NEW YORK (Bloomberg) — Bermuda-based Primus Guaranty Ltd., which sold banks credit-default swaps protecting almost $20 billion of debt, said its third-quarter economic loss narrowed as corporate defaults slowed and the company terminated contracts.

The loss, which doesn't account for market-value gains on its credit swaps, shrank to $9.6 million, or 23 cents a share, from $62.1 million, or $1.37, a year earlier, the company said yesterday in a statement. When accounting for market-value of the swaps, Primus had net income of $461.5 million, compared with a year-earlier net loss of $390.2 million.

Chief executive officer Thomas Jasper, a former Salomon Brothers Inc. banker who helped pioneer the interest-rate swaps market in the 1980s, is seeking to rebuild Primus after its unit that sells credit-swaps was shut out of the market last year and paid out 18 percent of its capital for credit-swaps bets on failed financial companies. The company is seeking to cap its losses by paying bank customers to rip up existing contracts, and it's expanding or developing other businesses.

"These transactions are expected to reduce the net risk in Primus Financial's credit swap portfolio and preserve capital for our shareholders," Jasper said in the statement.

Primus paid an unnamed client $6.5 million to terminate $1.3 billion of credit swaps last month, a discount to the market value of the contracts, according to a statement on October 5. The company capped its exposure on an additional $1.2 billion of contracts in a transaction that assigned them to a newly formed subsidiary, Primus said in July.