Bermuda-based Primus Guaranty yesterday reported third quarter net income rose eight percent over the previous year to $18 million compared to $16.6 million in the 2003 quarter ended September 30.

Broken down per share, Primus recorded a four percent increase to 51 cents per share compared with 49 cents per share in last year's third quarter.

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.

Company CEO Thomas W. Jasper said: "We are pleased with our overall performance, in particular the increase in our portfolio of credit swaps sold to $9.4 billion by September 30, 2004 and that net credit swap premiums continued to grow. Additionally, portfolio quality remained high, with an average rating of A/A3, and there were no credit event losses during the period. Contraction of market credit swap premium levels during the quarter caused a significant unrealised gain in our portfolio of credit swaps sold, and a small unrealised loss in our portfolio of credit swaps purchased. Two other highlights in the quarter included the issuance by our subsidiary, Primus Financial Products, LLC, of $75 million in 30 year AAA/Aaa subordinated deferrable interest notes and the commencement of our credit swap asset management business with the closing of the first transaction in which we will be managing a portfolio of credit default swaps on behalf of third parties".

Total revenues were $24.6 million for the third quarter of 2004, compared with total revenues of $22.4 million in the third quarter of 2003. Net credit swap revenue, which comprises premiums earned, as well as realised and unrealised gains and losses on the swap portfolio, increased seven percent to $23.3 million in the third quarter of 2004 from $21.8 million for the same period in 2003.

Premiums earned on credit swaps sold grew nine percent to $11.2 million in the third quarter of 2004 from $10.3 million for the same period in 2003. The increase was primarily due to the growth in the portfolio of credit swaps sold. Premium expense on credit swaps purchased as short term investments was $279 thousand in the third quarter 2004, there was no comparable expense in the third quarter of 2003 as this strategy had not been adopted at that time.

Total operating expenses, excluding interest expense, were $5.8 million for the third quarter for 2004, compared with $5.3 million in the year ago quarter. At September 30, 2004, total assets were $526 million, up 64% from total assets of $321 million at December 31, 2003. Primus says that 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 $114.8 million recorded as a receivable from the underwriters for the initial public offering.