Actuarial Science An ETSU Alumni Presentation For math or business majors

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Actuarial ScienceAn ETSU Alumni
PresentationFor math or business majors
February 28, 2003
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Andrew Sell, ActuaryUnum Provident
CorporationChattanooga, TNMS in Mathematics,
2001Graduate Certificate in Business, 2001
Presentations from ETSU Alumni
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
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Career Opportunities Actuarial Science
Program The Actuary ETSU Coursework National
Exam ProcessThe Actuarial ProfessionProfessio
nal Development
Content of Presentation
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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.

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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.

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Internships for Math Majors or Minors

• Central Intelligence Agency http//www.cia.gov/
  cia/employment/jobpostings/student.htm 500
  applicants, 50-60 accepted (1)

• Institute for Defense Analysis
  http//www.ida.org/IDAnew/Employment/interns.html
  Application period from January to March
  Definitely take mathematics majors.  Also hire
  undergraduates and graduates

National Security Agency http//www.nsa.gov8080
/programs/employ/program2.html Mathematics
undergraduate and graduate students accepted.  12
wk summer program.
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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.

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WWW.CAREERBUILDER.COM

• Jobs 117 Results Found for Actuarial
• FL   Sr Network Acct Mgr - Sunrise,
  FL UnitedHealth  
• PA  Actuary - Independence Blue Cross  
• IL   Field Auditor - Chicago Medicare Mutual of
  Omaha
• CT  Field Auditor - Hartford Medicare Mutual of
  Omaha
• MO Field Auditor - St. Louis Medicare Mutual of
  Omaha
• GA Sr. Associate KPMG
• CA Director of Underwriting Ultralink 
• CA HPO PRM Project Manager Kaiser Permanente  
• PA Actuarial Analyst Independence Blue Cross
• GA Health Welfare Director PricewaterhouseCoope
  rs

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Be prepared for your future

• Courses in economics, accounting, computer
  science, and insurance are useful.

• 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.

• A bachelor's degree in mathematics, actuarial
  science, statistics, economics, finance, or
  accounting.

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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.
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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(hong_at_etsu.edu). 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.ht
m
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The Actuary
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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.

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Definitions of Actuary
The professional who manages the financial
consequences of the uncertain.
The professional who evaluates the current
financial consequence of contingent future events.

• The professional who makes financial sense of
  the future.
• www.actuaries.org

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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.

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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.

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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.

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Russell Mawk, ActuaryMerastar Insurance
CompanyChattanooga, TNMS in Mathematics, 2001
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ETSU Coursework
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ETSU Coursework

• Exam I
• Calculus I, II, III (1910, 1920, 2110)
• Limits
• Series
• Sequences
• Derivatives of single multivariate functions
• Integrals of single multivariate functions

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ETSU Coursework

• Math Stats I, II (4387, 4397 5047, 5057)
• General Probability
• Bayes Therorem
• Single multivariate distributions

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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

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ETSU Coursework

• Essentials of Economics (5000)
• Principles of supply demand
• Characteristics of different business
  organizations (monopoly, corporation, etc.)

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ETSU Coursework

• Exam III
• Actuarial Mathematics (4387, 4397 5387, 5397)
• Survival distributions
• Life tables
• Life annuities

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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

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ETSU Coursework

• Essentials of Marketing (5010)
• Marketing environment consumer behavior
• Operations Research
• Linear nonlinear programming

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Merastar Insurance Company

• I work in a department of 13 with 2 Fellows
• Merastar is a subsidiary of Prudentials Property
  Casualty division.
• Auto Homeowners insurance are our primary
  products

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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

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Job Duties

• Random Testing
• Quality control tool to catch rating errors.
• Indicated Study
• Indicated rate changes by state and coverage

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Job Duties

• Pricing
• Im responsible for pricing our auto home lines
  in 6 states (DE, FL, IL, ME, NV, WI)
• Rate Review Proposal Exhibits
• Filing Exhibits
• Implementation Testing

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Andrew Sell, ActuaryUnum Provident
CorporationChattanooga, TNMS in Mathematics,
2001Graduate Certificate in Business, 2001
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The Actuarial Exam Process
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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.

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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

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Actuarial Designations

• Why do I want to take actuarial exams?

• 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.

• 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.

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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.

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November 2002 Exam Statistics
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How to Prepare for Exams

• Register early so you dont forget and miss the
  deadline (Ive seen it happen and the SOA doesnt
  make exceptions)
• Begin studying at least 3 months in advance. Ive
  been told that it takes, on average, about 400
  hours of studying to pass one exam, and I think
  thats true.

• Ask fellow students, coworkers, others about what
  worked for them and what materials are the best
  to study.
• Dont 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
  its best to wait until you have a job where they
  will pay for it, if you can.

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The Incentive

• Why do we take these exams?

• Greater ability to find a job. Finding a job
  with no exams is very difficult
• Greater responsibility at work

• 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

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Additional Actuarial Info

• Average time from entry-level to FSA or FCAS is
  between 5 and 10 years

• Despite the exam process, the Actuarial
  profession has been ranked in the top 5 for job
  satisfaction for the last 3 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

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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 didnt want to teach, I didnt 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

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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.
  Theres 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,
  ETSUs 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.

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Anna Mu, ActuaryNationwide InsuranceColumbus,
OHMS in Mathematics, 1999
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Actuarial Profession
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Breakdown of the Active Membership of the
Casualty Actuarial Society
Source www.beanactuary.org
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Breakdown of the Active Membership of the Society
of Actuaries
Source SOA 2003 Yearbook
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People in the Casualty Actuarial Society work
with these insurances

• 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

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People in the Society of Actuaries work with
these fields

• Life Insurance
• Annuities
• Health Insurance
• Pension, etc

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Some Government Insurance Program

• Federal Deposit Insurance Corporation (FDIC)
• National Flood Insurance
• Social Security (OASDHI)
• Unemployment Insurance

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Organization of an Insurance Company

• Marketing
• Agency
• Underwriting
• Actuarial
• Investment
• Claim Adjustment

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• Purpose of insurance
• Sharing Risk
• How does the insurance work?
• The Law of Large Numbers ( The sum of a large
  number of independent random variables from same
  random distribution approximately has a normal
  distribution)

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Salary Range Property Casualty
Source D.W. Simpson Company
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Salary Range Life Health
Source D.W. Simpson Company
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Salary Range - Pension
Source D.W. Simpson Company
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Useful Resources

• Job Search Websites
• http//www.dwsimpson.com/
• http//www.actuary.com/
• http//www.soa.org/job/job.asp
• http//www.rollinssearch.com/
• http//jobsearch.monster.com/
• http//www.careerbuilder.com/
• Company Information
• http//www.ultimateinsurancelinks.com/
• ltlt Bests Aggregate Averagesgtgt

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Top Firms Employing Casualty Actuaries (by
number of actuaries employed)
Source www.beanactuary.org
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Top Firms Employing Life, Health, and Pension
Actuaries (by number of actuaries employed)
Source www.beanactuary.org
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Reneé Ferguson, ActuarySocial Security
AdministrationBaltimore, MDMS in Mathematics,
2000Graduate Certificate in Business, 2000
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Professional Development
SOA Society of Actuaries
CAS Casualty Actuarial Society

• MAA The Mathematical Association of America

PAA The Population Association of America
SDA Southern Demographic Association
AWM Association for Women in Mathematics
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www.SOA.org
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SOA Employment Listing
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www.CASact.org
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www.CASact.org
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www.CASact.org
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Professional Development

• MAA www.maa.org

PAA www.popassoc.org/
AWM www.awm-math.org
SDA http//www.fsu.edu/sda/
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ActuarySocial Security AdministrationBaltimore,
MD
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Social Security Administration
OASDI
The Old-Age, Survivors, and Disability Insurance
(OASDI) program is administered by the Social
Security Administration (SSA). The program is
funded by payroll taxes, taxes on self-employment
income, and income from the taxation of benefits.
The OASDI program is the single largest
employee benefit plan in the country, perhaps in
the world.
SSI

• Another program administered by SSA is the
  Supplemental Security Income, or SSI, program.
  The program is funded by general tax revenue.
  Unlike Social Security, there is no trust fund
  for SSI. The Office of the Chief Actuary
  estimates the future cost of the SSI program and
  the financial impact of proposals to change it.

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Social Security Administration

• Commissioner

Office of the Chief Actuary Chief Actuary, FSA
The Deputy Chief Actuary Long Range, ASA
The Deputy Chief Actuary Short Range, ASA
Office of Long-Range Actuarial Estimates
Office of Short-Range Actuarial Estimates
Both offices are responsible for the development
of cost estimates for all Social Security
Programs both under current provisions and
proposed changes in law or regulation.
The programs for which estimates are prepared
include the retirement, survivors and disability
insurance program, and the supplemental security
income program.
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Social Security AdministrationOffice of the
ActuaryShort Range

• Develop special cost analyses involving technical
  actuarial issues

• Project operations of the Trust Funds

• Provide a variety of data services including data
  collection

• Provide statistical support and prepares
  estimates for general fund and interprogram
  reimbursement

• Provide analysis of experience in mortality and
  morbidity rates

• Preparation of regular reports and special
  studies on the financial aspects of the Social
  Security system that are of concern to the
  Congress and the general public.

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Social Security AdministrationOffice of the
ActuaryLong-Range

• Provides all revenue estimates in both the
  near-term and the long-term for the retirement,
  survivors and disability insurance program and in
  the near-term for the hospital insurance program.

• Designs the economic, demographic and
  programmatic assumptions and the methods needed
  to develop these estimates.

• Analyzes and publishes actuarial research based
  on projections and actual program experience

• Provides authoritative advice to agency policy
  makers and congressional staffs relating to the
  long-range actuarial impact of current law and
  proposed program changes.

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Actuaries in the Government
Centers for Medicare Medicaid Services
Treasury Department (Internal Revenue Service)
Department of Defense.
Department of Veterans' Affairs
Labor Department
Office of Personnel Management
General Accounting Office
Department of Housing and Urban Development
Department of Energy
Railroad Retirement Board
Pension Benefit Guaranty Corporation