Actuarial ScienceAn ETSU Alumni PresentationFor math or business majors February 28, 2003
Presentations from ETSU Alumni: Andrew Sell, ActuaryUnum Provident CorporationChattanooga, TNMS in Mathematics, 2001Graduate Certificate in Business, 2001 Anna Mu, ActuaryNationwide InsuranceColumbus, OHMS in Mathematics, 1999 Reneé Ferguson, ActuarySocial Security AdministrationBaltimore, MDMS in Mathematics, 2000Graduate Certificate in Business, 2000 Russell Mawk, ActuaryMerastar Insurance CompanyChattanooga, TNMS in Mathematics, 2001
Content of Presentation: Career Opportunities Actuarial Science ProgramThe ActuaryETSU CourseworkNational Exam ProcessThe Actuarial ProfessionProfessional Development
Opportunities A degree in mathematics is excellent preparation for graduate study in Law, Medicine, or Business. A nationwide study analyzed performance on the LSAT and GMAT based upon undergraduate major and…… Mathematics majors ranked first as a group on both tests.
Opportunities Academics: elementary and secondary teaching, college/university teaching and research. Business, Insurance, Banking: sales, banking, statistics, market research, securities, ACTUARIAL, underwriting, data processing. Industry: applied mathematics, computer systems, data processing, operations research, numerical analysis, robotics, quality control, industrial engineering. Government Agencies, (The NSA is the country's largest employer of mathematicians.): cryptologist, statistician, systems analyst, mathematician.
Internships for Math Majors or Minors Central Intelligence Agencyhttp://www.cia.gov/cia/employment/jobpostings/student.htm500 applicants, 50-60 accepted (1) Institute for Defense Analysishttp://www.ida.org/IDAnew/Employment/interns.htmlApplication period from January to March Definitely take mathematics majors. Also hire undergraduates and graduates National Security Agencyhttp://www.nsa.gov:8080/programs/employ/program2.htmlMathematics undergraduate and graduate students accepted. 12 wk summer program.
WWW.ACTUARYJOBS.COM • Analysts with a degree in mathematics, actuarial science, statistics or related work experience. Demonstrated written and oral communication skills. Health data management and analysis. • Our health insurance client requires an undergraduate or graduate degree in Actuarial Science, Mathematics, Statistics or Finance. Analytical and problem solving skills required. Up to 55K. • Company seeks entry-level actuarial candidates for growing office. Must have 1 SOA course completed. Actuarial internship a plus. • Click for dozens of other Pension entry-level opportunities.
WWW.CAREERBUILDER.COM • Jobs 117 Results Found for Actuarial FL Sr Network Acct Mgr - Sunrise, FLUnitedHealth PA Actuary -Independence Blue Cross IL Field Auditor - Chicago MedicareMutual of Omaha CT Field Auditor - Hartford MedicareMutual of Omaha MO Field Auditor - St. Louis MedicareMutual of Omaha GASr. AssociateKPMG CADirector of UnderwritingUltralink CAHPO PRM Project Manager Kaiser Permanente PAActuarial AnalystIndependence Blue Cross GA Health & Welfare DirectorPricewaterhouseCoopers
Be prepared for your future • Courses in economics, accounting, computer science, and insurance are useful. • A bachelor's degree in mathematics, actuarial science, statistics, economics, finance, or accounting. • Good communication and interpersonal skills are important • About 55 colleges and universities offer an actuarial science program, and most colleges and universities offer a degree in mathematics or statistics.
ETSU DEPARTMENT OF MATHEMATICS • ACTUARIAL PROGRAM • East Tennessee State University has developed a degree program in Actuarial Mathematics. By emphasizing mathematical topics of interest to Actuaries, this degree program prepares students for careers in industries that use business modeling skills, such as insurance companies, financial institutions, pension funds, governmental agencies, and consulting firms. • In the Fall of 1997, East Tennessee State University offered four core courses for actuarial students. The Theory of Interest and Actuarial Mathematics I & II, and Time Series.
EAST TENNESSEE STATE UNIVERSITY DEPARTMENT OF MATHEMATICS ACTUARIAL PROGRAM HOME PAGE • The Coordinator for Actuarial Mathematics at East Tennessee State University is Dr. Don Hong(firstname.lastname@example.org). If you have any comments or suggestions please feel free to send an e-mail. • Visit the following website to learn more about the Actuarial Program at ETSU: • http://www.etsu.edu/math/actuary/act-etsu.htm
Origin of the Actuary • “actuarius” was the business manager of the Senate in Ancient Rome • term first applied to a mathematician in 1775 at the Equitable Life Assurance Society, London, UK • by 1850 actuaries active in life insurance, friendly societies, and pension schemes • expanded to non-life, health care, social security, banking, corporate finance, financial engineering.
Definitions of “Actuary” The professional who manages the financial consequences of the uncertain. The professional who makes financial sense of the future. www.actuaries.org The professional who evaluates the current financial consequence of contingent future events.
U.S. Department of LaborBureau of Labor Statistics Occupational Outlook Handbook Actuaries held about 14,000 jobs in 2000. 7/10+ of the actuaries who were wage and salary workers were employed in the insurance industry. • Life and health insurance companies, • Property and casualty insurance companies, pension funds, or insurance agents and brokers employed others.
U.S. Department of LaborBureau of Labor Statistics Occupational Outlook Handbook Most of the remaining actuaries worked for firms providing a variety of corporate services, especially management and public relations, or for actuarial consulting services. A relatively small number of actuaries was employed by security and commodity brokers or by government agencies. Some developed computer software for actuarial calculations.
U.S. Department of LaborBureau of Labor Statistics Nature of the Work • Assemble and analyze data to estimate probabilities of an event taking place, such as death, sickness, injury, disability, or property loss. • Address financial questions including those involving the level of pension contributions required to produce a certain retirement income level or how a company should invest resources to maximize return on investment in light of potential risk. • Help determine company policy and sometimes explain complex technical matters to company executives, government officials, shareholders, policyholders, or the public in general.
Russell Mawk, ActuaryMerastar Insurance CompanyChattanooga, TNMS in Mathematics, 2001
ETSU Coursework • Exam I • Calculus I, II, III (1910, 1920, 2110) • Limits • Series • Sequences • Derivatives of single & multivariate functions • Integrals of single & multivariate functions
ETSU Coursework • Math Stats I, II (4387, 4397 & 5047, 5057) • General Probability • Bayes’ Therorem • Single & multivariate distributions
ETSU Coursework Exam II • Theory of Interest (5377) • Accumulation & present value functions • Interest & discount rates • Valuation of streams of payments • Essentials of Finance (5000) • Risk & divesification • Valuation of securities & cash flows
ETSU Coursework • Essentials of Economics (5000) • Principles of supply & demand • Characteristics of different business organizations (monopoly, corporation, …etc.)
ETSU Coursework Exam III • Actuarial Mathematics (4387, 4397 & 5387, 5397) • Survival distributions • Life tables • Life annuities
ETSU Coursework Other Beneficial Courses • Essentials of Accounting (5000) • Identification, measurement, & communication of data for stockholders & creditors • Essentials of Management (5010) • Organizational behavior, structure, change, & development
ETSU Coursework • Essentials of Marketing (5010) • Marketing environment & consumer behavior • Operations Research • Linear & nonlinear programming
Merastar Insurance Company • I work in a department of 13 with 2 Fellows • Merastar is a subsidiary of Prudential’s Property & Casualty division. • Auto & Homeowners insurance are our primary products
Job Duties • Marketing Proposals • Rate a set of sample policies for prospective accounts • Competitive Analysis • Comparison of our rates and rating structures with top competitors
Job Duties • Random Testing • Quality control tool to catch rating errors. • Indicated Study • Indicated rate changes by state and coverage
Job Duties • Pricing • I’m responsible for pricing our auto & home lines in 6 states (DE, FL, IL, ME, NV, WI) • Rate Review Proposal Exhibits • Filing Exhibits • Implementation & Testing
Andrew Sell, ActuaryUnum Provident CorporationChattanooga, TNMS in Mathematics, 2001Graduate Certificate in Business, 2001
Actuarial Organizations There are 3 primary actuarial organizations in the USA: • Casualty Actuarial Society (CAS) which is an organization for actuaries in property and casualty insurance (home, auto, personal lines) • Society of Actuaries (SOA) which is an organization for actuaries in life, health, disability, and pensions. • American Academy of Actuaries (AAA) is the organization that gives a unified voice to the actuarial profession. You might have seen Al Gore reference the AAA in his 2000 Presidential campaign.
Actuarial Exams In order to become an actuary in each society, a student must complete a series of exams. While the respective societies have differing numbers of exams and topics, the first 4 exams for each society are deemed “preliminary” and thus are jointly administered. The CAS has 9 total exams and the SOA has 8. • Course 1: Calculus, Probability, and Risk Theory • Course 2: Interest Theory, Economics, Price Theory and Finance • Course 3: Actuarial Mathematics, Probability Models, Loss Models, and Simulation • Course 4: Actuarial Modeling, Credibility, and Loss Models
Actuarial Designations • If you pass 6 actuarial exams and complete a course on actuarial professionalism, you will achieve the designation of an Associate in either the SOA or the CAS. This greatly improves your earnings potential as an actuary and gives you greater access to management and project control. Why do I want to take actuarial exams? • If you pass all 8 or 9 exams, depending on the society, along with professional development, you will gain the designation of Fellow in the SOA or CAS. This will greatly increase your earnings potential and open future management positions. It also gives you the ability to work on the Statement of Actuarial Opinion for a company.
Information on Exams • Exams 1-4 are given twice in a 12 month period. They are administered in May and November. There are generally 4 textbooks per exam and the exam fee is between $95 - $280. • If you work for a firm, it will generally pay all these expenses for you, given that it is your first or second attempt. • For exams 1-4, there is no pre-determined passing mark for a given exam. The exams are graded en masse and the SOA/CAS sets a number of questions that the average student should have gotten correct, based on exam difficulty. Once this is determined, the exams are scored accordingly. Later exams are written answer, and are scored in a different manner.
How to Prepare for Exams • Register early so you don’t forget and miss the deadline (I’ve seen it happen and the SOA doesn’t make exceptions) • Begin studying at least 3 months in advance. I’ve been told that it takes, on average, about 400 hours of studying to pass one exam, and I think that’s true. • Ask fellow students, coworkers, others about what worked for them and what materials are the best to study. • Don’t wait and try to cram. It will not work. There are many practice exams available at www.soa.org and in the CSM study manual for each exam. Working previous exams and tons of problems are the keys to passing exams. • I advise that you purchase materials from www.sliderulebooks.com because you get free stuff when you order from them. • Attend a seminar, if necessary. There are exam-passing seminars all over the country; Georgia State, New England, Temple Univ., etc. These seminars are expensive (at least $800), so it’s best to wait until you have a job where they will pay for it, if you can.
The Incentive • Greater ability to find a job. Finding a job with no exams is very difficult • Greater responsibility at work Why do we take these exams? • Average starting salary with 1 exam is $30,000 - $40,00 • Higher career salary potential • With each exam passed, firms will increase your salary from $1,500 to $5,000. Also, with each passed exam, a promotion is likely, which will further increase your salary and responsibility • Average Fellow with 5 years experience makes $95,000. Further salary data is at www.dwsimpson.com/salary
Additional Actuarial Info • Despite the exam process, the Actuarial profession has been ranked in the top 5 for job satisfaction for the last 3 years • Average time from entry-level to FSA or FCAS is between 5 and 10 years • Semi-annual meetings of the SOA and CAS allow each ASA/ACAS and FSA/FCAS travel opportunities each year, usually paid for by your company • On-the-job travel time is minimal • Virtually no interaction with customers • Allows you to have an input into the changing face of business, government, insurance, and pension strategy for a large portion of society
Why an Actuary? What do I do? WHY? I became an actuary because I had a moderate amount of logical, mathematical, and analytical ability. Since I didn’t want to teach, I didn’t know what to do. Being more practical than abstract, mathematically, I thought that being an actuary would be all right. And it is What do I do? • I work as an assistant for an FSA and 2 ASAs. • Maintain life and health valuation systems an provide reporting • Complete testing and system upgrades • Have responsibility for life models for various sub-companies and work on Financial Statement reporting (DAC and VOBA). • Other minor projects, as I learn the systems and insurance
Suggestions • Take a summer internship. This is invaluable for getting your foot in the actuarial door. I left information with Dr. Hong concerning summer internship opportunities at UnumProvident • After taking Calculus Statistics, attempt exam 1. There’s no substitute for having an exam passed when trying to find a job • Use people from ETSU who currently work in the actuarial field to get an entry-level position • Take as many computer classes as possible in college. While many experienced actuaries have complete knowledge of mainframe, I find that actuaries are lacking on the PC side. The newer generation of actuaries will be well-suited to have that knowledge • While a graduate degree is certainly not needed, ETSU’s actuarial sciences program will give you the tools to pass SOA/CAS exams 1-3. • If you take a position in the actuarial field, you must be prepared to relocate. The closest jobs are in Chattanooga, Nashville, Atlanta, and Charlotte. If relocation is not an issue, there are actuarial positions in almost every country in the world.
Anna Mu, ActuaryNationwide InsuranceColumbus, OHMS in Mathematics, 1999
Academic 15 0.4% Brokers & Agents 95 2.6% Consultants 679 18.9% Government 78 2.2% Life & Accident, Health 75 2.1% Property Liability 1,641 45.7% Reinsurance 464 12.9% Retired 227 6.3% Organizations Serving the Industry 105 2.9% Other 210 5.9% Total 3,589 Breakdown of the Active Membership of the Casualty Actuarial Society Source: www.beanactuary.org
Insurance Company 7,007 41.0% Consulting Actuary 5,944 34.8% Insurance Broker 64 0.4% Insurance Department (state or provincial) 136 0.8% Other Government Employment 260 1.5% University & College 201 1.2% Investment Banker or Advisor 332 1.9% Software Developer/Vendor 201 1.2% Organizations Serving Insurance Business 130 0.8% Non-Traditional 334 2.0% Retired 1,485 8.7% Unaffiliated 994 5.8% Total 17,088 Breakdown of the Active Membership of the Society of Actuaries Source: SOA 2003 Yearbook
Personal Lines Auto Homeowner Farm, etc Commercial Lines Commercial Auto Commercial Property Commercial General Liability Workers’ Compensation Professional Liability Public Liability Nuclear Insurance Pool Aviation, etc People in the Casualty Actuarial Society work with these insurances
People in the Society of Actuaries work with these fields • Life Insurance • Annuities • Health Insurance • Pension, etc
Some Government Insurance Program • Federal Deposit Insurance Corporation (FDIC) • National Flood Insurance • Social Security (OASDHI) • Unemployment Insurance
Organization of an Insurance Company • Marketing • Agency • Underwriting • Actuarial • Investment • Claim Adjustment