Amtrust Financial Services, Inc. | 2013 | FY | 3


The following summarizes data utilized in estimating the fair value of the portfolio of life insurance policies as of December 31, 2013 and 2012 and, as described in Note 6. “Investments in Life Settlements”, only includes data for policies to which the Company assigned value at those dates:
 
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.


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