Becoming an Actuary, and Associated Applications in

Probability and Finance

ACMS Talk

February 2, 2006

By Toby White

Recent Press

• Jack Nicholson portrays actuary in current film ‘About Schmidt’

• 2002 Job Almanac Rates Actuary #2 Career Overall behind Biologist

• Actuary has been rated #1 more often than not over last several decades – why?

Primary Attractions

• Combines Math/Business Applications

• Intellectual Challenge/Variety

• Career Potential/Mobility

• Salary/Benefits

• Work Conditions/Environment

Professional Designations

• F.S.A. = Fellow in the Society of Actuaries (requires passing all 8 life/health exams)

• A.S.A. = Associate in the Society of Acts. (requires passing the first 6 exams)

• F.C.A.S./A.C.A.S. = Fellow/Associate in the Casualty Actuarial Society (about same as above, but property/casualty is focus)

S.O.A. Exam System

• The first 4 exams are mathematically - oriented, multiple choice exams (exam P-3 hrs., exam FM-2 hrs., exams M/C-4 hrs.)– 1/P: Probability (includes calculus)– 2/FM: Interest Theory/Mathematical Finance– 3/M: Risk Modelling / Life Contingencies– 4/C: Credibility, Loss Distributions, Survival

Analysis, Construction of Models

S.O.A. Exam System (part 2)

• Courses 5,6, and 8 are primarily essay exams, testing knowledge of the insurance, banking, and financial services industries

• Course 7 is an intensive project-oriented seminar, but has a pre-test to qualify

• Professional Development and a Fellowship Admissions Course complete requirements

Salary Structure

• Starting Salaries around $45,000-$50,000 (and only requires undergraduate education)

• Salary Increases by $5,000 per exam passed

• New FSA Salary in $80,000-$100,000 range, depending on experience, company, and geographic living standard adjustments

• Annual Bonuses can add 10-50% to base

Main Actuarial Functions

• Pricing / Setting Premiums

• Product Creation / Development

• Reserving / Solvency Provisions

• Financial Reporting / Accounting

• Consulting

• Excecutive (C.E.O./C.F.O./V.P.,…)

Specialty Tracks

• Individual Life Insurance and Annuities

• Group/Health Insurance and Managed Care

• Pension/Retirement Funding

• Finance

• Investments

• International

Insurance v. Consulting

• Insurance– Standard business hours (40 hrs/week)– More traditional corporate infrastructure– Work is of periodic nature, expertise developed

• Consulting– Longer hours, but higher pay/bonuses– More travel; goal is to attain ‘principal/partner’– Work is more variable, depends on client

Geographic Opportunities

• Jobs are heavily concentrated in financial centers, such as:– East coast (NYC, Boston, Hartford, Philly)– Midwest (Chicago, Minneapolis, Des Moines)

• Consulting opportunities can be found in any of the 25-30 largest cities in the U.S.

• Seattle insurance companies include Safeco (office in U-district) and Farmer’s Life

Competing/Related Professions

• C.F.A. = Certified Financial Analyst

• C.F.P. = Certified Financial Planner

• C.P.A. = Certified Public Accountant

• M.B.A. = Master’s Business Administration

• Trading (Wall Street / Chicago exchanges)

• Academic (many schools have actuarial-training programs, and offer M.S. degrees)