Ask an Actuary

"Figure out whether you are really committed to [an actuarial career]. If you are, then finish the exams as quickly as possible. If you're not really committed, don't waste your time with it!"

"Ask an Actuary" features an actuary that is asked to describe the path that led him/her to an actuarial career. For this installment, our featured actuary is Daniel A. Tess, Director, PricewaterhouseCoopers LLP, in Sydney, Australia.

Q: When did you first decide to become an actuary?

A: I was a high school math and science teacher for three years after college, and three years was enough! I started looking around for something more lucrative and less stressful.

Q: Who or what influenced your decision?

A: I read a book called "The Invisible Bankers" by Andrew Tobias. He intended it to be a shocking story on the insurance industry, but it sounded fabulous to me and I just had to get into it. A friend told me about the actuarial profession and with the emphasis on maths and standardized qualification exams, it seemed to play to my strengths.

Q: What is your educational background? Where did you attend college and what was your major?

A: I have a degree in computer science from Duke University.

Q: What classes did you take in college that helped prepare you for the career?  What class was most helpful?  What classes outside of math and statistics (such as communications) were helpful?

A: Along with the computer science courses, I was a pre-medical student and also satisfied the requirements for a religion degree. The pre-med courses were great to develop a scientific approach mentality to research design and analysis.

My religion courses were very helpful for learning how to argue and debate constructively. My favourite professor was a man named Stanley Hauerwas, who was on Oprah's book club show last year and recently voted the "sexiest theologian in America" (!). He was from Texas and had worked as a bricklayer. The class was about the ethics and theology around war-quite a relevant topic today. The format of the class was that we read a (substantial) book each week, then met for three hours to discuss it. I remember that it was a level of intensity and engagement with the subject matter which was stunning to me at the time, and still sets my personal standard of excellence today.

Q: What was your first job in the profession?  How did you get the job?  Did you start as an intern or in an actuarial training program?  What type of work did you perform in you first actuarial job?

A: I started as an actuarial student with Aetna in Hartford. Aetna had some managers involved in recruitment who had come from a liberal arts background, and they were on the lookout for serious candidates who didn't have the "standard" maths/economics degree. I went there because they were the only company willing to take a gamble on someone who hadn't taken much mathematics at college and hadn't yet taken any actuarial exams.

My first rotation was analysing commercial automobile reserves. Then I worked in the claims area, helping to organise and pay the asbestos facility bills, and start to model superfund liability. It is amazing to me how these are still driving issues in the US insurance market!

Q: What was your career path from your first job to your current position?

A: I'm from Missouri, but had never seen the ocean until I went to college! I liked the people at Aetna, but had always wanted to live in California.

As soon as I had passed enough exams (2!) to be marketable, I moved to Fireman's Fund in San Francisco, just at the time they were bought by Allianz, a large German insurance group. Most of my Fireman's Fund work was related to Workers Compensation, especially large account pricing.

The Fireman's Fund actuarial program was really special. There was a large group of students all about at my level, and we were best friends, playing basketball every night in summer and taking ski trips to Tahoe together in winter. The whole group has pretty much scattered by now but we still keep in touch and see each other occasionally. My last manager there was Rose Barrett, who is now a senior regional office actuary at AIG. She was a great manager and "people person" and I've always tried to copy that about her (OK I haven't really succeeded but I'm better than I otherwise would have been!).

After finishing the exams I went to the Allianz head office in Munich for two years. When Allianz bought a large Australian workers comp insurer, I came here to Sydney to start an actuarial function in that company, and ended up running the workers comp underwriting operations.

My family and I liked Australia so much we decided to settle here, and I looked around for a permanent local contract. For the past three years I have been a Director in the Sydney actuarial practice of PricewaterhouseCoopers.

Q: What type of work do you do on a day-to-day basis in your current position?

A: I work in an actuarial consulting practice within a giant audit firm. I hardly ever look at numbers; rather, I help advise government insurers and regulators about workers compensation and health insurance issues. I develop a lot of policy papers that government bureaucrats use to administer their insurance schemes. I also facilitate the corporate strategic planning process for some large government agencies.

The best part of my job is that I get to do a lot of "ground floor" work in health-related areas. In America there is a well-established and separate career track for Health Actuaries, but not so in Australia. It's a great opportunity for someone like me (a property-casualty workers comp actuary) to branch out into something new and interesting.

I work for John Walsh, a "giant" in the profession who was last year's Australian Actuary of the Year and a very interesting man. He was an all-around sporting legend at school thirty years ago, but was injured in a rugby game and paralysed from the neck down. Despite his physical disability John has gone on to become the leading accident compensation and health finance actuary in Australia. John is as good an all-around man as he once was an athlete, and is a real role-model for me (and lots of others!). The thing about John I'm most impressed with is how much of his work involves broad management and financial advice, because his clients trust him. Aside from his personal integrity and intelligence, some of this is driven by his actuarial approach to problems; he is fair and objective, meticulous, understands which conceptual level is most important, and can translate difficult technical issues into plain language for managers.

Q: When did you take your first exam? Where are you currently in the exam process?

A: I took my first exam in 1989 and finished in 1996.

Q: What advice would you give to someone first starting out down the path of an actuarial career?

A: Figure out whether you are really committed to it. If you are, then finish the exams as quickly as possible. I delayed having kids until I was finished, which was a great decision for my wife and me. If you're not really committed, don't waste your time with it!

Find a great training program with lots of students at your level who you can study with and hang out with. Look out for someone senior who you are inspired by and can relate to, and work with them and figure out what makes them successful.

Take courses for your exams, even if you have to travel to get there. I met some great people that way who are still friends.

You are going to fail an exam in the process, even if you studied well and thought you had passed it. It might be the first time in your life you have failed a formal course or exam. Prepare for this now mentally and emotionally and don't let it derail your studying or career.

Additional Questions

Q: What are the odds for career changers to enter the actuarial profession? Any advice?

A: There is actually a section on the "BeAnActuary" website devoted to this question (http://www.beanactuary.org/changers/).

The odds of changing careers into the actuarial profession are excellent in terms of employers having interest. The only caveat I would throw in is that you have to demonstrate your sincerity. My suggestion is that passing the first couple exams is a great way to show this! The first two exams (they used to be called "prelims") relate only to basic calculus and statistics, with nothing particularly "actuarial" about them, so you should be able to complete these on your own without working in an actuarial environment. The early exams are also a good way for you to figure out whether you are really serious about the actuarial career track, including whether you can stand to take the exams for the next 5-10 years!

There is another issue to consider, which is salary. There is a rather steep "salary curve" in actuarial work (see http://www.actuaryjobs.com/salary.html). If you are reasonably experienced in the financial sector you will probably be looking at an initial pay cut.

I am actually a "career changer" myself, having taught high school for three years after university. Fortunately (?) for me, the salary change to junior actuarial analyst was actually a big step up!

Q: In 2000 I graduated with a BS in mathematics. My field of study was theoretical math. I also have a BA in history. I loved going to school for mathematics but it never came easy for me. I wasn't one of those people that had a natural talent for it. I spent many many hours studying. Do you think becoming an actuary would be an option for me? How much would being out of school for 3 years have an effect? Thank you.

A: I can certainly relate to your feelings about math talent. I never took any statistics in school, so all of the actuarial exam math (after calculus) was new to me and I had to learn it from scratch as part of exam study. Even for exam 1 (calculus) I had to review everything from scratch, since I hadn't seen it for seven years. In any case I did very well on the first three exams, so maybe learning it fresh when you are a little older and more goal-oriented can be a good thing (?).

Actuarial work generally involves low-level applied mathematics, akin to economics or engineering, not theoretical math like algebra or real analysis or geometry. Now, these applied fields can certainly be tricky and there are some real math whizzes who get into actuarial work, but in my experience they are the exceptions rather than the rule, and the best actuaries I know are certainly not the best at math. In general I would say most actuarial work is about creating and applying models, usually in MS Excel and maybe SAS. While there are tricky maths in some of these models, most of the time the skills that add the most value are the ability to understand the real-world business situation represented by the model, and to deal with all the limitations of the model in a way which helps your client or company.

In the end there is a simple way for you to find out whether you are "mathematically" cut out for actuarial work--take the first two exams! For the CAS exams there is hardly any math at all after exam 4. You can easily get old copies of these exams and see for yourself how difficult they are; go to: http://www.casact.org/admissions/studytools/sp03.htm

Q: Do you think a degree in actuarial science program is necessary for becoming an actuary?

A: No, a degree in actuarial science is absolutely not necessary. I don't have one--in fact I don't even have a degree in mathematics! I would encourage you to explore areas of interest to you while at university. I believe that the American actuarial job market regards broad experience together with successful exam results more favourably than a university actuarial science degree.

Q: I have been working in pensions for almost 2 years but have been asked to consider a P&C position. I'm assuming the skill set is exactly the same for pension/health/P&C although the job has a different focus. Any advice?

A: I would not say that the skill set for pension/health/P&C is all that similar. I think the general range of uncertainty around most P&C work is significantly greater than the norm in life and pension areas. Also the sheer variety of issues and topics is bigger, and the number of actuaries around to address them is smaller!

Of course I am biased since I am a P&C actuary, but I would advise you to give the P&C position a try (all other things being equal!). What have you got to lose?

Q: What is more important to employers: the number of exams passed or one's GPA and degree?

A: There are some pretty large generalisations underlying your question!

For some employers, exam performance is much more important than university record. Other employers actively seek outstanding university students from diverse fields of study, figuring that the work environment will mold them into successful exam takers.

I would say that for the actuarial market overall, outstanding performance in one of these areas can offset weakness in the other. With one exception: you have to pass a couple (a few?) exams to demonstrate that you are capable of passing and dedicated to the training process.

Q: I have been involved in the IT industry as a Business Systems Analyst for more than 20 years, but I am considering a change to an actuarial career. In high school I majored in mathematics, and began my college education as a math major - although I later changed to Management Science. I have always been good in math, and my work has given me extensive experience in business practices. I am 57 years old. My question is whether this is too late to start looking into a change into the actuarial profession. What in your opinion would be the chances that a company would want to take on someone of my age in an internship type of program?

A: Thanks for your question. You certainly present an interesting concept!

In terms of passing exams, I would not be particularly concerned about your age or time since you studied math. In my own case I had not studied most of the math on the exams before at any level, but did well. It is more an issue of your ability to learn new concepts rigorously on your own. I would strongly advise you to take exam 1 ASAP before making any bold job/career moves. I would hazard a guess that 50% of the students who take exams 1 & 2 while considering an actuarial career discard the idea before progressing further.

On the "plus" side, your work experience would easily differentiate you from the rest of your fellow intro-level students. The same might be true of your maturity and level of comfort in the workplace--it is a difficult transition for many students from university to the pseudo-Dilbert "cubicle-land" of office work!

On the "minus" side, I do not think I have yet had close contact with an actuarial employer who would seriously consider taking on someone in your situation. Even if you get through the actuarial exams at an average pace (no mean feat), you would finish at or past what is usually considered normal retirement age.

Many firms find that in the short-run they put in more effort than the productivity they get out of new actuarial students; the learning curve is that steep and training that labour-intensive. Many managers can often do jobs/work much faster and cheaper just by themself than if they involve anyone much below the Associate level. We do involve students anyway, so we can keep producing the talent we need in the long run. The issue in your case is what could the "long-run" be expected to look like?

Another point to consider is that remuneration packages for intro-level actuarial students would be expected to be well below anything that an IT manager your age has become used to. This is for a job which, when combined with exam-studying, is really all-consuming.

Despite my perhaps sobering comments, I would be very interested to know if you end up pursuing an actuarial career, and what success you are able to find. Best of luck!

Q: I love the opportunity. It sounds perfect for my analytical side. But I am not the type of person who can sit at a desk 60 hours a week crunching numbers and shuffling paperwork. Is there any chance for a career where there is some bit of outside work? By outside I mean outside of the office, be it outdoors or whatever.

A: My short answer is yes, but only after you have finished the exams, along with several years of training. The training & development process is pretty much Dilbert desk-slave type work. However, there are a lot of career & job opportunities for experienced actuaries who are "people-persons" and like to travel.

I am probably a bit like you--happiest when out of the office. I manage to be somewhere with clients most of the time--my coffee shop bills add up!

Q: You have stressed the importance of passing exams. Do employers make distinctions between different passing scores when looking at candidates? Also, you said 57 was too old, what about 42? I too am a teacher looking for a change.

A: There's a saying amongst actuarial students that the best possible score on an exam is a 6 (the minimum passing score). The implication is that you didn't waste any "extra" study effort, and no-one cares what your score is. In fact, employers don't even KNOW what your scores are--that is kept confidential betwen you and the actuarial organizations.

42 is certainly on the older side (!) for starting trainees, but at least logistically you could imagine having at least a productive decade or more of career work after you have finished the exams and the analyst training period that goes with them.

I should add that, with respect to my comments on starting ages and progress times, there is an incredible range of individual performance in the exams / traning process. I am aware of at least one actuary who passed all 10 exams in just 3 sittings (18 months). I also know people who have progressed rapidly up the insurance company management ladder without passing all the exams, sometimes to the Chief Actuary or even CEO level. The point is, please interpret my responses and advice as applying to the "average" situation, which I would say certainly applies to over 90% of successful actuarial students.

Hope this helps!

Q: I'm a member of the U.S. Coast Guard. My commitment to the service ends soon and I would like to pursue a career as an actuary. I've passed the first two exams and am now working on the third one. Any suggestions on which third exam to take -- CAS or SOA? Right now, I don't have any strong inclination either way as to which field I'd like to pursue. Also, is taking 3 or 4 exams before starting an actuarial job going to make it difficult for me to find employment?

A: Passing a few exams before starting is excellent and may even be seen by many employers as a prerequisite. When I left the US in 1996, "conventional wisdom" in my own circles was that the P&C actuarial market was better than the life market. However, this might have changed, and in any case is probably quite different amongst various regions. I'd advise you to call or e-mail an actuarial recruiter on this point (try one of this websites sponsors, actuaries@dwsimpson.com). Good luck in your new career!