Results and reserves

The result for the year of SEK 820 million strengthens our already stable financial position. EKN’s cash & cash equivalents have continued to grow and now amount to SEK 16.6 billion.

The result for 2008 amounted to SEK 820 million. This is a good result which further strengthens our already strong financial position. However, the result level is lower than in the previous three years. For a large number of years we experienced few losses, high levels of recoveries and lower provisions as a result of an improvement in global risks. Although the level of indemnifications remained low during the year, there were fewer recoveries, while the need for reserves increased.

Premiums

Net premium income for the year was SEK 525 million, compared with SEK 406 million the previous year. The premium increase is due to the increase in the volume of guarantees issued. The premium charged by EKN reflects the risk in a particular transaction. Premiums act as a reserve for future indemnification payments which EKN may have to pay to guarantee holders.

Increase in provisions

In addition to increased reserves for new transactions of SEK 625 million, the need for provisions was also affected by a number of different factors, one of the most important being exchange rate fluctuations. Many of our transactions are in US dollars and euro. With both the dollar and euro strengthening against the Swedish currency, the provision for risks in SEK has increased by 650 million.

The review of risk provisions which we always conduct before the balance sheet date has resulted in a large number of transactions requiring increased risk provision, although this is balanced by the fact that some of our large transactions require less. The only significant country with an impaired risk rating during the year was Pakistan.

The overall effect of currency fluctuations and risk changes is an increase of SEK 1.2 billion in risk provisions for expected losses.

In addition to risk provisions for expected losses, EKN makes provision for unexpected losses. A large number of future loss scenarios are simulated in EKN’s portfolio risk model. Provisions are allocated by reference to the level of concentration risk. The higher the proportion of the portfolio dominated by a small number of major risks, the higher the concentration risk and therefore the greater the need for provisions. Although concentration of EKN’s risks fell somewhat during the year, the volume of the entire risk exposure increased. This resulted in the provision for unexpected losses also rising by SEK 690 million.

EKN reinsures some of its transactions, mainly on the private market. Reinsurance reduces the need for provisions by over SEK 400 million.

The provision for risks rose by SEK 1.5 billion compared with the previous year.

EKN’s binding offer and guarantee commitments amounted to SEK 112 billion at the end of the year. This represents a substantial increase on the figure of SEK 96 billion at the end of 2007. Our provision for risks increases in line with our growing commitments. At the end of the year, the provision for risks stood at SEK 9.5 billion compared with SEK 8.3 billion at the end of 2007. This corresponds to 8.4 percent of EKN’s commitments at the end of 2008 (8.3 percent at the end of 2007).

Asset management

EKN’s earnings trends over several years have generated high levels of cash & cash equivalents. Cash & cash equivalents and securities totalled SEK 16.6 billion at the end of the year, which is an increase of SEK 2 billion. Interest income from asset management amounted to almost SEK 600 million and had an essential effect on the result for the year.

Assets in SEK are invested with the Swedish National Debt Office ranging from at-sight to fixed terms of up to 5 years. Foreign currency assets, mainly US dollar and euro, are deposited with Swedish commercial banks and bonds ranging from at-sight to fixed terms of up to 3 years.