HOW ACTUARIES SEE THE WORLDJoint Math Meeting, January 5, 2012

Emily Kessler, FSA, EA, MAAA, FCASociety of Actuaries

2

WHAT IS AN ACTUARY?

3

PART SUPER-HERO. PART FORTUNE-TELLER. PART TRUSTED ADVISOR.

ACTUARIES ARE EXPERTS IN:

• Evaluating the likelihood of future events—using numbers, not crystal balls.

• Designing creative ways to reduce the likelihood of undesirable events.

• Decreasing the impact of undesirable events that do occur.

4

WHAT DO ACTUARIES DO?

WE MANAGE RISK

• Actuaries use a combination of strong analytical skills, business knowledge, and understanding of human behavior to manage today's complex risks facing our society.

5

WHAT DOES RISK HAVE TO DO WITH IT?

6

THE FUTURE IS UNCERTAIN AND FULL OF RISK.

WHAT IS RISK?

• Risk is the chance that an undesirable event will occur, but risk is also opportunity. That's where we come in.

7

YOUR TURN!

It’s your turn to be the actuary. Try your hand at forecasting the future with these sample problems.

8

BACKGROUND:• ABC Insurance Company

insures 1,000 eighteen year old drivers.

• Assume 300 of the 1,000 have accidents within a year.

• Assume the average repair cost for each accident is $500.

AUTO PRICING 101

QUESTION: WHAT IS THE MINIMUM PREMIUM THAT ABC SHOULD CHARGE AN 18-YEAR OLD FOR A 1-YEAR CAR INSURANCE POLICY?

9

SOLUTION:• At a minimum, the total

premiums collected must equal the total cost of the accidents.

• Estimated cost of the accidents: 300 × $500 = $150,000

• Minimum premium for each driver: $150,000 ÷ 1,000 = $150

AUTO PRICING 101

CHALLENGE: SHOULD ABC CHARGE MORE THAN THIS PREMIUM? IF SO, WHY?

AUTO PRICING 101

10

BACKGROUND:• Assume 400 of the drivers

are males and 600 are females.

• Assume 200 out of 300 of accidents will involve males, and the remaining 100 accidents will involve females.

AUTO PRICING 101

QUESTION: WHAT PREMIUM SHOULD BE CHARGED FOR THE MALES AND THE FEMALES? SHOULD IT BE THE SAME?

AUTO PRICING 101

11

SOLUTION:• Total males’ premium:

200 accidents × $500 per accident = $100,000

• Each male’s premium: $100,000 ÷ 400

males = $250• Total females’ premium:

100 accidents × $500 per accident = $50,000

• Each female’s premium: $50,000 ÷ 600

females = $83.33

THE MALE’S PREMIUM SHOULD BE THREE TIMES THE FEMALE’S PREMIUMS!

AUTO PRICING 101

| 12

WHERE DO ACTUARIES WORK?

LIFE AS AN

ACTUARY…

WHAT’S GREAT ABOUT THE PROFESSION?

WHY DID YOU BECOME AN ACTUARY?

WHAT IT’S LIKE …

13

NOT JUST INSURANCE.

Although insurance companies can’t function without actuaries, that’s not the only place you’ll find us.

• Consulting• The Government• Private corporations• Colleges and universities • Banks and investment firms • Public accounting firms • Labor unions • Rating bureaus • Fraternal organizations• Energy/Utilities• Transportation

14

WHAT’S GREAT ABOUT THE PROFESSION?

TOP-RANKED JOB

• No matter the source, actuary is consistently rated as one of the best jobs. US News and World Report, the Jobs Rated Almanac, CNN Money, and others all agree.

GREAT SALARY

• Actuaries are well compensated. Experienced fellows have the potential to earn from $150,000 to $250,000 (USD) annually, and many actuaries earn more than that.

• Actuaries earn while they learn. An entry level actuary with 1-2 exams passed will bring in a starting salary of $45-$65,000 (USD) depending on region.

15

WHAT’S GREAT ABOUT THE PROFESSION?

JOB SECURITY:

• Actuaries enjoy certainty in uncertain times. We're always in demand as the world confronts risk.

LIFE IN BALANCE:

• More than a fulfilling career, being an actuary allows you to maintain a low-stress, highly sought-after work/life balance.

MAKE AN IMPACT:

• Actuaries manage today's complex risks facing our society.

WHAT IS AN ACTUARY

WHERE WILL I LIVE?

GEOGRAPHIC REGION

SOA MEMBERSHIP (%)

Eastern U.S. 26.5

Central U.S. 21.7

Southern U.S. 16.2

Western U.S. 9.2

Canadian and International members

26.4

GEOGRAPHIC REGION

CAS MEMBERSHIP (%)

Eastern U.S. 41.2

Central U.S. 23.5

Southern U.S. 11.2

Western U.S. 10.1

Canada 7.8

International members 5.9

16

17

WHY DID YOU BECOME AN ACTUARY?

• How I found out about the profession

• Why I became an actuary

• What I like best about being an actuary

| 18

LET’S COVER SOME

BASICS…

19

HOW DO I GET STARTED?

If you want to be an actuary, start preparing now!

• Follow a college preparatory curriculum of high school classes.

• Take math classes every year.

• Take advantage of Advanced Placement (AP) and advanced courses such as statistics and calculus.

• Enroll in computer science courses to develop your computer skills.

• Explore colleges and universities that offer actuarial science curriculum.

• Look into scholarship opportunities.

20

WHAT ABOUT COLLEGE?

• Among the college majors you might choose: actuarial science, math, statistics, economics, business and finance.

• Your equation for success should include the following courses:- finance- microeconomics and macroeconomics- calculus - linear algebra - calculus-based probability and statistics - actuarial science courses, as available - computer science courses - business courses, such as marketing - communication courses, such as speech, business writing and

technical writing

21

HOW DO I STAND OUT?

While you’re hitting the books, don’t forget to

• Apply for scholarships. There are a number of scholarships open exclusively to actuarial students.

• Look for internship opportunities. An internship will give you a head start on an actuarial career with relevant work experience.

• Get involved with your actuarial or math club, if your school has one.

• Talk to an actuary.

• Start taking exams!

| 22

BECOMING AN

ACTUARY…

23

BECOMING AN ACTUARY

Actuaries earn credentials to be able to practice

• Life/Health/Pension (Society of Actuaries)• Associate of the Society of Actuaries (ASA)• Fellow of the Society of Actuaries (FSA)• Chartered Enterprise Risk Analyst (CERA)

• Property/Casualty (Casualty Actuarial Society)• Associate of the Casualty Actuarial Society (ACAS)• Fellow of the Casualty Actuarial Society (FCAS)• Coming soon: CERA

BECOMING AN ASSOCIATE (SOA)

24

*(effective July 2012)

BECOMING A CERA (SOA)

25

BECOMING A FELLOW (SOA)

26

VEE* (Economics, Corporate Finance, Applied Statistics)

Exam 1/P*

Exam 2/FM*

Exam 4/C*

Exam 3F/MFE*

Exam 3L

Exam 5

Exam 6

Online Course 1

Online Course 2

CAS Course on Professionalism

*Shared with SOA

BECOMING AN ASSOCIATE (CAS)

27

ACAS + Exam 7

Exam 8

Exam 9

BECOMING A FELLOW (CAS)

28

FIND OUT MORE…

Follow us:

Like us on Facebook

beanactuary.org

riskisopportunity.net

DIVERSITY PROGRAMS…

| 30

31

TO DO THIS, WE ACTIVELY SUPPORT:

• Summer actuarial programs for high school students so students can get comfortable with the profession.

• Reimbursements for qualified minority students who pass either of their first two exams.

• Mentoring opportunities for those who want more guidance on what it takes to be a professional in today’s economy.

• Scholarship opportunities are available from the Actuarial Foundation and other organizations.

| 32

QUESTIONS?