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Overview of the Actuarial Profession and Career Opportunities

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  1. Overview of theActuarial Profession and Career Opportunities St. John’s University November 2, 2011 Michael L. Frank, Aquarius Capital

  2. Biography of Michael L. Frank • Actuary: Life & Health Actuary (ASA, FCA, MAAA, MIAA) • Experience: Insurance/Reinsurance/Employee Benefits • Appointed Actuary: Insurance Companies, HMOs, & Reinsurers • Consulted more than 500 municipalities and 80 private equity/hedge funds • Managed $4 billion block of reinsurance • Mergers & Acquisition Experience • Actuarial Society of Greater NY, President (2011) • SOA Section Councils: Actuary of the Future, Entrepreneurial, Reinsurance • Various NAIC/AAA/CCA Committees & Task Forces (e.g., Healthcare Reform) • SOA LEARN Program – Instructor for Reinsurance for Insurance Regulators • Speak/Recruit at Industry Meetings, Publish Articles, Industry Committees • Other Credentials & Designations • Licensed life, accident and health broker (25+ states) • Licensed reinsurance intermediary & managing general underwriter • BS, University of Michigan, Mathematics & Statistics (1987)

  3. What portion of the GNP in this country is tied to the insurance industry? How about worldwide?

  4. Insurance Products • Life Insurance • Health Insurance (e.g., medical, dental, disability) • Annuities • Property (e.g., Personal Items – Home, Earthquakes) • Casualty (e.g., Auto Liability, Professional Liability, Workers Comp) • Variety of Specialty Coverages & Hybrids (e.g., Contingencies) • Reinsurance/Retrocession • Catastrophe Covers

  5. Insurance is part of our day-to-day lives! • Business Interruption • Entertainment (TV, Movies, Sports) • Travel Coverage • Weather • Terrorism • Mail/Shipping • Transportation – Auto, Motorcycle, Boat • Home Owners/Renters Insurance • Many others – traditional and non-traditional

  6. A Strong Career Outlook Actuary Ranked Best Job of 2009 Ten Jobs That Pay $80,000 a Year Ten Jobs For Math Whizzes One of the Best Careers in 2007 Doing the Math to Find the Good Jobs Best Jobs for New College Graduates Now Ranked Top Four Careers in the Past Six Editions 6

  7. Definition of an Actuary • An actuary is a business professional who deals with the financial impact of risk and uncertainty. Actuaries provide expert assessments of financial security systems, with a focus on their complexity, their mathematics, and their mechanisms • Actuaries mathematically evaluate the likelihood of events and quantify the contingent outcomes in order to minimize losses, both emotional and financial, associated with uncertain undesirable events. Source: Wikipedia, 1/2011

  8. Types of Actuaries • Life Insurance • Health Insurance • Pensions/Retirement • Investments • ERM • Property Casualty

  9. Emerging Issues & Concerns 9

  10. Actuaries Involved in Public Issues • National Budget Deficit – What about OPEB • Employee Benefits – 20% to 25% of Salary • OPEB Largest Number in Municipal Financials • Medicare & Social Security Crisis • Financial Market Crisis What portion of the cost of this car is needed to fund retiree benefits?

  11. Actually, Actuaries… • Analyze, measure, convert and manage risk into opportunity • Use mathematical and statistical analytical skills, financial theory, business knowledge and an understanding of human behavior • Develop and validate financial models to guide decision making • Are creative problem solvers who see the “whole picture” 11 11

  12. High Standards and Ethics • Candidate Code of Conduct - Emphasizes importance of ethical behavior on the part of those pursuing an actuarial credential • Historically, actuaries many times wear the “black hat” and delivery bad news, but not always (they also deliver solutions). • It is a profession that takes the honor system very serious (Precepts and Actuarial Standards of Practice) 12

  13. Who Traditionally Employs Actuaries? • Insurance Carriers (e.g., AXA, MetLife, NY Life, Prudential, etc.) • Health Maintenance Organizations (HMOs) • Aetna, Blue Cross, Cigna, Coventry, Humana, United, and many others • Consulting Firms (e.g., Aon, Mercer, Milliman, Towers, etc.) • Reinsurers (e.g., Gen Re, Munich, RGA, Scor Re, Swiss Re, etc.) • Regulators – Insurance Departments, CMS, HHS • Rating Agencies – AMBest, S&P, others • Financial Institutions - Investment Bankers, Banks, Asset Managers • Large Employers or Welfare Funds • Other Organizations Serving the Insurance Industry 13

  14. Roles of Actuary • Actuarial - Pricing, Reserving, Product Development • Financial Reporting, Valuation & Analysis • Underwriting • Risk Management • Investment Managers • Claims Management • Reinsurance/Retrocession Purchasing • Broker/Intermediary Issues • Product Development • Audits (e.g., Forensic Audits) • Expert Witness 14

  15. Common Terminology • Reserves • Valuations • Loss Ratios • ROIs • Risk • Embedded Value • Experience Rating & Credibility • Underwriting • Risk Management/Reinsurance • Enterprise Risk Management (ERM) 15

  16. Life Contingency Functions (Life, Annuity, & Pension Actuaries) • Ax:n • ax:n • px • qx • Vx • Commutation Functions: Cx, Dx, Mx, Nx, etc. • Cash Values 16

  17. Health Insurance Terms • Medical Loss Ratio • Completion Factors & Claims Triangles • Healthcare Inflation (Trend) • PPO/POS/HMO/EPO • Capitation • Days per 1,000; Visits per 1,000 • Per Member Per Month • Provider Fee Schedules – DRGs, RBRVS • Publicly Traded HMOs – Earnings per Share (EPS) • PPACA (e.g., Accountable Care Organizations) 17

  18. Sample Actuarial Assumptions • Starting Claim Costs or Benefits • Inflationary Assumptions (e.g., healthcare inflation/trend) • Completion Factors • Interest discount rate • Retirement rates • Turnover rates • Disability rates • Mortality rates • Aging Assumptions (Age/Sex Factors) • Asset return on investments (if funded) • Salary increases • Plan Participation % • Actuarial cost methods (e.g., projected unit credit)

  19. Actuaries in Consulting Firms • Actuarial Valuations • Development of Pricing Models & Underwriting Box • Valuations – Reserves & Portfolio Valuations • Financial Modeling/Forecasting • Brokering & Consulting – Sourcing Policies • Employee Benefits and Other Insurance Products • Reinsurance • Product Development Consulting • Legal & Compliance Consulting • Financing • Fiduciary Services

  20. Emerging Trends • Changes in accounting rules • Increase in demand for financial reporting actuaries • Enterprise risk management (ERM) • Expanding traditional and non-insurance opportunities • CERA credential; SOA funding • Development of Insurance/Reinsurance Pricing Committees • Globalization • Opportunities for those understanding cultures, language, etc. • Unifying approaches, actuarial organizations, credentialing, etc. • Expanded underwriting/risk management roles • Health care - PPACA • Changes in regulation may drive new opportunities for actuaries 20

  21. Actuarial Organizations (US) • Society of Actuaries (www.soa.org) • American Academy of Actuaries (www.actuary.org) • Conference of Consulting Actuaries (www.ccactuaries.org) • Casualty Actuarial Society (www.casact.org) • Joint Board for Enrollment of Actuaries (www.irs.gov) • Actuarial Society of Greater New York (www.goasny.org) • Chartered Enterprise Risk Analyst (www.CERAnalyst.org) • Other Actuarial Organizations & Clubs Worldwide 21

  22. Resources for Students • www.Soa.org • www.Beanactuary.org • www.Riskisopportunity.net • www.Casact.org 22

  23. The Society of Actuaries (SOA) 23 • Is the largest professional, actuarial organization in the world (www.soa.org) • Serves over 21,000 members, 30,000 candidates and the public • Works for actuaries to be the leading professionals in the measurement and management of risk • Committed to: • Education • Research • The Profession 23

  24. Three Society of Actuaries (SOA) Designations/Credentials Associate of the Society of Actuaries (ASA) Chartered Enterprise Risk Analyst (CERA) Fellow of the Society of Actuaries (FSA) 24

  25. SOA Examinations 350 exam centers worldwide 49,500 Exams administered in 2009 More than 9,000 candidateswere new 25

  26. Enterprise Risk Management (ERM) 26 There is a growing need for organizations to link their risks across their business units and adopt a more comprehensive framework ERM is the process of risk analysis and management across an entire organization Evolution & growth of senior management pricing committees 26

  27. Actuarial Society of Greater New York(ASNY) • Largest actuarial club in the world • Serves actuaries in the NY, NJ, CT plus other states • Supports actuarial exams (e.g., venues & proctors) • Provides continuing education seminars to actuaries • 15 to 20 continuing education events a year plus annual meeting • Actuarial exam study classes (e.g., St. John’s University) 27

  28. ASNY (Continued) • Offers networking opportunities for new & future actuaries • ASNY has many volunteers plus new members joining • ASNY has a LinkedIn Group • Actuarial Career Day • “Bridge from University to Work World” • Website www.goasny.org 28

  29. ASNY Career Day • Learn about profession from actuaries in different disciplines • Life, health, pensions, P&C • Learn about traditional, emerging and non-traditional opportunities • Opportunity to interview with different employers (e.g., last year 14 employers participated) • 400+ students attended in 2011 event • Network with other actuaries and future actuaries • Annually: Typically 2nd Sunday in January (tentatively 1/8/12) • Traditionally hosted by Columbia University • Website www.goasny.org 29

  30. ASNY Career Day – 2011 Participating Companies 30

  31. Advice for Actuarial Students • Make learning a lifelong habit • Develop disciplined study habits • Acquire a well-rounded curriculum • Sharpen your communication and business skills • Take SOA/CAS actuarial exams while in school • Obtain an actuarial internship or relevant employment • Find mentors • “Networking” is important (e.g., volunteering, industry events) 31

  32. Academic Studies • Actuaries come from a range of disciplines including actuarial science, math, finance, statistics and engineering • Students should complete courses in probability, calculus and business communications • Other foundational coursework includes economics, applied statistics and corporate finance • Growing need for developing business skills & communications 32 32

  33. Things to Knows • Actuarial Exams • Need a Resume • Job Market • Actuarial Recruiters • Networking • Volunteering • “Never stop learning” Note: There are resources to help in your employment search 33

  34. Top 10 reasons… 10. Looking for a career that’s dynamic and challenging 9. You don’t want to go to graduate school 8. Superior job security through economic cycles 7. You want a professional title other than MD, Esq., or CPA 6. Opportunities to develop skills transferrable across multiple industries 5. “Earn while you learn” 4. Control over your own career: advancement is merit-based 3. Ability to choose among outstanding job offers 2. Highly competitive salary and benefits • You’re self-motivated and goal-oriented, with superior math & communication skills! http://www.beanactuary.org/college/topten.cfm & ASNY 2011 Career Day 34

  35. Open Discussion & Questions Michael L. Frank, ASA, MAAA, FCA, MIAA President & Actuary Aquarius Capital Phone: (914) 933-0063 E-Mail: michael.frank@aquariuscapital.com Website: www.aquariuscapital.com (Visit “Aquarius in the News” on Website) 35