Portfolio Recovery Drops Anchor, Shifts Staff

Account receivables management firm Portfolio Recovery Associates announced today it would close its third-party collections unit Anchor Receivables Management.

Norfolk, Va.-based Portfolio (Nasdaq: PRAA) said in a release it would redeploy the 100 Anchor staff to its core collections business. No job losses are expected. Anchor provided third-party fee-based collections from offices in Norfolk and Birmingham, Ala. Portfolio said it would work with existing Anchor clients to wind down their work with the division.

Portfolio said it was dropping Anchor and shifting the staff to its more profitable owned-portfolio collections. In the first quarter, Anchor accounted for 2 percent of Portfolio’s revenues and less than 0.5 percent of its net operating income, Portfolio reported.

Steven D. Fredrickson, Portfolio’s chairman, president and CEO, said in a statement that the collectors would “be able to make a far more significant contribution to our company’s growth and profitability,” once they moved to the company’s “core owned-portfolio business.”

Portfolio stood behind Anchor in its 2007 annual report. It noted that “Anchor does indeed have an important role to play at PRA,” despite the fee-compression that the sector has undergone in recent years.

Portfolio reported revenues of its fee-for-service business grew 44 percent to $36 million and that the three units in that sector-Anchor, RDS and IGS Nevada-contributed “a record 16% of revenues, up from” 13 percent in 2006. Pre-tax, net operating income for the three units “increased more than three-fold,” in 2007, according to the report.

In its release today, Portfolio said it remained “fully committed” to RDS and IGS Nevada. IGS serves the auto-finance industry and RDS works for government agencies.

For the entire company Portfolio reported 2007 profits of $48.2 million on revenues of $220.7 million. The company said it expects no material impact to its financial results due to shutting Anchor.

Portfolio Recovery declined to respond to questions. It did not respond to emailed questions by insideARM’s deadline.