Transcript Actuarial Job – Another Choice for Math Graduates

Actuarial Job
– Another Choice for Math Graduates
By Karen Cheng
On 12/04/2007
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It could last for several years before becoming an
actuary – depending on personal schedule and
priority
Easy Mathematics as compared to theoretical
mathematics
Outline
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Job Contents
Prerequisites
Personalities
Job Opportunities
Approaches -- Exams and on-job trainings
Salary
Q&A
Job Contents
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Most actuarial staff work in insurance companies,
either life or casualty insurance companies,
responsible for product development or valuation.
Other choices are available.
Actuarial staff are different from accountants as
actuarial staff forecast future earnings and risk
positions – in some cases, figures are not reconciled
to the last decimal place
Staff in product development are like vans whilst
staff in valuation department are like back offices
Job Contents – Product Development
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Product Development – main job responsibilities
-- Feasibility study: evaluate issues and designs of
new or revised insurance products with related departments
-- Determination of premium rates
-- Marketing concerns
-- Profitability and worst case scenario, risk taker or risk
tolerance
-- Internal systems
-- Filing of developed products to authorities and regional
offices before issuing
-- Impact to the company as a whole
Job Contents – Product Development
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Product Development – main job responsibilities
(continued)
-- Reaction from selling channels
-- Monitoring of experiences after sales
-- Revisions of products after sales
Job Contents – Product Development
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Product Development – persons to deal with
-- Authority
-- Regional office
-- Marketing department
-- Sales channels
-- Legal department
-- Underwriting department
-- IT department
-- Accounting/finance department
-- Investment department
-- Claim department
Job Contents – Product Development
Example (continued)
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Determination of premium rate
-- We need to know death rate and pricing interest rate
-- Premium rate = net level premium + expense loading
-- Net level premium is the premium such that present value of
future benefit is equal to present value of future premium
payment from policyholders
n 1
NLP * (1   t Px * (1  i) t )  ( DBt *t 1 Px * qx t 1 * (1  i) (t 0.5) )
t 1
t 1
x: issue age, t: policy year, n: premium paying period
Job Contents – Product Development
Example (continued)
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Determination of premium rate (continued)
-- Take premium rate of whole-life with 6-pay of male per
NT$10,000 death benefit for example
in NT dollars
Age
0
1
2
3
4
5
15
25
35
45
55
65
Pre
m
450
371
381
391
401
411
521
629
736
956
1233
1800
What problem do you observe from the rate?
Job Contents – Product Development
Example (continued)
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Others – Determination of commission for agents
-- Scenario 1: 70%/20%/5%/0%/0%/0%
-- Scenario 2: 50%/30%/10%/5%/0%/0%/0%
-- Scenario 3: 30%/20%/10%/10%/10%/10%/5%
-- Premium rate compared to market – big or small companies
-- Commission rate and commission amount compared to
market
-- Possibility of being abused by agents or policyholders
Job Contents – Valuation
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Valuation – main job responsibilities
-- Monthly new business report, claim report, and reserve
report (local basis, US basis, European basis)
-- Annual forecast of business earning for future years
-- Company’s strategic planning
-- Analysis of actual business earning by sources
-- Propose of annual bonus to shareholders
-- Company’s risk management
-- Annual actuarial report to authority
-- Experience analysis
-- Calculation of embedded value
Job Contents – Valuation
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Valuation – main job responsibilities (continued)
-- Actuarial model maintenance, including asset model, liability
model, and stochastic model
-- Bonus declaration of participating products to policyholders
-- Reinsurance management
-- Actuarial audit
-- Reserve adequacy currently and in the future
-- Asset liability management
Job Contents – Valuation
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Valuation – persons to deal with
-- Authority (mainly)
-- Regional office (mainly)
-- Marketing department (mainly)
-- Sales channels
-- Legal department
-- Underwriting department
-- IT department
-- Accounting/finance department (mainly)
-- Investment department
-- Claim department
Job Contents – Valuation Example
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Risk management
-- Underwriting is important, but is lower death rate or lapse
rate always good?
-- Protection products, saving products, or annuity products
-- We usually do not prefer high death rate for protection
products. The risk could be compensated by sales of annuity
products. This will allow insurance companies to write more
risky business.
Job Contents – Valuation Example
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Asset liability management
-- When market interest goes up
(a) What will happen to policyholders?
(b) What will happen to life insurance companies in asset side
and liability side, respectively?
© What actios could an insurance company do to prevent
fluctuation in earning?
Job Contents – Valuation Example
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Asset liability management (continued)
-- When interest rate goes up
(a) Low-pricing-interest policies will surrender
(b) Liability: Insurance companies will lose policies without
recovering acquisition expense and have to pay huge
surrender benefits.
Asset: Insurance companies will be forced to sell bonds
with decreased bond values.
(c) Insurance companies could levelized commissions, diversify
investment portfolio, and set capital in advance
-- This will be modeled by 500 sets of stochastic runs.
(a model with several thousands variables)
Prerequisites
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Background
-- Probability concept
-- Simple statistics concept
-- Strong logic
-- Financial concept (accounting and investment)
-- English proficiency
-- Ability to solve problems
Prerequisites
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Majors – not a necessary
-- Mathematics
-- Statistics
-- Finance
-- Risk management
-- Insurance
-- Mechanics
-- Others
Personality
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Be open-minded to learn and to listen
Enjoy facing challenge
Be a good team worker
Communicate well
Be ready to compete with international actuarial staff
Job Opportunities – Company Types
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Oversea or in Taiwan
If in Taiwan, local companies or international
companies
Company types
-- Life insurance companies (product development or valuation)
-- Casualty insurance companies
-- Reinsurance companies
-- Consulting firms
-- Authority
-- College
Job Opportunities – Positions
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Possible positions
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Actuarial staff
Actuarial manager
Actuarial department head
Appointed actuary
Chief actuary
Chief financial officer (CFO)
Chief executive officer (CEO)
Researcher in other departments
Consultant
Job Opportunities
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What kind of life do you want?
-- There are bunches of job opportunities.
-- There is always some thing new to be learnt
-- Long exam period and long working hours
-- Have to look for balance between job/exams and life
Approaches -- Exams
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Eight exams – the first four exams are more technical
related
-- Course P: (Calculus), probability, and statistics
-- Course FM: Investment, financial mathematics, derivatives
(basic accounting, compound interest,
macro-economics, and micro-economics)
-- Course M: Actuarial mathematics, model for quantifying risks,
(stochastics, and simulation)
-- Course C: Loss models, credibility theory, (time series, and
medical statistics)
Approaches – Exams (continued)
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Eight exams – the last four exams are more jobrelated
-- Fundamental of actuarial practice:
Life insurance and finance, pension, group insurance,
reinsurance, loss reserving, risk management
-- Final assessment: a 96-hour exams
ASA earned!!
-- Course CSP
-- Course DSP
FSA earned!!
Approaches – Exams (continued)
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Passing rate depends on exams taken
-- multiple choices or essay questions
-- technical or job related
-- Easier for the first four exams (20%~40%)
-- Harder for the 5th and 6th exams to earn ASA
-- Even harder for the 7th and 8th exams (around 40%) to earn
FSA
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Exams are held quarterly, semiannually, or annually
Approaches – Resources
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Check the website: www.soa.org
Be ready to lead devastating life
…..for at least 5 years!!
Approaches – on-job Trainings
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Learn along the way
Intern in insurance companies
Be trained by senior staff, boss, and self
Overtime is inevitable!!
Being good and maintaining competitive take
hard work!!
Salary
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Vary from persons to persons and vary from
companies to companies
Other Information
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Other than becoming an actuary, you could become
a chartered financial analyst (CFA) or a financial
engineer
Currently 139 fellows, including foreigners, in
Actuarial Institute of ROC
Currently around 40 fellows in Society of Actuary of
US in Taiwan
Passing ROC exams is easier, but no further exams
will be held in the future
Q&A
Thank You!!