(September 8 – 10:30 ET) – Transamerica Life Canada says that NN Life has implemented a plan to reimburse policyholders of the NN Information Technology Fund for losses suffered as a result of the inappropriate employee trading activity announced last month.

Under the restitution plan, a total of $6.2 million is being paid to current and former policyholders who have invested in the fund at any time since its inception. The pay out involves 12,971 policies.

All affected policyholders have been sent notification of the plan. Restitution payments are being paid, or credited to the accounts of, all current and former policyholders who had invested in the fund. The effective date for the payments is August 31, 2000.

The methodology for calculating the losses and restitution amounts was verified by the accounting firm Deloitte & Touche. It involved calculating a new set of daily unit values for the fund for each day since its inception on November 10, 1998, through July 24, 2000 — the date on which the faulty pricing mechanism was corrected. These new daily unit values were then applied to all policies that have had holdings in the fund at any time since its inception to calculate the amount due each policyholder.

Transamerica announced back on August 1 that inappropriate trading activity had capitalized on the fund’s faulty pricing mechanism by using the time lag between market closings in Europe and North America to accurately predict daily closing prices. Gains made in this way caused corresponding losses to other policyholders. The design flaw dated back to the fund’s inception on November 10, 1998, and the inappropriate trading activity began in late October 1999.

Transamerica Life Canada chairman, president and CEO George Foegele said the payments were made “to ensure that no policyholder suffers in any way from either the product design flaw or the inappropriate employee trading.” Under the restitution plan, he said, “all policyholder accounts are being restored to the position they should otherwise have enjoyed as investors in the fund.”

The NN Information Technology Fund was acquired by Transamerica on April 12, 2000, as part of its purchase of NN Life from ING Canada. Until the end of July, the fund was managed by ING Investment Management Inc. Transamerica Life Canada took over management of the fund on August 1.
-IE Staff