Bermuda-based credit protector Primus Guaranty Ltd. posted a record quarterly loss of $670.1 million yesterday, on the decline in market value of its credit swap portfolio.

The loss broke down to a negative $14.85 a share, as the company said the unrealised mark-to-market loss in its operating unit Primus Financial was $686.8 million in the first three months of this year.

The loss comes on the back of Primus's $403.8 million loss in the fourth quarter of 2007.

During the first quarter, credit spreads widened substantially as the global credit markets experienced extremely difficult conditions, which led to greater volatility and a re-pricing of credit risk, the company said.

Primus reported new credit swap transaction volume of $1.2 billion in the first quarter, increasing its total credit swap portfolio to $24.3 billion.

Primus Guaranty, the parent of Primus Financial Products, reported economic earnings of 49 cents a share. Two analysts on average estimated earnings of 33 cents a share, before special items, according to Reuters Estimates.

Economic results mainly exclude from revenue any unrealised gains and losses on Primus Financial's portfolio of credit swaps sold.

GAAP (generally accepted accounting principles) fair value accounting requires companies to include such unrealised losses in their net income calculation.

Primus Guaranty, through its unit Primus Financial, sells credit default swaps to commercial and investment banks, credit portfolio managers, and insurance companies.

Credit default swaps are financial instruments that help financial firms to reduce risk from bonds, loans, and receivables.

Shares of the company, which have lost more than 30 percent of their value so far this year.

Primus Guaranty's chief executive officer Thomas Jasper said: "During the quarter we generated record economic results and a record economic return on equity.

"While I am pleased with these results, the overall credit market environment in the first quarter was challenging and for the most part it remains challenging.

"We continue to be focused on the long-term and we are committed to leveraging our people, our credit market expertise, our flexible business model and our strong capital position to further build shareholder value."