HOW ACTUARIES SEE THE WORLD Joint Math Meeting, January 5, 2012 Emily Kessler, FSA, EA, MAAA, FCA Society 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 Canada7.8 International members

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

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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?