The suspended EEA Life Settlements fund has reduced the net asset value of its shares after an independent review was carried out into its valuation.
Dealing in the fund was suspended in December 2011 after it was hit with unprecedented levels of redemption requests from investors following the FSA’s labelling of life settlement funds as high risk, toxic products.
Last month, the fund’s annual report for the year ended 31 December 2011 contained arguments from auditors Ernst & Young that the portfolio could be worth as much as $100m less than the $871m valuation given by its directors.
EEA Life Settlements chairman Mark Colton then revealed an independent valuation exercise had been commissioned.
This exercise has now been completed and the maturity dates of the second-hand life policies owned by the fund have been extended. This means the original holders of the policies are likely to live longer than expected, hence increasing the amount of time it will take for money to flow into the fund.
The fund will also change the way its NAV is calculated. Previously, 12 months was added to the insured’s life expectancy when valuations were being determined, but this will be increased to double the life expectancy.
In an update to shareholders, Colton says: “The valuation of the fund’s policies is particularly sensitive to the estimates of life expectancy.
“The changes set out above, therefore, result in a reduction to the net asset value of the fund of around 10 per cent relative to the value immediately prior to the suspension of dealings.”