COVER story
Changes in ASA education for 2005/2006
A CANDIDATE'S perspective
Developing business acumen
EXAMS
Calculators—How do the societies choose the models they choose?
STUDENT matters
Discussion with an actuary
CAREER focus
Is your resumé up to snuff?
GLOBAL view
Going international—Part 1
Be An Actuary web site
Other Issues of the Future Actuary
Changes in ASA education for 2005/2006
by Stuart Klugman, FSA, Ph.D.For the past two years the Society of Actuaries Board of Governors has been working on revisions to the exam system. The Board was concerned that the process was not appropriately connected with actuarial practice and training, specifically with regard to travel time and the lack of practice- and nation-specific material. A comprehensive report on the proposed changes was released to the membership last summer and can be found at
www.soa.org/eande/report_membership03.pdfThe purpose of this article is to summarize the report and provide an update on activities since its release. While changes in the Fellowship exams/requirements are also being made, they will not be discussed here. They are, however, discussed in the summer report.
In requesting that changes be made, the SOA Board had several specific goals in mind. They included:
- Awarding the ASA sooner in the educational process, preferably near the halfway point.
- Ensuring that the subjects being covered are relevant and that study materials relate to actuarial practice.
- Testing only what is absolutely necessary in order to reduce travel time.
- Considering alternatives to the self-study/exam approach.
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We believe the proposed changes effectively meet these objectives.
Summary of the new ASA program
Prerequisites—Calculus, accounting and business law will be recommended subjects for prospective actuaries to study. They will not be directly evaluated, but will be tested indirectly in the context of actuarial applications.
Subjects to be validated by educational experience—Knowledge of economics, corporate finance and applied statistics will be demonstrated through the completion of an acceptable education experience. This requirement may be filled by the completion of college courses (the current proposal requires grades of B- or better in each course) or their equivalent.Subjects to be validated by traditional examination—There will be four such subjects—probability, mathematics of finance, using actuarial models and constructing actuarial models. Differences between these four subjects and the current Courses 1-4 will be covered later.
The ASA Course—This introduction to financial security systems replaces the current Course 5 and parts of Courses 6 and 7. Through eight interactive modules, exercises to be formally evaluated and two examinations, candidates will be exposed to the working environment of the actuary. The actuarial control cycle (viewing our work as a loop of observing the environment, understanding the problem, proposing a solution, implementing the solution and monitoring its success) will be used as a framework for organizing this course.
Reduction in travel time to Associateship
Associateship will be granted after completion of the above subjects plus the Associateship Professionalism Course. Because the ASA course modules can be taken at any time, we expect many candidates to have completed a substantial number of these modules by the time the four preliminary education exams have been passed. In addition, moving some of the Course 6 material to the FSA level will allow candidates to earn the ASA designation sooner. Finally, we are exploring the possibility of offering the probability exam more frequently using some form of computer-based testing.Making the material relevant
Feedback from the Board, surveys done by the SOA and input from employers indicated that the current syllabus does not do an effective job of preparing candidates for actuarial work. For example, we currently ask candidates to learn about Markov chains and Poisson processes without providing an understanding of how these models are useful in solving actuarial problems. The "Actuarial Mathematics" text emphasizes continuous models for the time to death (leading to exam questions using the unrealistic exponential and uniform distributions) when most actuarial practice uses discrete models. The applied statistics text and accompanying multiple-choice exams emphasize manipulating formulas, not analyzing data.Our proposal calls for new study material that is relevant to actuarial practice, yet still retains the theoretical underpinning so the methods can be used correctly. Education experiences will be used where either formal testing is more than is needed (economics and corporate finance) or is incapable of testing the skills that are important (applied statistics). Some subjects that had been removed from the syllabus (construction of tables and graduation in particular) will return on an introductory basis.
While all new materials may not be ready by the 2005 rollout of the new exams, writing efforts are underway.
Transition
Our plan is to have the four new exams and the process for validation by educational experience to begin in 2005. The ASA course will commence in 2006. The preliminary mapping of old subjects to new was outlined in the summer report, and some changes are anticipated based on feedback we have received from candidates and members.Coordination with the CAS
Currently, exams 1, 2 and 4 are administered jointly with the CAS. A joint CAS/SOA task force is currently at work refining the learning objectives for the four new exams and the subjects to be validated by educational experience. There are a few items on which the two societies do not currently agree. They include:
- Use of validation by educational experience. If the CAS does not accept this for economics and corporate finance, they will continue to offer an exam much like the current Course 2, rather than an exam concentrating on the mathematics of finance.
- Direct testing of mathematical statistics. Prior to 2000, mathematical statistics was directly tested on the second exam. Currently, it is indirectly tested on the fourth exam. The SOA is recommending that this approach continue, while the CAS prefers more explicit testing.
- The exam on using actuarial models (similar to the current third exam) may continue to be offered separately, although the possibility of a joint exam has not been ruled out. If separate exams are given, the CAS is likely to include mathematical statistics on this exam.
Conclusion
The SOA Board and the task forces it appointed believe that the changes recommended for 2005 and beyond will make the process educationally more effective and relevant and at the same time maintain the high qualification standards our members and the public expect.Stuart Klugman, FSA, Ph.D., is the Principal Financial Group professor of actuarial science at Drake University and has recently completed a two-year term as SOA vice-president for education.
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Developing business acumen
For those of us still taking actuarial exams, it is difficult to focus on anything other than studying and getting the job done at work. The problem is that too many people fall into this trap and stop making an effort to develop their business skills and basic knowledge base. In order to be successful at your job, it is imperative to have a basic understanding of the industry that you work in, as well as have business sense.
In the following paragraphs, I am going to outline some methods you can employ in order to develop your business acumen. I have also included a list of resources that, while not complete, will give you a great starting point.
- Use the Internet. In today’s technologically advanced society, the Internet is an invaluable tool. Carry out a search using an engine such as Google or Yahoo, and look up various sites with information on your industry. For example, if you work on pricing medical products in a particular region of the country, read up on healthcare-related articles on a local paper’s Web site. You will be surprised how much information is out there.
- To be successful as an actuary, you need to have a good understanding of accounting and financial concepts as well. Look into some of the training opportunities at your company or firm. An increasing number of employers offer basic accounting and finance training. In addition, some firms will also support external training classes at a more advanced level.
- Talk to your manager about increasing the level of information and training available within your department. Perhaps you could set up a small library of resources such as industry manuals that employees can check out from time to time. You might even want to set up a training curriculum for employees new to your department. This will greatly reduce the learning curve timeframe. Employees will also welcome the opportunity to receive advanced training sooner so they can get settled into their new roles relatively quickly.
- Use your lunch hour constructively. Most people don’t realize how valuable this time is. Have lunch at your desk once in a while. Read the Wall Street Journal. It will give you a break from work, and you will be amazed at how quickly you get into the habit of reading it every day.
- Set up some time with upper management and co-workers. You can gather a wealth of information from the people around you. This is particularly valuable when you start a new job or new rotation. Finding out about the specific roles of other workers and how different departments interact will help give you the big picture and allow you to understand the dynamics of the organization.
- Watch business news on television. There are quite a few news programs that are very valuable in providing you information about the latest business news.
- Put down those fiction novels and read some good business books! There are several great business books out there, and I have listed some below.
Web sites
www.economist.com
www.ft.com
www.stls.frb.org
www.actuariallibrary.org
www.mckinseyquarterly.comNewsletters/magazines
Wall Street Journal
The Economist
Fortune
Forbes
Best's Review
Business WeekNews Programs
CNBC
"Louis Rukeyser's Wall Street"Books/Misc
Berkshire Hathaway Annual Report 2002
"One up on Wall Street" 2000 by Peter Lynch
"A Random Walk Down Wall Street" 2003 by Burton Gordon Malkiel
"The Handbook of Fixed Income Securities" 2000 by Frank J. Fabozzi
Calculators—How do the societies choose the models they choose?
by Arlene F. Woodruff, FCAS, MAAAIn the early 1970s hand-held calculators became available for general consumer use. At that time, a calculator that could add, subtract, multiply and divide would cost well over $100. Over the years, prices have dropped, functionality has increased and the solution to many mathematical problems is now at your fingertips. As technology progresses, the actuarial organizations continue to struggle with the task of providing candidates with tools to assist in solving problems while making sure that there is an even playing field for all exam candidates.
The BA-35 is the oldest of the slate of available calculators and was endorsed by the CAS and SOA as the “official” exam calculator for many years. By just having one calculator with the societies’ logos on the back, it was easy for proctors to verify that there was no technological advantage for any candidate in the exam room. The candidate could also purchase one calculator for a reasonable price and know that it could be used for any future exam.
This was acceptable for many years, however as technology improved, the examination committees preferred to provide tools to allow the candidate to focus on solving problems rather than performing calculations.
Various considerations go into the selection of a calculator. The actuarial societies are concerned with availability, affordability and functionality. The proctor must also be able to easily check for unauthorized calculators at large exam sites. If a calculator is no longer in production, it is not eliminated from the list since there may be candidates who purchased one in the past and prefer to work with a familiar tool.
Within the list of authorized calculators, the BA series provides the ability to work with financial functions such as present value, interest rate, etc. Candidates working with theory of interest material (and in some instances the related field of life contingencies) will find these functions save a great deal of time and effort. The BA II Plus is the more current version and it has several enhanced features such as larger buttons and parentheses. The other calculators are acceptable if basic principles and formulae are applied, but the time-savings of the BA series can be critical under exam conditions for the financial material.The 30X series does not have financial functions, but it has an edge in other functionality and ease of use. The 30X II (both battery and solar) is the newest calculator in the series and includes improved features such as a two-line display with arrows to allow you to scroll through and make changes to your input. It also allows you to review your previous steps. In addition, there is a stat mode that can be helpful in performing a regression analysis. Where financial functionality is important for interest theory, accuracy and ease of use may be just as necessary for the other exams.
It is possible for a candidate to select just one calculator and use it for all of the actuarial exams, but the candidate who utilizes the tools designed to handle the specific material he or she is being tested on has an advantage. Until there is a tool that combines the best features of both series at an affordable price, most candidates prefer to purchase more than one calculator and gain whatever advantage is possible from each.Arlene F. Woodruff is general officer of the CAS Examination Committee.
Key features of calculators for CAS/CIA/SOA examinations
BA 35 Solar TI-30Xa TI-30 IIS BA II plusEight-digit display. Ten-digit display. Two-line: Shows entries on the top line and results on the bottom line. Solves time-value-of-money calculations such as annuities, mortgages, leases, savings and more. Also generates amortization schedules. Preprogrammed financial and accounting functions, including time-value-of-money and compound interest calculations. Fraction features: Adds, subtracts, multiplies and divides fractions entered in traditional numerator/denominator format. Scrolling: Entry line (top) shows up to 11 characters and can scroll left/right up to 88. Result line (bottom) shows up to a 10-digit answer and 2-digit exponent. Performs cash-flow analysis for up to 24 uneven cash flows with up to four-digit frequencies; computes NPV and IRR. Capability for recalling time-value-of-money values as well as annuity due operations. One-variable statistics. Previous entry: Lets you review previous entries and look for patterns. Choose from two day-count methods (actual/actual or 30/360) to calculate bond price or yield to maturity or to call. Amortization balance and payment-to-interest calculations. Conversions Fractions/Decimals Degrees/Radians/Grads DMS/Decimal/Degrees/ Polar/rectangular conversion. Menus: Allow you to select settings appropriate for your classroom needs. Four methods for calculating depreciation, book value and remaining depreciable amount: SL, SYD, DB, DB with SL cross-over. Annual Percentage Rate (APR) to Effective Rate (EFF) interest conversions. Basic scientific and trigonometric functions. Fraction features: Allows operations with fractions and mixed numbers List-based one- and two-variable statistics with four regression options: linear, logarithmic, exponential and power. One-variable statistics with frequencies. Two-variable statistics: Enter/delete/insert/edit individual statistical data elements. Also computes: break-even calculations, interest conversions, delta %, profit and loss. Calculates mean, sample standard deviation and population standard deviation. Conversions: Fractions/Decimals Degrees/Radians/Grads DMS/Decimal/Degrees. Prompted display guides you through financial calculations showing current variable and label. Cost-sell-margin and
mark-up calculations.Symbolic value of p:
Recognizes p as a symbol in radian mode.Ten user memories. Basic scientific and trigonometric functions. Math functions include trigonometric calculations, natural logarithms and powers.
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Discussion with an actuary
Claude Penland is an Associate of the Casualty Actuarial Society and is manager of Web sites and Internet strategy for D.W. Simpson & Company for four years. Why did you become an actuary?
After my junior year of college, I had a good experience as an actuarial intern at a firm down the road from my parents' home. So the profession basically fell in my lap.Who or what influenced your decision?
My boss at my internship was an alumnus of my college, and I could relate to his experience. Also, the starting salary without an actuarial exam (at the time) was impressive. I interviewed for many math-related jobs and this one looked like the best choice.What is your educational background?
I have a B.S. in applied math from Johns Hopkins University with a concentration in economics.What classes did you take in college that helped prepare you for the career? What classes outside of math and statistics (such as communications) were helpful?
I took at least a dozen writing and social sciences classes and those were the most helpful. Even though my curriculum was "applied" math, I found out in taking the exams that I basically had to relearn much of the material because it had been pretty theoretical.
What was your first job in the profession?
I sent my resume via snail mail to one of the top actuaries at CIGNA Property & Casualty. The first few years, I worked in the special risk pricing unit pricing large corporate accounts' insurance and writing reports.
What are the skills needed to become a successful actuary?
Besides the obvious technical skills needed (math, stat, computer), I think that intellectual curiosity, an understanding of how the technical actuarial work fits into the business environment and the ability to explain actuarial concepts to and work with non-actuaries are all components that help an actuary become more successful.
With what types of positions do you have contact? (Such as statisticians, CEOs/CFOs, marketing staff, etc.)
I have contact with recruiters, other webmasters, and all levels of actuaries who contact me to discuss questions/comments they have. I have occasional contact with hiring managers and HR people who have questions about our company's salary survey.
How are promotional or growth opportunities for actuaries in general?
As a Web site manager, I have a unique perspective in viewing the opportunities in the field. I actually get to see job descriptions as they come in. I have noticed that the role of the actuary has become much more broad, encompassing risk management, ALM management, investment (asset side) work, product management and has become more strategic in nature. The market is much more global now (we have as many positions in China/Asia as we have in NYC), and I think non-North American locations will provide a lot of new challenges and growth opportunities for actuaries. Lastly, I have noticed that more actuaries are running insurance companies. That is good for the profession.
Into what positions can an actuary be promoted (or grow)?
I see actuaries leading insurance companies, running consulting firms, becoming underwriters, product managers, investment managers, etc. My actuarial skill set and experience are even valuable in my current role. Much of what we learn as actuaries is transferable to other roles and fields.
What was your career path from your first job to your current position?
In addition to large account pricing, I spent a few years in claims reserving. From there, I quit my job to drive around the country for the summer. After that I worked in New York, pricing nontraditional insurance risks for AIG and later consulting at Milliman & Robertson.
After fiddling with the Web for a little while, I was hooked and some informal discussions with my current employer, an actuarial recruiter, led to my current position. I am the only actuary that I know of that does what I do.
What type of work do you do on a day-to-day basis in your current position?
I manage several Web sites, among them www.dwsimpson.com and www.on-campus.com. I am personally responsible for our online presence, including making the user experience as beneficial as possible, negotiating advertising on other Web sites, everything. I can also usually be found answering questions at the www.actuary.ca (dot-CA) discussion forum.
When did you take your first exam? Where are you currently in the exam process?
I passed Course 1 the month that I was hired in 1990. I received my ACAS five years later.
What advice would you give to someone starting down the path of an actuarial career?
It will probably take you a few thousand hours of study to obtain your Associateship or Fellowship. To get a feel for what 2,000 hours represents, buy that many paper clips and dump them on your desk. If you're prepared to study for as many hours as paper clips, go for it.Always ask "Why?" regardless of how you think the person across from you will take the question. Begin building a personal network from your very first day.
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Is your resumé up to snuff?
by Vivek Natarajan, Future Actuary student representative
Now that you know how to write the perfect cover letter (see the fall issue of The Future Actuary), you’ve got the employer’s attention. What can you do to make sure that the employer stays attentive? Follow your cover letter with an effective resumé—and you could become the most marketable candidate around! On the other hand, a sloppy resumé can send you in an eternal job search. Whether you’re pursuing your first internship opportunity and developing your resumé for the first time, or simply polishing up your old resumé for a renewed job search, this article will provide you with a handy list of tips on how to craft the perfect resumé.
In a survey of over 2500 recruiters and headhunters from a wide variety of industries, ResumeDoctor.com found that the biggest pet peeve is the existence of spelling, grammar and punctuation mistakes. One of the most common blunders leading to this resume no-no is the reliance upon spell-checking software to catch the mistakes. Be your own spell checker! Make sure that you weren’t promoted by your “manger” and that you’re not looking for an “exiting” opportunity with a new company (with that spelling, they’d be more than happy to oblige). There’s no excuse for having your resumé laced with these kinds of mistakes when they are easily avoided. Give it to another set of eyes to scrutinize. Read over each phrase to ensure that it expresses exactly what you want it to, and that there’s no way to misinterpret it.
Never underestimate the importance of being clear and concise; don’t make people wade through lines of jargon to get to the important stuff, or you’ll simply lose their attention. Jennifer Rottkamp, director of CIGNA’s Actuarial Executive Development Program,says that, it’s really important to indicate what kind of position you are looking for, whether it's an internship or full time. Don’t give employers a reason to pass over your resumé simply because they didn’t know what you were looking for.
An important portion of the resumé that most people include but don’t approach correctly is work experience. Be proactive in describing what you’ve done. Employers are looking for people who coordinate, facilitate and direct, rather than people who simply work or do! When outlining your work experience, don’t just restate the job description or focus too much on the job duties and responsibilities. Work is going to be similar from job to job—especially in the actuarial profession. Make sure to communicate what you specifically brought to the job, from organizational skills to management skills. Only then will employers have an idea as to what skills and abilities you can transfer to them.
In the end, the little things can sway an employer one way or the other. “Always include your GPA,” says Rottkamp. Omitting it could mean you’re trying to hide something. Also, at the top of your resumé, clearly indicate your anticipated graduation date (if you haven’t already matriculated), your degree and your exam performance. If you haven’t yet passed an exam, don’t fret! Simply indicate when you are planning on sitting for your first (or next) exam. A lot of employers recruit on potential, so knowing that you are taking an exam even if you haven’t already done so will put their minds at ease.
A good resumé is really very easy to compose if you follow these steps and precautions. Putting your best foot forward on paper is imperative in this field, and your resumé can help you rise above the rest to help you land the job you’ve always wanted!
Going international—Part 1
by Glenda Greenberg
At one time or another, you may have wondered what it takes to carry your actuarial skills abroad. To learn more, The Future Actuary talked to a candidate and an FSA about uncovering international opportunities. In the first part of a two-part series, Antoni Forgues, 24, discusses his experiences. Antoni has been an analyst at Towers Perrin in London for 1-1/2 years.
Why did you decide to pursue actuarial science?
I started out in industrial engineering at the technician level. I did two internships, but it wasn't really interesting. I saw that the actuarial profession could offer a good salary and you needed very good math skills—two things I like—so I thought it would be a good challenge.Also, when I was younger, maybe 12 or 13, an actuary came to my school. I was quite impressed with what he was doing. I did two actuarial internships and found it very rewarding and challenging.
How did you end up in the United Kingdom?
I was born in Montreal, and French is my first language. I attended Concordia University, an Anglophone university in Montreal, because I knew that if you want to do business on a big scale, you need to speak English—even in Quebec.They had a very good internship program and a good bank of prospective employers, and some of them were international. I wanted to travel a bit, and I wanted to work in an English-speaking environment—not just study English, but also work in English. I looked into working in the United States, but I didn't find a job, so I ended up in Toronto, which was close enough because of the Anglophone environment, and I was hired by Towers Perrin, the company I am working for now.
For my second actuarial internship, I asked Towers Perrin if they had any opportunities in Europe. There were none open, but I took an internship in Boston—slowly getting further from Quebec.
On a visit to Italy, I fell in love with the country, so I asked if there were any open positions in Milan or Rome, since Towers Perrin has offices there. There weren't any open positions there, so they sent me to London where there is an international unit. So that was an opportunity to be abroad in Europe and close to Italy. All of the places I went to were not my first choice, but I've enjoyed the experiences a lot. I'm very lucky.
Where are you at in the exam process?
I've passed five exams. I failed Course 6 twice, so now I'm trying Course 8. Another reason I came here was to get away from all of the distractions I had in Quebec and try to complete my exams as soon as possible.What's the best way to learn more about a country's business customs?
You need to be very open-minded, because you meet new cultures, encounter new problems, new people and new ways of doing things. You need to be open to their ways because you are in their country. You want to be flexible and try to work their way, but you can still bring the experiences from your home country. You need to work within their patterns.Obviously, you need to have the desire to learn, because in every country you've got different laws that are very specific and sometimes go in the opposite direction of what you're used to. I think if you're in the actuarial profession, you like to learn because of all the exams. You could look at every country as another exam. You need to be curious. You need to like change.
The best way to learn about a country's business customs is to work there and get your hands dirty. I don't think you can read a book and understand.
What are the benefits of working internationally?
I wanted to travel, and not just go on vacation in some other country. I wanted to work in the country and get to know the people and the place very well.Another benefit is the ability to broaden your horizons. I like change. I like to experience different cultures. When you go back, you can bring back the positive aspects of what you've learned from adversities abroad. In the end, though, all countries probably face the same challenges.
What are some of the challenges?
You need to adapt and accept a new environment. At first you're lost because everything is new—the people, the place, the streets, the languages. After a few months you get acclimated.Of course, it's a challenge to be away from your friends and family, even if nowadays you can phone or e-mail quite easily. Luckily, in Europe, you get so much vacation time that you can visit your home country. We get five weeks of vacation to start with. That's one of the benefits, but it can actually be too much sometimes. You don't know how to spend it all there. Or you don't have the money to spend there.
Another challenge is communicating effectively—especially when it's not your first language. My first language is French. I've been working in English, but I'm not perfect at communicating ideas, concepts and opinions, so it's a bit of a challenge to make people aware of what you can do, what you know, what you think, so you need to be prepared for people sometimes not being able to understand you. It can be upsetting or annoying, but you just keep telling them what you think. At some point you'll find the right formula.
How do you find companies that are seeking employees to work internationally?
In my situation, the internship program at Concordia University shared a database on employers outside of Quebec, so I used that to go to Toronto. From Toronto, they knew people at the Boston office. Boston is a big office for Towers Perrin, so they had contact with the European offices.There are some placement agencies that specialize in international jobs. The best thing to do is to look locally for people that you know that know people where you want to work, because if you knock on the door of a French company from Montreal, even if you speak the same language, they really don't know who you are or how good you are. The education systems are different, also.
Did you have to do a lot of convincing or did you just talk to people at your company about working internationally?
The first thing is to let people know what you want to do, and the second thing is to give them a reason to move you. You need to work hard to sell yourself. If you put the word out there and keep talking to people, they'll think about you first.
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From The Future Actuary, Vol. 12, No. 4, Winter 2003
Copyright 2003 Society of Actuaries
and Casualty Actuarial Society