Money is a Lousy Way to Keep Score. Do we really have the best job in America?

Transcription

1 Money is a Lousy Way to Keep Score Do we really have the best job in America? November 21, 2003 Powell & Associates

2 Where is the Actuarial Profession Going? Do we really have the best job in America? Is there a growing demand for actuaries? Is there any chance the world at large will ever recognize our profession? Would you recommend the actuarial profession to your child? November 21, 2003 Powell & Associates 1

3 What the 60 s s Looked Like to Me Plans: Participating Whole Life, etc. Portfolio Interest Rates = % No GAAP No Deferred Annuities No Yearly Renewable Term No Universal Life No Surplus Strain No computers November 21, 2003 Powell & Associates 2

4 Yield: 10-Year Treasury Notes November 21, 2003 Powell & Associates 3

5 What Today Looks Like to Me Universal Life is the dominant life plan Annuities words fail me ($250B premium) Interest rates are about back where they belong, but they haunt actuarial thinking Surplus Strain is, rightly, a constant concern Computers drive product development and financial reporting November 21, 2003 Powell & Associates 4

6 Jobs Rated Almanac Factors 1. Environment 2. Income 3. Physical demands 4. Outlook 5. Security 6. Stress Rank = 10 Rank = 32 Rank = 2 (tied for second with mathematician) Rank = 99 (7% job growth; it s 17% for lawyers) Rank = 52 Rank = 6 November 21, 2003 Powell & Associates 5

7 Persistently High Job Ratings Actuary (in the top 5 for 6 straight years) Software Engineer Accountant November 21, 2003 Powell & Associates 6

8 Definition of Actuary Jobs Rated Almanac: Interprets statistics to determine probabilities of accidents, sickness, and death, and loss of property from theft and natural disaster. 100 Best Careers for the 21 st Century: Measure risk; assess cost of risk; analyze statistics to calculate probabilities of injuries, sickness, death, and or property loss. SOA: The vision of the SOA is for actuaries to be recognized as the leading professionals in the modeling and management of financial risk and contingent events. November 21, 2003 Powell & Associates 7

9 Education of Professionals The actuary is educated to do things right, e.g., to design profitable products and value reserves adequately Doctors and lawyers learn about good health and legality as benchmarks against which to measure pathology November 21, 2003 Powell & Associates 8

10 Demand for Actuarial Services Traditional 1. Life insurance companies 2. Consulting 3. Government 4. Employee benefit plans, HMOs, etc. Personal Services sold directly to the public November 21, 2003 Powell & Associates 9

11 What Florida Thinks Actuaries Do There are 25 statutes referring to actuary Credentials required: 1. AAA 5 (including SVL) 2. SOA/AAA 3 3. CAS 3 4. Ea+SOA/AAA 2 (police & fire pensions) 5. Ea 1 6. None 11 November 21, 2003 Powell & Associates 10

12 Personal Actuarial Services Long-term care advice Life expectancy Health expectancy Personal injury settlements Viatical settlements Individual investments In general: assistance in evaluating financial choices November 21, 2003 Powell & Associates 11

13 Examples of Legal Services Life and worklife expectancies Investment advice Long-term care planning (Medicaid) Estate planning November 21, 2003 Powell & Associates 12

14 Life and Worklife Expectancies Published by Lawyers & Judges Publishing Company, Inc. Has tables of mortality rates, life expectancy, and worklife expectancy by age, sex, race, and education No actuary involved the authors have degrees in geology, filmmaking, economics, and law The attorney needs to employ a qualified economist to reduce any structured settlement offer to a present value. Actuary does not appear in the index November 21, 2003 Powell & Associates 13

15 Future First Financial Group Insurance benefit = $100,000 Fully secured, non-speculative return of 42% per annum Insured against default Complete protection of the investment Dramatic return without the risk found in other high yielding investments November 21, 2003 Powell & Associates 14

16 Viatical Settlement Procedure Investor pays a fixed sum to the viatical company The viatical company pays some portion of this sum to the terminally ill policyholder (Viator), who has an incontestable policy and provides evidence of his medical condition The Viator assigns the policy to the viatical company which designates the Investor as irrevocable beneficiary The viatical company pays the premiums until the Viator dies (or until they run out of money) November 21, 2003 Powell & Associates 15

17 Future First Medical Report A copy of the reviewing physician s medical report that confirms the life expectancy of Joe Policyholder: Combining the specific clinical information provided with currently available statistical life expectancy models and data for individuals afflicted by HIV and/or AIDS an opinion of life expectance of approximately 12 months has been formulated in this particular case. Michael Duffy, M.D. November 21, 2003 Powell & Associates 16

18 Why No One Can Define Our Job The profession itself favors broad definitions ( designers of security systems ) that imply an emphasis on long-term guarantees We are the only profession that truly deals with long-term guarantees as a product, and the public does not care about long-term guarantees The general public has permanently classified us as technicians rather than businessmen November 21, 2003 Powell & Associates 17

19 Hallmarks of the Actuary Basically honest person Passes several exams that the average person would never attempt to pass Has, so far, resisted the vulgarization that has plagued other professions Is content to live without the privileges and ornaments that other occupations enjoy November 21, 2003 Powell & Associates 18