1. Risk is Opportunity: The Actuarial Profession in 2010 Presented to: Actuaries Club of Philadelphia February 16, 2010 S. Michael McLaughlin, FSA, CERA, SOA President

2. 2 Risk is Opportunity: Agenda  ERM and the CERA goes Global  Broader Roles for Actuaries  Employers Council  SOA Strategic Initiatives for 2010

3. 3 Enterprise Risk Management

4. 4 Enterprise Risk Management is the discipline by which an organization in any industry assesses, controls, exploits, finances and monitors risks from all sources for the purpose of increasing the organization’s short- and long-term value to its stakeholders. - Courtesy, Casualty Actuarial Society 2003

5. 5 ERM Leading Principles:  Culture  Roles and Responsibilities  Integration  Communication

6. 6 In addition to considering the requirements of S&P and other external stakeholders, the maturity model can be used to understand how a company’s ERM practices compare to other industry participants. The model shown here is a generalized version of a model that can help companies assess the robustness of their current ERM program. The model considers not only rating agency and regulatory requirements, but also the business value of ERM activities. The ERM Maturity Model The maturity model shows five stages of ERM capability In the Ad Hoc stage, ERM procedures are reactive rather than proactive At the most mature end of the spectrum, the Strategic stage is characterized not only by a robust systematic process for ERM, but by continuous improvement to that process Most companies are currently situated between the Fragmented and Integrated stages of the maturity model Overarching risk management philosophy or objectives are not defined Risk Management functions independently within business units Risk Management is enterprise-wide and encompasses all risk types Risks are treated as a portfolio at the enterprise level and are correlated and aggregated across risk types and business units Risk Management is built into decision making. The organization selectively seizes opportunity because of its special ability to exploit risks Ad HocFragmentedComprehensiveIntegratedStrategic Risk Quality Risk Management Process Capability Maturity Model † † Adapted from the Capability Maturity Model framework developed by Carnegie Mellon University

7. 7 CERA Credential goes Global!

8. 8 Chartered Enterprise Risk Analyst (CERA) Credential for ERM

9. 9

10. 10 Global CERA Treaty

11. 11 Broader Roles for Actuaries

12. 12 An Actuarial Contract  High initial acquisition cost, including sales commission, bonus; intangible asset recovered out of future profits  Recurring fees over several years  Contract subject to mortality, lapse, replacement, time value of money  Fee on early termination  Various plans are available (size, term); extra features available at added cost  Price guarantees typical

13. 13 A Mortality Study

14. 14 A Mortality Study  Natural gas utility  Pipes, valves installed, maintained, removed  Needed to estimate depreciation costs based on average lifetime  Accurate records available back to 1902  Performed a mortality study, using actuarial methods  Alternative approach: rust pit depth method

15. 15 Actuarial Skills: Present and Future

16. 16 Actuarial Skills: Present  Predictive Modeling for Underwriting, Marketing  Customer Value  Expense Analysis (functional, ABC)  Sports statistics  Airline pricing  Operations research

17. 17 Actuarial Skills: Future  PMO (Project Management Office)  Team building  Meeting facilitation  Storyboarding  Presentation and media skills  Speaking out, being visible

18. 18 How do we know? How will we get there? Employers Council

19. 19 SOA Employers Council – December 2009 Meeting  Employers: Want the profession to be more visible outside of traditional areas Place a high value on experience studies See opportunity in broader roles for actuaries Show great support for the profession; many want to be more involved

20. 20 SOA Employers Council  Provides insight on: Business trends, issues and challenges Hiring and staff development needs, preferences and practices Business needs for research and other forms of intellectual capital development in risk-related areas Market relevance of SOA products and services

21. 21 SOA Strategic Initiatives for 2010

22. 22 SOA Strategic Initiatives for 2010  Global CERA Credential  International Membership Strategy  Intellectual Capital Framework  Role of Academia  Professional Development Redesign

23. 23 SOA Strategic Initiatives for 2010  Communication 2.0  Marketing and Market Development Plan  Untapped Opportunities for Actuaries in the Health Industry  Interorganizational Synergies  Leadership Development Program

24. 24 Questions?

25. 25 Thank You