ANNUAL REPORT INTRUM JUSTITIA A N N U A L R EP O R T 2 0 ...

Credit institutions, private and public companies
and public authorities are among
them. By selling their receivables they can
quickly access liquid assets and concentrate
on their core business, at the same time as
they avoid not getting paid at all.
Buyers of overdue receivables include
companies in the industry such as Intrum
Justitia and financial ones such as international
investment banks. Around one third
of Intrum Justitia’s portfolio of purchased
receivables comes from our credit management
clients. The remainder is purchased
by Intrum Justitia from external partners.
In the case of large portfolio investments,
Intrum Justitia often works with financial
partners such as Crédit Agricole or Goldman
Sachs. Other partnerships are being
evaluated on a continuous basis, and in January
2010, we announced a partnership
with East Capital and the European Bank of
Reconstruction and Development relating
to joint investment in the Russian market.
SPECIALISTS IN CONSUMER DEBT
The market for written-off receivables mainly
consists of receivables that are secured, e.g.
real estate. We have decided, however, to
concentrate on small and medium-sized unsecured
consumer debt as this is an area where
we have extensive collection experience and
well-developed analysis and valuation methods.
The portfolios Intrum Justitia purcha-
ses consist largely of unsecured bank loans
and credit card debt belonging to private individuals,
followed by receivables originating
from telecom, mail order and infrastructure,
as well as receivables, e.g. from municipal
companies. Most of the portfolios thus have
amounts of around SEK 7,100 per claim.
TRANSPARENT ACCOUNTS
In our income statement, revenue from
receivables is recognized as the collected
amount less amortization. In recent years
amortization has been around 50 percent
of the collected amount. The amortization
of each portfolio’s carrying value is based on
the change in the discounted present value
of future cash flows between two periods
according to the portfolio’s initial effective
interest rate. The amortization amount is a
relatively stable portion of the anticipated
collections over the remaining life of the
portfolio. The return on purchased debt has
been between 14.4 and 17.0 percent over
the past five years. The goal is to achieve an
annual return of at least 15 percent.
In the balance sheet, the value of each
portfolio is recognized as the discounted value
of all anticipated future cash flows. Cash
flow forecasts are reviewed quarterly and
reassessed based on, for example, achieved
collection results, agreements with debtors
on installment plans and macroeconomic
information.
Outcome of investment in purchased debt
%
20
15
10
5
0
MSEK
1 200
1 000
800
600
400
200
0
PORTfOLIOS BY
BUSINESS SECTOR
Bank loans 35% (39)
Credit cards 14% (15)
Telecom 25% (23)
Finance 14% (15)
Mail-order 1% (1)
Utilities 11% (7)
YIELD
06 07 08 09 10
The return on investments in
overdue receivables was 16.3%
in 2010.
INVESTMENTS IN
PURCHASED DEBT
03 04 05 06 07 08 09 10
The investment level in 2010
exceeded 1 billion SEK.
23