2006 - ERV

DEFERRED ACQUISITION COSTFor purposes of obtaining a real accrual accountingof costs relating to sale of insurance, the acquisitioncost is capitalized and depreciated over one year. Costsfluctuating with, and being directly or indirectly relatedto acquisition or renewal of insurance agreements,are the base for capitalization.Examples of direct related sales costs are sales commission,salaries and other costs for own sales staff.RECEIVABLES AND PAYABLES IN FOREIGN CURRENCIESReceivables and payables have been recalculated at theyear-end rates of exchange. Currency gains and lossesare accounted as income/costs in the investment result.APPROPRIATIONS AND SAFETY RESERVESSwedish tax legislation allows companies to reduce thefinancial year’s taxable income through appropriationsto untaxed reserves. The following forms of untaxedreserves exist:Equalisation reserveThe equalisation reserve forms a collective safetyreinforcement of the insurance technical provisions.Accessibility is limited to the covering of loss anddemands. For other purposes it is necessary to obtainpermission from the Financial Supervisory Authority.TECHNICAL PROVISIONSTechnical provisions forms by appropriation for nonearnedpremium and remaining risks as well as appropriationfor outstanding claims and corresponds toobligations in accordance with entered contracts.Provision for unearned premiums and remaining risks;For non-life insurance and reinsurance the calculationof technical provision for unearned premiums is normallymade strictly time-proportional in accordancewith the pro rata temporis calculation. If the premiumlevel is considered to be insufficient to cover expectedclaims and administrative expenses, an additional provisionfor unearned premiums must be added for suchremaining risks, a so-called premium deficiency reserve.Provision for claims outstanding;Technical provision claims outstanding are calculatedto correspond with the policy commitments. Provisionfor outstanding claims has been augmented with supplementsfor unknown claims and inflation effects.Receivables from recourse claims are accounted in accordancewith the accruals concept and have reducedthe provision for claims outstanding.REINSURERS´ SHARE IN TECHNICAL PROVISIONSReinsurers´ share in technical provisions is taken up tothe amount that corresponds to the reinsurance agreements.WRITE DOWNIf there at the time of closing the accounts exist anyindication of that a material or immaterial asset hasdecreased in value a calculation of the assets recoveryvalue is made. With recovery value one mean the highestof the assets net market value or its useful value. Ifthe accounted value exceeds the recovery value a writedown will take place. If at a later time a higher valueis established then a reversal of previous write downwill take place.17