Primus Investor Presentation Out

Just a quick note for you guys today: Primus (PRS) presented at a Lehman Brothers Investor Conference this morning and they have posted the webcast from the event, along with their supplemental Powerpoint (32 slides), on their Investor Relations Page.

If my last post on the company interested you at all, I'd highly recommend you read the presentation and/or listen to the webcast. The presentation is full of some wonderful graphics and management's own thoughts on the company.

One slide alerted me to a fact that I didn't even consider in my valuation: if you adjust that $9.58 in BV for unearned premiums, the potential value of the company goes up above $18.

Regarding Unearned premiums, Primus is basically saying that they have written contracts in effect that will provide them with about $9/share in future premiums (or "fees" as I called them in my previous post). Once Primus provides credit protection for the given time period, they are allowed to recognize the corresponding fee revenue.

Here's how the journal entry would work there, for you accountants. A liability carried that will be taken down with a debit as the revenue is earned with a credit.

So, as Primus earns the revenue (provides protection for time period "x"), they will record this entry:

DR: Unearned Premiums xxx , CR: Premium Revenue xxx

The unearned premium account decreases with a debit, thus book value increases, and Primus recognizes the revenue in the income statement with a credit.

Thus, the economic book value of $9.58/share is probably understated relative to the future. It's more likely somewhere in between $9.58 and $18.50, without any growth in written business.

Slide 4 of the presentation has the numbers on unearned premium and book value.


Besides all that good stuff, the presentation is absolutely worth a good look; you can get a better feel for the company and hopefully more comfortable with the numbers.


View the presentation here.