2013 | 2012 | ||||||
Average age of insured | 80.1 | 78.8 | |||||
Average life expectancy, months (1) | 131 | 139 | |||||
Average face amount per policy | $ | 6,611,000 | $ | 6,770,000 | |||
Effective discount rate (2) | 14.2 | % | 17.7 | % | |||
(1) | Standard life expectancy as adjusted for insured’s specific circumstances. |
(2) | Effective Discount Rate (“EDR”) is the Company's estimated internal rate of return on its life settlement contract portfolio and is determined from the gross expected cash flows and valuation of the portfolio. The valuation of the portfolio is calculated net of all reserves using a 7.5% discount rate. The EDR is implicit of the reserves and the gross expected cash flows of the portfolio. The Company anticipates that the EDR's range is between 12.5% and 17.5% and reflects the uncertainty that exists surrounding the information available as of the reporting date. As the accuracy and reliability if information improves (declines), the EDR will decrease (increase). The decrease in the EDR from December 31, 2012 to December 31, 2013 resulted from routine updating of life expectancies, which reflect a higher quality of information. |