preparing your students for actuarial … booklet... · preparing your students for actuarial...

ACTEX Publications · 800-282-2839 · 860-379-5470 [email protected] · www.ActexMadRiver.com

ACTEX PublicationsTHE EXPERTS IN ACTUARIAL EDUCATION

PREPARING YOUR STUDENTS FOR ACTUARIAL CAREERSA GUIDE FOR PROFESSORSLook inside for the following information:

• About the actuarial profession• Becoming an actuary• Starting your own actuarial science program

ACTEX Publications · 800-282-2839 · 860-379-5470

can helpTABLE OF CONTENTS

What is an Actuary?

The Self-Study Program Guide

Starting Your Own Actuarial Program

ACTEX Study Materials and Resources

About ACTEX

Skill-Development Books

A Message from ACTEX’s President

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ACTEX Publications

If you have an actuarial science program… If you offer a few actuarial exam preparation courses …If you have students who want to pursue an actuarial career and need your advice …

2 • Introduction


WHAT IS AN ACTUARY?An actuary is a business professional who appliesmathematics, finance, and statisticstoanalyzeandpredictthefinancialimpactofuncertain events. Actuaries manage risk in order to help insurance companies, government agencies, consulting firms, and other entities protectthemselves from loss, optimize earnings, and to plan for the future. Actuaries have a variety of job responsibilities including analysis, research, strategy development, and written and verbal communication.The actuarial profession is specialized, with fewer than 30,000 credentialed actuaries in the United States (compared to 1.8 million accountants). Actuaries enjoy high wages in a profession that is estimated to grow 27% by 2020.

THE ACTUARIAL CREDENTIALING PROCESSTo become a professional actuary, a student must pass a series of online courses and rigorous examinations, most of which are taken while employed in an actuarial capacity in industry or government.The first five actuarial examinations are consideredto be preliminary because they give the student a foundational knowledge in probability, interest theory, financial instruments, financial models, and lifecontingencies.After passing the preliminary tests, students take specific exams and courses that pertain to theindustry in which they work. Once a student passes all the requirements, he or she may apply for the professional designation of an Associate or Fellow with the credentialing body in their industry.

3What is an Actuary?

WHAT IS AN ACTUARY?Like many people, your students may only have a vague idea of what anactuary does on the job. This section will help.

IN THE UNITED STATES Life insurance, annuity, healthcare, advanced pension and general insurance actuaries are credentialed by the Society of Actuaries [SOA]; property and casualty actuaries receive their designations from the Casualty

Actuarial Society [CAS]. IN CANADA

Actuaries are credentialed by the Canadian Institute of Actuaries, which coordinates their standards with

the SOA and CAS.

TO GET CREDENTIALED

– Bureau of Labor Statistics, U.S. Department of Labor, Occupational Outlook Handbook, 2012-13 Edition, Actuaries.


self-studyprogram

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4 • Self-Study

Take undergraduate courses in general business, communication, and mathematical concepts to gain prerequisite knowledge.Students need to have knowledge in a range of subjects in order to have the necessary foundation for the actuarial exam material. Encourage your students to take classes in the following areas:

• Linear Algebra• Introductory Accounting• Calculus• Mathematical Statistics• Business Law• Writing

• Applied Statistical Methods (Regression and Time Series)• Corporate Finance (Intermediate Level)• Microeconomics and Macroeconomics

Advise your students to take the coursework above as an undergraduate. These courses are not prerequisites for the actuarial exams and may be taken while students are working on passing exams.

If these courses are unavailable, or a student’s schedule will not permit these classes, there are online courses approved by the SOA that also meet these requirements.

BECOMING AN ACTUARY

Take required undergraduate courses.Students are required to pass college-level courses in these topics:

Undergraduates Interested In Actuarial Studies Have Many Options Available To Them.If your school does not currently have a formal actuarial science program, you can encourage your students by guiding them through these steps to help prepare them for exams with a Self-Study Program. You can mentor students with an interest in actuarial careers with this step-by-step guide that explains the process from preliminary courses, to actuarial accreditation.


program

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5Self-Study

Begin taking actuarial exams.Therearefiveso-called“preliminary”actuarialexams.FourofthefirstexamsareadministeredjointlybytheSOA and the CAS, and are identical.

Since the first three tests are identical, students have theflexibilityoftakingafewexamswithouthavingtoimmediatelychoose between the life/annuity and the property/casualty career paths.

Get an internship in an actuarial department.Internships are an excellent way for students to practice interviewing and to gain valuable experience working in a government, professional insurance, or consulting business environment.

SOASociety of Actuaries

Same Exam, Jointly Administered




Specifictolife,annuities, health and pensions industries

Specifictoproperty and

casualty industries

Exam PProbability

Exam FMFinancial Mathematics

Exam MFEModels for Financial Economics

Exam MLCModels for Life Contingencies

Exam CConstruction and Evaluation

of Actuarial Models

Exam 4Construction and Evaluation

of Actuarial Models

Exam 1Probability

Exam 2Financial Mathematics

Exam 3LModels for Life Contingencies

& Statistics

Exam 3FModels for Financial Economics

CASCasualty Actuarial Society

Enter the workforce and keep taking exams.Once students near graduation (or are new graduates), and have passed one or two exams, they are ready to seek full-time employment.

After students have been hired by an insurance company, consulting firm,orgovernmententity,theywillbegivenopportunitiestostudyand pass exams, and take online courses on the job as they further their careers.

THE PRELIMINARY EXAMS ARE LISTED BELOW IN RECOMENDED ORDER:


thinking about

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6 • Starting Your Program

STARTING YOUR OWN ACTUARIAL SCIENCE PROGRAM

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Undergraduateswhopassthefirsttwoexams have an advantage in the job market – you can help.

In the absence of a formal actuarial program, you can help your students by offering comprehensive courses in probability and interest theory while considering the possibility of a full program.

Adopt the suggested course reading for existing courses.Each exam has an approved topic syllabus and a list of textbooks recommended by the SOA and CASthatcovertherequiredtopicsinsufficientdepth.ACTEXhas specialty texts on this list for most topics, written by our world-class actuarial educators.

Make sure to include practice problems from old exams in your course curriculum. Studentswillneedproficiencywiththekindofquestionsthatareontheexam.You can get additional practice problems from ACTEX for each exam.

Set expectations for your students.Takingacourse in thetestedtopic isonly thebeginning.Havingsufficientproficiencytopassdemandingactuarialexamswilltakeself-studytoo—lots of self study. Your students should plan to study between 300 and 400 hours for each exam.Offertotutoryourstudentsondifficulttopics.

Passing exams requires a rhythm of condensing, outlining, reviewing, and practicing the hundreds of new concepts required for each exam.

Reassure your students that it is normal for students to fail an

examortwoatfirst—anotion which can be a

shock to bright students accustomed to earning

high grades.

“Actuarialexams

require students to

have in-depth

specialized

knowledge that

typical undergraduate

courses may not offer.

It is not unusual for a

math major to pass

a probability course

without having

seen topics, such as

moment generating

functions, that appear

ontheexam.”

– Matthew J. Hassett, PhD, Professor Emeritus, Arizona State University and retired actuary

ACTEX Publications · 800-282-2839 · 860-379-5470 [email protected] · www.ActexMadRiver.com Starting Your Program

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Consider taking actuarial exams yourself.Tacklingatleastthefirsttwoexamswillgiveyoufirst-handexperiencethatyoucantranslateinto insights for your students.

Reach out to the actuarial community.Actuaries value education and most companies would be pleased to communicate with you as you design your program.

If you live near an area with active actuarial employment, you and your students can participate in actuarial clubs, internships, and other opportunities.

BuildanOfficialActuarialScienceDegreeProgramBeginbuildingadefinedactuarialprogramusingresourcesavailable fromtheSOAandACTEX. Create the courses from the SOA or CAS Syllabus of Examinations.

Attain the Centers for Actuarial Excellence designation.If your college or university chooses to become active in actuarial education, your school may become eligible for the SOA’s Centers for Actuarial Excellence designation.This designation is awarded to colleges and universities worldwide with extensive resources devoted to actuarial education and research. Accredited schools are eligible for research grants up to $100,000 per year.

The accreditation process has stringent requirements on curriculum, graduate count, faculty composition, industry connection, and research. Designated schools must also pass a site visit from the SOA.

CAE For more information on the Centers for Actuarial Excellence accreditation, please see the SOA website at www.soa.org

or email [email protected]

ACTEX Publications · 800-282-2839 · 860-379-54708 • Textbooks

Probability for R

isk Managem

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Hassett

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About the TextThis textbook differs from most intermediate probabilitytexts in that it focuses the theory directly on applications in the general field of financial risk management, including insurance, economics, and finance. It will be appropriate for a first course in probability.

About the Authors

Matthew J. Hassett is professor emeritus of mathematics at Arizona State University where he taught from 1966 to 1999. He worked in industry as a health actuary from 1999 to 2005, and then returned to Arizona State to continue working with actuarial students. He has published papers in mathematical logic, mathematics education, finance and actuarial science. Dr. Hassett has co-authored an introductory statistics textbook and the ACTEX study guide for Exam M of the Society of Actuaries. He has consulting experience in mathematical analysis of mortgage-backed securities and their derivatives. Dr. Hassett is an Associate of the Society of Actuaries.

Donald G. Stewart is professor emeritus of mathematics at Arizona State University, following a career of 34 years. His original research interests were in topology. Since 1994, Dr. Stewart has worked with actuarial students at ASU. He also participated in the creation of the ASU televised course in Survival Models. Dr. Stewart has extensive experience inproviding analysis for expert witnesses. Dr. Stewart has co-authored the ACTEX study manual for Exam M of the Society of Actuaries.

ACTEX A CA d E m i C S E r i E S

Probability forRisk Management

m A T T h E w J . h A S S E T T , A S A , P h . d .

2ndEdition

d o n A l d G . S T E w A r T , P h . d .

ACTEX PublicationsWinsted, CT 06098www.ActexMadRiver.com

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4thEdition

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Y· G·Introduction to Credibility Theory presents the reader with a wide variety of credibility models, and, in so doing, traces the historical development of the subject. In the first ten chapters emphasis is on basic statistical concepts. Each of the last five chapters describes a practical application of concepts discussed earlier. The text contains end-of-chapter exercises and an extensive bibliography.There has been a significant expansion of information in the Fourth Edition of this important work, including three entirely new chapters. The first new chapter is inspired by the concepts discussed in The Cult of Statistical Significance text. The second is an application of the Bühlmann credibility model to group health insurance. The third is an application of Bayesian methods to data obtained during a clinical study of young children with cystic fibrosis. The goal of this study was to estimate the frequency, severity, and ultimately the cost of individual hospital visits. The Fourth Edition also contains a new section on the beginnings of Bayesian statistical inference and an update on recent applications of credibility.

About the text

About the AuthorThomas N. Herzog, PhD, ASA, is Distinguished Scholar in Insurance Regulation with the National Association of Insurance Commissioners. Dr. Herzog recently retired from the U.S. Department of Housing and Urban Development where he served many years as the Chief Actuary of the Federal Housing Administration. He has a Sc.B. in Applied Mathematics from Brown University and a Ph.D. in Mathematics, with a major in Statistics, from the University of Maryland. Dr. Herzog is a coauthor of the following books: Models for Quantifying Risk; Applications of Monte Carlo Methods to Finance and Insurance; and Data Quality and Record Linkage Techniques. Dr. Herzog is the winner of the 1990 AERF Practitioner’s Award for a paper on Home Equity Conversion Mortgages, written with Theresa R. DiVenti. Dr. Herzog is also a Fellow of the American Statistical Association.

The 4th edition of Herzog’s Introduction to Credibility Theory improves upon its already well-received and instructive material by introducing new ways of advancing the field. The text is easy to read and easy to understand with documented examples to guide the reader.

Marjorie A. Rosenberg, PhD, FSAProfessor and Department Chair of Actuarial Science, Risk Management and Insurance, with a Joint Appointment in Biostatistics and Medical Informatics

University of Wisconsin-Madison

I have taught from the book, Introduction to Credibility Theory, by Thomas Herzog for years. Both the students and I like the way the various topics of credibility are presented in this book. It is done in a clear and concise manner without getting bogged down with too much notation. I find that after teaching from this book, my students have a firm understanding of the concepts of credibility and are better prepared to attempt the credibility questions on SOA Exam C/4.

Steve J. Kopp, M.Sc., FSA, FCIADepartment of Statistical and Actuarial Sciences

University of Western Ontario

4thE

dition

Bayesian methods have long been a key part of the actuarial repertoire, and are now rapidly gaining traction in a variety of domains in the natural and social sciences. Actuaries are fortunate to have Tom Herzog’s practical and rigorous primer on this important subject.

James C. Guszcza, PhD, MAAA, FCASConsulting Actuary and Predictive Modeler

Probability for R

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Hassett

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About the Authors



ACTEX A CA d E m i C S E r i E S



2ndEdition



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2

A FULL COMPLEMENT OF RISK MANAGEMENT EDUCATIONAL MATERIALS

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Introduction toCredibility Theory

T h o m a s N . h e r z o g , P h d , a s a

4thEdition

·W·

Z·

Y· G·Introduction to Credibility Theory presents the reader with a wide variety of credibility models, and, in so doing, traces the historical development of the subject. In the first ten chapters emphasis is on basic statistical concepts. Each of the last five chapters describes a practical application of concepts discussed earlier. The text contains end-of-chapter exercises and an extensive bibliography.There has been a significant expansion of information in the Fourth Edition of this important work, including three entirely new chapters. The first new chapter is inspired by the concepts discussed in The Cult of Statistical Significance text. The second is an application of the Bühlmann credibility model to group health insurance. The third is an application of Bayesian methods to data obtained during a clinical study of young children with cystic fibrosis. The goal of this study was to estimate the frequency, severity, and ultimately the cost of individual hospital visits. The Fourth Edition also contains a new section on the beginnings of Bayesian statistical inference and an update on recent applications of credibility.

About the text

About the AuthorThomas N. Herzog, PhD, ASA, is Distinguished Scholar in Insurance Regulation with the National Association of Insurance Commissioners. Dr. Herzog recently retired from the U.S. Department of Housing and Urban Development where he served many years as the Chief Actuary of the Federal Housing Administration. He has a Sc.B. in Applied Mathematics from Brown University and a Ph.D. in Mathematics, with a major in Statistics, from the University of Maryland. Dr. Herzog is a coauthor of the following books: Models for Quantifying Risk; Applications of Monte Carlo Methods to Finance and Insurance; and Data Quality and Record Linkage Techniques. Dr. Herzog is the winner of the 1990 AERF Practitioner’s Award for a paper on Home Equity Conversion Mortgages, written with Theresa R. DiVenti. Dr. Herzog is also a Fellow of the American Statistical Association.

The 4th edition of Herzog’s Introduction to Credibility Theory improves upon its already well-received and instructive material by introducing new ways of advancing the field. The text is easy to read and easy to understand with documented examples to guide the reader.

Marjorie A. Rosenberg, PhD, FSAProfessor and Department Chair of Actuarial Science, Risk Management and Insurance, with a Joint Appointment in Biostatistics and Medical Informatics


I have taught from the book, Introduction to Credibility Theory, by Thomas Herzog for years. Both the students and I like the way the various topics of credibility are presented in this book. It is done in a clear and concise manner without getting bogged down with too much notation. I find that after teaching from this book, my students have a firm understanding of the concepts of credibility and are better prepared to attempt the credibility questions on SOA Exam C/4.

Steve J. Kopp, M.Sc., FSA, FCIADepartment of Statistical and Actuarial Sciences


4thE

dition

Bayesian methods have long been a key part of the actuarial repertoire, and are now rapidly gaining traction in a variety of domains in the natural and social sciences. Actuaries are fortunate to have Tom Herzog’s practical and rigorous primer on this important subject.

James C. Guszcza, PhD, MAAA, FCASConsulting Actuary and Predictive Modeler

“I selected Models for Quantifying Risk as the text for my class. Given that the syllabus had changed quite dramatically from prior years, I was looking for a text that would cover all the material in the new syllabus in a way that was rigorous, easy to understand, and would prepare students for the May 2012 MLC Exam. To me, the text with the accompanying solutions manual does precisely that.”

-- Jay Vadiveloo, Ph.D., FSA, MAAA, CFAMath Department,

University of Connecticuton using Models for Quantifying Risk (3)

Visit us online at www.ActexMadRiver.com, where you can:• View sample textbook chapters• Explore the full line of ACTEX Study Materials• Request bulk catalogs to hand out to your students• Order free textbook examination & desk copies for professor use

Click on our “professors” tab for all your education needs!

TEXTBOOKSYou and your students will appreciate having a course textbook that focuses on the key topics of importance for each exam.

STUDY MANUALSStudy guides are the foundation of good study practices for actuarial students. ACTEX study manuals feature comprehensive reviews of all syllabus material, worked examples, and problem sets with complete solutions.

ACTEX Publications · 800-282-2839 · 860-379-5470 [email protected] · www.ActexMadRiver.com 9Syllabus Coverage

Probability for R

isk Managem

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Hassett

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About the Authors



ACTEX A C A d E m i C S E r i E S



2ndEdition



ndEdition

2P

robability for Risk M

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Hassett

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About the Authors



ACTEX A C A d E m i C S E r i E S



2ndEdition



ndEdition

2

Introduction to Credibility theory

Risk Models and Their EstimationUsed together, these textbooks address all topics in the Exam C/4 syllabus.

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Probability for Risk ManagementFocused on applications of probability inthegeneralfieldofRiskManagement, including insurance, economics,andfinance.

Mathematics of Investment and CreditThe leading textbook in interest theory, this publication is the required or recommendedtextbookinfinancialmathematics in many university courses.

Probability and Statistics with ApplicationsProvides the content to serve as the primary text for a standard, two semester advanced undergraduate course in probability and statistics.

Models for Quantify RiskIdeal for use in a two or three semester university course in basic actuarial science, it covers all life contingency exam topics in a single reference.

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“I wanted to thank Dr. Hassett and everybody at ACTEX who helped me pass this exam. Dr. Hassett’s textbook prepared me very well for the exam.”

-- S. Baskaran, Exam P Student,on using Probability for Risk Management (1)


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10 • Study Materials

Online Courses If students are struggling with the material, ACTEX offers online

coursestaughtbyexpertsinthefield.

Practice Exams / Review QuestionsACTEX offers lots of exam style questions for student practice, which is

so vital to exam success.

Flashcards Great for memorizing key formulas.

SUCCESS

Study Manuals Students will want to use a study manual as part of their exam preparation, particularly for the difficult material. ACTEX StudyManuals contain comprehensive reviews of all syllabus material. They also include many examples and problems sets with complete

solutions to further illustrate topics.

TextbooksThe most comprehensive tools for study, ACTEX textbooks give students a thorough understanding of a topic and allow for greater

understanding when accompanied with the options listed below.

Exam Preparation ResourcesClasses are the best way for students to learn, but for your self-study students, there are many educational products

and opportunities available.

About ACTEX Publications

We opened our doors in 1972 with a simple goal: to help new risk management professionals navigate the actuarial examination process by offering quality educational and study support.

Since that time, colleges, universities, corporations, and over 50,000 self-study students have relied on ACTEX for professional development resources.

Today, we offer materials for exam takers and seasoned professionals alike. All of our products are created by expertsinthefieldsofriskmanagementandeducation.

40 YEARS STRONG

ACTEX Publications · 800-282-2839 · 860-379-5470 [email protected] · www.ActexMadRiver.com Skill Development 11

SKILL DEVELOPMENT BOOKSCheck out two of our most popular books

- Robin Cunningham, Co-Founder Arch Solutions, Co-Author Models for Quantifying Risk

“This is the only book on the market that directly addresses how to successfully navigate the entire actuarial exam system.”

- Robert L. Brown, Professor Emeritus, University of Waterloo; and President Society of Actuaries 2000-2001

“Given that you can spend over 300 hours studying for just one actuarial examination, it is well worth an investment of two to three hours to read this fine summary of how to study for and write actuarial exams.”

This text is listed as an optional reference in the Society of Actuaries Decision Making and Communication Module.

Available in paperback and digital versions.

Available in paperback and digital versions.

THE INFLUENTIAL ACTUARY How Actuaries and Other Technically Oriented Professionals Set Themselves Apart.

MAKING THE GRADE, 4TH EDITION The Aspiring Actuary’s Guidebook to Consistent Exam Success and Advancement in the Workplace. Providestipsonsignificantlyimprovingexamscores.

Most working actuaries use written and communication skills almost as much as they use analytic ones.

This book offers specific tools and strategies foractuaries and other technical professionals on how tobemore influential in theway theycommunicate,influence,andrelatetoothers.


Actuarial Resources Corporation

Aetna Inc.

Allstate Insurance Company

American Family Insurance

Aon Hewitt

Arizona State University

AXA Equitable

Chinese University of Hong Kong

CIGNA Corporation

Conrad Siegel

Drake University, Iowa

Gabriel Roeder Smith & Co.

Genworth Financial

Georgia State University

The Hartford

Illinois State University

Laval University School of Actuarial Science, Quebec

Legal & General America

Liberty Life Assurance Co Of Boston

Manulife Financial

MassMutual

Mercer

Milliman Inc.

Ohio National Financial Services Inc.

Pennsylvania State University

Prudential Retirement

Robert Morris University

SAFECO

St. John’s University

Simon Fraser University

Temple University

The Co-Operators

Towers Watson

Transamerica

Trustmark Companies

University of Connecticut

University of Hong Kong

University of Illinois at Urbana-Champaign

University of Iowa

University of Manitoba

University of Michigan

University of Nebraska-Lincoln

University of St. Thomas

University of Toronto



Dear Teaching Professional,

On behalf of everyone here at ACTEX, I would like to extend my thanks to you for guiding the next generation of mathematicians, engineers, and business people into the workforce.

As educators ourselves, we recognize the importance of the work you do and strive to be your trusted partner for quality risk management educational materials.

We welcome your feedback. Please contact me or my staff with your comments, questions, or requests.

Thank you for allowing us to serve you.

Gail A. Hall, FSA, MAAA

a message From the President of ACTEX Publications

ACTEX PRODUCTS ARE USED IN UNIVERSITIES AND CORPORATIONS AROUND THE WORLD!

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