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Actuarial Science as a Math Career Presentation to Conard High School October 21, 2011

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- 2 - Document Tracker Do red cars cost more to insure? Myth red cars are charged higher insurance premiums Fact paint color is not used to price auto insurance Data-driven pricing factors are used to price auto insurance Red cars are not correlated with higher loss costs or aggressive driving styles More important is what kind of car do you drive, and how you drive it Up to 100 variables are used when pricing auto insurance such as: Age, Gender, Marital Status Zip code where the vehicle is parked Type, make, and year of car Credit History Driving Record/Prior accident history Good grades!

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- 3 - Document Tracker Why become an actuary? Do you want a job that Has consistently been rated one of the top five jobs in the United States Offers high pay and lets you earn while you learn? Has excellent job security? Gives you the opportunity to participate in high-level business decision making? Lets you balance work and private life?

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- 4 - Document Tracker Why become an actuary?... Then you should be an actuary!

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- 5 - Document Tracker Actuaries provide expert advice and relevant solutions to business problems that involve risk. They usually work in: Insurance Companies Consulting Firms Banks and Investment Firms Colleges and Universities Insurance Regulators What is an actuary? Risk is the possibility that an undesirable event will occur. Actuaries are experts in: Evaluating the likelihood of future events Designing creative ways to reduce the likelihood of undesirable events Decreasing the impact of undesirable events that do occur

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- 6 - Document Tracker What do actuaries do? Traditional Roles Pricing of Insurance Product Development Financial Modeling Profit Analysis Risk Management Actuaries solve business and societal problems and help corporations and government agencies make decisions. To do this they make financial forecasts and apply analytical skills to key business and economic problems. Nontraditional Roles Derivative Modeling Economic Hedging Enterprise Risk Management Mergers and Acquisitions

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- 7 - Document Tracker What career choices do actuaries have? Determine the premium, or how much a company should charge, for a new type of health insurance Design new features for a life insurance policy Evaluate how much money must be invested today so that employees retirement benefits are secured Calculate reserves for hurricane damage Opportunities for actuaries also exist in: Health Actuary Life ActuaryPension Actuary Property & Casualty Actuary Banking Government Education Executive Roles Technology Actuary

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- 8 - Document Tracker What do I do every day? Julia Bishop Travel to insurance companies across the Northeast US Validate selected life and annuity policy reserves for multiple clients Review actuarial assumptions (mortality, lapse rate, interest rate) Actuarial Auditing Implement solutions for client consulting projects by creating and validating spreadsheets, macros, or actuarial projection software Document all meetings with the client in order to build detailed solutions to match their specific needs Create presentation materials and help facilitate workshops with the client Actuarial Consulting Assist in recruiting at University of Connecticut Help to transition and welcome new hires into the Deloitte culture Pass actuarial exams and earn actuarial designation Other Responsibilities Analyst for Deloittes Actuarial & Risk Analytics Group Background Hometown: Carterville, IL School: University of Illinois Degree: Actuarial Science How I chose Actuarial Science as a career: My love of math, puzzles, and people all come together. How I ended up in Connecticut: Paid internship with a small life insurance company in Hartford the summer after my junior year in college

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- 9 - Document Tracker What do I do every day? Matt Wininger Business consultant for capital management, financial reporting, expense management Manage project teams of actuaries, accountants, and business strategists Travel to client workplaces in Connecticut, New York, and Florida Listen to clients request and design an efficient solution Work within budget and time constraints Be the go-to-person for the client; review and deliver the final work product Business Consulting Perform auditing work for payout annuities and reinsurance transactions Evaluate clients financial statements with professional skepticism Review details of client work against professional standards Add value to the client by helping them identify and solve problems Auditing Manager for Deloittes Actuarial & Risk Analytics Group Deliver 6-10 projects / year on average worth $150,000 Clients

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- 10 - Document Tracker What makes a good actuary? Responsible for explaining complex concepts about applied statistics, insurance, accounting, and finance Work in large teams of people, often have supervisory role Actuaries work with numbers statistics, income streams, financial statements daily. Success on actuarial exams require comfort with higher mathematics and statistics Excellent CommunicatorFacility with Technology Figure out what is important about a complex situation Develop an understanding of what is the right thing to do, even in complex and ambiguous situations Make recommendations and solve problems Quantitatively-oriented Critical Thinker Microsoft Excel and Access are used daily to produce reports and analyze data More complex software such as Mathematica and SAS are sometimes used Must be able to learn new software quickly

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- 11 - Document Tracker What are Actuarial Exams? Actuaries need to pass professional exams that test their knowledge and skills similar to doctors and lawyers. Aspiring actuaries usually start taking exams while they are in college, especially if they are in actuarial science degree programs. After getting your degree, most full time jobs offer exam support. Examples: paying for study materials giving time during normal work hours to study Employers also reward students through salary increases for passing exams

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- 12 - Document Tracker Actuarial Exam Topics Calculus-based probability and statistics Theory of Interest Life contingencies and stochastic models Financial economics, option pricing, and forecasting models Loss models, credibility theory, and financial forecasting Time series and regression analysis Corporate finance Insurance product design

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- 13 - Document Tracker What are the benefits? Many different jobs/roles to choose from Rotations offer training and development Competitive Compensation Starting base salaries $55k - $70k 5 Years experience $80k - $115k Merit and exam increases Highly respected profession Executive opportunities Job security Graduate degree not required Earn while you learn!

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- 14 - Document Tracker Arent you an Accountant? Accountants Work with past events to explain financial results For an example, an accountant would review number of policies sold, amount of premium received and amount of claims paid in the past. Actuaries Forecast economic future events and prepare for different outcomes. An actuary forecasts the number of policies that may be sold in the future and the expected amount of claims that those policies might produce.

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- 15 - Document Tracker Comparable Careers Analytical, but with a sales focus 70-80 hr/week Client interaction Internally competitive Generally not a rotational program Large, but variable, initial compensation Investment Bankers Actuaries Purely analytical no sales bias Work/life balance (45-55 hour weeks) Progress at your own pace take breaks from exams if needed Support for professional development Structured rotation and promotional process Document Tracker

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- 16 - Document Tracker Choosing a Career Hours Compensation Work / Life balance Emotional reward Job Security Travel Desk Job / Work outdoors / Work with people Lets compare an actuary and a medical doctor Cost of Entry Cost of switching What is important about a career and how can we analyze it? Working Conditions Personal Interests Career Costs Subject Matter expertise (e.g. finance, biology, etc) Hobbies Team environment vs. working alone Geographical location

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- 17 - Document Tracker Choosing a Career - Actuarial Projections Suppose youre a high school senior and are interested in becoming an actuary or a doctor. How can you think about this decision? Lets analyze the objective elements of the decision: Cost / benefits of entry Time requirements

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- 18 - Document Tracker Projection Assumptions Will review actuary and doctor on the objective basis of compensation and working hours Need to develop assumptions about time, cost of education, projected income Actuary and general practitioner go to a in-state university, minimal scholarships, no college loans As full time students, classes 20 hrs / week + 40 hrs studying / week for 8 months/year Finds summer internship that pays $20 / hour for 3 months/year Works 45 hours / week, increasing 5 hrs/week with each promotion Exams take 300 hours / session, 10 sessions to pass all post-graduate Salaries include exams, bonuses and merits, estimated from DWSimspson.com Initially 2 weeks vacation; 1 additional week every five years ActuaryMD General Practitioner No paid internships, you volunteer in hospitals instead Salary info from MDSalaries.com Med school is 60-80 hours / week, 10 months/year. Medical residents work average 80 hours/week, 11 months / year GPs work 70 hours/week for 11 months/year General Assumptions

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- 19 - Document Tracker Analysis of Results Compensation Comparison On average, actuaries have significantly higher salaries than doctors during their first decade out of college, but eventually doctors have higher salaries

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- 20 - Document Tracker Analysis of Results Hours Comparison Doctors consistently work longer hours than actuaries

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- 21 - Document Tracker Analysis of Results Accumulated Value Throughout our projection period, actuaries have a higher accumulated value

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- 22 - Document Tracker Conclusions from analysis Actuaries work fewer hours, on average, than doctors Actuaries have a higher accumulated value (defined as compensation less education expenses) than doctors Training period is much more costly and time-consuming for doctors than for actuaries. Actuaries tend to earn higher incomes than doctors at the beginning, and doctors tend to earn higher incomes than actuaries later on.

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- 23 - Document Tracker Choosing a Career - Review and Limits Assumption uncertainty Limited projection period Important decision factors are not objectively measured Career satisfaction Intangibles such as prestige Does not account for self or externally imposed limits: Ability to borrow or earn Family care decisions A career decision has important objective and subjective elements; you must consider both and should compare your selected career choice to alternatives in order to make a fully informed decision.

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- 24 - Document Tracker How do I become an Actuary? In High School Associated classes Math/Calculus/Statistics Economics/Investments Computer Science Apply to Colleges & Universities with Actuarial Programs, and begin to pass exams while in college Job Shadow & Network To learn more about the actuarial profession: www.BeAnActuary.com www.soa.org www.castact.org www.coachingactuaries.com Extracurricular Activities Develop communication skills Leadership opportunities & teamwork

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- 25 - Document Tracker Copyright 2011 Deloitte Development LLC. All rights reserved. Questions?

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- 26 - Document Tracker Copyright 2006 Deloitte Development LLC. All rights reserved. About Deloitte Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, its member firms and their respective subsidiaries and affiliates. Deloitte Touche Tohmatsu is an organization of member firms around the world devoted to excellence in providing professional services and advice, focused on client service through a global strategy executed locally in nearly 150 countries. With access to the deep intellectual capital of approximately 135,000 people worldwide, Deloitte delivers services in four professional areas, audit, tax, consulting and financial advisory services, and serves more than one-half of the worlds largest companies, as well as large national enterprises, public institutions, locally important clients, and successful, fast-growing global growth companies. Services are not provided by the Deloitte Touche Tohmatsu Verein and, for regulatory and other reasons, certain member firms do not provide services in all four professional areas. As a Swiss Verein (association), neither Deloitte Touche Tohmatsu nor any of its member firms has any liability for each others acts or omissions. Each of the member firms is a separate and independent legal entity operating under the names Deloitte, Deloitte & Touche, Deloitte Touche Tohmatsu or other related names. In the United States, Deloitte & Touche USA LLP is the U.S. member firm of Deloitte Touche Tohmatsu and services are provided by the subsidiaries of Deloitte & Touche USA LLP (Deloitte & Touche LLP, Deloitte Consulting LLP, Deloitte Financial Advisory Services LLP, Deloitte Tax LLP, and their subsidiaries), and not by Deloitte & Touche USA LLP. The subsidiaries of the U.S. member firm are among the nations leading professional services firms, providing audit, tax, consulting, and financial advisory services through nearly 40,000 people in more than 90 cities. Known as employers of choice for innovative human resources programs, they are dedicated to helping their clients and their people excel. For more information, please visit the U.S. member firms Web site at www.deloitte.com.