The result for the year of SEK 1.8 billion means that EKN has further strengthened its already strong financial position. To that must be added the right to unlimited borrowing from the Swedish National Debt Office, which guarantees that EKN can fulfil its commitments.

The 2007 result of SEK 1.8 billion is at the same level as the previous year’s result. The main reasons for the result are extremely low losses, reduced provisions, recoveries being larger than expected, and the return on capital. These are by and large the same reasons as behind last year’s result.

EKN’s annual accounts are subject to risk, and are greatly affected by changes in risk in our exposure, and changes in the net value of claims. The result is positively affected by risk provisions that are reversed because the risks in the transaction have ceased, and negatively affected by risk provisions that are increased because the risks in the transaction have increased. The result is positively affected by recoveries being greater than expected, and negatively by losses in a transaction being greater than the risk provision for it. In addition to this, the result is affected by interest on liquid assets.

Premium income has a positive effect on the result, but premiums are always linked to risk-taking in a transaction, which affects the result in a negative direction. The two items, premiums and risks, partly cancel each other out in a transaction.

Recoveries can have a large positive effect on the result if they are larger than expected, but if they are in line with expectations the result is not affected. In the same way, writing off a loss may have no effect whatsoever on the result, if the claim has already been valued at zero.

Premiums

Net premium income for the year was SEK 515 million, compared to SEK 1,120 million in 2006. The difference is mainly due to the previous year’s premium income for one single very large transaction. During the year, several large transactions were also paid off early, and premiums for the remaining risk period were repaid. Following the repayment of premiums, these risks were removed from our exposure.

Reduction in the provision

The fixed exposure, defined as outstanding commitments, guarantees falling due in problem transactions, notified delays in payment, and binding offers, amounted to SEK 95.8 billion at the year-end (SEK 97.7 billion in 2006). Total provisions for risks in our exposure amounted to SEK 8.0 billion (SEK 8.5 billion in 2006). This is equivalent to 8.3% of the fixed exposure, compared to 8.6% at the previous year end, and 10.1% in the year before that.

There are several reasons for the reduction in provisions. The average risk period for the whole exposure became in total somewhat shorter. The provisions for the large transactions paid off early during the year have been reversed. An improvement in the risks in several large transactions, and the upgrading of a number of countries, except for Iran, led to a reduced need for provisions. EKN reinsures a proportion of its risks, and in all this means that the provisions could be reduced by SEK 1.3 billion.

Low level of losses

The year’s relatively low amounts of indemnifications and loss prevention costs of SEK 32 million (43 million in 2006) mean that almost none of the provisions set aside to cover expected losses needed to be utilised.

Recoveries that exceed expectations

Recoveries amounted to SEK 925 million during the year – once again a larger than expected amount, which exceeded the book values. Claims amounted to a nominal SEK 6.9 billion at the year-end, a reduction of SEK 1.4 billion. The change was due to the large recoveries and write-offs. The valuation of claims reflects the expected recoveries over time. The claim value fell to SEK 1.4 billion, a reduction of SEK 0.5 billion.

Asset management

The large liquid assets and holdings of securities increased by SEK 1.3 billion, to a year-end total of SEK 14.6 billion. During the year, a contract was drawn up with the Legal, Financial and Administrative Services Agency for the management of a third of the liquid assets. Other assets in SEK are invested with the Swedish National Debt Office with maturities up to five years. Foreign currencies, primarily US dollars and euro, are invested in cash deposits in Swedish commercial banks, and in bonds with maturities up to three years. Interest income from asset management amounted during the year to SEK 469 million, representing a quarter of the result for the year.

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