Bermuda insurance company Primus Guaranty Ltd. lost $9.2 million in the second quarter after a $14 million decline in the value of its credit swap portfolio, the company said in an earnings statement yesterday morning.

The loss for Primus, which has its primary office in New York, compared to a $200,000 profit during the second quarter, 2004.

For investors, the loss amounted to 21 cents a share, compared to earnings of one cent a share in the year-ago period.

The $14 million decline in Primus? credit swap portfolio this quarter compared to a similar development during the same period last year when a $5.6 million credit swap portfolio loss was recorded.

Primus? primary business is the selling of credit default swaps to dealers, banks and portfolio managers through its principal operating subsidiary, Primus Financial Products Llc.

Another subsidiary, Primus Asset Management, manages Primus Financial?s credit swap portfolios.

Under a credit swap contract, the insurer or reinsurer agrees to make a payment to the buyer in the event of a specified credit event.

Primus chief executive officer Thomas W. Jasper said current market conditions had seen the Primus portfolio of single name credit swaps grow in the second quarter by $1.4 billion to $12.2 billion.

?This growth was achieved in a more favourable premium environment than we have seen recently,? he said.

Mr. Jasper said Primus saw higher credit mitigation expenses of $2.9 million, as the company moved to avoid its credit exposure to companies that are the subject of buy-out attempts.

The decline in value of the Euro also did not help, with Primus absorbing a $955,000 loss because of currency revaluation.

He said ?continuing discipline over operating expenses? helped offset the affect of these higher expenses.

Total expenses, including financing costs, were $7.6 million in the second quarter, $1.2 million higher than the $6.4 million expense bill Primus had during the same period a year ago.

Revenues during the second quarter of 2004 reached $6.7 million, compared to a negative $1.6 million this year.

Quarterly interest income was $2.8 million, a nearly three-fold increase compared with the $716,000 earned on interest during the second quarter, 2004.

Primus, which trades on the New York Stock Exchange, said its interest income rose because of an increase in the balance of invested funds, as well as higher investment yields.

Primus shares fell 70 cents, or five percent, to $13.29 in afternoon trading on the New York Stock Exchange yesterday.

Investors may have pushed down the value of shares after the company?s earnings fell far short of analyst expectations.

The consensus estimate for Primus? second quarter earnings was 22 cents a share (compared to the 21 cents a share loss), according to a Yahoo! listed poll of four analysts that follow the company.