of cash earnings over the period and net proceeds of $110.7 million from the initial public offering. The average investment yield increased to 1.30% in 2004, compared with 1.08% in 2003. The increase in yield was primarily due to increases in short-term market interest rates.
    Total expenses were $30.0 million for 2004, compared with $27.8 million for 2003. Compensation expense was $17.8 million, compared with $11.7 million in 2003. $3.3 million of the increase is due to the accelerated vesting of employee restricted stock and options upon the IPO. The remainder of the increase is attributable to the growth in the number of staff, increased compensation levels, and additional stock and option expense associated with new awards granted in 2004.
    Operating expenses, other than compensation, were $9.2 million in 2004, compared with $14.2 million in the same period in 2003. The principal reason for the decline was an expense of $3.2 million for the accelerated amortization of software costs incurred in 2003.
    Financing costs, comprising distributions on preferred shares and interest expense, were $3.0 million in 2004 compared with $1.9 million for 2003. The increase is attributable to interest expense associated with the issuance of $75 million of subordinated deferrable interest notes in July 2004 together with an increase in market interest rates during the latter part of 2004.

    Balance Sheet

    At December 31, 2004, total assets were $542.8 million, up 69% from total assets of $321.4 million at December 31, 2003. This increase was due primarily to proceeds received in connection with the issuance of $75 million of subordinated deferrable interest notes in July 2004 by Primus Financial Products and the $110.7 million received from the initial public offering, completed in October 2004. At December 31, 2004, shareholders' equity was $361 million, a 68% increase from shareholders' equity of $214.8 million at December 31, 2003. The increase in shareholders equity stemmed primarily from the issuance of 9.1 million shares in connection with our initial public offering.

    Credit Swap Portfolios

    At December 31, 2004, our portfolio of credit swaps sold totaled $10.5 billion, up 68% from our portfolio of credit swaps sold of $6.3 billion at December 31, 2003. The credit swap portfolio's weighted average credit ratings at December 31, 2004 were A/A3, the same as at December 31, 2003. There were 476 reference entities in the portfolio at December 31, 2004 compared with 347 reference entities at December 31, 2003. For the full year 2004 there were no credit events on our credit swap portfolio.
    The portfolio of credit swaps purchased as short-term investments was $468 million at December 31, 2004, compared with a balance of $130 million at December 31, 2003.

    Other Performance Data

    In managing our business and assessing its growth and profitability from a strategic and financial planning perspective, we believe it is appropriate to consider both our United States GAAP financial results as well as the impact on those results of fair value accounting and the termination of credit swaps. Therefore, we evaluate what our economic results would have been if we excluded from revenue the amounts of any unrealized gains and losses on our portfolio of credit swaps sold, and any realized gains from terminations of credit swaps sold prior to maturity, although we amortize those gains over the remaining original lives of the terminated contracts.
    During the fourth quarter of 2004, unrealized gains on the portfolio of credit swaps sold were $11.2 million. Realized gains on the portfolio of credit swaps sold were $173 thousand and the amortization of previously realized gains was $1.7 million.
    For the full year of 2004, net unrealized gains on the portfolio of credit swaps sold were $2.0 million. Realized gains on the portfolio of credit swaps sold were $5.5 million and the amortization of previously realized gains was $6.2 million.

    Earnings Conference Call

    Primus Guaranty will host a conference call Wednesday, February 9, 2005, at 11:00 AM (ET) with access available via Internet and telephone. To access the live conference call, dial (800) 299-0433 (toll-free domestic) or (617) 801-9712 (international). The access code is 70470196. Please call to register at least 10 minutes before the conference call begins. A replay of the call will be available for two weeks via telephone starting at approximately 1:00 PM (ET) on Wednesday, February 9, 2005, and can be accessed at (888) 286-8010 (toll-free domestic) or (617) 801-6888 (international). The access code is 20349019. The webcast will be live as well as archived for one month on Primus Guaranty's website: www.primusguaranty.com. To access the webcast, refer to the investor relations section of the website, and click on webcast icon in center of page.

    About Primus Guaranty

    Primus Guaranty, Ltd., through its principal operating subsidiary, Primus Financial Products, LLC, offers protection against the risk of default on investment grade credit obligations. Primus Financial assumes these risks through the sale of credit default swaps to dealers, banks and portfolio managers. As a swap counterparty, Primus Financial is rated Aaa by Moody's Investor Service, Inc. and AAA by Standard & Poor's Rating Services. Another subsidiary of Primus Guaranty, Primus Asset Management, Inc., manages the credit swap portfolios of Primus Financial and third parties.
    The company, which is traded on the New York Stock Exchange under the symbol PRS, has over $526 million in assets at September 30, 2004. Primus Guaranty is a Bermuda company, with the operations of its principal subsidiaries, Primus Financial Products and Primus Asset Management, headquartered in New York, New York.

    Safe Harbor Statement

    Some of the statements included in this press release, particularly those anticipating future financial performance, business prospects, growth and operating strategies and similar matters, are forward-looking statements that involve a number of risks and uncertainties. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. For a discussion of the factors that could affect our actual results please refer to the risk factors identified from time to time in our SEC reports, including, but not limited to, our 10-Q, as filed with the SEC.

Primus Guaranty, Ltd. Consolidated Statements of Financial Condition (dollars in 000s except per share amounts)

Dec. 31, ------------------- 2004 2003 --------- --------- Assets Cash and cash equivalents $320,989 $257,967 Short-term investments 161,101 3,968 Accrued interest receivable 1,381 129 Accrued premiums on credit swaps 3,349 3,642 Premiums receivable on credit swaps 197 140 Premiums receivable on financial guarantees 800 1,201 Asset management fee receivable 15 -- Prepaid expenses 868 395 --------- --------- Total current assets 488,700 267,442

Unrealized gain on credit swaps, at fair value 46,517 46,594 Fixed assets, less accumulated depreciation of $493 in 2004; $259 in 2003 and $45 in 2002 1,800 1,651 Internal use software costs, less accumulated amortization of $5,862 in 2004; $4,176 in 2003 and $1,803 in 2002 4,297 5,473 Income tax receivable 313 269 Debt issuance costs 1,125 -- --------- --------- Total assets $542,752 $321,429 ========= =========

Liabilities and shareholders' equity Accounts payable $ 906 $ 653 Compensation payable 5,317 5,474 Brokerage fees payable 14 50 Current state and local taxes payable 45 -- Interest payable 364 -- --------- --------- Total current liabilities 6,646 6,177

Long-term debt 75,000 -- Unrealized loss on credit swaps, at fair value 259 68 Deferred rent payable 455 473 Deferred financial guarantee premiums 805 1,201 Unrealized loss on sublease -- 39 Deferred credit swap premiums 69 112 --------- --------- Total liabilities 83,234 8,070

Preferred securities of subsidiary 98,521 98,521 Commitments and contingencies (see Note 14)

Shareholders' equity: Common stock, $0.08 par value, 62,500,000 shares authorized, 42,789,406; 2,600,000; 2,570,988 shares issued and outstanding at December 31, 2004; 2003; 2002 3,535 230 Additional Paid-in-Capital 264,860 1,325 Convertible Preferred stock -- 143,908 Warrants 612 1,070 Retained earnings (accumulated deficit) 91,990 68,305 --------- --------- Total shareholders' equity 360,997 214,838 --------- --------- Total liabilities and shareholders' equity $542,752 $321,429 ========= =========

Primus Guaranty, Ltd. Consolidated Statements of Operations (amounts in 000s except per share data)

Three months ended Year ended Dec. 31, Dec. 31, ------------------- ------------------- 2004 2003 2004 2003 -------- -------- -------- --------- (unaudited) Revenues Net credit swap revenue $21,563 $23,776 $47,729 $103,326 Premiums earned on financial guarantees 100 - 395 - Interest income 2,316 702 4,850 2,617 Rental income - 27 40 107 Asset management fees 12 - 15 - Foreign currency revaluation 765 - 726 - -------- -------- -------- --------- Total net revenues 24,756 24,505 53,755 106,050

Expenses Employee compensation and benefits 6,659 3,557 17,801 11,701 Excess-of-loss insurance policy premium - - - 727 Professional and legal fees 1,254 1,017 2,414 3,398 Fixed asset depreciation and amortization 497 3,786 1,951 5,829 Technology and data feeds 449 307 1,363 1,316 Rent 194 185 744 692 Bank fees 136 141 576 529 Rating agency fees 57 119 346 494 Brokerage expense 87 123 602 442 Interest expense 505 - 881 - Other 631 255 1,208 769 -------- -------- -------- --------- Total expenses 10,469 9,490 27,886 25,897 Distributions on preferred securities of subsidiary (589 ) (489 ) (2,138 ) (1,854 ) -------- -------- -------- --------- Income (loss) before benefit (provision) for income taxes 13,698 14,526 23,731 78,299 Benefit (provision) for income taxes 49 299 (46 ) 172 -------- -------- -------- --------- Net Income (loss) available to common shares $13,747 $14,825 $23,685 $78,471 ======== ======== ======== =========

Earnings (loss) per common share: Basic $ 0.32 $ 5.89 $ 1.44 $ 31.18 Diluted $ 0.31 $ 0.44 $ 0.59 $ 2.33

Average common shares outstanding: Basic 42,957 2,517 16,486 2,517 Diluted 44,401 34,002 40,256 33,737

Primus Guaranty, Ltd. Summary Financial Information (amounts in 000's except per share data)

For the Three Months Ended --------------------------------------------- Dec. 31, Sept. 30, June 30, March 31, 2004 2004 2004 2004 ---------------------------------------------- (Unaudited) ---------------------------------------------- Revenues Net credit swap revenue 21,563 $ 23,331 $ 5,865 $ (3,030) Premiums earned on financial guarantees 100 99 97 99 Interest income earned 2,316 1,166 716 652 Rental income - - 13 27 Asset management fees 12 3 - - Foreign exchange revaluation 765 66 (32) (73) ------------ --------- -------- -------- 24,756 24,665 6,659 (2,325) ------------ --------- -------- -------- Expenses Compensation 6,659 3,858 3,861 3,423 Technology and data feeds 449 243 364 307 Professional and legal fees 1,254 382 363 415 Rent 194 193 184 173 Fixed asset depreciation and amortization 497 494 486 474 Other operating expenses 911 713 577 531 Financing costs 1,094 778 605 542 ------------ --------- -------- -------- 11,058 6,661 6,440 5,865 ------------ --------- -------- --------

Income (loss) before income taxes 13,698 18,004 219 (8,190) Income tax expense (benefit) (49) (22) 45 72 ------------ --------- -------- -------- Net income (loss) $ 13,747 $ 18,026 $ 174 $ (8,262) ------------ --------- -------- --------

Per Share and Share Data

Basic earnings per share $ 0.32 $ 4.23 $ 0.05 $ (3.21)

Weighted average common shares outstanding - basic 42,957 4,264 3,527 2,570

Diluted earnings per share $ 0.31 $ 0.51 $ 0.01 $ (3.21)

Weighted average common shares outstanding - diluted 44,401 35,219 34,768 2,570

Net credit swap revenue components Credit swaps sold Premium income $ 11,894 $ 11,192 $ 10,398 $ 10,010 Realized gains 173 3,251 948 1,161 Realized losses (348) (778) (13) - Change in unrealized gains/losses 11,153 10,998 (5,285) (14,967)

Credit swaps purchased as short-term investments Premium expense (400) (279) (126) (122) Realized gains 174 346 319 421 Realized losses (51) (34) (47) - Change in unrealized gains/losses (1,027) (1,335) (313) 450

Credit swaps purchased to offset credit risk on certain swaps sold Premium expense (23) (23) (23) (23) Realized gains - - - - Realized losses - - - - Change in unrealized gains/losses 18 (7) 7 40

------------ ---------- --------- --------- Net credit swap revenue $ 21,563 $ 23,331 $ 5,865 $ (3,030) ============ ========== ========= =========

For the Three Months Ended --------------------------------------------- Dec. 31, Sept. 30, June 30, March 31, 2003 2003 2003 2003 --------------------------------------------- (Unaudited) --------------------------------------------- Revenues Net credit swap revenue $ 23,776 $ 21,804 $ 45,961 $11,785 Premiums earned on financial guarantees - - - - Interest income earned 702 607 635 673 Rental income 27 26 27 27 Asset management fees - - - - Foreign exchange revaluation - - - - ---------- ----------- -------- -------- 24,505 22,437 46,623 12,485 ---------- ----------- -------- -------- Expenses Compensation 3,557 3,112 2,615 2,417 Technology and data feeds 307 330 377 302 Professional and legal fees 1,017 480 1,129 772 Rent 185 164 165 178 Fixed asset depreciation and amortization 3,786 689 682 1,399 Other operating expenses 638 523 550 523 Financing costs 489 534 610 221 --------- ---------- -------- ------- 9,979 5,832 6,128 5,812 --------- ---------- -------- -------

Income (loss) before income taxes 14,526 16,605 40,495 6,673 Income tax expense (benefit) (299) 22 (32) 137 --------- ---------- -------- ------- Net income (loss) $ 14,825 $ 16,583 $ 40,527 $ 6,536 --------- ---------- -------- -------

Per Share and Share Data

Basic earnings per share $ 5.89 $ 6.59 $ 16.11 $ 2.70

Weighted average common shares outstanding - basic 2,517 2,517 2,515 2,421

Diluted earnings per share $ 0.44 $ 0.49 $ 1.20 $ 0.20

Weighted average common shares outstanding - diluted 34,002 33,965 33,843 33,241

Net credit swap revenue components Credit swaps sold Premium income $ 9,485 $ 10,303 $ 10,179 $ 9,145 Realized gains 3,224 7,360 5,960 1,769 Realized losses (50) - - (214) Change in unrealized gains/losses 10,912 4,170 29,636 1,736

Credit swaps purchased as short-term investments Premium expense (19) - - - Realized gains 28 - - - Realized losses - - - - Change in unrealized gains/losses 23 - - -

Credit swaps purchased to offset credit risk on certain swaps sold Premium expense (28) (23) (24) (60) Realized gains - - - - Realized losses - - (448) - Change in unrealized gains/losses 201 (6) 658 (591)

------------ ------------ --------- -------- Net credit swap revenue $ 23,776 $ 21,804 $ 45,961 $11,785 ============ ============ ========= ========

Full Year ----------------------------------- Dec. 31, 2004 Dec. 31, 2003 -----------------------------------

----------------------------------- Revenues Net credit swap revenue $ 47,729 $ 103,326 Premiums earned on financial guarantees 395 - Interest income earned 4,850 2,617 Rental income 40 107 Asset management fees 15 - Foreign exchange revaluation 726 - ---------------- --------------- 53,755 106,050 ---------------- --------------- Expenses Compensation 17,801 11,701 Technology and data feeds 1,363 1,316 Professional and legal fees 2,414 3,398 Rent 744 692 Fixed asset depreciation and amortization 1,951 6,556 Other operating expenses 2,732 2,234 Financing costs 3,019 1,854 -------------- --------------- 30,024 27,751 -------------- ---------------

Income (loss) before income taxes 23,731 78,299 Income tax expense (benefit) 46 (172) -------------- --------------- Net income (loss) $ 23,685 $ 78,471 -------------- ---------------

Per Share and Share Data

Basic earnings per share $ 1.44 $ 31.18

Weighted average common shares outstanding - basic 16,486 2,517

Diluted earnings per share $ 0.59 $ 2.33

Weighted average common shares outstanding - diluted 40,256 33,737 Net credit swap revenue components Credit swaps sold Premium income $ 43,494 $ 39,112 Realized gains 5,533 18,313 Realized losses (1,139) (264) Change in unrealized gains/losses 1,899 46,454 Credit swaps purchased as short-term investments Premium expense (927) (19) Realized gains 1,260 28 Realized losses (132) - Change in unrealized gains/losses (2,225) 23 Credit swaps purchased to offset credit risk on certain swaps sold Premium expense (92) (135) Realized gains - - Realized losses - (448) Change in unrealized gains/losses 58 262

--------------- ----------------- Net credit swap revenue $ 47,729 $ 103,326 ============== ===============

Primus Guaranty, Ltd. Summary Financial Information Fourth Quarter 2004 (dollars in 000's) As of ------------------------------------------ Dec. 31, Sept. 30, June 30, March 31, 2004 2004 2004 2004 ------------------------------------------ (Unaudited) Assets Cash and cash equivalents $320,989 $357,539 $272,523 $240,548 Short-term investments 161,101 3,429 3,441 23,624 Unrealized gain on credit swaps, at fair value 46,517 37,072 29,121 32,446 Receivable from underwriters - 114,797 - - Other assets 14,145 13,262 14,948 12,946 --------- --------- --------- --------- Total assets 542,752 526,099 320,033 309,564 ========= ========= ========= =========

Liabilities Long-term debt of subsidiary 75,000 75,000 - - Compensation accrual 5,317 4,479 3,042 1,604 Unrealized loss on credit swaps, at fair value 259 958 2,664 394 Other liabilities 2,658 3,271 2,169 2,065 --------- --------- --------- --------- Total liabilities 83,234 83,708 7,875 4,063 --------- --------- --------- ---------

Preferred securities of subsidiary 98,521 98,521 98,521 98,521

Shareholder's equity Equity 269,007 265,626 153,420 147,155 Retained earnings (accumulated deficit) 91,990 78,244 60,217 59,825 --------- --------- --------- --------- Total shareholder's equity 360,997 343,870 213,637 206,980 --------- --------- --------- ---------

Total liabilities and shareholder's equity $542,752 $526,099 $320,033 $309,564 ========= ========= ========= =========

As of ------------------------------------------ Dec. 31, Sept. 30, June 30, March 31, 2003 2003 2003 2003 ------------------------------------------ Assets Cash and cash equivalents $257,967 $247,982 $236,255 $224,508 Short-term investments 3,968 3,002 - 36 Unrealized gain on credit swaps, at fair value 46,594 35,458 31,250 6,814 Receivable from underwriters - - - - Other assets 12,900 16,181 16,675 16,890 --------- --------- --------- --------- Total assets 321,429 302,623 284,180 248,248 ========= ========= ========= =========

Liabilities Long-term debt of subsidiary - - - - Compensation accrual 5,474 3,643 2,251 1,193 Unrealized loss on credit swaps, at fair value 68 66 22 5,882 Other liabilities 2,528 664 558 630 --------- --------- --------- --------- Total liabilities 8,070 4,373 2,831 7,705 --------- --------- --------- ---------

Preferred securities of subsidiary 98,521 98,521 98,521 98,521

Shareholder's equity Equity 146,533 146,250 145,931 145,650 Retained earnings (accumulated deficit) 68,305 53,479 36,897 (3,628) --------- --------- --------- --------- Total shareholder's equity 214,838 199,729 182,828 142,022 --------- --------- --------- ---------

Total liabilities and shareholder's equity 321,429 $302,623 $284,180 $248,248 ======== ========= ========= =========

Primus Guaranty, Ltd. Statistical Portfolio Information Fourth Quarter 2004 (USD equivalent in 000's)

For the Three Months Ended

Dec. 31, Sept. 30, June 30, 2004 2004 2004 ------------ ---------- ----------

(Unaudited)

Credit Swaps Sold End of period notional $10,544,728 $9,440,873 $8,626,160

New transaction volume $1,672,937 $1,674,570 $1,042,088

Maturities, assignments, unwinds and foreign exchange adjustment $569,082 $859,857 $408,526

Weighted average tenor - portfolio (years) 2.89 2.78 2.77

Credit Swaps Purchased as Short-Term Investments End of period notional $468,175 $372,886 $217,095

New transaction volume $102,090 $191,924 $207,095

Maturities, assignments, unwinds and foreign exchange adjustment $6,801 $36,133 $115,000

Weighted average tenor - portfolio (years) 4.69 4.91 5.05

Credit Swaps Purchased to Offset Credit Risk on Certain Swaps Sold End of period notional $5,000 $5,000 $5,000

New transaction volume $- $- $-

Maturities, assignments, unwinds and foreign exchange adjustment $- $- $-

Weighted average tenor - portfolio (years) 2.89 3.14 3.39

Primus Guaranty, Ltd. Statistical Portfolio Information Fourth Quarter 2004 (USD equivalent in 000's)

For the Three Months Ended

March 31, Dec. 31, Sept. 30, 2004 2003 2003 ------------ ---------- ---------- (Unaudited)

Credit Swaps Sold End of period notional $7,992,598 $6,291,375 $6,281,319

New transaction volume $2,064,626 $395,250 $613,768

Maturities, assignments, unwinds and foreign exchange adjustment $363,403 $385,194 $560,587

Weighted average tenor - portfolio (years) 2.76 2.79 2.91

Credit Swaps Purchased as Short-Term Investments End of period notional $125,000 $130,000 $-

New transaction volume $50,000 $135,000 $-

Maturities, assignments, unwinds and foreign exchange adjustment $55,000 $5,000 $-

Weighted average tenor - portfolio (years) 5.05 4.54 0.00

Credit Swaps Purchased to Offset Credit Risk on Certain Swaps Sold End of period notional $5,000 $5,000 $5,000

New transaction volume $- $- $-

Maturities, assignments, unwinds and foreign exchange adjustment $- $- $-

Weighted average tenor - portfolio (years) 3.64 3.90 4.15

Primus Guaranty, Ltd. Statistical Portfolio Information Fourth Quarter 2004 (USD equivalent in 000's) For the Three Months Ended

June 30, March 31, 2003 2003 ------------ ----------

(Unaudited)

Credit Swaps Sold End of period notional $6,228,138 $5,695,234

New transaction volume $881,357 $1,209,734

Maturities, assignments, unwinds and foreign exchange adjustment $348,453 $165,000

Weighted average tenor - portfolio (years) 3.12 3.32

Credit Swaps Purchased as Short-Term Investments End of period notional $- $-

New transaction volume $- $-

Maturities, assignments, unwinds and foreign exchange adjustment $- $-

Weighted average tenor - portfolio (years) 0.00 0.00

Credit Swaps Purchased to Offset Credit Risk on Certain Swaps Sold End of period notional $5,000 $10,000

New transaction volume $-

Maturities, assignments, unwinds and foreign exchange adjustment $5,000 $-

Weighted average tenor - portfolio (years) 4.41 4.60

Primus Guaranty, Ltd. Summary Financial Information - Other Performance Data Fourth Quarter 2004 (dollars in 000's)

In managing our business and assessing its growth and profitability from a strategic and financial planning perspective, we believe it is appropriate to consider both our U.S. GAAP financial results as well as the impact on those results of fair value accounting and the termination of credit swaps. Therefore, we evaluate what our economic results would have been if we excluded from revenue the amounts of any unrealized gains and losses on our portfolio of credit swaps sold, and any realized gains from terminations of credit swaps sold prior to maturity, although we amortize those gains over the remaining original lives of the terminated contracts, except for credit swaps purchased as investments.

For the Three Months Ended (Unaudited) Dec. 31, Sept. 30, June 30, March 31, 2004 2004 2004 2004 ------------------------------------- Change in unrealized fair value of credit swaps sold (gain/(loss)) $11,171 $10,991 $(5,278) $(14,927)

Realized gains from early termination of credit swaps sold 173 3,251 948 1,161

Amortization of realized gains from the early termination of credit swaps sold 1,681 1,542 1,500 1,452

For the Three Months Ended (Unaudited) Dec. 31, Sept. 30, June 30, March 31, 2003 2003 2003 2003 -------------------------------------

Change in unrealized fair value of credit swaps sold (gain/(loss)) $11,113 $4,164 $30,294 $1,145

Realized gains from early termination of credit swaps sold 3,224 7,360 5,960 1,769

Amortization of realized gains from the early termination of credit swaps sold 1,317 882 462 232

--30--SM/ny*

CONTACT: Investor Relations: Primus Guaranty, Ltd. Christopher Gerosa, 212-697-1992 investorrelations@primusguaranty.com or Media: Kennedy & Company Susan Hartzell, 914-961-2436 ext. 15 susan@kennedycom.com

KEYWORD: NEW YORK INTERNATIONAL LATIN AMERICA INDUSTRY KEYWORD: BANKING EARNINGS CONFERENCE CALLS SOURCE: Primus Guaranty, Ltd.

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