Risk exposure

The portfolio volume has increased substantially. The largest change in the portfolio is the increased proportion of risk exposure to Swedish exporting companies. This change reduces the average level of risk in the guarantees, but brings with it an increased concentration risk.

The volume of EKN’s outstanding guarantees and binding offers increased dramatically during 2009 from SEK 112 billion at the start of the year to SEK 159 billion at the year-end. Including all the offers, the total volume at the year-end was SEK 364 billion.

Outstanding guaranteed amounts

When EKN deducts the exposure from the statutory limit decided on by Parliament, the offer volume is halved. At the end of the year, EKN had utilised SEK 264 billion of the statutory limit. With the new limit of SEK 500 billion, EKN has the capacity that easily meets the demand we believe there is among exporting companies.

The increase in volumes led to an increase in risk provisions during the year. Provisions for expected losses increased from SEK 4.4 billion at the start of the year to SEK 6.1 billion at the year-end. Provisions for unexpected losses (the concentration risk) increased from SEK 5.1 billion to 5.3 billion. Risks for Swedish.

The 15 largest countries – exposure in sek (million )

Risks for Swedish companies dominate

EKN has outstanding guarantees and claims in a total of 134 countries, but they are unevenly distributed. A handful of countries form a very large proportion of
the exposure.

Sweden is the country in which EKN has by far the largest increase in risk exposure. This very large increase is because of the working capital guarantees to large Swedish companies that EKN issued during the year. The working capital guarantees mean that EKN shares the risk with lending banks for major Swedish exporting companies with high creditworthiness.

As in previous years, Pakistan and South Africa are among the biggest countries. The reason is a very large transaction in each country which will remain in EKN’s portfolio for many years to come.

The exposure for transactions in Turkey, Mexico and Russia has increased since the year-end. Mexico was not among the 15 largest countries at the previous year-end, but is now there as a result of a large telecoms transaction.

The demand for guarantees for transactions in OECD countries has increased during the year, but it is Asia that still dominates the total exposure. Guarantees to Africa have increased greatly, but from a low level. The exposure to Sub-sahara Africa (excluding South Africa) has increased six-fold in the last two years, and is now SEK 6.3 billion.

Distribution by counterparty and sector

The increase in both offered and issued guarantees during 2009 has been for all types of counter-parties, though the exposure to Swedish companies has doubled. The public sector counterparties also increased rapidly during 2009. They form the same proportion of the exposure as in the prior year, which means they have increased at the same rate as the portfolio as a whole.

At the end of 2009, telecoms was by far the largest industry, followed by defence. These two industries constitute more than half the portfolio. Telecoms have dominated the portfolio for many years. The increase in the proportion of defence during the year is because of an offer issued for a very large transaction.

Turkey is in fourth place on EKN’s list of countries where EKN has outstanding guarantees in transactions. In a joint trip with Volvo Construction Equipment, EKN visited the company’s customers in Turkey.

Risks in EKN’s portfolio

EKN values outstanding guarantees on a quarterly basis. During 2009, the main effect of these valuations was that EKN increased the risk provision for guarantees already issued in certain industries and on certain markets, as a result of the financial crisis.

The large guarantee sums issued during 2009 were mostly to highly-rated companies in Sweden and other countries.

These companies have on average a higher credit rating than is normally the case for companies in EKN’s portfolio. This helped to reduce the average level of risk in the exposure. It should however be added that these large new guarantees have had the effect of increasing the concentration of risks in EKN’s portfolio, which in turn has increased EKN’s need for provisions for unexpected losses.

Increased provision for expected losses

unexpected losses, in order to ensure that potential future losses can be met out of its own funds. EKN charges premiums and makes provisions for expected losses in each guarantee issued. The size of the provision is determined by the valuation of the risks in each individual transaction, and the duration of the transaction. By means of risk-based accounts, EKN reports on trends in risks in the transactions in EKN’s portfolio.

During the year, many existing risks were revalued at a somewhat higher risk level, while large new transactions had a low level of risk. As a result, the average risk is somewhat lower, but the large volume increase in the portfolio has increased the need for provisions. The increase in the need for provisions has been somewhat eased by the strengthening of the Swedish krona against the euro and the US dollar during 2009.

Three-quarters of EKN’s outstanding guarantees are issued in these two currencies, while provisions are made in Swedish krona. Guarantees in foreign currencies reduce the exposure in SEK when the krona appreciates.

At the end of 2009, the provisions for expected losses were SEK 6.1 billion, compared to SEK 4.4 billion at the start of the year.

EKN’s portfolio of risks consists of guarantees in transactions with both short and long credit periods, and for amounts from less than SEK 100,000 up to many billions. There are transactions in 134 countries. Mexico is one of the countries where EKN’s exposure has increased during the year.

Increased provision for unexpected losses

When estimating risk exposure, EKN takes into account any concentration risk in the portfolio and makes provisions accordingly. EKN applies a conservative estimate, with the aim of ensuring that EKN has sufficient reserves to be able to cope with very large losses.

At the end of 2009, the provisions for unexpected losses were SEK 5.3 billion, an increase from SEK 5.1 billion at the start of the year.

EKN does not charge any additional premium for transactions which increase the concentration risk, and continues to be open for new transactions in markets and companies where EKN’s exposure is already high.

Reinsurance

At the year-end, EKN had outstanding guarantees of SEK 4.0 billion reinsured on the private market, compared with SEK 4.5 billion the previous year. The main reason for the reduction is the stronger Swedish krona. A portfolio insurance policy for 20 exposures in 20 countries has been extended by one year.

This private reinsurance policy reduced the need for provisions for expected losses by SEK 0.6 billion and for unexpected losses by SEK 0.7 billion. EKN has also reinsured risks with other export credit agencies totalling SEK 1.3 billion, while other export credit agencies had reinsurance with EKN totalling SEK 16.2 billion.

EKN’s outstanding offers and guarantees		EKN’s outstanding offers and guarantees

Scope of guarantee operations

Indemnifications, recoveries and outstanding claims