##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2011
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to .
 Commission File Number: 001-32307
 
 Primus Guaranty, Ltd.
  Bermuda
    
    98-0402357(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 Clarendon House
2 Church Street
Hamilton HM 11, Bermuda
 441-296-0519
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



Primus Guaranty, Ltd.
 Form 10-Q
  INDEX
 Part I. Financial InformationItem 1. Financial StatementsCondensed Consolidated Statements of Financial Condition as of March 31, 2011 (Unaudited) and December 31, 2010
    
    
    3Condensed Consolidated Statements of Operations (Unaudited) for the three months ended March 31, 2011 and 2010
    
    
    4Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 2011 and 2010
    
    
    5Condensed Consolidated Statements of Equity (Deficit) for the three months ended March 31, 2011 (Unaudited) and year ended December 31, 2010
    
    
    6Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    27Cautionary Statement Regarding Forward Looking Information
    
    
    38Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    39Item 4. Controls and Procedures
    
    
    40Part II. Other InformationItem 1. Legal Proceedings
    
    
    40Item 1A. Risk Factors
    
    
    40Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    41Item 6. Exhibits
    
    
    41Signatures
    
    
    42Exhibit 31.1Exhibit 31.2Exhibit 32
   2




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Part I. Financial Information
 
 Item 1.
    
    Financial Statements
 Primus Guaranty, Ltd.
 
 Condensed Consolidated Statements of Financial Condition
(Unaudited)
 (in thousands except share amounts)
 March 31,
    
    
    December 31,2011
    
    
    2010AssetsCash and cash equivalents
    
    $
    63,021
    
    
    $
    177,736Investments (includes $381,585 and $288,815
at fair value as of March 31, 2011 and
December 31, 2010, respectively)
    
    
    381,756
    
    
    
    288,985Restricted cash and investments
    
    
    140,228
    
    
    
    138,540Accrued interest and premiums
    
    
    6,935
    
    
    
    5,860Unrealized gain on credit swaps, at fair value
    
    
    3,259
    
    
    
    2,006Debt issuance costs, net
    
    
    3,856
    
    
    
    4,072Other assets (includes $10,947 and 11,559 at
fair value as of March 31, 2011 and December
31, 2010, respectively)
    
    
    19,141
    
    
    
    17,660Total assets
    
    $
    618,196
    
    
    $
    634,859Liabilities and Equity (deficit)LiabilitiesAccounts payable and accrued expenses
    
    $
    4,498
    
    
    $
    8,701Unrealized loss on credit swaps, at fair value
    
    
    313,679
    
    
    
    395,164Payable for credit events
    
    
    2,963
    
    
    
    3,447Long-term debt
    
    
    203,091
    
    
    
    215,828Restructuring liabilities
    
    
    506
    
    
    
    3,729Other liabilities
    
    
    7,670
    
    
    
    6,025Total liabilities
    
    
    532,407
    
    
    
    632,894Commitments and contingenciesEquity (deficit)Common shares, $0.08 par value, 62,500,000
shares authorized, 37,996,854 and 38,078,790
shares issued and outstanding at March 31,
2011 and December 31, 2010, respectively
    
    
    3,040
    
    
    
    3,046Additional paid-in capital
    
    
    274,687
    
    
    
    275,453Accumulated other comprehensive income
    
    
    3,229
    
    
    
    3,333Retained earnings (deficit)
    
    
    (288,269
    )
    
    
    (372,969
    )Total shareholders equity (deficit) of
Primus Guaranty, Ltd.
    
    
    (7,313
    )
    
    
    (91,137
    )Preferred securities of subsidiary
    
    
    93,102
    
    
    
    93,102Total equity (deficit)
    
    
    85,789
    
    
    
    1,965Total liabilities and equity (deficit)
    
    $
    618,196
    
    
    $
    634,859
 See accompanying notes.
  3




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Primus Guaranty, Ltd.
 
 Condensed Consolidated Statements of Operations
(Unaudited)
 (in thousands except per share amounts)
 Three Months EndedMarch 31,2011
    
    
    2010RevenuesNet credit swap revenue
    
    $
    86,098
    
    
    $
    87,530Interest income
    
    
    2,611
    
    
    
    2,699Gain on retirement of long-term debt
    
    
    2,760
    
    
    
    4,757Other income
    
    
    297
    
    
    
    183Total revenues
    
    
    91,766
    
    
    
    95,169ExpensesCompensation and employee benefits
    
    
    2,122
    
    
    
    4,580Professional and legal fees
    
    
    822
    
    
    
    1,485Interest expense
    
    
    1,567
    
    
    
    1,869Other
    
    
    1,316
    
    
    
    1,723Total expenses
    
    
    5,827
    
    
    
    9,657Income from continuing operations before
provision for income taxes
    
    
    85,939
    
    
    
    85,512Provision for income taxes
    
    
    10
    
    
    
    140Income from continuing operations, net of tax
    
    
    85,929
    
    
    
    85,372Income (loss) from discontinued operations, net of tax
    
    
    (270
    )
    
    
    91,551Net income
    
    
    85,659
    
    
    
    176,923Less:Distributions on preferred securities of subsidiary
    
    
    959
    
    
    
    988Net income from discontinued operations attributable to
non-parent interests in CLOs
    
    
    
    
    
    
    89,413Net income available to common shares
    
    $
    84,700
    
    
    $
    86,522Income per common share:Basic:Income from continuing operations
    
    $
    2.23
    
    
    $
    2.18Income (loss) from discontinued operations
    
    $
    (0.01
    )
    
    $
    0.06Net income available to common shares
    
    $
    2.22
    
    
    $
    2.24Diluted:Income from continuing operations
    
    $
    2.21
    
    
    $
    2.09Income (loss) from discontinued operations
    
    $
    
    
    
    $
    0.06Net income available to common shares
    
    $
    2.21
    
    
    $
    2.15Weighted average common shares outstanding:Basic
    
    
    38,124
    
    
    
    38,686Diluted
    
    
    38,376
    
    
    
    40,280
 See accompanying notes.
  4




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Primus Guaranty, Ltd.
 
 Condensed Consolidated Statements of Cash Flows
(Unaudited)
 (in thousands)
 Three Months EndedMarch 31,2011
    
    
    2010Cash flows from operating activitiesNet income available to common shares
    
    $
    84,700
    
    
    $
    86,522Net income attributable to non-parent interests in CLOs
    
    
    
    
    
    
    89,413Distributions on preferred securities of subsidiary
    
    
    959
    
    
    
    988Net income
    
    
    85,659
    
    
    
    176,923Adjustments to reconcile net income to net cash used in
operating activities:Non-cash items included in net income:Net unrealized gains on CLO loans and securities
    
    
    
    
    
    
    (62,077
    )Net unrealized losses on CLO notes
    
    
    
    
    
    
    14,143Net realized gains by the CLOs
    
    
    
    
    
    
    (26,758
    )Net unrealized gains on credit swaps
    
    
    (82,738
    )
    
    
    (127,136
    )Gain on retirement of long-term debt
    
    
    (2,760
    )
    
    
    (4,757
    )Other
    
    
    2,545
    
    
    
    2,574Increase (decrease) in cash resulting from changes in:CLO cash and cash equivalents
    
    
    
    
    
    
    (46,468
    )CLO other assets
    
    
    
    
    
    
    11,317CLO other liabilities
    
    
    
    
    
    
    41,969Proceeds from sale of CLO loans and securities
    
    
    
    
    
    
    222,496Purchases of CLO loans and securities
    
    
    
    
    
    
    (228,413
    )Restricted cash
    
    
    (1,004
    )
    
    
    (993
    )Accrued interest and premiums
    
    
    (1,075
    )
    
    
    (1,009
    )Other assets
    
    
    (2,229
    )
    
    
    2,068Trading account assets
    
    
    
    
    
    
    (26,698
    )Accounts payable and accrued expenses
    
    
    (3,024
    )
    
    
    (4,932
    )Payable for credit events
    
    
    (484
    )
    
    
    (23,269
    )Restructuring liabilities
    
    
    (3,223
    )
    
    
    Other liabilities
    
    
    656
    
    
    
    9,027Net cash used in operating activities
    
    
    (7,677
    )
    
    
    (71,993
    )Cash flows from investing activitiesPurchases of available-for-sale investments
    
    
    (222,849
    )
    
    
    (78,928
    )Maturities and sales of available-for-sale investments
    
    
    127,756
    
    
    
    22,716Payments received from CLO investments
    
    
    623
    
    
    
    Purchases of fixed assets
    
    
    (6
    )
    
    
    Net cash used in investing activities
    
    
    (94,476
    )
    
    
    (56,212
    )Cash flows from financing activitiesRepayment of CLO notes by the CLOs
    
    
    
    
    
    
    (15,623
    )Retirement of long-term debt
    
    
    (9,069
    )
    
    
    (6,665
    )Purchase and retirement of common shares
    
    
    (2,534
    )
    
    
    (1,034
    )Net preferred distributions of subsidiary
    
    
    (959
    )
    
    
    (988
    )Net cash used in financing activities
    
    
    (12,562
    )
    
    
    (24,310
    )Net effect of exchange rate changes on cash
    
    
    
    
    
    
    (38
    )Net increase (decrease) in cash
    
    
    (114,715
    )
    
    
    (152,553
    )Cash and cash equivalents at beginning of period
    
    
    177,736
    
    
    
    299,514Cash and cash equivalents at end of period
    
    $
    63,021
    
    
    $
    146,961Supplemental disclosures of cash flow information:Cash paid for interest
    
    $
    1,550
    
    
    $
    2,833Cash paid for taxes
    
    $
    
    
    
    $
    8
 See accompanying notes.
  5




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Primus Guaranty, Ltd.
 
 Condensed Consolidated Statements of Equity
(Deficit) (Unaudited)
 (in thousands)
 Three Months Ended
    
    
    Year EndedMarch 31, 2011
    
    
    December 31, 2010Common sharesBalance at beginning of period
    
    $
    3,046
    
    
    $
    3,061Common shares purchased and retired
    
    
    (34
    )
    
    
    (166
    )Shares issued under employee compensation plans
    
    
    28
    
    
    
    151Balance at end of period
    
    
    3,040
    
    
    
    3,046Additional paid-in capitalBalance at beginning of period
    
    
    275,453
    
    
    
    280,685Common shares purchased and retired
    
    
    (2,529
    )
    
    
    (13,135
    )Shares vested under employee compensation plans
    
    
    1,763
    
    
    
    7,903Balance at end of period
    
    
    274,687
    
    
    
    275,453Accumulated other comprehensive income (loss)Balance at beginning of period
    
    
    3,333
    
    
    
    2,148Foreign currency translation adjustments
    
    
    
    
    
    
    30Change in unrealized holding gains on
available-for-sale securities
    
    
    (104
    )
    
    
    1,155Balance at end of period
    
    
    3,229
    
    
    
    3,333Retained earnings (deficit)Balance at beginning of period
    
    
    (372,969
    )
    
    
    (628,443
    )Net income
    
    
    85,659
    
    
    
    197,462Net loss attributable to non-parent interests in CLOs
    
    
    
    
    
    
    61,174Distributions on preferred securities of subsidiary
    
    
    (959
    )
    
    
    (3,162
    )Balance at end of period
    
    
    (288,269
    )
    
    
    (372,969
    )Appropriated retained earnings from CLO consolidationAdoption of ASC Topic 810, Consolidation
    
    
    
    
    
    
    265,639Net income attributable to non-parent interests in CLOs
    
    
    
    
    
    
    (61,174
    )Deconsolidation of CLOs
    
    
    
    
    
    
    (204,465
    )Balance at end of period
    
    
    
    
    
    
    Total shareholders equity (deficit) of Primus
Guaranty, Ltd.
    
    
    (7,313
    )
    
    
    (91,137
    )Preferred securities of subsidiaryBalance at beginning of period
    
    
    93,102
    
    
    
    93,102Balance at end of period
    
    
    93,102
    
    
    
    93,102Total equity (deficit) at end of period
    
    $
    85,789
    
    
    $
    1,965
 See accompanying notes.
  6




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##### Table of Contents



Primus Guaranty, Ltd.
 
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 1. Organization and Business
        7




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Primus Guaranty, Ltd.
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 2. Summary of Significant Accounting Policies
 Basis of Presentation
    Principles of Consolidation
  Recent Accounting Pronouncements
 Fair Value
Measurements and Disclosures (Topic 820)  Improving Disclosures about Fair Value Measurements
   8




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Primus Guaranty, Ltd.
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 3. Investments
  March 31, 2011Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueAvailable-for-sale:Corporate debt securities
    
    $
    376,706
    
    
    $
    3,411
    
    
    $
    (253
    )
    
    $
    379,864Asset-backed securities
    
    
    1,915
    
    
    
    
    
    
    
    (194
    )
    
    
    1,721Total available-for-sale
    
    
    378,621
    
    
    
    3,411
    
    
    
    (447
    )
    
    
    381,585Held-to-maturity:Certificate of deposit
    
    
    171
    
    
    
    
    
    
    
    
    
    
    
    171Total held-to-maturity
    
    
    171
    
    
    
    
    
    
    
    
    
    
    
    171Total investments
    
    $
    378,792
    
    
    $
    3,411
    
    
    $
    (447
    )
    
    $
    381,756
 December 31, 2010Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueAvailable-for-sale:Corporate debt securities
    
    $
    284,090
    
    
    $
    3,378
    
    
    $
    (311
    )
    
    $
    287,157Asset-backed securities
    
    
    1,392
    
    
    
    266
    
    
    
    
    
    
    
    1,658Total available-for-sale
    
    
    285,482
    
    
    
    3,644
    
    
    
    (311
    )
    
    
    288,815Held-to-maturity:Certificate of deposit
    
    
    170
    
    
    
    
    
    
    
    
    
    
    
    170Total held-to-maturity
    
    
    170
    
    
    
    
    
    
    
    
    
    
    
    170Total investments
    
    $
    285,652
    
    
    $
    3,644
    
    
    $
    (311
    )
    
    $
    288,985
   9




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Primus Guaranty, Ltd.
 Notes to Condensed Consolidated Financial Statements (Unaudited)
  March 31, 2011Securities with Unrealized LossesLess than 12 Months
    
    
    12 Months or More
    
    
    TotalGross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    GrossFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesCorporate debt securities
    
    $
    143,177
    
    
    $
    (253
    )
    
    $
    
    
    
    $
    
    
    
    $
    143,177
    
    
    $
    (253
    )Asset-backed securities
    
    
    1,721
    
    
    
    (194
    )
    
    
    
    
    
    
    
    
    
    
    1,721
    
    
    
    (194
    )Total
    
    $
    144,898
    
    
    $
    (447
    )
    
    $
    
    
    
    $
    
    
    
    $
    144,898
    
    
    $
    (447
    )
 December 31, 2010Securities with Unrealized LossesLess than 12 Months
    
    
    12 Months or More
    
    
    TotalGross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    GrossFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesCorporate debt securities
    
    $
    78,053
    
    
    $
    (311
    )
    
    $
    
    
    
    $
    
    
    
    $
    78,053
    
    
    $
    (311
    )Total
    
    $
    78,053
    
    
    $
    (311
    )
    
    $
    
    
    
    $
    
    
    
    $
    78,053
    
    
    $
    (311
    )
   4. Restricted Cash and Investments
   10




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Primus Guaranty, Ltd.
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 5. Credit Swaps
 Net Credit Swap Revenue
    Three Months EndedMarch 31,2011
    
    
    2010Net premium earned
    
    $
    11,171
    
    
    $
    16,436Net realized losses on credit swaps
    
    
    (7,811
    )
    
    
    (56,042
    )Net unrealized gains on credit swaps
    
    
    82,738
    
    
    
    127,136Net credit swap revenue
    
    $
    86,098
    
    
    $
    87,530
  Credit Events and Terminations of Credit Swaps
  Three Months EndedMarch 31,2011
    
    
    2010Net realized gains (losses) on single name credit swaps
    
    $
    47
    
    
    $
    (19,223
    )Net realized losses on tranches
    
    
    
    
    
    
    (35,000
    )Net realized losses on CDS on ABS
    
    
    (7,858
    )
    
    
    (1,819
    )Total net realized losses
    
    $
    (7,811
    )
    
    $
    (56,042
    )
  11




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Primus Guaranty, Ltd.
 Notes to Condensed Consolidated Financial Statements (Unaudited)
    Credit Swap Portfolio Information
  March 31, 2011
    
    
    December 31, 2010Notional
    
    
    Fair
    
    
    Notional
    
    
    FairRating Category
    
    Amount
    
    
    Value
    
    
    Amount
    
    
    ValueBy Single Name Reference
Entity/TrancheCredit Swaps Sold-Single Name:AAA
    
    $
    57,474
    
    
    $
    (18
    )
    
    $
    55,143
    
    
    $
    (144
    )AA
    
    
    1,095,031
    
    
    
    (3,380
    )
    
    
    1,137,217
    
    
    
    (8,776
    )A
    
    
    2,320,174
    
    
    
    (405
    )
    
    
    2,831,049
    
    
    
    (8,407
    )BBB
    
    
    1,712,744
    
    
    
    2,513
    
    
    
    1,946,885
    
    
    
    (1,094
    )BB
    
    
    255,738
    
    
    
    (889
    )
    
    
    231,167
    
    
    
    (359
    )B
    
    
    57,079
    
    
    
    (331
    )
    
    
    66,691
    
    
    
    (886
    )CCC
    
    
    35,000
    
    
    
    (476
    )
    
    
    40,000
    
    
    
    (638
    )Non rated
    
    
    298,965
    
    
    
    (57,049
    )
    
    
    302,819
    
    
    
    (57,286
    )Total
    
    $
    5,832,205
    
    
    $
    (60,035
    )
    
    $
    6,610,971
    
    
    $
    (77,590
    )Credit Swaps Sold-Tranche:AAA
    
    $
    2,650,000
    
    
    $
    (132,322
    )
    
    $
    2,650,000
    
    
    $
    (168,627
    )AA
    
    
    200,000
    
    
    
    (9,768
    )
    
    
    450,000
    
    
    
    (49,035
    )A
    
    
    300,000
    
    
    
    (25,500
    )
    
    
    300,000
    
    
    
    (30,390
    )BBB
    
    
    550,000
    
    
    
    (46,885
    )
    
    
    300,000
    
    
    
    (22,193
    )BB
    
    
    50,000
    
    
    
    (3,992
    )
    
    
    50,000
    
    
    
    (5,175
    )Non rated
    
    
    43,317
    
    
    
    (18,208
    )
    
    
    43,317
    
    
    
    (19,373
    )Total
    
    $
    3,793,317
    
    
    $
    (236,675
    )
    
    $
    3,793,317
    
    
    $
    (294,793
    )CDS on ABS:BBB
    
    $
    736
    
    
    $
    (402
    )
    
    $
    736
    
    
    $
    (358
    )CCC
    
    
    10,000
    
    
    
    (8,585
    )
    
    
    18,000
    
    
    
    (15,794
    )CC
    
    
    5,000
    
    
    
    (4,723
    )
    
    
    5,000
    
    
    
    (4,683
    )Total
    
    $
    15,736
    
    
    $
    (13,710
    )
    
    $
    23,736
    
    
    $
    (20,835
    )
  12




---



##### Table of Contents



Primus Guaranty, Ltd.
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 March 31, 2011
    
    
    December 31, 2010Notional
    
    
    Fair
    
    
    Notional
    
    
    FairRating Category
    
    Amount
    
    
    Value
    
    
    Amount
    
    
    ValueBy Single Name Reference
Entity/TrancheCredit Swaps Purchased-Single Name:A
    
    $
    
    
    
    $
    
    
    
    $
    (4,120
    )
    
    $
    60Total
    
    $
    
    
    
    $
    
    
    
    $
    (4,120
    )
    
    $
    60By Counterparty Buyer / (Seller)Credit Swaps Sold-Single Name:AA
    
    $
    1,363,536
    
    
    $
    (1,163
    )
    
    $
    1,675,212
    
    
    $
    (5,970
    )A
    
    
    4,468,669
    
    
    
    (58,872
    )
    
    
    4,935,759
    
    
    
    (71,620
    )Total
    
    $
    5,832,205
    
    
    $
    (60,035
    )
    
    $
    6,610,971
    
    
    $
    (77,590
    )Credit Swaps Sold-Tranche:AA
    
    $
    2,293,317
    
    
    $
    (160,425
    )
    
    $
    1,843,317
    
    
    $
    (147,723
    )A
    
    
    1,500,000
    
    
    
    (76,250
    )
    
    
    1,500,000
    
    
    
    (98,034
    )BBB
    
    
    
    
    
    
    
    
    
    
    450,000
    
    
    
    (49,036
    )Total
    
    $
    3,793,317
    
    
    $
    (236,675
    )
    
    $
    3,793,317
    
    
    $
    (294,793
    )CDS on ABS:A
    
    $
    15,736
    
    
    $
    (13,710
    )
    
    $
    23,736
    
    
    $
    (20,835
    )Total
    
    $
    15,736
    
    
    $
    (13,710
    )
    
    $
    23,736
    
    
    $
    (20,835
    )Credit Swaps Purchased-Single Name:A
    
    $
    
    
    
    $
    
    
    
    $
    (4,120
    )
    
    $
    60Total
    
    $
    
    
    
    $
    
    
    
    $
    (4,120
    )
    
    $
    60
  13




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##### Table of Contents



Primus Guaranty, Ltd.
 Notes to Condensed Consolidated Financial Statements (Unaudited)
  March 31, 2011
    
    
    December 31, 2010Notional
    
    
    Fair
    
    
    Notional
    
    
    FairDomicile
    
    Amount
    
    
    Value
    
    
    Amount
    
    
    ValueCredit Swaps Sold-Single NameBy Reference Entity:North America
    
    $
    2,000,027
    
    
    $
    (53,252
    )
    
    $
    2,429,477
    
    
    $
    (57,512
    )Europe
    
    
    3,525,178
    
    
    
    (5,673
    )
    
    
    3,834,494
    
    
    
    (17,814
    )Asia-Pacific
    
    
    277,000
    
    
    
    (1,101
    )
    
    
    317,000
    
    
    
    (2,065
    )Others
    
    
    30,000
    
    
    
    (9
    )
    
    
    30,000
    
    
    
    (199
    )Total
    
    $
    5,832,205
    
    
    $
    (60,035
    )
    
    $
    6,610,971
    
    
    $
    (77,590
    )By Counterparty:North America
    
    $
    2,238,792
    
    
    $
    (5,625
    )
    
    $
    2,649,509
    
    
    $
    (13,665
    )Europe
    
    
    3,556,413
    
    
    
    (54,170
    )
    
    
    3,924,462
    
    
    
    (63,603
    )Asia-Pacific
    
    
    37,000
    
    
    
    (240
    )
    
    
    37,000
    
    
    
    (322
    )Total
    
    $
    5,832,205
    
    
    $
    (60,035
    )
    
    $
    6,610,971
    
    
    $
    (77,590
    )Credit Swaps Sold -TrancheBy Counterparty:North America
    
    $
    600,000
    
    
    $
    (24,635
    )
    
    $
    600,000
    
    
    $
    (31,442
    )Europe
    
    
    3,193,317
    
    
    
    (212,040
    )
    
    
    3,193,317
    
    
    
    (263,351
    )Total
    
    $
    3,793,317
    
    
    $
    (236,675
    )
    
    $
    3,793,317
    
    
    $
    (294,793
    )CDS on ABSBy Reference Entity:North America
    
    $
    15,736
    
    
    $
    (13,710
    )
    
    $
    23,736
    
    
    $
    (20,835
    )Total
    
    $
    15,736
    
    
    $
    (13,710
    )
    
    $
    23,736
    
    
    $
    (20,835
    )By Counterparty:North America
    
    $
    5,736
    
    
    $
    (5,125
    )
    
    $
    13,736
    
    
    $
    (12,038
    )Europe
    
    
    10,000
    
    
    
    (8,585
    )
    
    
    10,000
    
    
    
    (8,797
    )Total
    
    $
    15,736
    
    
    $
    (13,710
    )
    
    $
    23,736
    
    
    $
    (20,835
    )Credit Swaps Purchased-Single NameBy Reference Entity:North America
    
    $
    
    
    
    $
    
    
    
    $
    (4,120
    )
    
    $
    60Total
    
    $
    
    
    
    $
    
    
    
    $
    (4,120
    )
    
    $
    60By Counterparty:Europe
    
    $
    
    
    
    $
    
    
    
    $
    (4,120
    )
    
    $
    60Total
    
    $
    
    
    
    $
    
    
    
    $
    (4,120
    )
    
    $
    60
  14




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##### Table of Contents



Primus Guaranty, Ltd.
 Notes to Condensed Consolidated Financial Statements (Unaudited)
  March 31, 2011
    
    
    December 31, 2010Notional
    
    
    Fair
    
    
    Notional
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueCredit Swaps Sold-Single NameYear of Maturity2011
    
    $
    1,317,214
    
    
    $
    (55,079
    )
    
    $
    2,261,170
    
    
    $
    (57,836
    )2012
    
    
    3,786,249
    
    
    
    (8,594
    )
    
    
    3,659,132
    
    
    
    (22,212
    )2013
    
    
    728,742
    
    
    
    3,638
    
    
    
    690,669
    
    
    
    2,458Total
    
    $
    5,832,205
    
    
    $
    (60,035
    )
    
    $
    6,610,971
    
    
    $
    (77,590
    )Credit Swaps Sold-TrancheYear of Maturity2012
    
    $
    375,000
    
    
    $
    (2,739
    )
    
    $
    375,000
    
    
    $
    (5,117
    )2013
    
    
    93,317
    
    
    
    (22,201
    )
    
    
    93,317
    
    
    
    (24,548
    )2014
    
    
    3,325,000
    
    
    
    (211,735
    )
    
    
    3,325,000
    
    
    
    (265,128
    )Total
    
    $
    3,793,317
    
    
    $
    (236,675
    )
    
    $
    3,793,317
    
    
    $
    (294,793
    )CDS on ABSEstimated Year of Maturity2011
    
    $
    5,000
    
    
    $
    (4,280
    )
    
    $
    18,000
    
    
    $
    (16,000
    )2012
    
    
    5,000
    
    
    
    (4,723
    )
    
    
    5,000
    
    
    
    (4,477
    )2013
    
    
    5,000
    
    
    
    (4,305
    )
    
    
    
    
    
    
    2020
    
    
    
    
    
    
    
    
    
    
    736
    
    
    
    (358
    )2021
    
    
    736
    
    
    
    (402
    )
    
    
    
    
    
    
    Total
    
    $
    15,736
    
    
    $
    (13,710
    )
    
    $
    23,736
    
    
    $
    (20,835
    )Credit Swaps Purchased-Single
NameYear of Maturity2014
    
    $
    
    
    
    $
    
    
    
    $
    (4,120
    )
    
    $
    60Total
    
    $
    
    
    
    $
    
    
    
    $
    (4,120
    )
    
    $
    60
  15




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##### Table of Contents



Primus Guaranty, Ltd.
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 6. Financial Instruments and Fair Value Disclosures
    
    
    Level 1  Valuations based on unadjusted quoted prices in active markets for identical
assets or liabilities.
  
    
    Level 2  Valuations based on quoted prices in markets that are not considered to be
active; or valuations for which all significant inputs are observable or can be
corroborated by observable market data, either directly or indirectly.
  
    
    Level 3  Valuations in which a significant input or inputs are unobservable and that
are supported by little or no market activity.
  16




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##### Table of Contents



Primus Guaranty, Ltd.
 Notes to Condensed Consolidated Financial Statements (Unaudited)
  Nonperformance Risk Adjustment  Credit Swap Portfolio
 Fair Value Measurements and Disclosures,
  March 31,
    
    
    December 31,2011
    
    
    2010Unrealized loss on credit swaps, at fair
value, without nonperformance risk
adjustments
    
    $
    352,243
    
    
    $
    456,498Nonperformance risk adjustments
    
    
    (38,564
    )
    
    
    (61,334
    )Unrealized loss on credit swaps, at fair
value, after nonperformance risk adjustments
    
    $
    313,679
    
    
    $
    395,164
  17




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##### Table of Contents



Primus Guaranty, Ltd.
 Notes to Condensed Consolidated Financial Statements (Unaudited)
  Three Months EndedMarch 31,2011
    
    
    2010Net credit swap revenue without nonperformance
risk adjustments
    
    $
    108,868
    
    
    $
    150,284Nonperformance risk adjustments
    
    
    (22,770
    )
    
    
    (62,754
    )Net credit swap revenue after nonperformance risk
adjustments
    
    $
    86,098
    
    
    $
    87,530
 Fair Value Hierarchy Tables
  Quoted Pricesin
    
    
    Significant
    
    
    
    
    
    
    TotalActive Markets
    
    
    Other
    
    
    Significant
    
    
    Assets /For
    
    
    Observable
    
    
    Unobservable
    
    
    LiabilitiesIdentical Assets
    
    
    Inputs
    
    
    Inputs
    
    
    at Fair(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    ValueAssetsInvestments
    
    $
    
    
    
    $
    379,864
    
    
    $
    1,721
    
    
    $
    381,585Restricted investments
    
    
    
    
    
    
    
    
    
    
    6,480
    
    
    
    6,480Unrealized gain on credit swaps
    
    
    
    
    
    
    
    
    
    
    3,259
    
    
    
    3,259Other assets
    
    
    
    
    
    
    1,860
    
    
    
    9,087
    
    
    
    10,947Total Assets
    
    $
    
    
    
    $
    381,724
    
    
    $
    20,547
    
    
    $
    402,271LiabilitiesUnrealized loss on credit swaps
    
    $
    
    
    
    $
    
    
    
    $
    313,679
    
    
    $
    313,679Other liabilities
    
    
    
    
    
    
    
    
    
    
    7,014
    
    
    
    7,014Total Liabilities
    
    $
    
    
    
    $
    
    
    
    $
    320,693
    
    
    $
    320,693
   18




---



##### Table of Contents



Primus Guaranty, Ltd.
 Notes to Condensed Consolidated Financial Statements (Unaudited)
  Quoted Pricesin
    
    
    Significant
    
    
    
    
    
    
    TotalActive Markets
    
    
    Other
    
    
    Significant
    
    
    Assets /for
    
    
    Observable
    
    
    Unobservable
    
    
    LiabilitiesIdentical Assets
    
    
    Inputs
    
    
    Inputs
    
    
    at Fair(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    ValueAssetsInvestments
    
    $
    
    
    
    $
    287,157
    
    
    $
    1,658
    
    
    $
    288,815Restricted investments
    
    
    
    
    
    
    
    
    
    
    6,114
    
    
    
    6,114Unrealized gain on credit swaps
    
    
    
    
    
    
    
    
    
    
    2,006
    
    
    
    2,006Other assets
    
    
    
    
    
    
    2,602
    
    
    
    8,957
    
    
    
    11,559Total Assets
    
    $
    
    
    
    $
    289,759
    
    
    $
    18,735
    
    
    $
    308,494LiabilitiesUnrealized loss on credit swaps
    
    $
    
    
    
    $
    
    
    
    $
    395,164
    
    
    $
    395,164Other liabilities
    
    
    
    
    
    
    
    
    
    
    5,148
    
    
    
    5,148Total Liabilities
    
    $
    
    
    
    $
    
    
    
    $
    400,312
    
    
    $
    400,312
  Level 3 Assets and Liabilities Reconciliation Tables
 Level 3 Assets
  Three Months Ended
    
    
    Three Months EndedMarch 31, 2011
    
    
    March 31, 2010Unrealized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnrealizedGain on
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gain onCredit
    
    
    
    
    
    
    Restricted
    
    
    Other
    
    
    CreditSwaps
    
    
    Investments
    
    
    Investments
    
    
    Assets
    
    
    Swaps
    
    
    InvestmentsBalance, beginning
of period
    
    $
    2,006
    
    
    $
    1,658
    
    
    $
    6,114
    
    
    $
    8,957
    
    
    $
    2,207
    
    
    $
    1,344Realized gains
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrealized gains
(losses)
    
    
    1,253
    
    
    
    (79
    )
    
    
    366
    
    
    
    130
    
    
    
    (334
    )
    
    
    (54
    )Purchases
    
    
    
    
    
    
    142
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,127Sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuances
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Settlements
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,265
    )Transfers into
Level 3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, end of
period
    
    $
    3,259
    
    
    $
    1,721
    
    
    $
    6,480
    
    
    $
    9,087
    
    
    $
    1,873
    
    
    $
    1,152
  19




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##### Table of Contents



Primus Guaranty, Ltd.
 Notes to Condensed Consolidated Financial Statements (Unaudited)
     Level 3 Liabilities
  Three Months Ended
    
    
    Three Months EndedMarch 31, 2011
    
    
    March 31, 2010Unrealized
    
    
    
    
    
    
    UnrealizedLoss on
    
    
    Other
    
    
    Loss on Credit
    
    
    OtherCredit Swaps
    
    
    Liabilities
    
    
    Swaps
    
    
    Liabilities
    
    
    CLO NotesBalance, beginning of
period
    
    $
    (395,164
    )
    
    $
    (5,148
    )
    
    $
    (691,905
    )
    
    $
    (5,470
    )
    
    $
    Adoption of ASC
Topic 810, Consolidation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,210,642
    )Net realized losses
    
    
    7,811
    
    
    
    
    
    
    
    56,042
    
    
    
    
    
    
    
    (2,809
    )Unrealized gains (losses)
    
    
    73,674
    
    
    
    (1,866
    )
    
    
    71,427
    
    
    
    (1,342
    )
    
    
    (10,976
    )Purchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuances
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Settlements
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,623Transfers into Level 3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, end of period
    
    $
    (313,679
    )
    
    $
    (7,014
    )
    
    $
    (564,436
    )
    
    $
    (6,812
    )
    
    $
    (2,208,804
    )
   20




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##### Table of Contents



Primus Guaranty, Ltd.
 Notes to Condensed Consolidated Financial Statements (Unaudited)
   Financial Instruments Not Carried at Fair Value
     21




---



##### Table of Contents



Primus Guaranty, Ltd.
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 Fair Value Option
 Financial Instruments, Financial Instruments, Financial Instruments,
  7. Discontinued Operations
   Consolidation,
   22




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##### Table of Contents



Primus Guaranty, Ltd.
 Notes to Condensed Consolidated Financial Statements (Unaudited)
  Three Months EndedMarch 31,2011
    
    
    2010RevenuesAsset management fees
    
    $
    490
    
    
    $
    177Interest income
    
    
    
    
    
    
    1Other income
    
    
    837
    
    
    
    Net CLO revenue
    
    
    
    
    
    
    77,593CLO interest income, net
    
    
    
    
    
    
    17,585Total revenues
    
    
    1,327
    
    
    
    95,356ExpensesCompensation and employee benefits
    
    
    68
    
    
    
    845Professional and legal fees
    
    
    75
    
    
    
    154Other
    
    
    1,454
    
    
    
    1,813CLO expenses
    
    
    
    
    
    
    990Total expenses
    
    
    1,597
    
    
    
    3,802Income (loss) before provision for income taxes
and income attributable to non-parent interests
in CLOs
    
    
    (270
    )
    
    
    91,554Provision for income taxes
    
    
    
    
    
    
    3Income from discontinuing operations, net of tax
    
    
    (270
    )
    
    
    91,551Income from discontinued operations attributable
to non-parent interests in CLOs
    
    
    
    
    
    
    89,413Income (loss) attributable to common shares
    
    $
    (270
    )
    
    $
    2,138
    23




---



##### Table of Contents



Primus Guaranty, Ltd.
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 8. Earnings per Share
  Three Months EndedMarch, 312011
    
    
    2010Income from continuing operations, net of tax
    
    $
    85,929
    
    
    $
    85,372Income (loss) from discontinued operations, net of
tax
    
    
    (270
    )
    
    
    91,551Net income
    
    
    85,659
    
    
    
    176,923Less:Distributions on preferred securities of subsidiary
    
    
    959
    
    
    
    988Net income from discontinued operations
attributable to non-parent interests in CLOs
    
    
    
    
    
    
    89,413Net income available to common shares
    
    $
    84,700
    
    
    $
    86,522Income (loss) per common share:Basic:Income from continuing operations
    
    $
    2.23
    
    
    $
    2.18Income (loss) from discontinued operations
    
    $
    (0.01
    )
    
    $
    0.06Net income available to common shares
    
    $
    2.22
    
    
    $
    2.24Diluted:Income from continuing operations
    
    $
    2.21
    
    
    $
    2.09Income (loss) from discontinued operations
    
    $
    
    
    
    $
    0.06Net income available to common shares
    
    $
    2.21
    
    
    $
    2.15Weighted average common shares outstanding:Basic
    
    
    38,124
    
    
    
    38,686Effect of dilutive instruments:Restricted share units
    
    
    252
    
    
    
    1,594Diluted
    
    
    38,376
    
    
    
    40,280
  9. Share-Based Compensation
   24




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##### Table of Contents



Primus Guaranty, Ltd.
 Notes to Condensed Consolidated Financial Statements (Unaudited)
    10. Comprehensive Income
  Three Months EndedMarch 31,2011
    
    
    2010Net income
    
    $
    85,659
    
    
    $
    176,923Other comprehensive income (loss):Foreign currency translation adjustments
    
    
    
    
    
    
    (38
    )Change in net unrealized gains (losses) on
available-for-sale investments
    
    
    (104
    )
    
    
    1,382Comprehensive income:
    
    
    85,555
    
    
    
    178,267Less: Distributions on preferred securities of subsidiary
    
    
    959
    
    
    
    988Less: Net income attributable to non-parent interests in CLOs
    
    
    
    
    
    
    89,413Comprehensive income available to common shares
    
    $
    84,596
    
    
    $
    87,866
 11. Segment Reporting
 Consolidation Consolidation
  25




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Primus Guaranty, Ltd.
 Notes to Condensed Consolidated Financial Statements (Unaudited)
  Three Months Ended March 31, 2010CreditProtection,AssetManagementand
    
    
    CLOs
    
    
    ConsolidatedCorporate
    
    
    Stand-alone
    
    
    TotalsRevenues:Net credit swap revenue
    
    $
    87,530
    
    
    $
    
    
    
    $
    87,530Interest income
    
    
    2,699
    
    
    
    
    
    
    
    2,699Gain on retirement of long-term debt
    
    
    4,757
    
    
    
    
    
    
    
    4,757Other income
    
    
    183
    
    
    
    
    
    
    
    183Total revenues
    
    $
    95,169
    
    
    $
    
    
    
    $
    95,169Expenses:Compensation and employee benefits
    
    $
    4,580
    
    
    $
    
    
    
    $
    4,580Professional and legal fees
    
    
    1,485
    
    
    
    
    
    
    
    1,485Interest expense
    
    
    1,869
    
    
    
    
    
    
    
    1,869Other expenses
    
    
    1,723
    
    
    
    
    
    
    
    1,723Total expenses
    
    $
    9,657
    
    
    $
    
    
    
    $
    9,657Income from continuing operations
before provision for income taxes
    
    $
    85,512
    
    
    $
    
    
    
    $
    85,512Provision for income tax
    
    
    140
    
    
    
    
    
    
    
    140Income from continuing operations, net
of tax
    
    
    85,372
    
    
    
    
    
    
    
    85,372Income from discontinued operations,
net of tax
    
    
    2,138
    
    
    
    89,413
    
    
    
    91,551Net income
    
    $
    87,510
    
    
    $
    89,413
    
    
    $
    176,923Less: Distributions on preferred
securities of subsidiary
    
    
    988
    
    
    
    
    
    
    
    988Less: Net income attributable to
non-parent interests in CLOs
    
    $
    
    
    
    $
    89,413
    
    
    $
    89,413Net income available to common
shares
    
    $
    86,522
    
    
    $
    
    
    
    $
    86,522Segment assets
    
    $
    657,756
    
    
    $
    2,655,652
    
    
    $
    3,313,408
  26




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Item 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 The following is a discussion and analysis of our financial condition and results of
operations. This discussion should be read in conjunction with the condensed consolidated
financial statements, including the notes thereto, included elsewhere in this Quarterly Report and
our consolidated financial statements and accompanying notes which appear in the Companys 2010
Annual Report on Form 10-K . It contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated in these
forward-looking statements as a result of various factors, including those discussed below and in
the Companys 2010 Annual Report on Form 10-K , particularly under Item 1A Risk Factors and the
heading Cautionary Note Regarding Forward-Looking Statements.
 In this discussion, the terms Primus Guaranty and we, us, and our refer to Primus
Guaranty, Ltd. and its wholly owned subsidiaries, and other capitalized items used but not defined
are as defined elsewhere in this Quarterly Report.
 Business
  Primus Financial
    Primus Asset Management
   27




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Critical Accounting Policies
    Results of Operations
 Introduction
    Consolidation
  Three Months Ended March 31, 2011 Compared With Three Months Ended March 31, 2010
 Overview of Financial Results
   28




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Consolidation,
 Net Credit Swap Revenue
   
    
    Net premiums earned;
  29




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
    
    Net realized gains (losses) on credit swaps, which include gain (losses) on terminated
credit swaps and losses on credit events during the period; and
 
    
    Net unrealized gains (losses) on credit swaps.
  Three Months EndedMarch 31,2011
    
    
    2010Net premiums earned
    
    $
    11,171
    
    
    $
    16,436Net realized losses on credit swaps
    
    
    (7,811
    )
    
    
    (56,042
    )Net unrealized gains on credit swaps
    
    
    82,738
    
    
    
    127,136Total net credit swap revenue
    
    $
    86,098
    
    
    $
    87,530
 Net Premiums Earned
  Net Realized Losses on Credit Swaps
   Net Unrealized Gains on Credit Swaps
  Interest Income
   30




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Gain on Retirement of Long-Term Debt
     Other Income
  Operating Expenses
  Three Months EndedMarch 31,2011
    
    
    2010Compensation and employee benefits
    
    $
    2,122
    
    
    $
    4,580Professional and legal fees
    
    
    822
    
    
    
    1,485Other
    
    
    1,316
    
    
    
    1,723Total operating expenses
    
    $
    4,260
    
    
    $
    7,788
  31




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Interest Expense and Preferred Distributions
 Interest Expense
     32




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Preferred Distributions
   Provision for Income Taxes
  Discontinued Operations
     Income Taxes
    33




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Non-GAAP Financial Measures  Economic Results
   
    
    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, and
that amortization is added to GAAP net income (loss) available to common shares;
 
    
    Provision for CDS on ABS credit events; and
 
    
    Reduction in provision for CDS on ABS credit events upon termination of credit swaps.
    34




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##### Table of Contents



Three Months EndedMarch 31,2011
    
    
    2010GAAP net income available to common shares
    
    $
    84,700
    
    
    $
    86,522Adjustments:Change in unrealized fair value of credit swaps
sold (gain) loss by Primus Financial
    
    
    (82,738
    )
    
    
    (127,136
    )Realized gains from early termination of credit
swaps sold by Primus Financial
    
    
    
    
    
    
    Amortization of realized gains from the early
termination of credit swap sold by Primus
Financial
    
    
    39
    
    
    
    294Provision for CDS on ABS credit events
    
    
    (1,143
    )
    
    
    (2,374
    )Reduction in provision for CDS on ABS credit
events upon termination of credit swaps
    
    
    7,858
    
    
    
    1,819Economic Results
    
    $
    8,716
    
    
    $
    (40,875
    )Economic Results earnings per GAAP diluted share
    
    $
    0.23
    
    
    $
    (1.01
    )Economic Results weighted average common shares
outstanding  GAAP diluted
    
    
    38,376
    
    
    
    40,280
  Off-Balance Sheet Arrangements
  Contractual Obligations
   35




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Liquidity and Capital Resources
          36




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Cash Flows
 Cash flows from operating activities 
 Cash flows from investing activities 
 Cash flows from financing activities 
   37




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Cautionary Note Regarding Forward-Looking Statements
  
    
    fluctuations in the economic, credit, interest rate or foreign
currency environment in the United States and abroad;
    
    the level of activity within the national and international credit markets;
    
    the level of activity in the leveraged buyout and private equity markets;
    
    changes and volatility in pricing levels;
    
    change in rating agency ratings requirements or methodology;
    
    counterparty limits and risk;
    
    Legislative, industry and regulatory developments, including changes
in accounting principles;
    
    the extent and timing of any share or debt repurchases;
    
    changes in tax laws;
    
    changes and volatility in international or national political,
economic or industry markets or conditions;
    
    terrorist activities, international hostilities and natural disasters, which
may adversely affect the general economy, domestic and international
financial and capital markets or specific industries or companies;
    
    the effects of implementation of new or revised accounting pronouncements; and
    
    uncertainties that have not been identified at this time.
  38




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Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
     39




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Item 4.
    
    Controls and Procedures
    
 Part II. Other Information
 
 Item 1.
    
    Legal Proceedings
   
 Item 1A.
    
    Risk Factors
   40




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Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
 Issuer Purchases of Equity Securities
  Total Number of
    
    
    Approximate DollarTotal
    
    
    
    
    
    
    Shares Purchased
    
    
    Value of Shares thatNumber of
    
    
    Average
    
    
    as Part of Publicly
    
    
    May Yet Be PurchasedShares
    
    
    Price Paid
    
    
    Announced Plans
    
    
    under the Plans orPeriod
    
    Purchased
    
    
    per Share
    
    
    or Programs
    
    
    Programs (a)January 1  31
    
    
    142,600
    
    
    $
    5.01
    
    
    
    142,600
    
    
    $
    32,471,821February 1  28
    
    
    129,000
    
    
    $
    5.01
    
    
    
    129,000
    
    
    $
    31,825,531March 1  31
    
    
    153,200
    
    
    $
    4.99
    
    
    
    153,200
    
    
    $
    31,061,063Total
    
    
    424,800
    
    
    $
    5.00
    
    
    
    424,800
 
 (a)
    
    On October 8, 2008, our board of directors authorized the implementation of a buyback
program for the purchase of our common shares and/or our 7% Senior Notes in the aggregate up to
$25.0 million. On February 3, 2010, our board of directors authorized an additional expenditure of
up to $15.0 million of available cash for the purchase of our common shares and/or our 7% Senior
Notes. On July 29, 2010, our board of directors authorized an additional expenditure of up to $5.0
million of available cash for the purchase of our common shares and/or our 7% Senior Notes. On
October 27, 2010, our board of directors authorized an additional expenditure of up to $10.0
million of available cash for the purchase of our common shares and/or our 7% Senior Notes. The
amounts in this column do not reflect the cost of approximately $14.7 million for purchases of our
7% Senior Notes, since inception of our buyback program through the quarter ended March 31, 2011. 
 Item 6.
    
    Exhibits
  31.1
    
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
200231.2
    
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
200232
    
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002
 
  41




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SIGNATURES
  PRIMUS GUARANTY, LTD./s/ Richard ClaidenRichard ClaidenChief Executive Officer/s/ Christopher N. GerosaChristopher N. GerosaChief Financial Officer(Duly Authorized Officer and Principal Financial
Officer)   42




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Primus Guaranty, Ltd.
 
 Exhibit Index
 Number
    
    Exhibit31.1
    
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
200231.2
    
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
200232
    
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002
  43