Ladies and gentlemen, welcome to the Intrum webcast with teleconference Q4 2021. Today, I'm pleased to present President and CEO Anders Engdahl. For the first part of this call, all participants will be in a listen-only mode, and afterwards, there will be a question and answer session. Anders, please begin your meeting.
Thank you. Good morning, everyone. My name is Anders Engdahl. I'm the CEO of Intrum, and with me, I have Michael Ladurner, our CFO. Today, I'm very happy to present to you the results of the fourth quarter and the full year results of 2021. If we turn to page three of the presentation. As we summarize, looking back at 2021, I'm very pleased to see the progress that we made on the path that we laid out at the Capital Markets Day in 2020. We laid out two key strategic priorities, transformation and organic growth. I'm happy to see the progress that we made during the first year of this three-year journey.
First, we laid out our transformation journey, ONE Intrum, where we set out to build a common operating model based on a common technology platform, and where we build a strong foundation for data and analytics in order to deliver superior value proposition to our clients and customers to deliver efficiency benefits in order to gain a competitive advantage, supporting our ability to capture market share. Secondly, we set out to build a trajectory for organic growth and commercial success, building on the positive market conditions in the post-pandemic environment. As we look back at these achievements over the first year on this journey, it is worth noting a few highlights. Starting with ONE Intrum, we can see that the program is already delivering value, and we are now in a position to scale up for further operating leverage.
We have in the first 12 months built a common global front office footprint across four key locations with now 343 agents serving 15 markets. We have migrated 20% of our case volume to our common technology platform, and we now have approximately 10% of our staff located in global centers of excellence, driving the standardization of our processes based on a common blueprint. We are on track to deliver SEK 1 billion of operating cost savings supporting our competitiveness. Second, we built a strong trajectory for organic growth, including a number of high-profile client wins. In 2021, the value of newly signed contract increased by 80% versus the previous year, corresponding to approximately 10% of the installed base of servicing revenues.
Our pipeline has grown consistently and is now more than 2x what we had pre-pandemic at the end of 2019. We've just signed a transformational CMS deal in the U.K. with a large retail bank that will add approximately 2.5% to CMS growth once fully onboarded in the second half of 2022. At the same time, our investment business is back to deployment pace, which is consistent with a double-digit organic growth trajectory at attractive returns. The benefits are now becoming clearly visible in the financial results. Comparing to pre-pandemic, we see improvements across all our key cash metrics driven by the operating leverage in the business. You see cash revenues are up 10% compared to 2019.
At the same time, cash spend is flat at 0%, which drives up our EBIT before replenishment CapEx to 20%. Our cash EBIT is up 37%, our cash EPS up 96%. This is also resulting in strong margin and profitability expansion, where our cash margin has gone from 49% to 54%, and our cash ROIC is up from 6.5% to 8.9% at the end of 2021. If we turn to page four. As indicated in the previous quarter, we have, during the year, seen a reversal to more normal seasonal pattern with a weaker Q1 and Q3 and a stronger Q2 and Q4, especially in the strategic markets. During Q4, we also saw a positive and supportive economic sentiment despite challenges posed by concerns over inflation and increasing interest rates.
We also did not see any material negative impact from the Omicron variant during the quarter, despite the increasing restrictions across certain markets. Overall, this allowed us to finish 2021 with a strong performance across all markets and segments with improvement in key cash and accounting metrics versus previous quarter as well as year-over-year. Looking at the servicing businesses or segments, our servicing segments saw increases in new case inflows during the quarter, including also increases in higher value financial claims. Servicing revenues rose 12% and the CMS margin increased 3 percentage points versus the same quarter last year. In the portfolio investment segment, we saw broad-based outperformance on our backlog portfolio with gross collections at 113% versus active forecast.
We also saw good growth in the volume of supplier portfolios for sale at attractive returns, which allowed us to invest SEK 2.7 billion in the quarter. In the transformation program, we migrated 4 million cases to the common technology platform with strong post-migration performance. Given we now have 20% of our cases on the common platform, it is our single largest collection system, which does now allow us to start deploying our advanced analytics and automation roadmap, driving efficiency and competitiveness. Turning to page five. Looking at the market dynamics for our servicing segments, we see that the economic indicators are at historically high levels. We see continued normalization of business and consumer behavior and client activity and increasing outsourcing is growing the addressable market. However, at the same time, we see inflationary pressures and concern regarding interest rate increases gaining ground.
For Intrum, this is a conducive market backdrop. We see that the inflationary pressures, especially the energy crisis, is driving increased case inflow. Inflation and interest rate increases is likely to erode discretionary disposable income and affordability, which we expect will drive new NPE formation and new case inflow also medium term. Intrum is well-positioned to capture more volume, driving operating leverage further enhanced by our transformation program. Turning to page six. For portfolio investments, the market has been favorable during 2021, and we expect this to continue to prevail into 2022, with good continued supply of portfolios for sale and a picture that will be further supported medium term in light of the inflationary pressures and interest rate increases. For Intrum, this meant a return to deployment trajectory consistent with double-digit growth in 2021.
We have also continued to be able to mitigate the increasingly competitive environment, leveraging our broad footprint, our servicing franchise, and strong and deep client relationships, combine that with stringent deal selection criteria. The recent level of outperformance is expected to normalize towards the long-term average in light of the macro environment. Turning to page seven. As mentioned, the transformation program is progressing well, and it's according to plan. To date, we've spent approximately 74% of the total program budget, and in aggregate, we're about 5% below the total budget to date. Turning to page eight. During Q4, we successfully migrated 4 million cases with strong performance post-migration. In the past month, we've also replanned the case migration timetable, focusing on accelerating migrations that deliver the greatest benefits earlier.
This has led to a slightly different shape in the migration curve as laid out on the upper chart on page eight. Furthermore, we see a positive development in the cost to collect KPI, where the fourth quarter cost to collect was 5.7% compared to 6.6% in Q4 2020, demonstrating the positive early effects of the program delivery. Turning to page nine. Looking at the development versus pre-pandemic, we see significant benefits already visible in the results of 2021. Since 2019, we've increased cash revenues by 10%. In the same period, the cash spend, so the sum of cash operating expenses and CapEx is flat. Hence, the entire benefit of the revenue growth is reflected in the EBIT before replenishment CapEx, which is up 20%.
The cash margin is up 5%, demonstrating the strong operating leverage in the business. An important factor here is the benefit of the transformation program, which allows us to focus all our investments into technology towards the future state and the common technology platform, which has allowed us to more than half the amount of CapEx required for the business compared to the previous situation where we had to spend significant CapEx in order to upgrade the legacy environment. Turning to page 10. In 2021, we have made significant progress towards our ESG agenda. A few highlights include that Intrum now supports the TCFD, and we have started CDP reporting. We have revised our global travel policies, and we financed certain projects to offset our carbon footprint. Further, on the social domain, Intrum has developed a global Treating Customers Fairly instruction.
We've implemented a harmonized measure of customer satisfaction, and we completed human rights due diligence. We've also made further improvements in our ESG targets, where our client satisfaction index increased from 75 to 77, and our employee engagement index increased from 79 to 80 during the year. During 2021, we obtained sustainability ratings from Sustainalytics and MSCI, placing Intrum among the top 5% of companies globally. With that, I will hand it over to Michael for the financial review.
Thank you, Anders, and good morning. I'm now turning to page 12, group key financials. Q4 was a seasonally strong quarter. With the continued normalization of the seasonality pattern, we saw significant improvement across all cash metrics in Q4 2021 compared to Q4 2020. Cash revenues increased 8% to SEK 6.1 billion. Cash EBITDA increased 19% to SEK 3.7 billion. Cash EBIT increased 43% to SEK 2.2 billion. Cash EPS increased 55% to SEK 13.9 per share for the quarter, and cash return on invested capital increased to 12%, up more than 3 percentage points compared to Q4 2020. Overall, the strong development clearly highlights the continued normalization in the context of the ongoing pandemic. The operating leverage inherent in our business and the progress made throughout 2021, also in terms of delivering on our ONE Intrum transformation.
Therefore, also when looking at the full year 2021 development, we see the same improvements across all cash metrics compared to full year 2020, as well as the pre-pandemic full year 2019. 2021 cash revenues came in at SEK 22.2 billion, up 4% versus 2020. Cash EBITDA was SEK 12.3 billion, up 6%. Cash EBIT was SEK 6.3 billion, up 14%. For the full year 2021, we generated a cash EPS of SEK 29 per share and a cash return on invested capital of 8.9%, up 1.2 percentage points year -over -year. We also delivered on our deleveraging trajectory with a leverage ratio of 3.9 x, down 0.3x from the end of Q3 and 0.1x compared to Q4 2020. Looking at page 13, group cash earnings generation.
The chart on the left illustrates the developments I have just described very clearly. We have organic growth in cash revenues up 4% year-over-year. We see operating leverage and cost control coming through with cash spends, cash expenses together with other CapEx down 2%. As a result, we have the increase in cash EBITDA of 6%, the increase in cash EBIT of 14%, and the increase in recurring cash earnings of 12% year-over-year. This growth trajectory is consistent with our medium-term financial targets of growing our recurring consolidated cash earnings per share by more than 10% each year. When we look at 2021 from a returns perspective, this result translates into recurring cash earnings yield on shareholders' equity of 15% and based on adjusted net income, a return on equity of 17%.
I'm now turning to the segments, starting with CMS on page 14. In CMS, we saw continued gradual normalization in U.K.'s inflows. Compared to Q3, we also saw more higher value financial services claims in Q4, as well as an increase in utility claims on the back of the significant increase in energy prices. This progress is also due to formal moratoria, with very few exceptions having expired, and based on conversations with our clients, informal payment holidays previously granted being withdrawn. At the same time, we have also focused on cost control and phasing out legacy systems in the context of our ONE Intrum transformation.
This has enabled us to increase cash EBITDA by 13% to SEK 444 million and cash EBIT by 56% to SEK 437 million compared to Q4 2020, despite a small decrease in cash revenues of 4% to SEK 1.1 billion. Similarly, for the full year 2021, even though cash revenues and cash EBITDA decreased, we were able to increase cash EBIT by 3% to SEK 1.64 billion compared to full year 2020. Cash return on invested capital was up 3.3 percentage points to 9.1% compared to Q4 2020, and up 0.4 percentage points to 8.5% year-over-year. This progress can also be seen in the adjusted earnings margin for the segment, up 3 percentage points to 23% in Q4 2021 compared to Q4 2020.
I'm now turning to page 15. In our strategic markets, we experienced a seasonally very strong Q4 across all three markets, Spain, Italy, and Greece, in the context of a broad-based sharp recovery from the pandemic. The normalized seasonal pattern is particularly evident when comparing the results to Q4 2020, which at the time I described as more muted due to the pandemic. Important to note is the timing of expenses versus revenues in strategic markets. While expenses are more evenly distributed throughout the year, revenues tend to be somewhat lumpier and more concentrated in Q2 and particularly Q4, when activities carried out throughout the year tend to come to fruition. Spain finished the year strongly across the board with real estate sales of EUR 3.7 billion in Q4 and EUR 12.8 billion for the full year of particular note.
In Italy, we saw further normalization of legal system effectiveness during Q4. During the course of 2021, we also added EUR 53 billion GBV of new assets under management to the platform. In Greece, circa 70% of the claims, or EUR 165 billion of gross book value, originally covered by the joint venture with Piraeus Bank, have now been securitized with Intrum as the servicer long term and servicing economics maintained. In shifting towards a more broad-based platform anchored on strong strategic partnerships, the strategic market segment has benefited from certain transactional revenue items such as advisory and sourcing fees. While such revenues are recurring in nature, they're less predictable from quarter to quarter. Going forward, we expect such transactional revenues to have a smaller impact and be replaced with more diversified and predictable revenues.
As the question has been asked before, and for the sake of clarity, Strategic Markets has not materially benefited from removal fees in Q4 2021 or the full year 2021. In terms of results for Q4, cash revenues came in at SEK 1.8 billion and cash EBIT at SEK 1.3 billion, both significantly up compared to Q4 2020. For the full year, cash revenues came in at SEK 5.6 billion, up 4% and cash EBIT at SEK 3 billion up 19% compared to full year 2020. Strategic Markets had a cash ROIC of 34.3% in Q4 and 19.2% for the full year 2021. I'm now focusing on portfolio investments on page 16. In Q4, we saw continued broad-based outperformance across our entire footprint.
Portfolio investments exceeded collection expectations, the active forecast by 13% for Q4 and 11% for the full year 2021. We increased our investments to SEK 2.7 billion for the quarter and SEK 8.1 billion for the full year, in line with pre-pandemic investment volumes and consistent with a double-digit growth trajectory. Cash revenues for the segment increased by 5% to SEK 3.2 billion compared to Q4 2020 and 8% to SEK 12.5 billion versus full year 2020. Similarly, cash EBITDA increased by 6% to SEK 2.4 billion in Q4 and 8% to SEK 9.2 billion for the full year. Cash EBIT also improved by 8% to SEK 901 million in the fourth quarter and 12% to SEK 3.6 billion year-over-year.
Segment cash return on invested capital was flat compared to Q4 2020 and increased 0.8 percentage points to 9.8% year-over-year. We have also now successfully completed the refinancing of our Italian SPV that we flagged in Q3. I'm now turning to page 17 for some additional details on the refinancing. While the basic investment structure has remained unchanged, Intrum has recycled refinancing proceeds and thereby increased its stake in the transaction to 59%. Intrum has invested no new money into the transaction. In aggregate, the investment vehicle that Intrum jointly controls with CarVal Investors has increased its stake in the junior and mezzanine notes issued by the underlying securitization vehicle from 51% to 95%. Overall, the outcome of the refinancing is very much in line with the guidance given in the Q3 presentation.
The estimated remaining collections profile has been reshaped and delayed with ERC increasing from EUR 5.8 billion to EUR 7.1 billion. Senior debt has increased from EUR 7.3 billion to EUR 10.1 billion, with the implied deal level leverage ratio up to 3x from 2.2x. The senior debt is now also rated A- and intended to be GACS eligible. From a book value perspective, the carrying value has decreased from EUR 5.2 billion to EUR 5.1 billion due to a EUR 40 million value adjustment in the context of the refinancing. Financing and performance expectations are in line with current best estimates of the pandemic and post-pandemic environment. Now looking at page 18. The difference between our cost of funds and the last twelve-month average unlevered underwriting IRR now stands at 3.9x.
Very much in line with pre-pandemic levels and stabilizing. At the end of Q4, we had available liquidity of SEK 20 billion up circa SEK 1 billion from Q3. We also have no significant upcoming debt maturities before 2024. I'm now turning to page 19 and the progress towards our medium-term financial targets. Looking at the charts on the left, we have made significant progress both compared to 2020 but also compared to pre-pandemic levels at year-end 2019. Cash ROIC is continuously improving and now stands at 8.9% up 1.2 percentage points compared to Q4 2020 and up 2.4 percentage points compared to Q4 2019. Recurring consolidated LTM cash EPS is exhibiting strong growth and now stands at SEK 29 per share, up 15% from Q4 2020 and with a compound annual growth rate of 23% from Q4 2019.
This is very much in line with our target of more than 10% growth on average per annum. Deleveraging is progressing with a leverage ratio of 3.9x as of year-end 2021, down 0.1x compared to Q4 2020 and 0.4x compared to Q4 2019. We are on track towards achieving our medium-term financial targets. On that note, back to you, Anders, for some final remarks.
Thank you, Michael. We can turn to page 21 in the presentation. To summarize, we saw a strong performance in the fourth quarter, and we're encouraged by the positive outlook into 2022. I also want to say that we do expect the seasonality pattern that we highlighted will prevail also into 2022, where we expect to have seasonally weaker first and third quarters, but seasonally stronger second and fourth quarters. Looking at the segments. For CMS, we expect to see a normalizing new case inflows also for financial claims. In addition, we expect to see a positive contribution from new client signings supporting revenue growth in the coming quarters, as well as operating leverage supporting revenue, a positive margin trajectory gradually throughout the year.
For strategic markets, we expect to continue to have a positive operating environment supporting continued improvement in underlying operating efficiency. We expect that new AUM signing to contribute positively to underlying organic growth. At the same time, we expect to reduce the contribution from transactional fee revenues. In portfolio investments, we expect a favorable supply environment with stable and attractive underwriting returns. We also expect the gradual reversion of our back book outperformance levels towards the long-term average. For our ONE Intrum transformation program, we're also very pleased with the progress made during the first year, and we will continue our journey on building our global operating model, the global technology platform, and analytics capabilities.
We can already now see the potential benefits our data and analytics and automation roadmap can bring above and beyond the scope and timeframe of the program, and I expect to continue to update you as we progress. As we deliver on the program into 2022 and 2023, we expect that the operating leverage and scalability benefits will become even more apparent and supporting our competitiveness and organic growth ambitions. With that, we will open up for questions.
Our first question comes from the line of Jacob Hesslevik from SEB. Please go ahead.
Yeah. Hi, good morning, everyone. Congrats on a very good report. Just a quick question. I mean, strategic market is very strong with a margin of 60%. What is the main driver here? Is it Italy performing better than previous quarters, or how sustainable is this level?
Perhaps I can, you know, start, and Michael, you can fill in. If you look at strategic markets, you're right, it is a very strong quarter. You should also remember the point that Michael made that, you know, a lot of things that we've worked upon throughout the year will have the, you know, the cost of, you know, the employee staff and everything else throughout the year as we go through the year. The revenues tend to be more focused in the Q2 and Q4 for those activities that we perform throughout the year. There is an element of that in that, and that's contributing to the seasonality effect that we see particularly in the strategic markets.
It's also fair to say that it is, you know, strong contribution from all three countries into the result of the fourth quarter. We see very strong development in our Spanish business with our, particularly our real estate business, doing extremely well. We see that we have a continued positive development in our Italian business, and the effectiveness of the Italian court system is continuing to positively progress. Obviously, we're also very happy with having now added more AUMs to the platform with the new signing of mandates. We also continue to see a positive development, or continued strong result, I should say, in the Greek platform, which has been performing very well for the last number of quarters. You know, effectively, all cylinders are firing in the right direction here.
I can only echo what Anders says. You know, ultimately, I'd also draw your attention to the year-over-year comparison, where obviously the strategic markets in 2020 were among the hardest hit by the pandemic overall. We really see this sharp recovery that we've mentioned coming through, and obviously with the return to the seasonality pattern with the underlying rationale that Anders has just laid out. Again, very broad-based and very pleased with how this has developed.
All right. Thank you. What's the impact of the transformational CMS deal in the U.K. that you wrote about? Is it like any impact on margins going forward, or how much volume does it add?
We anticipate that it will contribute approximately 2.5% to CMS growth once that is fully implemented, which it will be during the second half of 2022. It's a material deal, and we're very, very proud that we've been able to achieve that signing in the U.K., which is an important market for us, and we receive very good traction for our CMS business. It's a landmark deal for us.
You don't foresee any impact on the margins in the beginning years?
Like, we don't give a specific margin guidance for that particular transaction, but it is contributing positively to the organic growth in CMS. As we've pointed to with the transformation program, we are able to leverage you know, the benefits from the program to continue to drive operating leverage in the business and margin improvement for CMS. You know, this deal is no different from other deals in that respect.
All right. Thank you.
The next question comes from the line of Patrik Brattelius from ABG. Please go ahead.
Thank you. My first question is in regard to the Omicron variant. Can you talk a little bit how that has affected your business so far in the first quarter here, and what's your expectations of the impact during the first half year of 2022, please?
As we said in the report, we saw no impact of Omicron in the fourth quarter despite seeing some increasing restrictions across a number of markets. I mean, Q1 is too early to tell, but I don't expect it to be a material, you know, a material impact from the Omicron variant per se. I think what we are though pointing to is other factors like inflation and interest rate increases that will have a positive impact in terms of new incoming case inflow. We're seeing that to contribute positively to CMS business already starting to see some effect of that in the fourth quarter, but not the Omicron variant.
My second question is in regards to the transformation program which seems to be well on track to deliver the SEK 1 billion in recurring benefits. Can you talk a little bit about what your expectations regarding benefits for this year, for 2022 please?
I think as we deliver on the program, I mean, the benefit realization is somewhat more backloaded than the trajectory for case migrations. The simple reason for that is that, you know, once we have migrated we can then start implementing the efficiency improvements, right? There's a lead time from migration to full benefit realization. That's why we see some of the benefits being more backloaded than the plan, you see, which has now been reshaped. That said, we reshaped it in such a way that we have higher value benefit realizations being migrated earlier so that we, you know, we will stay on that course. It's a little bit. It's not a linear realization path between 2022 and 2023.
It's probably also fair to say that, you know, the developments we've seen in 2021 and highlighted in terms of not focusing on legacy but focusing on the future states and the attendant effects and costs they should persist going forward. I think that's something that we're very proud of and wanted to highlight as well. Obviously in terms of the actual transformation benefits it's exactly as Anders says, that's somewhat more backloaded and linked to the lead indicator of case migrations.
Okay.
You can see that in the cost to collect, by the way, the cost to collect curve I think demonstrates that, you know, quite well actually.
Yeah. Yeah, that's a great chart. Thank you for that. And then my last question is, what can you say about the expected price level in the market and what do you expect your IRR to develop here in 2022?
As we look into 2022, comparing, taking a step back, 2021 we saw meaningful increases and improvements from 2020. The volume of supply in 2021 has been much more favorable and it's very broad-based. I think one of the highlights of 2021 has been the fact that we've been able to deploy more broadly across our footprint. We expect that to continue into 2022 and with a continued favorable supply environment. From our perspective what I think is really worth highlighting is our ability to source and generate portfolio opportunities through strong client relationships which are, you know, on the back of our strong CMS franchise across these markets.
That's really the, you know, the benefit of that is becoming quite clear to us. In terms of returns perspective, I think we're now, as also Michael highlighted, we're seeing a stable development, so stabilizing at pre-pandemic levels and we do not anticipate that to materially, you know, go up or down. A continued development at the current levels into 2022.
In some reports out there you could read about expecting IRR development to come down given tough competition but you are not seeing that from your perspective then?
I mean, what I'm saying is there's competition in the market. The fact that we have such broad and for that matter capillary, you know, sourcing footprint allows us to generate so many transactions. We only invest in a smaller selection of that total pipeline that we're able to generate. We generate a pipeline which far outpaces the amount of capital that we invest in any given year. As long as we have that it allows us to trade off opportunities across entire footprint and we remain very stringent with our deal selection. I think that may be a difference to others who don't have the same footprint.
Yeah. Great. I understand. Perfect. Thank you so much.
Thank you.
Next question comes from the line of Ermin Keric from Carnegie. Please go ahead.
Good morning and thanks for taking the questions. Perhaps if we start with the CMS. You mentioned at the beginning that the pipeline is more than twofold versus what you saw in before the start of pandemic. Just could you clarify what are you referring to when you say pipeline? Is that basically volumes on existing contracts that you expect to commence?
Then also the signed value was up 80% versus last year. How would it compare to pre-pandemic, like 2019 just to get a sense of if last year was very impacted by the pandemic?
When we look at the pipeline and we look at our servicing businesses, we look at Annual Contract Value. How much revenues a contract is expected to generate once it has been signed on, onboarded and fully ramped up. That's how we define pipeline value. You know, we track that throughout the entire you know business and across all markets. When we look, we've done a very concerted effort across the business to build out our sales capabilities. We've strengthened our sales teams. We've implemented you know sales excellence programs and a lot of operational sales activities to really drive our organic growth agenda. The result of that is that we now have...
When we look at the pipeline, is the number of opportunities, which is, you know, at any given point, more than 1,000 single opportunities, right? It's very broad based. The value of those contracts that we're pursuing has doubled at the end of 2021. That amount stood at more than double what it was at the end of 2019 before we started this concerted effort to drive organic growth and servicing. That's what we're referring to. Then in terms of client signings, we had a particularly good year in 2021, but we're raising our ambition further for 2022 to continue to drive and support the organic growth direct trajectory. Yes, it's up very significantly. I'm very proud and happy to see that.
It really demonstrates our ability to compete and our ability to, you know, to get our value proposition across in the marketplace.
Thank you. I agree it's a big uptick. Just to understand also, with the transformation program, I think you've been talking about how you can basically maybe be a little bit more aggressive on driving organic growth because you also have a better operating leverage. Is that something you've already started to price out towards clients, so you're kind of offering more competitive prices already due to the program? Is that part of the increased momentum on client signing?
No, we haven't done that yet. I've got the question a few times and no, we haven't done that yet. I think that's an additional leg of competitiveness that will come in. This is simply the result of a very concerted sales and sales excellence project that we've been running. In terms of the transformation program benefits, we expect to start seeing them come through this year and into next, particularly into next, as you can see from the cost to collect chart. As that progresses, it will also help us enhance further our competitiveness and our ability to win. I mean, one thing is to generate pipeline, but the other one is also obviously to win and our win rates.
We expect that to contribute positively to our ACV touch signings trajectory as we deliver on the program.
Okay. That's very helpful. Moving on to strategic markets. Just to kind of phrase it in a different way to confirm I've understood it correctly. If we look on a full year on about SEK 2.2 billion in strategic markets adjusted earnings, that is a good starting point to start thinking about 2022 as well. It's kind of expected that the advisory fees, et cetera, will be offset by more kind of the larger AUM and so on already from 2022 fully.
I mean, as you said, I think we have benefited from a certain amount of transactional fee revenues. We are at the same time building an underlying organic growth in more recurring revenue nature. Even as you said, as Michael says, the transactional fee revenues are recurring, and they have. We have had them and we'll continue to have them, but the impact of them in proportion to the total will reduce over time. We'll obviously have, you know, the positive fee from the asset management increase, AUM increases coming through. That's sort of correctly understood in that respect, yes.
Perfect. Thank you. The SPV refinancing, will that have any impact on strategic markets?
Nothing beyond the refinancing itself. That, that's happened. We're very pleased that we got it all done and in line with the expectations that we communicated in the context of Q3. There are no meaningful differences in the servicing contract or any fee generation for the servicing business in strategic markets out of that. No.
Got it. Thank you. I'll jump back in line and let others ask their questions first. Thank you.
Thank you.
Next question comes from the line of David Johansson from Nordea. Please go ahead.
Hi. Good morning. Two questions from me. Anders, you mentioned in November during an interview that you saw some very positive signs of increasing stage two provisions among European banks. So far, SEB statistics for Q3 still suggest that stage twos are declining. Could you please elaborate where you see this growth in stage two provisions? Thank you.
When we look at the number of the markets throughout our footprint, we do see that both stage two and for that matter unlikely to pay is increasing. Over time, we expect that to translate also to increasing NPL formation. Through the pandemic, it has, with the moratoria that have been, you know, we've been living with for an extended period of time. That has obviously, you know, not yet translated, and it's delayed that NPL formation. Over time, we would still continue to expect that to feed through in terms of increasing NPL formation.
What we also see and I think what we point to also in this report is our capability to also service our clients at an earlier stage, which means that we can benefit, and we see that already now to an extent that we are benefiting in terms of volume increase of new mandates also for early-stage services. It's a positive driving force.
Okay then. Moving on to interest rates. We see some rising interest rates in the market now. Could you remind us again, what your interest rate sensitivity looks like? To what extent do you think rising rates will be reflected in prices for future portfolio acquisitions?
I think it's a slightly complex question, right? I think that on the one hand, if you look at the servicing businesses, the rising interest rate environment in the context of higher inflation, as we're now seeing it, leads to an erosion of disposable income for consumers and to some extent also for small businesses. That will drive, and we're already starting to see that to some extent, increasing new inflows for servicing. At the same time, the other side of that coin is that we would also expect a more normalized back book performance on our back book as the affordability erosion also, we would expect to take off the extraordinarily good result that we've seen in portfolio investment back book performance during the last, well, 18 months.
In terms of our funding costs, it may over time as most of our funding is fixed rate. If we have substantial interest increases, that could obviously impact our funding cost. On the portfolio investment side, in terms of new investments, what we've seen so far is that pricing levels in the new investments market adjusts very rapidly. I don't expect that to have any meaningful impact on the spread between our funding cost and the rates at which we can or the underwriting returns that we can generate in terms of new investments. As the market has become has matured and often become very sophisticated, those spreads tend to be very stable over time.
Okay. That's all for me. Thank you.
The next question comes from the line of Wolfgang Felix from Sarria. Please go ahead.
Yes. Thank you very much. On your slide 18, you have this very interesting graph on the underwriting returns versus funding costs. Sort of maybe dovetails a little bit with the previous question as well. And that multiple there of 3.9 x sort of seems to stabilize there, as you say, at the pre-pandemic levels. I think that. Maybe I'm wrong, but I think for a while there may have been an expectation that post-pandemic prices for portfolios may be somewhat more favorable, there may be more offers than demand ultimately.
Would this be an indicator that maybe the market is quite efficient and there's possibly also a lot of capital chasing these kinds of portfolios, and we're just seeing a return more or less to pre-pandemic normality as opposed to having maybe a sort of a larger cheap opportunity here? Or how should I read this graph?
I mean, it's a good question. We don't perceive that there is an imbalance between demand and supply in the market at the moment, and nor do we expect it to be that during 2022. Therefore, we expect to have a fairly stable. It's competitive, but a stable competitive environment into 2022. The question though that I think and quite a few analysts do think that once we see the throughput of the increases of you know, early arrears coming through into late arrears and that turning into also portfolio sales from the banks can lead to increasing volumes coming out in the market. But that's probably another. It's hard to tell, right? It's hard to guess, but probably another some months before that starts to feed through.
In that case, we'll start to see further demand, supply increases, in which case, that can change and be more favorable. But at the moment, we see a stable environment, and we're very happy with our footprint and our ability to source a large amount of transactions. As we said earlier, we're remaining very stringent in our deal selection, and we continue to trade off opportunities internally to make sure that we invest well and that we invest at a stable return for us.
Wonderful. Okay, thank you. I think it was in strategic markets. You were mentioning significant fees that you were generating. I think that may have blown into Q4. I'm not fully oriented on that. How significant are those? Or maybe I just misunderstood.
I think there are three points to make in and around, and we've made it a few times now in and around strategic markets. One is that the seasonality pattern itself on the regular underlying business is seasonal, and we tend to have more completed recoveries, and there may be a realization of collaterals, or there may be agreements with certain cases and so forth happening before. Right before the half year and the full year marks, which means that the Q2 and Q4 revenue tend to be stronger, but we have the costs spread out throughout the year. On top of that, we have been benefiting from a certain amount of transactional revenues, that you know, things like sourcing fees for portfolio transaction opportunities where you know, we have been paying the sourcing fee. There are due diligence fees.
There's other advisory type fees that we get, and they tend to end up in the fourth quarter in particular. That has also been positively contributing to the revenue picture. We see over time that, you know, the growth of added volumes to the platforms that we have across the three strategic markets will over time continue to grow, and that the reliance on those transactional fees will reduce over time. We haven't given any specific numbers, but you know, we just want to make sure that point is understood.
Okay. One last sort of follow-up question on my first question, actually. This 3.9x that you're calculating on that page 18, is it just for the quarter, or is it your book average?
That's the quarter.
It's quarter.
Okay.
It's points in time, right? You can see that, you know, it's fairly stable over time. There is smaller variation.
Yeah. Okay. Thank you.
Thank you.
We have just one follow-up from Ermin Keric from Carnegie. Please go ahead.
Thank you. It was basically just around the ONE Intrum program. You mentioned that you've now used about 74% of your total spend. Could you just clarify, is that in relation to the SEK 1 billion or the SEK 1.6 billion that's included in the kind of redundancy cost as well? If that's all been taken through OpEx, then mainly on which items in OpEx has that been inflating so far?
Michael, do you want to comment on that?
Yeah, happy to. The 74% we reference on page seven of the presentation refers to the SEK 1 billion. Obviously, in our items affecting comparability, we have taken part of the 0.6 billion that was referenced at the time of the Capital Markets Day as well. In terms of OpEx, you see that both going through the cash expenses as well as the other CapEx. There's elements in both as the SEK 1 billion essentially refers to cash spend.
I think that's why what Anders has shown on page nine in his presentation is so relevant that in terms of doing the transformation and de-emphasizing the legacy, we've actually managed to to keep cash spend flat when you look at both those categories, even though we have the transformation running through it on top of it. That's also highlighted in the margin, where when you strip out those transformation related cash costs or cash spends, you see in 2021 a further two-point margin uptick on a relative basis.
Got it. That's very helpful. Thank you. And then just one final question was on slide 8, and sorry if you already touched upon it. The kind of curve for cases migrated, I understood why the curvature has changed somewhat, but it seems like the end point is also a bit lower. Is it so that you've decided to migrate about 10 million cases less than in the original forecast, or is it just that it's later in time that it's completed? Just so I'm understanding that chart correctly.
No. The way to understand the chart is that we have reordered the migrations to make the higher value impact migrations where we can get more benefit out earlier. I think it's around SEK 5 million-SEK 6 million at the end there that there's a difference. One is a slight adjustment of the expected out end point, which is more of a technical adjustment. The other one is that the remaining ones will be migrated beyond the end of 2023 timeframe. It's just that we don't see them to have a meaningful impact on the value delivery for the SEK 1 billion to be able to complete that by 2023, and therefore it has also been deprioritized. They will be done over time, and they will also have some benefits.
You know, they're not necessary to achieve the targets that we set out for 2023.
Got it. That's all for me. Thank you very much.
Thank you.
As there are no further questions, I'll hand it back to the speakers.
Okay. Thank you so much for joining, and have a good day.
Thank you so much.
This concludes our conference call. Thank you all for attending. You may now disconnect your lines.