17th general insurance seminar – risk and reward banking ... · katrina mcfadyen publications...

Oc

tob

er

20

10 Actuary A

ust

rali

a

Issu

e 1

54

17th General Insurance Seminar – Risk and Reward

Banking Insights

Membership Renewals

Actuarial Salaries

ACTUARY AUSTRALIA • October 2010

2

ContributionsContributions should be sent to The Institute of Actuaries of Australia, marked to the attention of Katrina McFadyen (Publications Manager). When sending contributions please supply text in Microsoft® Word format. Illustrations and photos should be supplied as JPEG, TIFF, EPS or PDF files at a resolution of 300dpi. (Note: GIF files are generally unacceptable because of low resolutions). Prior to supply of material, please confirm supply specifications, copy limits and relevant details with Katrina McFadyen. Email: [email protected]

Magazine Design Kirk Palmer Design 57 Griffin Street Surry Hills NSW 2010 Tel / Fax (02) 9332 1223 Email [email protected]

Next Edition AA155 November 2010AA156 December 2010 – Deadline for contributions: 1 November 2010

Actuary Australia Editorial Committee

James Collier EditorTel (02) 9335 8933 Email [email protected]

Catherine Robertson-Hodder EditorTel (02) 9455 9178 Email [email protected]

Katrina McFadyen Publications ManagerTel (02) 9233 3466 Email [email protected]

Genevieve Hayes Assisting EditorTel (03) 9940 4589 Email [email protected]

Kitty Ho Assisting EditorTel (02) 9272 8178 Email [email protected]

David Millar Assisting EditorTel (02) 9276 9347 Email [email protected]

Matthew Wood Assisting EditorTel (02) 9995 1857 Email [email protected]

The Institute of Actuaries of Australia ABN 69 000 423 656Level 7, Challis House, 4 Martin Place Sydney NSW 2000 Australia Tel (02) 9233 3466 Fax (02) 9233 3446 Email [email protected] www.actuaries.asn.au

Published by The Institute of Actuaries of Australia© The Institute of Actuaries of Australia ISSN 1035-6673

Actuary Australia

Advertising PolicyAdvertisements on any relevant subject will be accepted subject to space limitations and provided only that they do not, in the opinion of the Institute, detract from the actuarial profession. Positioning of advertising within Actuary Australia will be at the Editor’s discretion. Copy should be lodged with the Institute Publications Manager in time to meet the production schedule. Further information can be obtained from [email protected] or via the office of The Institute of Actuaries of Australia.

Advertising Rates* One-off Run 3+ All 10 Edit.

Back Page: $3000 $2700 $2250Full Page: $2000 $1800 $1500Half Page: $1750 $1575 $1313Inserts: $2000 $1800 $1500Note: all rates are plus (10%) GST. *Effective from 1 January 2010

Disclaimer Opinions expressed in this publication do not necessarily represent those of either The Institute of Actuaries of Australia (the ‘Institute’), its officers, employees or agents. The Institute accepts no responsibility for, nor liability for any action taken in respect of, such opinions. Where an advertisement is accepted by the Institute for placement in this publication, the advertiser:(a) acknowledges and agrees that the Institute acts as a medium through which

individuals seek employment opportunities and that the Institute does not vet, nor is it responsible for vetting, job candidates or the representations (whether oral or in writing) made by them. The Institute disclaims all liability for any loss, costs, damages or loss of profits sustained as a consequence of any advertiser employing or engaging any person sourced through an advertisement placed in this publication;

(b) acknowledges and agrees that, while the Institute makes every effort to avoid errors in advertisements it has agreed to print in this publication, no responsibility or liability is accepted for any errors or omissions;

(c) must comply with the Human Rights and Equal Opportunity Commission Act 1986 (Cth) and all anti-discrimination and equal opportunity legislation applicable in the State or Territory in which they conduct business;

(d) agrees to indemnify, and keep indemnified, the Institute, its officers, employees and agents against all claims, actions, suits, liabilities, actual or contingent costs, damages and expenses incurred by the Institute in connection with any of the following by the advertiser: any breach of this agreement; any negligent act or omission; the publication of any advertisement in this publication; and an actual or alleged breach of any law, legislation, regulations, by-laws, ordinances or codes of conduct which occurs as a consequence of the advertiser’s advertisement appearing in this publication; and

(e) warrants and undertakes that it has the legal capacity and power to enter into this agreement and perform its obligations under it and that advertisements placed by the advertiser in this publication do not breach the intellectual property rights of any third party.

editorial

Rednecks and Risk Management

A t a time of moving forward, it may be insightful to apply our beloved actuarial control cycle and look back at the

process that elected our government: a government that was ultimately determined by what some remarked as a few colourful rednecks and country hicks. Was this a breakdown of the national risk management process? Could actuaries have improved the process? This sounds reminiscent of our own efforts at devaluing the actuarial qualification to Associate status initially decided by a handful of people against the dissent of the majority. (CEO’s note – please read my column on page 34 for an alternative view).

Can risk management systems avoid reliance on people, or are they ultimately dependent upon them? Should the Independents have declared conflicts of interest (on behalf of the nation) as each party pitched what they could offer their electorates? Should the Governor General have been forced to intervene or have had to resign her post with her daughter married to a Labor politician? Should the Queen have had to intervene? Would the Queen satisfy a Fit and Proper Person Policy? Should Treasury stress-test electoral promises and publish the probability of failure? What deficits should be permissible? What financial condition document

or statement of advice should we receive on the inherent risks of the parties’ business plans / budget?

Is this the wrong interpretation of the Independents? Should they be viewed like independent directors elected to represent the shareholders (voters), more informed and more qualified to actually assess management (the different parties)? Should parliament have a compulsory number of Independents (perhaps without reference to an electorate)? How about an actuarial submission on parliamentary reform?

This month’s magazine discusses our favourite subject – risk management – with the backdrop of the upcoming GI Seminar Risk and Reward. We also explore the related subject of gambling and corruption, with some tips on how to pick a winner for the Melbourne Cup. – JC ▲

James Collier

[email protected]

Catherine Robertson-Hodder

[email protected]


3

What’s New on the Web – October

Renew your membership in four easy steps

Membership renewals notices for 1 October 2010 – 30 September 2011 are now available online www.actuaries.asn.au/renewals

Website re-build update

In response to your feedback we are rebuilding our website. We are progressing through a series of upgrades that will continue for the rest of the year and appreciate your patience as these improvements are made. Latest enhancements include:

• Online registrations are now available for Insights. You must be logged in to register.

• Professional Matters is now complete and you can easily find the Professional Standards and Guidance notes and information on CPD etc.

We are also working on giving you easy access to papers and presentations from past events. In the meantime there is a Google text search available. If you cannot find a paper please contact us via [email protected] and we will send it to you.

Are you CPD audit ready?

The Institute is committed to seeing continuing levels of CPD compliance. To help achieve this, a brochure highlighting the key points of PS1 about CPD has been developed, a copy can be requested by emailing [email protected]

Life Insurance and Wealth Management Practice (LIWMPC) Committee Newsletter

The sixth edition of the LIWMPC Newsletter is now available, please forward any feedback to [email protected]

contentsAA No 154, October 2010

4 A Punter’s Guide to the Spring Racing Carnival Comment: Chris Woolfrey

6 President’s Column Bozenna Hinton

7 Actuary Unearthed Ashley Wilson

8 The Actuarial Pulse Survey: Genevieve Hayes

11 Banking Insights Report: Jules Gribble

12 Variable Annuities in Australia Review: Ismar Tuzovic

15 It’s What You Asked For – Understanding Changes to Your Membership

Notice

16 Member Services and Educator Implementation Group – Wrap Up

Report: Fatima Dawood

18 17th General Insurance Seminar – Risk and Reward

Event

22 In the Margin Puzzles: Genevieve Hayes

23 More than Maths Communications: Martin Mulcare

24 Work Ahead – So You Know What You Mean by Work?

Report: Chris White

26 Actuarial Salaries Review: Jenny Lyon

28 ERM 2010 – It’s All About Opportunity Report

29 Education Update Philip Latham

30 CAP Course Report: Revsion Tam

31 Student Column – European Union: Modern-day Fairy Tale

Report: Arun Isaac

32 Obituary: Galfrid Leslie ‘Tig’ Melville Owen Roach / Tim Trahair

34 Report from the CEO Melinda Howes

Diary Dates

13 October Melbourne Super Policy Forum – Projecting the Future – How Much is My Super Really Worth?

18 October Sydney Insights – The Risk Free Discount Rate Question – Can we Agree?

25-26 October Sydney Professionalism Course

27 October Sydney Young Actuaries Program – Actuarial Women’s Network

4 November Sydney RAGS

7-10 November Gold Coast 17th General Insurance Seminar – Risk & Reward

15 November Melbourne Graduation Dinner

11-13 April 2011 Sydney Biennial Convention


Bring me a quart of colonial beer,And some doughy damper to make good cheer,I must make a heavy dinner;Heavily dine and heavily sup,Of indigestible things fill up,Next month they run the Melbourne Cup,And I have to dream the winner.

– From A Dream of the Melbourne Cup by Andrew Barton ‘Banjo’ Patterson (1864 – 1941)

I n the lead up to the 150th Melbourne Cup to be run on 2 November, I’ve been asked to write an article about horse racing from a punter’s perspective. So I have set out my

thoughts on different approaches to betting on horses, depending on your experience. I have considered one-race-a-year punters, novice punters who might attend one or two race meetings over the Spring Carnival and longer-term punters.

One-race-a-year puntersFor the one-race-a-year punter, I believe that knowing the probability of your bet winning is more important than the horse that you back. By knowing the probability of your bet winning your expectation of success is set and you won’t have a false hope of making a profit.

The probability of winning might be simply estimated from the TAB dividend before the race by: Probability of Winning = 1 / (TAB dividend). For example, if the TAB dividend is $8.0, then the probability of winning would be estimated to be 12.5%. But if you did this calculation for all the horses in the race the percentages would sum to about 120%, not 100% as you might think. This is how the TAB makes a profit. So a better estimate would be:

Probability of Winning = 1 / (TAB dividend x 1.2). Using this calculation the estimate of the probability of winning for a horse with a TAB dividend of $8.0 is 10%.

But unless you have a particular horse that you want to back, the office Cup Sweep is a better option for once-a-year punters. In a Sweep there is no TAB margin so all of the money makes its way back to the winners.

Novice Punters attending one or two race meetings over the Spring CarnivalMany people go to the Spring Carnival races just for the party atmosphere, but if you want to have a bet and watch the races my suggestion is to bet on the most favoured horse in each race. You may simply want to back the favourite as listed in the form guide in the newspaper. Taking this approach you won’t win enough to pay off your mortgage but you are more likely to enjoy the thrill of backing a winner. Also, the horses you back should be competitive and so make the day more interesting.

To give an indication of the potential success of this strategy, I’ve analysed the results of ‘paper favourites’ in each Saturday metropolitan race meeting in Melbourne, Sydney and Brisbane over the last 10 months. By ‘paper favourites’ I mean the horses shown as favourites in Saturday’s newspaper. The analysis covers 133 race meetings which typically have 8 races. The results below are for each of the meetings based on putting a $10 win bet on the paper favourite in each race. Results are rounded to the nearest $10.

Total number of meetings 133

No. of meetings at which there were at least one winner 124 (93%)

No. of meetings at which losses were made 64 (48%)

No. of meetings at which profits were made 55 (41%)

No. of meetings that broke even 14 (11%)

Total profit across all meetings $260

For such a simplistic approach the results are quite acceptable, with a high probability of backing at least one winner. Note that while the total profit across all meetings was $260, most of this came from one particular meeting. The amount of winnings will change depending with whom and when you bet. Bets that allow you to lock in the odds at the time of placing the bet will produce different results to those that calculate the odds once all money has been received.

A Punter’s Guide TO THE SPRING RACING CARNIvAL

4 comment


5

▲

comment

More analysis would be needed to verify if such an approach were viable in the long-term, but for novice punters attending one or two meetings over the Spring Carnival I would recommend it.

A refinement to this strategy is to only bet in races for which the form is well-exposed; by this I mean that there is relatively reliable information about all the horses in the race. A simple way to implement this refinement is to ignore races in which any runner is having its first start. With such races excluded from the analysis the following results are obtained:

Total number of meetings 133No. of meetings at which there were at least one winner 124 (93%)

No. of meetings at which losses were made 60 (45%)

No. of meetings at which profits were made 65 (49%)

No. of meetings that broke even 8 (6%)

Total profit across all meetings $560

There may be one or two races in a meeting that are excluded under this approach but, based on the observed results, it increases the likelihood of making a profit on the day.

Longer-term puntersThe secret to success in the long-term is not about determining the best horse in the race; nor is it about determining the horse most likely to win each race. The secret to long-term success is about backing horses that have a better probability of winning than suggested by the odds available on the TAB or with a bookmaker. If you assess that a horse has a 50% probability of winning but the best TAB or bookmaker dividend available is $1.90, then you will eventually go broke by backing these. In cases like this a dividend greater than $2.00 is required for long-term success (using the same formulas as I provided earlier).

The most difficult part in all of this is assessing the probability of winning for each horse. In Australia, the most well known books on numerical rating methods used to make such assessments were published by Don Scott from the late 1970s through to the 1990s. The principles described in these books can still be used today but properly assessing the ratings of horses in the major meetings each week amounts to a full time job. There are some short cuts however. Free ratings worksheets and information that can be used to develop your own ratings are available from the website www.racingandsports.com.au, while completed ratings, with odds already assessed, can be obtained from www.racenet.com.au for a price.

There are also individuals and companies that look for irregularities in the odds provided, in much the same way as arbitrage traders scour through the financial markets, in the attempt to make a profit regardless of which horse crosses the line 1st, 2nd or 3rd.

With all of this in mind, it is important to keep it all in perspective.

Bet with your head, not over itIt is not my intention to encourage people to gamble but hopefully this article will enable those that are having a bet to make more

informed decisions. For me, betting on the horses is part of a hobby which includes the pre-race and post-race analyses as well as watching or listening to the races. I never bet more than I would feel comfortable to lose.

After all, if you are not relying on the income you may receive, then there should be aspects of the betting that make your experience all the more enjoyable. Whether that be the thrill of backing a winner, the heightened intensity of the races when you have ‘some of your own skin on the line’ or the bragging rights over your friends when you take home greater winnings than they do.

Horses to follow for the Melbourne CupAt the time of writing, 253 horses have been nominated for the Melbourne Cup with the final field of 24 to be determined on 30 October, so some, or all, of the horses mentioned below may not be in the final field. Nevertheless, I have set out below some horses to watch out for.

The master trainer Bart Cummings has nominated 12 horses including the mare Dariana. In the Winter she beat the colts in the Queensland Derby over 2400 metres and, while she might be more suited to the Caulfield Cup, if she makes it to the Melbourne Cup she will demand a lot of respect.

Two horses from Japan, Delta Blues and Pop Rock, finished first and second in the 2006 Melbourne Cup but since then there have been no entries from Japan due to the extreme quarantine restrictions put in place following the equine influenza outbreak in 2007. These restrictions have been eased somewhat with the result that 5 Japan-based horses have been nominated this year. Of these Jaguar Mail is the best performed and will be ridden by Australian jockey Craig Williams in the Cup.

Rebel Raider won both the vRC and South Australian Derbies as a 3-year old, but went amiss in his preparation for last year’s Cup. He looks to be an ideal Melbourne Cup type of horse.

Last year’s winner, Shocking, has been nominated again and, as a proven performer over the distance, must have an excellent chance. He has an astute trainer in Mark Kavanagh and is sure to have a top jockey on board in the Cup. ▲

Chris [email protected]


C ontinuing Professional Development (CPD) is an important issue for all professionals. It is a key differentiator for members of the actuarial profession. As members of the

Institute, we have a “continuing duty to develop and maintain [our] professional knowledge and skill”. Members are required to complete 40 hours of CPD each year.

CPD consists of activities that maintain, improve or broaden knowledge and skills. According to Professional Standard 1, it involves the development of personal or professional qualities needed for the provision of professional services and which are:

● relevant to a member’s current role; or● in related disciplines that bear on a member’s work; or● in an area in which the member contemplates practising in the

future; or● in an area which broadens the member’s professional skills and

experience

Plans for CPDThe Institute, in conjunction with the Practice Committees, is reviewing the range and scope of CPD activities it makes available to its members. Within each practice area, we are looking at the core skills needed and assessing what is available at various levels (newly qualified actuary, more experienced actuary and senior actuary). CPD for students is already covered by their studies.

Once the scope of what could be covered has been identified, the intention is to develop a three-year plan, so that all topics and levels are covered over this timeframe. This exercise will be carried out in each practice area. Once this mapping has been completed, we can also identify any gaps between what is ideal and what is readily available, either through the Institute or from other suppliers.

For our members working outside the main practice areas, we are looking for feedback as to whether they would like the Institute to assist them with their CPD or whether they prefer to use other external sources. As our numbers in each new area grows, members may benefit from sharing their experiences with like-minded others and developing an ‘actuarial view’.

The Institute is always keen to work with its members who have moved into new areas and assist them to keep in touch with others

in the profession who have similar interests or are on similar career paths.

Brainstomers’ TeamMany members have indicated a willingness to contribute as a volunteer on an ad hoc basis. The Institute is in the process of recruiting volunteers to form a database of names, so that as issues arise, a short-term subcommittee could be formed to address them. It is anticipated each subcommittee would involve a commitment of less than five hours, over a few weeks, and would be responsible for proposing a course of action.

It is envisaged that each task would be circulated to the Brainstormers’ Team database. Team members could then respond if they were interested and able to help in the required timeframe. The intention is three or four participants would then be asked to proceed with the task. This provides another way for members to meet and interact with new contacts within the profession, as well as providing valuable extra assistance to the Institute in servicing our members.

Actuary of the YearI am delighted to congratulate Fred Rowley on being recognised as the 2010 Actuary of the Year. Fred has contributed to the Institute over many years, including serving as President in 2007. He led the development of the global actuarial qualification in Enterprise Risk Management, now called the Chartered Enterprise Risk Actuary (CERA) designation.

Fred’s negotiations with other societies and institutes over a number of years resulted in the signing of the CERA Treaty in Hyderabad, with 14 International Actuarial Association members, in November 2009. This has been so successful that other countries are now queuing up to join.

As a result of Fred’s work, the Institute now offers an International ERM qualification. Our ERM course has recently been approved by the International CERA body as meeting the required standards. We are now waiting on the final legal hurdles to be cleared (covering trademarks and other issues) before we officially award our first CERA designations. This is expected to occur in the next few months. ▲

Bozenna [email protected]

president’s column6


Title…Life Solvency Capital Actuary

Organisation...Zurich Financial Services (Corporate Centre in Switzerland)

Why I moved to Switzerland... Why not? I was keen for another overseas adventure and didn’t have anything tying me to Sydney. I had visited there before and found it such a beautiful country and I also like the idea of one day being able to speak a second language

My favourite energetic pursuit...What do you expect a guy to write for this question? I do enjoy a good work out on the tennis court and did miss the City2Surf a few weeks ago (although I generally don’t like running that much)

My favourite meal...Hard to go past a really good steak with some nice chunky fries, particularly when living in Switzerland where such a thing is rare and very expensive

The sport I most like to watch...Most of them to be honest. In terms of live sport I really enjoy going to the dragons games at Kogarah (rugby league) and from the couch my favourite would be cricket

The last book I read (and when)...I think it was David Balducci – Divine Justice. I only really read when I’m on holidays so that would probably make it January this year just before I went to Switzerland

My favourite CD...12th Man – The Final Dig (I do like actual music as well but don’t really think in terms of CDs)

My favourite film...Tough one – tie between Happy Gilmore and The Bourne Identity

My interesting / quirky hobbies... No unusual hobbies that I can think of

My ideal weekend day...Sleep in, fry up breakfast, have a round of golf and shoot under par, go out for dinner and drinks with friends

If stranded on a desert island I’d take...Jennifer Hawkins

The person I’d most like to meet...Winston Churchill

What gets my goat…Traffic jams

What I wanted to be when I grew up...Professional cricketer

Why I decided to become an actuary...Firstly, I enjoyed maths at high school and it was about the only thing I was relatively good at so that left me relatively few options. Secondly, the profession seemed to be held in quite high regard by anyone that knew what it was which is always a plus. Thirdly, people would always tell me how difficult it was to become an actuary so the challenge factor was an attraction. Lastly, I’d be lying if I said the pay scales of actuaries weren’t attractive

Where I studied to become an actuary...The Australian National University (2001-04), then Part 2 through Macquarie in 2005 and then Part 3 through the Institute (2006-08)

Qualifications obtained...B Act St, B Ec, FIAA

My work history...Ernst & Young Life Actuarial Team for five years from end 2004 to start 2010, and then Zurich Financial Services Global Life Actuarial team from Feb 2010 till present. I also did a short stint at The Quantium Group as a vaccie in 2003

What’s most interesting about my role...My main role at the moment is co-ordinating the various Zurich legal entities that are participating in QIS5 for Solvency 2. The most interesting part of the role is dealing with a whole range of people across both Corporate Centre within the business units, as well as consultants

My role’s greatest challenges...Trying to come up with simplifications in place of doing calculations that can’t be performed on existing systems in available time, then somehow documenting the difference between the simplification relative to the full calculation (that wasn’t possible)

Who has been the biggest influence on my career (and why)... Probably Andrew Mead, Grant Peters and David Hotchkies who interviewed me for Ernst & Young and must have collectively decided to give me a job

My most important decision…Not sure. Moving to Switzerland was a big decision but a really good one thus far

My biggest regret…None, I always try to be optimistic and make the best out of each decision I make or situation I’m in

I’m most passionate about…Golf

I’d like to be brave enough to…Fly an aeroplane

My proudest moment…Probably qualifying as an FIAA

The best party I’ve had… I did a Contiki bus trip around western Europe in 2004. The party lasted 24 nights and I had such an awesome time

The Olympic sport I’d like to be in…I find most summer Olympic sports quite boring and pointless to be honest. I’ll say the bobsled in the winter Olympics

If I were a car, I would be an…An Alfa Romeo 166

My most embarrassing moment… I’m not sure. I tend to easily forget them all as I know I can rely on my friends to bring them back up. A few weeks ago I asked a stranger in (poor) German whether they were gay, when in fact I meant to ask whether they were feeling too hot in the room. That wasn’t the best

The age I would like to stay… Current age is fine (27)

At least once in their life, every actuary should…Travel

My next holiday destination is… Back to Australia in December

My best advice for my children…Don’t know – I’m not ready for children just yet

Four words that sum me up…Relaxed, hard-working, sporty, sociable ▲

Ashley [email protected]

actuary unearthed

Ashley Wilson

7


The Actuarial Pulse is an anonymous, web-based survey of Institute members, run on a monthly basis, giving members an opportunity to express their opinions on a mixture of serious and not-so-serious issues.

survey

Q3. How would you describe your attitude to life?

Choice %Mostly positive 80.9%Mostly negative 6.3%Neither positive nor negative 12.8%

Most respondents consider themselves to have either a positive or a neutral attitude to life. Of those 19 respondents who consider themselves to have a negative attitude to life, 14 (73.7%) are males, and 13 (68.4%) are FIAAs, which is consistent with the demographic distributions of the respondents shown in questions two and three.

However, 10 (52.6%) of those aged 25 – 34 consider themselves to have negative attitudes, while all of the respondents aged 55 or above consider themselves to have positive or neutral attitudes, suggesting that younger actuaries are more likely to have a negative outlook on life than older ones.

Q5. Do you consider yourself to be a success in your career to date?

It is pleasing to see that most respondents consider themselves to be a success in their career to date, although there are still 47 respondents who do not think this way. The respondents who do not see themselves as being successful are predominantly unqualified (only 48.9% are FIAAs) and in the 25 – 34 year old age group (53.2%).

There is also a greater proportion of females in this group than in the group of respondents as a whole (36.2%). By contrast, all respondents aged 55 or above consider themselves to be successful in their careers.

The reasons cited by respondents as to why they do or do not consider themselves to be successful in their careers mostly fall into one of four categories:● whether or not the respondent has qualified as an actuary yet;● whether or not the respondent considers their current salary to

be sufficiently high, relative to their peers;

PulseThe Actuarial

8

Next Survey New questions will be available in October 2010.

What would you like to know? If you have a question you would like to put to the membership, email it to [email protected]

Results Report generated on 9 September 2010, 307 responses to the survey.

Successful... or not?It is hard to imagine a person who does not want to be a success. However, ‘success’ is a relative concept and its meaning varies from person to person. In this month’s Actuarial Pulse, we explore the notion of success and what it means to Australian actuaries. We also investigate the reasons behind the success of respondents, in the hope that others can replicate that success

Q1. What is your age?

Age %Under 25 10.2%25 – 34 36.5%35 – 44 27.6%45 - 54 14.2%55 - 64 8.9%65 + 2.6%

Q2. What is your gender?

Q3. What is your highest level of actuarial qualification?

Choice %FIAA 70.3%AIAA 20.6%Some (or no) Part I and II subjects 9.1%

These first three questions were included in order to determine the demographic profile of the respondents to this survey. The information in these questions is used throughout the remainder of the analysis in order to determine whether or not the responses vary by demographic group.

Male 72.2% Female 27.8%

+ve neutral -ve

Yes 84.6% No 15.4%


● whether or not the respondent has been able to advance in their job (or can see opportunities for future advancement); and

● whether or not the respondent is generally happy in their current job.

Given this reasoning, it does not seem surprising that it is the younger respondents who see themselves as being less successful. With fewer years in the workforce, they haven’t had as much time as the older respondents to achieve everything they want to achieve in their careers, nor, in many cases, to find the job that is just right for them.

Q6. If you answered ‘Yes’ to Question 5, what do you consider to be the main reason behind your success?

Choice (Yes to Q5) %Hard work 40.8%Education background 10.0%Socioeconomic background 1.9%Innate ability 20.8%Connections/networking 2.7%Attitude to life 15.8%Physical appearance 1.1%Other 6.9%

Q7. If you answered ‘No’ to Question 5, what do you consider to be the main reason behind your lack of success?

Choice (No to Q5) %Lack of hard work 8.3%Education background 2.1%Socioeconomic background 6.3%Lack of innate ability 10.4%Lack of connections/networking 29.2%Attitude to life 18.7%Physical appearance 2.1%Other 22.9%

These two questions explore which factors respondents consider to be the main determinants of their success (or lack thereof). Of those respondents who consider themselves to be successful in their careers to date, most put this success down to hard work, innate ability or attitude to life (luck or providence is also a commonly stated reason in the ‘other’ category).

Those who do not see themselves as being successful tend to put this down to a lack of connections/networking, or again, attitude to life (with bad luck, poor management and a lack of opportunities being the most commonly cited ‘other’ reasons).

Of those respondents who cited their attitude to life as being the main reason for their success in their careers, all described their attitude to life as being positive, except for one, which was neutral. By contrast, only three of the nine people who cited attitude to life as the main reason for their lack of career success described their attitude to life as being mostly positive and five of these respondents described their attitude as being mostly negative.

Among all respondents who considered themselves to be a success, 85% consider themselves to have a positive attitude and 4% consider themselves to have a negative attitude, while only 53% of those who do not see themselves as being successful claim to have a positive attitude and 17% claim to have a negative attitude.

It has often been suggested that people with positive attitudes are more likely to succeed, for a variety of reasons (these range from the idea that people who believe they will succeed are more likely to take the risks necessary to succeed, to the suggestion that positive attitudes supernaturally attract good fortune). It is possible to view the above results as being an example of this phenomenon. At the same time, perhaps the respondents who see themselves as being unsuccessful developed their negative attitudes as a result of their perceived lack of success. It is difficult to conclusively rule either way based only on this survey.

Q8. What career advice would you offer an aspiring actuary?

This question received an overwhelming number of responses – 212 in total. Some of the most practical and/or commonly cited pieces of advice are as follows:● Check your work – twice.● Learn SAS properly when you first start, if you work in GI.● Switch companies when you qualify.● Do the uni course – it’s a much easier way to qualify.● If you want to pass your exams, don’t try to climb the corporate

ladder too fast or you’ll be working too many hours to have time to study.

● Don’t enter the profession for the money. It is an unfounded myth that exists in the general community!

● Get the exams done as quickly as you can.● Exams are very hard, so if you are struggling, make up your

mind early whether to stick at it no matter what or to bail out.● Enjoy the road to qualification if possible, as it doesn’t get any

easier once you qualify.● Keep your hands off the boss’s wife.● If at first you don’t succeed … give up. You’re clearly not cut out

to be an actuary.

survey

▲

9

ACUMENQ

dTel: +61 2 9262 1612 • www.qedactuarial.com.auActuarial Recruitment Experts

Local service, global reach


10

Q9. Do you consider yourself to be a success in your life in general?

Slightly more respondents consider themselves to be successful in their lives in general than considered themselves to be successful in their careers. This time, however, the demographic distribution of the group of respondents who consider themselves to be unsuccessful is broadly consistent with those distributions identified in the first three questions, indicating that a perceived lack of success in life is independent of age, gender and level of actuarial qualification.

Nevertheless, those who consider themselves to be successful in life are more likely to have a positive attitude to life than those who do not consider themselves successful. 85% of those who consider themselves successful have a positive attitude to life and 5% have a negative attitude, compared to 41% of those who do not consider themselves successful claiming to have a positive attitude and 18% claiming to have a negative attitude.

Only 56% of those who consider themselves to be unsuccessful in life also consider themselves to be unsuccessful in their careers. Based on the comments given in this question, those people who consider themselves to be unsuccessful in their lives in spite of their career success generally feel this way as a result of having a poor work/life balance. In fact, whether or not a person has a good work/life balance seems to be the main determining factor as to whether or not they consider they have succeeded in life.

Q10. What is the best piece of advice (on any topic) that you could offer someone?

A diverse range of answers was given in response to this question. A small selection of these answers is given below:● Don’t take short cuts.● Success is measured by how happy your life is, including the

extent to which it is filled with love, not by how wealthy you are.● Always investigate job opportunities even if you are not

actively looking.● Don’t spend more time at work than you need to.● When you meet someone who impresses you, ask them to

recommend a book they have read that has made the most difference to them.

● Get right with God.● Don’t be naive and think money isn’t important. Living in

Australia is expensive!● Find a spouse whom you genuinely like and get on with, and

make whatever reasonable compromises are necessary to stay together.

● Don’t give up. Taste spew (that’s for marathons)...● Success is ultimately measured against one’s own expectations

– it is more satisfying to reach the goals that you set for

yourself but you can also get there by managing your own expectations.

● Do not work with people you know are evil – either they will corrupt you or attempting to resist evil will destroy your mental health. And it won’t achieve anything – you can’t change an inherently evil organisation.

● Take more financial risks while you don’t have many/any responsibilities. That way, when you do have many, you will still be willing to take risks to make a better life.

● Never get involved in a land war in Asia.

Q11. What is the worst piece of advice (on any topic) you have ever received?

Much of the bad advice listed in response to this question fell into one of four categories: ● Bad investment advice – e.g., “don’t buy (residential) property

(now) – the market is overvalued” or “now that you are out of uni, don’t bother saving – your salary will increase 50-100% by the time you qualify, so just enjoy yourself. They didn’t tell me my cost of living would also increase by 55%-110%!”

● Bad educational advice – e.g., “choose uni subjects only according to interest with no regard to whether they could ever be useful”.

● Bad drinking advice – e.g. “come to the pub, you can study later”.

● Advice suggesting the person should give up.

Other ‘useful’ pieces of bad advice respondents have contributed include the following:● Do yoga, it’s good for you.● That vanilla yoghurt is an acceptable substitute for sour cream

when making stroganoff.● Sure! You can jump that far.● You must see the movie Prêt à Porter.

Hopefully this column has proved useful to readers. I wish you all success in every aspect of your lives and to finish off I will leave you with one last piece of respondent contributed advice: “Listen to all advice, but ignore it all – including this.” ▲

Genevieve [email protected]

survey

▲

Yes No 88.8% 11.2%


11report

O n 1 September, an Insights Networking session was held in Melbourne, at the NAB head office in Docklands. About 35 people came to hear Phillip Everett and Nick

Scott share their experiences of working at the NAB and give a fascinating insight into the opportunities arising for actuaries in the banking industry. Actuaries currently work in many areas at the NAB, outside MLC. Some very positive quotes from senior NAB executives powerfully demonstrate the value the actuarial skill set is seen to offer:

“Underrated and not used in banking enough, particularly in risk management and portfolio management. The way they look at information provides a focus that someone like a statistician would not.”

Experienced Senior Risk and Portfolio Manager with nearly 40 years experience around the world.

“When I was in consulting, I used engineers because they applied structure in their thinking. I employ actuaries for the same reason in the bank.”

Banking Executive who employs three Actuaries.

“The rigour of the analytical approach is hugely beneficial. It helps senior executives get clarity around the facts, the impacts on business performance, on a concrete basis. It, therefore, allows for improved decision making.”

Group Executive of Major Banking Division.

Nearly 25 Institute members are employed by the NAB outside of wealth management (i.e. MLC) and there are opportunities for that number to grow.

The session was informal and interactive with a good discussion on why actuaries can be valuable in banking. In addition to having strong numerical and analytic skills, three key capabilities emerged to me as being key to actuaries adding value:

● Synthesis: The ability to synthesise lots of information with multiple drivers (variables) and understand interactions and

scenarios. Through analysis and clear communication, provide the business with practical insights that support better business decision making.

● Judgement: The ability to apply judgement in the face of uncertainty of future outcomes and incomplete information, understanding the world is not a linear place (leverage occurs, and at some point events may conspire to produce catastrophic results) and, while history may be a useful starting point for setting assumptions, it is an input to the process not the output.

● Actuarial practice and control: This paradigm centres on a feedback loop – the ‘identify, solve and monitor’ control cycle. Surrounding this is another cycle including the key elements of professionalism, governance (including risk management), understanding the broader environment, and implementation of projects. The entrenched perspective of circling back regularly, assessing whether what you expected (hoped?) would happen actually did happen and then taking structured remedial action if required, is a key contribution.

As a profession, we often talk about these, and other capabilities such as effective communication and business acumen. We believe we have these capabilities and wish our users would give us more credit for them. Here is a live demonstration of this coming to fruition. As with many areas, banks are learning from their experiences in the GFC, changing and improving their business models and practices. There is a window of opportunity for actuaries and the profession to contribute to this. To take advantage, the profession needs to understand the language and terminology of banking and apply our transferable skills in the banking environment. Our challenge is to succinctly translate our skills into this world. Several references were made to established actuarial materials that, when read with a focus on the principles and not the detail, provide strong guidance. Our established Actuarial Practice of General Insurance and Money & Capital Markets texts were mentioned as books kept on desks and regularly referenced. Perhaps more interesting was recognition that the general insurance text provides guidance on running an organisation and that general insurance management had many parallels to lending management – a top-down governance approach in contrast to a bottom-up technical approach.

This was the second in an ongoing series of Insights that Tim Gorst and Phillip Everett have organised. They expect to organise another, focusing on banking and finance, later this year. Tim and Phillip deserve great credit for their initiative in ‘taking the bull by the horns’ and organising these networking and information sessions. I encourage all actuaries to come to the next session, learn more about the banking actuarial profession and support the profession’s capacity to increase our presence and reputation in this core, but non-traditional, financial services area. At an institutional level, we should also consider how to actively support members moving quickly and effectively into this area. ▲

Jules [email protected]

Banking Insights


12 review

R ecently in Australia, there have been several launches of unit-linked products with guarantee benefits attached. Conceptually these are similar to products overseas known

as variable Annuity (vA) products, which have existed in overseas markets for some time.

This article contains an outline of generic vA products and the global vA market. This is followed by an overview of the products on offer in Australia, followed by a summary of prudential capital developments in Australia, Europe and US.

Product VariationsA typical vA product combines a unit linked investment product with one or more guarantee minimum (GM) benefits. The guarantee benefits may be offered either as an integral part of the base product or as optional rider benefits. Benefits are payable either as a regular income or a lump sum benefit.

A GMAB (Guarantee Minimum Accumulation Benefit) is an accumulation benefit product with a guaranteed minimum amount payable as a lump sum at a specified date, such as a policy anniversary or attained age. Like unit linked products, a GMAB does not contain any insurance elements. A variation of this is GMDB (Guaranteed Minimum Death Benefit) where the guarantee is payable on death rather than a specified point in time.

A GMWB (Guarantee Minimum Withdrawal Benefit) supplements the account based pension with a guarantee that the regular income will not fall below a predetermined minimum amount. This can either be for a specified term or for the lifetime of a policyholder. The account value, if it has not been depleted, would be payable on surrender or death. Where the benefit is paid for lifetime there is an element of longevity insurance in addition to market risk protection.

Another variation is a GMIB (Guarantee Minimum Income Benefit), a unit linked accumulation product which at some point converts to a traditional annuity. Provided that the policy is converted to an annuity, the benefit base at conversion and the annuitisation rate are guaranteed. As yet this type of product has not been offered in Australia.

As with unit linked products, the customer retains some control over the investment strategy, of which a significant portion may be invested in growth assets. The strategy can be varied over time. Early surrenders are allowed subject to any withdrawal charges, and upon death any remaining account balance or guarantee death benefit is paid to the beneficiary.

Fees and charges on vA products are explicitly disclosed in product brochures in contrast to a traditional annuity where there is a lack of transparency regarding the fees which are embedded within the product. That said vA products have often been criticised for the high fees charged. Guarantee costs are usually added to the investment management costs so that total fees can be between 2% to 4% per annum, depending on the type of guarantee.

Global ContextUS is the largest and most established vA market, with US$1,350bn assets under management as at end of 2009. Japan saw large volume increases in 2000s to become the second largest market, however volumes have slowed down recently with several large providers withdrawing from the market. Similarly in the US, sales volumes have contracted since the GFC. More recently companies have started issuing vA’s in the UK and across Europe, and products in the US and Japanese markets have been de-risked, with softening of the guarantees and decreasing exposures to risky assets.

In the US, vA ownership is concentrated in the age groups 45-64 and 65+ with the latter being the majority of owners. Most of the ownership is by the 10% of the population in terms of wealth1. A 2008 Towers Watson survey of financial advisors in the UK found that 97% financial advisers in the UK would consider that the client would need to have more than £50,000 in financial assets before they would recommend a variable annuity product.

Accumulation ProductsIn Australia AXA offers two GMAB products as part of its North platform, a longer term 10- or 20-year guarantee option or a shorter 6- to 8-year term guarantee. The guaranteed amount is the initial and subsequent superannuation contributions which ‘ratchet’ up. This means that at each anniversary period (one or two years in this case) the guarantee amount is reset to the higher of the account value or the then current guarantee amount, so that if markets have risen so does the level of the guarantee. Overall this increases the cost of the guarantee to the provider and ultimately the policyholder. However, the intention is to encourage the policyholder to continue with the guarantee and the underlying product, by making sure the guarantee does not drift a long way out of the money, at which point it would become less valuable to the policyholder.

The product is designed to be held to maturity, at which point the full guarantee applies. For the 10 or 20 years options the guarantee grades over time so that an element of it becomes available on surrender along the policy term. This compares to the shorter term options, where the benefit is strictly at the end of the term.

Variable Annuities in Australia


13

▲

review

The guarantee is provided by NMFM, AXA’s funds management company, part of the AXA Asia Pacific Group. APRA’s view is that a product with an unbundled investment guarantee, a pure GMAB product, does not classify as a life insurance policy under the Life Insurance Act and hence cannot be written out of a life insurance company.

Income ProductsThe post accumulation retirement stage of the superannuation system has been found lacking by both the Henry Tax Review and the Cooper led Super System Review Panel. The Cooper report states that “there is need with an ageing population for more retirement products to be available for members.” The predominant retirement income product in the Australian market is the allocated pension. Companies have been responding to the need for more income generating products, with three GMWB products launched in Australia since 2009.

ING MoneyForLife, Macquarie Lifetime Income Guarantee and AXA North Protected Income are all lifetime income guaranteed products. The products share the following common features:

● Provide a guaranteed income for life, calculated as a percentage of a guaranteed income base. The percentage is generally around 4% for age 60 increasing with age to a maximum of around 5%. In cases where this is less than the legislated

minimum portion of account balance that must be taken out, than the shortfall is also allowed to be withdrawn without affecting the guarantee base.

● The guaranteed income base ratchets annually.

● Guaranteed and written out of the respective life companies because the longevity protection is ‘bundled’ with the investment guarantee.

● Offer a joint life option, where the payments continue while either of the two lives remains alive. The additional cost of this option is around 0.5% per annum.

● Policyholders are allowed a choice of investment strategies with the option of high allocations to growth assets (60%-85%).

● Able to withdraw from the account value and switch between funds.

● Guarantee Fees of 1%-2% per annum of either the account balance or guaranteed income base, depending on the level of allocation to growth assets. Fund management and administration fees are in addition to the guarantee fee.

● Additional contribution, withdrawal and switching fees apply.

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

Inco

me p

aym

en

ts

Acco

un

t b

ala

nce

Age

Account balance Guaranteed Income Payments Income Payments Ratchet/Guaranteed Income Base

1. Guaranteed Income Base

4. Account balance

5. If the Account balance falls to zero,

income payments are guaranteed for life

3. Income payments (right hand axis)

2. Ratchet

The Guaranteed Income Base will increase regularly (e.g. annually) if the account balance is higher than in the previous period.

Variable Annuities – GMWB Example


14 review

▲

ING Money For Life, introduced in 2009, was the first product of this type offered in Australia. It works across both the superannuation accumulation and pension stages of the system. Contributions continue until the policy switches to a pension, at which point contributions must cease and regular draw downs commence. There are three investment option choices, which are all index-based, which should reduce the basis risk to the company associated with the risk of imperfect hedging.

Some distinguishing characteristics of the AXA and Macquarie products are:

● The Macquarie product offers an additional income of 2% in addition to the lower base income for at least five years, depending on market performance. Policyholders receive the higher income in at least the first five years of retirement, after which income reduces to the base rate.

● The investment options offered by Macquarie include volatility managed equity funds. These funds increase or decrease the total allocation to equities depending on the prevailing market volatility. This is an emerging technique used in reducing the overall guarantee cost that would otherwise need to be accepted or hedged. However this will also have implications for policyholders’ expected returns relative to the index.

● In all instances the trustee of the superfund is the policyholder and they pass on the policy benefits to members. The Macquarie product is designed and marketed to superannuation fund trustees. This structure means that the product may appeal to Self-Managed Super Funds or other superannuation funds that decide to offer the product to their members. This is in contrast to INGA & AXA products, which are currently only available through their own ‘in house’ superannuation funds.

● The AXA product offers a choice of up to 40 investment options, including external managers and non-indexed funds, subject to restriction on allocations at asset class level. While providing more choice to investors, it also introduces additional risks and complexity in hedging relative to indexed funds.

Prudential RegulationCurrent Australian capital standards were written prior to the introduction of vA products in Australia. APRA has expressed the view that the proposed new asset risk capital charge capital standards may not adequately cater for variable annuities and that a separate requirement will apply to vA products.

APRA is likely to require the use of stochastic modelling in order to model the contracts and any hedging program that the company has adopted. The credit given to hedging program (future hedges) will depend on the sophistication of the internal model and the robustness of the hedging program.

At this point, APRA expects life insurers that issue variable annuities to discuss the appropriate capital methodology with them.

Internationally there have been two major developments in the variable annuity space coming from the Solvency II initiative in Europe and the C-3 Phase II developments in the US. Both of these relate to the level of capital required to be held.

The Solvency II approach is based on a one year value at risk at a 99.5% confidence level. The assumption is that the company should have capital to withstand a one in 200 event over a period of one year, at which point it could offload its liabilities or take additional capital management actions. This is referred to as the ‘market exit’ approach.

The US approach is different to Solvency II in that it requires that income and outgoes be projected to maturity on a stochastic basis and that the capital be calculated at a specified level of sufficiency. The focus is on the insurer to hold capital at a level such that all future obligations can be met with a degree of sufficiency.

This is in contrast to the market exit approach described above which is over a one year horizon. The US method is to use conditional tail expectation CTE at 90% sufficiency, where the capital is calculated by averaging the worst 10% of simulated loss scenarios.

A major point of discussion is the allowance within the capital standards for dynamic hedging strategies adopted by the company and in particular whether any allowance for future hedges would be permissible or whether only the hedges in place are allowed for. ▲

Ismar [email protected]

1 Brown, Poterba. 2006. Household Ownership Of Variable Annuities, National Bureau Of Economic Research

APRA has expressed the view that the proposed new asset risk capital charge capital standards may not adequately cater for variable annuities, and that a separate requirement will apply to VA products.


15notice

T he Member Services and Educator Implementation Group (MSEIG) recently presented findings to Council recommending the Institute simplify membership categories

and make fees fairer for all. These recommendations have resulted in changes to your membership. Here’s a quick guide to the changes.

New payment deadlinesOur membership year currently runs from 1 October – 30 September, with renewals due by 31 January. For this year’s renewal, the payment deadline will remain 31 January 2011 however next year, the payment deadline will be brought forward.

Changes to feesCouncil has approved three key changes to membership fees. We’re:

● Changing category fees – membership category fees have been reviewed to make the cost of membership fairer for all. These changes are part of an ongoing plan to standardise fees across membership categories.

● Lowering exemption fees for students – we’ve listened to your feedback and Part I exemption fees will be lowered from $250 to $200 per subject for students who become eligible for exemptions after December 2010.

● Simplifying reduced fees – we’re now making it easier to identify if you are eligible for a reduced membership fee. Members earning under $50,000 per annum* for the financial year 1 July 2010 to 30 June 2011 will be entitled to a reduced rate of membership.

Clarifying Student MembershipWe’ve listened to your feedback and have made changes to the ‘Student’ membership category. Members no longer studying with the Institute who were previously in the ‘Student’ category will now be ‘Affiliate’ members.

Increasing the Age of Complimentary MembershipTo align with our recommendations to the Cooper Review, we are increasing the qualifying age for complimentary membership from 70 to 75. Currently, members aged 70 or over on 1 October 2010 receive a complimentary membership. From 1 October 2015, complimentary membership will be given to members aged 75 years or over.

Simplifying the reinstatement policyWe’ve simplified the reinstatement policy so there is no difference in fee for members who default or resign their membership. Members must now pay the applicable membership fee and any re-joining entrance fee before being reinstated.

Renew your membership todayMembership renewal notices for 1 October 2010 – 30 September 2011 have now been posted. We value your membership and encourage you to continue to enjoy the professional and personal benefits being a member of the Institute.

To renew your membership, visit: www.actuaries.asn.au/renewals

If you have any questions, please email [email protected] or call +61 (0) 2 9233 3466.

*This amount will be indexed and future changes advised by Council.

Renew your membership and win.If you renew your membership before 30 November 2010 you’ll go into the draw to win of one three tablet computers valued at $928.00 each.

Renew your membership and logon onto www.actuaries.asn.au to enter the competition.

It’s what you asked forUnderstanding changes to your membership


16 report

T he MSEIG was formed in May 2009 to investigate the recommendations and implement the findings of the Member Services and Educator (MSE) Taskforce Report. It

has now wound up its work with the last meeting held in July 2010. The key recommendation of the Taskforce was to establish a project implementation group made up of Institute staff and volunteers to test and implement its findings and develop a ‘target’ member services model for the Institute. The four areas of focus were:

● provide membership value;● reassess education and CPD delivery;● review marketing objectives; and● ensure the secretariat has the required capabilities.

The group developed a detailed project plan to roll out the initiatives and created short- and long-term action items.

Clarify the brand ‘Actuary’ and the brand ‘The Institute’ A subgroup of the MSEIG was formed to examine the brands ‘Actuary’ and ‘The Institute’ with the aim of identifying unique selling points to assist in ensuring continued relevance and recruitment of new members. Council approved the ‘branding’ proposal and a Marketing Consultant was hired and a marketing plan created for the secretariat to begin rolling out the branding exercise. A summary of the subgroup’s findings included:● The Actuary is facing continuing demand in traditional markets

with significant growth opportunities using actuaries’ core skills in new markets.

● Actuaries’ skills include a mixture of technical and professional components that are unique in the financial markets and are in the public interest.

● Actuaries’ education process recognises the importance of developing technical expertise and professional business acumen.

● The brand ‘Actuary’ needs to recognise the strong technical knowledge as well as professional overlay.

● The brand ‘The Institute’ needs to be recognised by current and potential members as the vehicle through which careers and skills will be enhanced.

Thanks are extended to the members of the Branding Subgroup – John Maroney, Barry Rafe and Jeremy Waite.

Membership Categories and Value Proposition The value Propositions Subgroup was created to define the Institute’s objectives and value propositions for each key member segment, review the current Institute membership categories, review the annual and joining fees for each level of membership category, and review exemption fees.

To segment members in a targeted way the subgroup decided to test the value proposition service levels for members in various stages of their careers. The four career stages and value propositions identified are described in the table below.

Scenario analysis was conducted on each of the career life cycle phases to test how robust the propositions were and they were then tested by focus group participants.

The subgroup recommended that the career stages developed were generally already in line with the Institute’s current membership categories.

The only change was with student members that had not studied with the Institute for a certain period of time. It was agreed that ‘Student’ did not provide a suitable description of their level of expertise. Student members not studying were surveyed and input sought. The majority felt that ‘Affiliate’ was a better description for them.

The value proposition work has provided the secretariat with important insights into future member services and benefits and this information has been used to shape the Institute’s Strategic Plan 2010-2012.

Fee ModellingMembers of the value Proposition Subgroup then reviewed annual and joining fee levels for each membership category. A fees strategy

Career Stage Value Proposition Identified

Senior – senior management, senior actuaries or retired actuaries

Influencing business outcomes, targeted networking, helping contribute to the profession and representation by the Institute on industry issues.

University Students –who may be thinking of going down the actuarial path

Affordability (cheaper membership and discounts on CPD), relevance (newsletters, information sessions, career support, advice/mentoring) and networking opportunities

Early Career – analysts focused on qualifying

Career focus (professional development and helping members be effective in their job), networking opportunities and quality interactive education facilities.

Mid Career – recently qualified actuaries, middle management or senior analysts

CPD, networking opportunities and availability of education material.

Member Services and Educator Implementation Group (MSEIG) – WRAP UP


17

▲

report

was developed and subsequently approved at the August Council meeting. The main elements of the fee strategy included:● comparing the UK and US actuarial society fees and where

possible aligning the Institute’s overseas fees;● introducing a new fee category for members earning under a

certain level of income and for the first time including student members in this category;

● considering the introduction of an early bird offer during the membership renewal period;

● a simplified reinstatement policy, and considered introducing a reinstatement amnesty on entrance fees for ex-members wishing to reinstate their membership;

● simplifying the current fee structure and removing anomalies in the system; and

● bringing the renewal period forward to the beginning of October each year, to better align the membership year with the renewal period.

Exemption FeesFull-time university student members were surveyed to test the market for exemption fee sensitivity. The majority of respondents felt that exemption fees were too high and a major barrier to new members joining the Institute. The MSEIG has proposed that exemption fees be reduced.

Thanks are extended to the Value Proposition Subgroup –Michael O’Neill, Barry Rafe, Daniel Smith, Nina Nissan, Felix Sun, Charles Qin, Aravind Srinivas and Christine Fan.

New Member Benefit: Professional Indemnity InsuranceIndemnity insurance was researched as a new member benefit for self-employed and semi-retired actuaries. Over the past two years the Institute has worked closely with insurance broker Marsh Pty Ltd to identify a competitive professional indemnity insurance scheme. In July 2010 an offer was introduced to members with vero Insurance for actuaries living in Australia and New Zealand.Further information is available at www.actuaries.asn.au

Target and Engage University StudentsFrom the outset, the MSEIG identified targeting and engaging with university students as an opportunity that could deliver quick results. They endorsed the establishment of the University Subscriber initiative, a free university student subscription for full-time undergraduate students of Institute accredited universities.

With support from the university actuarial societies in promoting the initiative, over 500 actuarial students have subscribed at the time of writing. University Subscribers receive information on career opportunities, invitations to Institute events and access to Institute publications.

Events for University Subscribers have also been held in Sydney and Perth with more planned for Melbourne and Canberra.

It is hoped that engaging with students will provide them with a positive experience of the profession and encourage them to further their studies through the Institute. Due to the success of the initiative, changes to the criteria for becoming a University Subscriber will soon be introduced and the scope of the initiative widened as a result.

Encourage Greater Involvement Among Members outside of SydneyA travel register has been created of senior actuaries in Australia who may be travelling overseas and interested in presenting to members in overseas countries at networking events. The Institute collects members’ travel plans and advises on upcoming opportunities. A pilot Insights event was held in the UK on 27 September 2010.

New IT Platform and WebsiteThe upgrade of the Institute’s IT infrastructure was launched on 1 June 2010. The new website is a staged redevelopment project spanning three phases and is due for completion in 2011. The IT project is the responsibility of Institute management rather than the MSEIG, however many of the MSEIG action items rely on the new platform to roll out the new member services and undertake the proposed member value propositions.

Volunteer EngagementThe Institute’s membership database currently captures information on members that have indicated willingness to volunteer in selected areas of professional interest. The MSEIG decided as a starting point that Practice Committees should be advised of those members who had indicated an interest in volunteering and for them to be contacted regarding potential volunteer opportunities. Members who had indicated an interest in volunteering were also invited to attend the 2009 volunteer’s Cocktail Party as an opportunity to network and hear about how to get involved. In an effort to engage further with our volunteer base, Rebecca Moore has been appointed the Institute’s volunteer Manager.

Other Action ItemsOther items the MSE Taskforce recommended were considered, but after investigation, the MSEIG decided against any further action. They included introducing rewards for long-term volunteers, introducing a membership renewal suspension policy and introducing affinity schemes. Some of the MSE Taskforce recommendations related to other projects which have now been successfully completed. They include implementing the ‘Actuary’ designation, introducing the global ERM qualification and reviewing the Commercial Actuarial Practice (CAP) course delivery.

Action items for the MSEIG are now either well underway or have been rolled up in to the Institute’s Operational or Marketing Plans. Thanks are extended to all MSEIG members for their valuable contributions.

Barry Rafe, Senior vice President and ConvenorMelinda Howes, CEOJohn Maroney (former Institute CEO)Daniel Smith, Councillor (Actuary, Taylor Fry Consulting Actuaries)Wayne Cannon (State Actuary, Queensland Treasury)Michael O’Neill (Investment Analyst, Investors Mutual Ltd)Jenny Lyon (Director Asia-Pacific, QED Actuarial)Jeremy Waite (Executive Director, Willis Reinsurance Australia)Peter Jones, Director OperationsFatima Dawood, Membership Manager ▲

Fatima [email protected]


18 event

T he Institute of Actuaries of Australia will convene the 17th General Insurance Seminar at the Sheraton Mirage Resort, Gold Coast, Queensland from Sunday 7 to Wednesday 10

November 2010. The seminar theme is Risk and Reward.

The plenary program will consist of four sessions each covering a topic of current market interest. Industry experts will share their insights in a series of presentations and panel discussions.

In addition to the plenary sessions the seminar will include over 35 concurrent papers / presentations on a wide range of topics. Each concurrent session will offer attendees the choice of three to four different topics.

Plennary SessionsPlenary One – Keynote Address and Market Issues will feature two presentations on the current landscape in general insurance. Following the opening of the seminar, the Keynote Address will be given by Ian Laughlin who has recently been appointed to APRA. Ian will discuss his thoughts on the current regulatory environment, where he sees regulation in Australia going in the near future and what he hopes to achieve during his time with regulator. Siddharth Parameswaran, Senior Insurance Equity Analyst at JP Morgan will then provide us with an update on the challenges facing insurance companies at the moment and how collectively they are responding.

The general insurance industry in Australia remains very competitive in both personal and commercial lines and the market is changing with some large overseas insurers looking to penetrate into the Australian market. Internet distribution is becoming increasingly common and discussion of aggregators has been hitting the press. During the panel discussion in Plenary Two – Pathways to the Market we will hear from industry representatives including Simon Lindsay, Country Manager, Progressive Insurance and Anthony Day, CEO Commercial Insurance, Suncorp, about how they see the challenges and opportunities unfolding.

Tuesday morning will kick off with Plenary Three on the theme of the seminar – Risk and Reward. This session will feature two panel discussions, the first on Enterprise Risk Management (ERM) and the second on looks at actuaries working outside traditional areas. ERM is an area of growing interest to the actuarial profession but to date there has been little debate about what it all means for the general insurance industry. Dan Tess, Keith Tomkins and Jason Brown will each share their industry perspectives on the opportunities and challenges for actuaries working in this growing area.

Actuaries have now been working in the general insurance industry for over two decades but the experiences and skills that we have developed stand us in good stead to make a difference beyond our core expertise. We will hear from three actuaries who have each branched out to explore new horizons. Adam Driussi, Rick Shaw and Joyce Tong will share their stories about rewarding experiences in their careers to date.

As we move towards the conclusion of the seminar on Wednesday morning, Plenary Four will explore Regulatory Developments. The session will feature APRA with a presentation from Helen Rowell, covering the many initiatives in which APRA have been involved including Level Two and Level Three reporting, changes to prudential reporting and of course the capital proposals. The latter in particular is a topic close to the hearts of industry practitioners, Helen will be joined by Noeline Woof, Blair Nicholls, Geoff Atkins, James Goodchild and Tim Spicer for a panel discussion. This is an opportunity for an active debate on how the capital proposals are impacting insurers as well as a chance for APRA to feed back to the industry a few of the points raised through the consultation process.

Have you registered yet?

7 – 10 November 2010 • Sheraton Mirage, Gold Coast

17th General Insurance SeminarRisk and Reward

Gold Coast


19

Concurrent SessionsAs in past general insurance seminars, a number of papers explore the state of the insurance market. These range from the proposed prudential changes both locally and internationally from APRA and the International Accounting Standards Board, and Solvency II, to the historical and international comparisons of Australian insurance trading results.

In the past few years, the Australian general insurance market has seen a number of new entrants challenging the existing market players, as well as the increase in use of the Internet as a distribution channel. This change in landscape, with increasing consumer awareness of general insurance products, in particular in the personal lines has heightened focus on product design and pricing. Complementing the discussion in Plenary Two several papers discuss the change in landscape in distributing general insurance products, its history, development and current / potential impact to the Australian insurance market. In addition, there are papers that explore the various new techniques to enhance pricing of general insurance products and in specific areas such as natural perils. There will also be a presentation from the Institute working party on the pricing / ratemaking survey.

Although the Australian insurance industry has stood up to the challenges from the Global Financial Crisis, risk management continues to be a focus of much actuarial work. Several papers tackle this topic from different angles, ranging from high level discussion on the strategic direction and aspiration of the actuarial profession in the ERM space to the use of Internal Capital Models (“ICM”) to quantify the insurers’ risks tolerance or appetite.

In addition there are papers looking at new actuarial techniques and a number of niche products. Each session will have papers to suit everyone.

NetworkingDelegates are also invited to attend three fun dinners – the perfect opportunity to catch up with colleagues and meet new friends. On Sunday 7 November the Seminar will kick off with a a barbeque buffet poolside at the Sheraton Mirage. The second night delegates will enjoy a relaxing dinner while taking in a dolphin show at Sea World. The Gala Dinner on Tuesday evening will be held at Warner

Bros Movie World and delegates are encouraged to dress like a rock star and roll with the likes of Elvis and Marilyn Monroe (impersonators only)! There will be several exciting optional networking activities on offer on Tuesday afternoon including jet boating, kayaking, golf or even cooking! We look forward to seeing you.

REGISTER NOW!

Organising CommitteeAndrew Smith (Convenor) David KoobRuth LeishaSusan LeyAda LuiWin-Li Toh Melissa YanSarah Hodgkinson Emma Simonson

7 – 10 November 2010 • Sheraton Mirage, Gold Coast

▲

event

Sponsors

Sponsors

Gold Sponsor

Main session of 16th GIS

Movie World, Gold Coast


20

▲

event

Geoff AtkinsGeoff is a Principal with Finity. 25 years in general insurance have not dampened his enthusiasm for risk based capital and he has worked on the topic in Trinidad and New Zealand as well as Australia.

Vivek Bhatiavivek is Chief Executive Officer of Wesfarmers General Insurance Limited which encompasses the businesses of Lumley Insurance and WFI. He spent his early career working for consulting

firms KPMG and PricewaterhouseCoopers focusing on strategy and business transformation projects for financial services companies. In 2008, vivek was selected by the Australian Financial Review’s BOSS magazine as a finalist in their Young Executive of the Year Awards.

Jason BrownJason is Chief Risk Officer with QBE Australia. His current areas of responsibilities include managing enterprise risk, researching and analysing acquisition opportunities and managing the acquisition process,

plus governance, internal audit, legal, compliance, fraud and business continuity. Jason has also held the positions of Executive General Manager, Technical and Operations and Executive Manager, Finance and Technical for QBE Australia between 2003 and 2007.

Anthony DayAnthony joined Suncorp in 2008 bringing with him some 30 years experience working with local and international insurers in various claims, underwriting and senior management positions. He

was appointed Commercial Insurance’s CEO in 2009. As CEO he is responsible for all of the Suncorp Group’s commercial insurance businesses operating in Australia.

Adam DriussiAdam co-founded Quantium in 2002 where he now employs over 70 staff across consulting, software development and media planning. Adam is an expert in personal lines pricing, advising most of

Australia’s leading insurers in various aspects of pricing strategy over the past 15 years. Adam also advises clients in industries such as banking, retail, telecommunications, media and gaming on using data to help inform pricing, marketing and customer strategy.

James GoodchildJames came to Australia to join Suncorp in 2004 and has recently become the Principal Actuary General Insurance, with responsibility and oversight over all actuarial work done for the Suncorp group’s

Australian general insurers. He has worked across the entire spectrum of work including pricing, reserving, capital management, reinsurance and investment strategy.

Ian LaughlinIan was appointed as a Member of APRA on 1 July 2010 for a three-year term. He has extensive experience in the financial services industry. He has been a director of AMP Life Limited, serving as

chairman of its Board Audit Committee, Managing Director of the United Kingdom life insurance subsidiaries of AMP (Pearl, London Life and NPI), director of HHG plc (now Henderson Group), and non-executive director of Diligenta Ltd in the UK. Ian has also served on the Council of the Institute of Actuaries of Australia.

Simon LindsaySimon is Country Manager, Australia for the Progressive Corporation. He has held this role since 2008 leading Progressive’s entry into the Australian motor insurance market with the launch

of Progressive Direct, an online car insurance offering, in December 2009. Prior to this role, Simon spent 10 years working an advisory capacity with JP Morgan and Merrill Lynch, primarily focused on the insurance sector.

Blair Nicholls Blair is the Chief Actuarial Officer for the QBE Group. He is part of QBE’s Group Executive and is involved in areas such as business planning, reserving and pricing, catastrophe aggregate

accumulations, reinsurance management and purchasing, commutations, investor relations, acquisitions and economic capital modelling. Blair has been with QBE for around 16 years and has undertaken a variety of roles.

Siddharth ParameswaranSiddharth is JP Morgan’s Senior Insurance Research Equity Analyst for Australia and New Zealand. He provides analysis of listed equity securities in the general, life and health insurance

space. Previously he worked at Merrill Lynch, he is a qualified general insurance actuary, having also worked at QBE, looking after pricing and valuations and some capital modelling of their worker’s compensation, asbestos and travel insurance portfolios.

Helen RowellHelen is the General Manager, Policy Development with APRA. She is responsible for overseeing APRA’s policy development activities. Prior to this role, Helen was General Manager, Diversified Institutions Division

from October 2006 to March 2010, with supervisory responsibility for a range of financial institutions. Helen also chairs APRA’s internal general insurance industry committee. Prior to joining APRA Helen was a partner at Towers Perrin. She was President of the Institute of Actuaries of Australia in 2002 and actively involved in various committees of the International Actuarial Association from 2001 to 2007.

Speakers

21

▲

event

Rick ShawRick has advised governments, corporations and international bodies in many countries, most recently as Chief Actuary of the Bermuda Monetary Authority.

Tim SpicerTim moved to Australia from New Zealand in 2004, working at Taylor Fry until 2006. He is currently working in Ernst & Young’s general insurance consulting practice in Sydney and holds two

Appointed Actuary roles and two External Peer Review roles.

Dan TessDan is the Group Actuary for Wesfarmers Insurance, which includes the Lumley and WFI brands. Dan has formed a team of 10 actuaries who are creating a complete actuarial control cycle from scratch.

Prior to Wesfarmers, Dan was a partner of PricewaterhouseCoopers where he specialised in general insurance, accident compensation and health system financing and served as the Appointed Actuary for WorkSafe victoria, the victorian Transport Accident Commission (TAC) and the Royal Automobile Club of Queensland Insurance company (RACQI).

Keith TomkinsKeith is the Appointed Actuary for Zurich. He has worked extensively as a general insurance actuary and after many years in the UK, both in the company market and at Lloyds, he relocated to Sydney in 2007

to join Zurich. Prior to leaving London, he was heavily involved in the first phase of the FSA ICA regime, both from an actuarial perspective as well as supporting the risk management function.

Joyce TongJoyce is a Senior Consultant at Ernst & Young and works in the Actuarial Services – General Insurance team. Since joining Ernst & Young four years ago, her experience has included reserving, premium

rating and reviews across a variety of clients. To pursue her interest in an emerging area of the insurance industry, Joyce also worked for eight months in India in an actuarial capacity at a small, not-for-profit organisation offering health microinsurance to slum dwellers in Pune, India.

Noeline WoofNoeline is an Actuary with over 15 years experience in the general insurance industry. She has been a partner with PricewaterhouseCoopers for the past five years during which she has performed

both Appointed Actuary and external peer review actuary roles for general insurers. In 2010 she took a year’s leave of absence from PricewaterhouseCoopers to work with APRA as senior advisor on APRA’s Insurance Capital Review project. ▲

Actuarial Practice● Post Event Damage Surge

● Solvency II: One-year and Ultimate Year Risk Horizons, Technical Provisions (TP) and Market Value Margins (MVM) for Long Tail LOBs

● The Inflation Risk in General Insurance

● Towards a Better Inflation Forecast

● Risk Margin Monitoring

● Achieving Finality – The Commutation Process

Claims and Reserving● The Rise and Rise of Hybrid Modelling

● A Testing for Moral Hazard Survey versus Claims Data

● Worker to Worker Claims in Liability Portfolios

● Legal, Medico Legal, Medical Providers – Does the Choice of Provider Influence Claim Results in Bodily Injury / Liability Claims?

● Public Liability Personal Injury Claims – an Investigation of Post Tort-Reform Trends by Head of Damage

● Stochastic Reserving with Bayesian Models: Can it Add Value?

● Injury Compensation and Health Outcomes: Concepts and their Measurement

● Thoughts on Unusual But Not Uncommon Claims

● Home Warranty Insurance – Taming the Ups and Downs of the Building Cycle

● Is Compensation ‘Bad for Health’? A Systematic Meta-Review

● Drivers of Consumer Credit Insurance Profitability

Industry Studies● Natural Catastrophes in Australia: Issues of Funding and

Insurance

● Reinsurance Efficiency and Market Value Added

● Risk and Capital Management – What Can We Learn from the Noughties?

● Implications from the Annual JP Morgan Deloitte Surveys

● Performance Monitoring for the 21st Century

● Premium, Claims and Profit – A Class by Class Analysis of the Australian General Insurance Market

● Solvency II – How Insurance Companies are Changing in Europe

● International Updates

● Insurance Risk Study

● IASB Insurance Contract, ED Submissions

Pricing and Distribution● Understanding the Impact of New Entrants on the Australian

General Insurance Market

● Pricing When Only the Customer Can See

● Leveraging Competitive Advantage through Pricing, Marketing and Product Design

● Using Machine Learning Techniques to Enhance Predictive Models

● Delivering Transparency and Flexibility in Pricing: The Buzz Insurance

● Approach to Pricing Natural Perils

● Convex Optimisation: A New Approach to Common Challenges in Premium Rating

● Ratemaking Working Party

Risk Management● Strategic ERM – Using Capital Modelling to Align Your Business

● Using Internal Capital Models to Better Measure Risk Tolerance and Articulate Risk Appetite

● Enterprise Emerging Risk Management

● Turning the Spotlight on Peer Review

Topic Snapshot



22

All the Small Things (AA152 – Solution) What is the smallest positive number that can be expressed using no more than three digits and the usual mathematical symbols?

Discussion: This month’s In the Margin competition has proven to be far harder to judge than I originally anticipated. Many entries consisted of mathematical expressions comprising multiple factorial signs (for example, 99!-9!!!!) and several readers even went so far as to argue that, as it is always possible to add one more factorial sign to the index of an expression, such as the one given above, it is always possible to come up with a smaller number than any suggested. Some other readers came up with solutions containing mathematical symbols I had never even seen before (for example, [9

<

9$]-9).

However, after much consideration, I have decided to award this month’s prize to Vijay Nandagiri who was selected randomly from the two entrants who suggested 1 – 0.9 as their solution. This solution was chosen due to its simplicity. Congratulations vijay, you have won a $50 book voucher.

Beastly MathematicsWoooo! Spooky, spooky, spooky! With Halloween just around the corner, this month’s In the Margin turns its attention to the most frightening of all numbers, 666. In modern culture, 666 is commonly seen as being the Devil’s or Antichrist’s number. This meaning can be traced back to the Bible book of Revelation, where 666 is referred to as “the number of the beast” (Rev 13:18).

Many scholars believe that the ‘beast’ referred to in the Bible is, in fact, the Roman Emperor Nero, whose name, when written in Hebrew numerological code, sums to 666. Nero was one of the first persecutors of Christians and many Christians of the time believed that Nero was either the Antichrist or would return after death as the Antichrist. In more recent times, various theories have been put forward claiming that numerologically Hitler, Saddam Hussein, Bill Gates, Napoleon, George W. Bush, Barrack Obama, Prince Charles and Barney the purple dinosaur, among others, all have names that sum to 666 and so must be the Antichrist. However, at the very least, all but one of these theories must be wrong.

In addition to being the focus of Bible scholars, conspiracy theorists and heavy metal fans, the number 666 has also been extensively studied by mathematicians. The puzzles in this month’s puzzle page centre around some of the interesting facts that are known about this number.

1. Write 666 as the sum of the squares of seven consecutive prime numbers.

2. Goldbach’s conjecture states that ‘every even number greater than two is the sum of two prime numbers’. (This conjecture has yet to be proven, but has been verified for all even numbers up to 1.6 x 1018). 666 can, in fact, be written as the sum of two consecutive palindromic prime numbers. Find them.

3. 666 is the smallest even number that can be expressed as the sum of different prime numbers using all ten digits (where each digit is only used once). This can be done in four different ways. Find these four sums.

4. Relate 666 to the golden ratio ( = (1 + √5)*0.5) using only the standard trigonometric functions and the four basic mathematical functions.

The Numbers of the Beast666 can be expressed as the sum of its digits plus the sum of the cubes of its digits. That is, 666 = 6 + 6 + 6 + 63 + 63 + 63. However, 666 is not the only number to possess this property. Find all positive integers, x, where x is equal to the sum of its digits plus the sum of the cubes of its digits, and prove that these are the only positive integers that satisfy this criterion.

For your chance to win a $50 book voucher, email your solution to: [email protected]

Alternatively, for your chance to earn a place in mathematical history (and the associated fame and fortune that will undoubtedly result), prove Goldbach’s conjecture and send your solution to any of the world’s major mathematical societies.▲

puzzles

In the Margin with Genevieve Hayes “I have discovered a truly marvelous proof of this, which this margin is too narrow to contain” – Fermat.

with Genevieve Hayes

“I have discovered a truly marvellous proof of this, which this margin is too narrow to contain” – Fermat

i n themarg in@ac tua r i es .asn .au

Solutions: 1. 666 = 22 + 32 + 52 + 72 + 112 + 132 + 172. 2. 666 = 313 + 353. 3. 666 = 2 + 5 + 83 + 109 + 467 = 2 + 5 + 83 + 167 + 409 = 2 + 5 + 89 + 103 + 467 = 2 + 5 + 89 + 107 + 463. 4. = -2sin(666°) = -2cos(6x6x6°) = -[sin(666°) + cos(6x6x6°)]


23

I have had the privilege of being involved in both the Step Up program and the Professionalism Course. In that context I have had a number of conversations about mentoring and I

thought I might share some thoughts…

What is a mentor? It is a term that is widely used and often misunderstood. There are many definitions out there. My description of a mentor is someone who employs their relevant wisdom and experience for the benefit of another person through a trusted one-on-one relationship. My favourite definition is provided by Ann Rolfe*, an expert on mentoring, who says:

“Mentoring is an alliance, that creates a space for dialogue, that results in reflection, action and learning.”

In any event, if the mentor relationship is to be successful the communication process must be very effective. In this column I would like to focus on the communication characteristics of mentoring. (The questions of where to find mentors, what is a good mentoring process and how to design a mentoring program can be left for another forum.)

The most important communication skills for the mentor are listening, listening and listening. Sounds obvious but good quality listening is not easy to deliver. Why?

1. Judgment can get in the way. It is not easy to suspend judgment when listening to an account of someone else’s behaviour but that is exactly what is required. As Jim Stackpool says, “trust cannot be built when judgment is present.” If you, as a mentor, are thinking “what a silly thing to do” – that’s judgment! And that will impede your relationship.

2. Ego can get in the way. There is a big difference between empathy and what Matt Donnan calls ‘autobiographical listening’. Let’s say that the mentee is outlining a situation and you, as the mentor, respond with “that sounds like the time that I…” – that’s autobiographical listening! Remember, it’s supposed to be about them not you.

3. Solutions can get in the way. I know that mentors are meant to be helpful but you are not really listening if you are thinking about a solution while the mentee is still speaking. If you, as a mentor, respond with anything that includes the words ‘should’, ‘must’ or ‘have to’ – that’s a solution! Most mentees are looking for you to guide them not dictate to them.

For the mentee, the most important things that you can bring to the communication table are openness, honesty and a willingness to change. If you, as mentee, want a different outcome in some aspect of your life then I suggest that you will need to do something different. That is not easy, particularly if you have been doing something the same way for a long time. It’s easy to get new ideas into your head – it’s really hard to get the old ideas out of your head. It requires:

● honesty to admit that the old way is not working● openness to listen (without judgment) to a new way of doing it● courage to implement the new way● trust in the mentor to be able to report back on the experience

The latter point leads to my final reminder of the importance of feedback for mentors and mentees. There is value in a quick, open debrief of each meeting. What worked well? What could be done differently next time to improve the meeting? It is also critical that the feedback from the mentee on the actions that he or she has undertaken is accurate and complete. If you, as the mentee, are not reporting the full story then who is fooling who?

It takes more than maths to be an effective mentor (and an effective mentee). The relationship has the potential to be life-changing. ▲

Martin [email protected]

* Please visit Ann’s site for more insights: www.mentoring-works.com

communications


24 report

A s an actuary who worked in employee benefits for many years, towards the end of my full-time career for a multi-disciplinary firm

that advised across a wide range of HR issues, I have long been interested in the broader subject of work. In particular, its nature, definition, history and the way it has changed in recent decades. Over the last decade, part- and full-time study, coupled with various other part-time and voluntary roles, have focused my mind on these questions in a deeper and more personal way.

For example, to what extent do I see myself as defined by the work I do or did? Specifically, how do I now answer the “cocktail party” question “What do you do?” Why do so many people struggle with their self-image once they cease work?

Much could be said on the subject but my more limited purpose here is to discuss what constitutes work, in a variety of different social and cultural contexts. I see the potential for the way we see work to be not only a source of positive change but also of limitation or even oppression.

For something which is so deeply embedded in our daily lives, work is surprisingly difficult to define. Perhaps the best evidence of this difficulty is the fact that (nearly thirty years ago) the papal encyclical Laborem Exercens defined work as meaning any human activity “whether manual or intellectual, whatever its nature or circumstance ... that can and must be recognized as work, in the midst of all the many activities of which man is capable and to which he is predisposed by his very nature”. So, according to John

Paul II, one of the deepest (albeit conservative) philosophical/theological thinkers of recent times,

and with an impressive array of intellectual advice available to him, work is what we think it is – hardly a

satisfactory definition as a basis for a definitive philosophy (or theology) of work.

Part of the problem is work’s ordinariness and at the same time the profound transformation which it is undergoing in our age, due mainly to technology and globalisation. However, when we extend our scope beyond modern life in the ‘developed’ world to include either the pre-modern past, or the rest of the planet, this difficulty in defining work increases substantially.

What we mean by work matters. Words are not only a neutral means of communication. To use an ubiquitous illustration, if we define work as ‘gainful – i.e. specifically paid-employment’ (probably the most familiar colloquial meaning of the word, along with ‘toil’), we have already prejudged the question of whether household chores are ‘work’ or not. Oddly, on this definition of work, household activity is not work if it is unpaid in one’s own home, but it is work if it is paid activity in another’s home. Further, what we collectively regard as work, and those who do it, is more highly valued by economically developed society than the opposite – what is regarded as ‘not work’, and those who are regarded as ‘not working’. Whether a woman who supports her family as a full-time, not directly paid, homemaker describes herself as ‘only a housewife’, or (probably tongue-in-cheek) as a ‘domestic engineer’, her words belie her attitude to, and the extent of the

So You Know What You Mean By Work?


25

▲

report

limitation, and even oppression, by this widespread colloquial definition of work as gainful employment.

Even with the enormous growth in recent years of two-income families, there is ample evidence that household chores remain a predominantly female activity. This reflects the still widespread perception (amongst women as well as men) that household activities are not ‘proper work’ inter alia because they do not bring in income; rather they are more related to incurring expenditure (particularly household activities related to meals, clothing, etc). There still seems to be a residue of belief that earning income (traditionally a male activity) is a more ‘worthy’ activity than spending (traditionally a female activity), however unrepresentative this traditional division of labour may be of much modern family economic life.

A feminist critique of family roles and economic activity within modern capitalist society would, while acknowledging some improvement in recent years, point to the oppressive role played by work as practised in reinforcing gender stereotypes.

Another example of the inadequacy of ‘gainful employment’ as the defining characteristic of work can be found in most economies in the developing or undeveloped worlds. As an example, a couple of decades ago about 4% of Ghana’s population was engaged in formal, recorded wage employment, while about twice that number were self- or family-employed in the informal sector (small-scale food preparation, furniture manufacture, etc). But the great majority of the active adult Ghanian population (over 30% of the total population) were self-employed in agriculture, primarily for household survival. To suggest that less than one in twenty of the Ghanaian population was working is obviously nonsense.

Defining work as toil and drudgery has a long history, particularly in the Judeo-Christian traditions. But this also has its limitations, primarily because much of what is clearly work, in modern life in the developed world in particular cannot reasonably be so defined. Perhaps it was a more reasonable definition of most work in a primarily agricultural or industrial age. While some modern unskilled and semi-skilled service or information sector work (such as ‘hamburger jobs’ or work in a call centre) might be defined as drudgery, a more accurate description would probably be ‘tedium’. There is also the significant limitation on ‘toil and drudgery’ as a definition that it is quite subjective – what is meaningful and enjoyable work to one person may indeed be toil and drudgery to another.

Thus far I have touched on two commonly used meanings of the word work – ‘gainful employment’ and ‘toil and drudgery’. Both represent culturally and historically conditioned characteristics of work and are dominantly so. Nevertheless, they are inadequate to represent what is inherent in work itself. What we are seeking in the definition of work are its essential characteristics, as far as possible transcending economic, cultural and historical boundaries.

Croatian/American theologian and philosopher Miroslav volf suggests the following useful definition of work:

“Work is an honest, purposeful, and methodically

specified social activity whose primary goal is

the creation of products or states of affairs that

can satisfy the needs of working individuals

or their co-creatures, or (if primarily an end in

itself) an activity that is necessary in order for

acting individuals to satisfy their needs apart

from the need for the activity itself.”

Thus, the primary feature of volf’s definition is work’s instrumental character (in particular, its capacity for satisfying needs). Work’s contrast with leisure is also a significant feature of his definition, although volf is careful to point out that together, work and leisure do not encompass all of human activity (e.g. eating does not seem to be necessarily either). What distinguishes enjoyable work from a profitable or useful hobby is that it is either necessary to satisfy needs (other than the worker’s need for the activity itself) or not be primarily done for its own sake. Thus, there is still a necessarily subjective element in volf’s definition, in that the worker’s (or hobbyist’s) attitude to the activity can be significant, in addition to the more objective test of instrumentality. volf also rejects the quite commonly accepted polarity of coercion (work) and freedom (leisure) as much too simplistic. While work involves subordination of the worker to remoter aims, it is not necessarily a sacrifice of freedom.

volf’s definition goes a long way towards a better understanding of work, particularly in the Western world, in which work has become dominant in how many people see their significance. ▲

(See Miroslav volf, ‘Work in the Spirit’, OUP, 1991, pp 3-65.)

Chris [email protected]


26 review

W hatever your approach to money, there is no doubt it is always a topic of interest. Twenty-five years ago, salaries for actuarial students in Australia were closely

linked to exam progress and years of experience. The evolving employment market, actuarial education system and general business environment mean that remuneration is now affected, to a greater extent, by a wider range of factors. These include job position, level of responsibility, bonus potential, performance against objectives, economic environment and more personal attributes such as leadership potential, communication and interpersonal skills. In 2000 Qed Actuarial completed its first salary survey, in response to demand from individuals and employers. It has helped us build a depth of market evidence and ensures we are well placed to provide realistic advice. We now have ten years’ worth of data and thought it would be interesting to review the changes in salaries over this time.

Note: The graphs illustrate the typical range of salaries only, outliers are excluded.

Graduates

● I was surprised at the low level of graduate salaries recorded in the early part of the decade. My recollection is that these results were actually a low point, and that in the late 90s graduate salaries were higher than in 2000 and more likely to be in the range $40,000- $45,000.

● In more recent years, the range of salaries offered to graduates has widened. This is a result of high competition for top

graduates, and with a higher number of graduates on the market, competition for jobs has been intense and individuals have been more flexible to ensure they gain useful experience.

● The graph does not reflect the salaries of actuarial graduates who do not find positions within actuarial teams. In our experience the number who do not find the type of role to which they aspired on commencing their actuarial degree has increased significantly over the period.

● Typically, no additional bonus (or only a small bonus of, say, 5%) is payable at this level. In addition to salary, the graduates in this survey would usually receive generous study packages. A very recent trend is an increasing number of companies who are clawing back part of the exam and study costs if a student leaves the company.

Qualification as a Fellow

● Again, the range of typical salaries being paid to newly qualified Fellows has increased over time (except for the last couple of years). This reflects the fact that qualification on its own has become a less dominant factor. Individuals are rewarded more for their experience, knowledge and skills.

● The results in 2009 and 2010 are significant and clearly reflect the impact of the GFC, when we found that many newly qualified Fellows received lower increases on qualification than they had anticipated.

● At this level, bonus payments on top of salary typically fall in the range 0-20%.

Actuarial Salaries“All I ask is a chance to prove that money can’t make me happy” Spike Milligan

“There’s no money in poetry, but there’s no poetry in money either”Robert Graves


27

▲

Five and Ten years Post Qualification

● The data becomes less consistent as we move further away

from qualification. As position and performance become increasingly important, it is difficult to make any real predictions about salaries simply in relation to years of experience.

● It is interesting to note that, for Fellows at five years post qualification, the range of typical salaries across the period has not increased significantly and they remain generally in the band $150,000 to $200,000.

● The impact of the GFC on salaries can also be seen at these levels.

● Bonus becomes an increasingly important factor and can range from 0-50% although it is more typically in the 0-30% range.

Salary Considerations when Moving OverseasMutual recognition agreements signed by various Actuarial Institutes facilitate actuaries working internationally. An overseas transfer can enhance your resume giving you broader experience, challenges, variety, new contacts, and the opportunity to work in a different culture and enjoy the benefits of that lifestyle.

While there are many issues to consider, such as how your family feels about it, visas, timing, cultural differences and how your skills transfer, the salary and standard of living are often key.

These days, unless your company is asking you to transfer internally, you should expect to be paid on a local salary basis.

The first thing to remember is that it rarely, if ever, makes sense to convert your current salary to another currency and assume you should target this amount. This example highlights some of the issues. Lei is a recently qualified actuary in Sydney on a salary of $115,000. She has done some research about moving to London or Singapore and understands the typical base salary she could expect to earn in those locations. Comparisons both at 30 June 2009 and 31 December 2009 produced the following results :

Location Salary in local Salary in $A Salary in $A

currency at 30/6/09 at 31/12/09

Sydney $115,000 $115,000 $115,000

London £55,000 $112,796 $98,714

Singapore S$100,000 $98,117 $91,498

Using only the exchange rate can mean your expectations are quite different, depending on the date at which you perform your calculations. After some more research, Lei refined her calculations to allow for tax and the likely cost of living.

Location Assumed Assumed Cost Gross Salary Net Salary

tax rate of Living (COL) in $A in $A adjusted

adjustment * at 31/12/09 for COL

Sydney 27% 1.0 $115,000 $83,950

London 26% 1.05 $98,714 $69,570

Singapore 15% 1.10 $91,498 $70,703

*For illustration only

In addition to salary, when reviewing any offer Lei would also need to consider the other benefits, such as pension scheme, whether a car is a standard part of the package, annual leave (some countries offer up to 6 weeks, while others may only have 2-3 weeks as standard) and health coverage/insurance and any contribution to relocation.

For further information please contact me on [email protected] or +612 8235 7901. ▲

New Salary Survey opens October 2010We will be collecting data via a link on our website www.qedactuarial.com.au from 18 October 2010 and encourage you to contribute. All participants will receive a copy of the report.

Jenny [email protected]

review


T he Institute’s second Enterprise Risk Management Seminar was held in Sydney on Tuesday 21 September 2010. ERM 2010 – It’s All About Opportunity looked at ERM as a

way for Corporates to optimise risk taking while highlighting the opportunities for professionals to adapt their skills to this emerging area of practice.

Over 120 risk professionals attended the seminar with 34% working outside the profession. High-level speakers and a power packed ERM Survey, released at the event, helped generate wide coverage in the media.

The four business sessions covered; Business Risk, ERM and implementing Risk Appetite; Scenario testing Risk Appetite; The role of the CRO in Risk Appetite; and ERM in times of Crisis. The following provides a flavour for the content of the day.

Business Risk & Enterprise Risk ManagementCraig Dunn, CEO of AMP, delivered the Keynote Address by sharing AMP’s ERM journey to date, with some insights on how effective risk management provides opportunities to create greater value.

Tips and Traps for Implementing Risk AppetiteMark Lawrence highlighted the increased focus now on risk appetite as the GFC showed that many companies were taking risks that were not understood or were not authorised by the Board. Damien Green, CEO of AIA, outlined four steps to create a foundation for implementing ERM:1. Ensure the ERM framework is proportionate to the organisation’s

stage of maturity.2. Ensure culture and behaviours align with, and support, the ERM

framework.3. Give permission for ERM to represent upside and downside risk.4. Link emerging risks to business strategy

Hypothetical – Road Test Your Risk Appetite Through Scenario TestingThe ‘Hypothetical’ explored scenario testing as a way of preparing organisations to respond to crisis events. Anthony Bice chaired a panel of experts as they discussed three potential disaster scenarios.

Panel members included Andrew Hinchliff from investment banking; Rob Daly life insurance and Tony Coleman providing a general insurance perspective. Scenario 1 was that a Global Double Dip Recession occurred that impacted Australia; Scenario 2 envisaged a massive terrorist attack on the Sydney CBD; while Scenario 3 contemplated the extreme weather events that are expected to be caused by climate change.

The discussion showed the strength of scenario testing as a way of identifying critical issues, many of which were not

obvious at first glance. Who realised that the exchange rate impacts of a recession may affect the price of car parts, which could in turn push up motor insurance claim costs? Or that the 9/11 experience shows that there may be a wave of disability claims from those involved in cleaning up toxic material after a terrorist attack? Many people may think of rising sea levels as a substantial issue for insurance companies but who realises that banks may face greater risks due to their mortgage portfolios?

CRO’s Role in Risk AppetiteThe CRO’s role in Risk Appetite was facilitated by Fred Rowley and the three panellists were Mike Thornton (CRO of Axa Asia-Pacific), Mark Baxter (CRO of Commonwealth Bank’s Wealth Management division) and Robert Stribling (CRO of Suncorp-Metway).

Mike outlined the role of the CRO, which he said was to ensure that RM focuses on low-probability, high-impact events, to build an effective RM capability and to embed Risk Management into the organisation’s corporate culture.

Mark Baxter, focussed on the development of a Risk Appetite Statement (in which the Board had been fully-engaged). Since the introduction of the high-level Bank Risk Appetite Statement, Business Units had since implemented and took ownership of their own Risk Appetite Statements.

Robert Stribling’s key theme was that RM needs to take into account that, in an actual risk emergency, people’s actions would be dictated largely by their animal instincts (fight or flight). But we should aim for a structured, measured process citing the example of the military who train their people to think quickly and clearly under pressure.

ERM in Times of Crisis – What Happens When it All Hits the Fan?This final session was focussed on the Cultural aspects of ERM and in particular the role of Leadership. This was tackled by hearing the ‘War Stories’ from Warwick Young and Peter Clarke with Colleen Guray drawing from those experiences to highlight the behavioural aspects of a crisis.

As CFO of an AIG subsidiary in Japan, Warwick had to deal with the unexpected during the GFC. He spoke graphically about his company’s sudden change in circumstances, the implications of the prevailing culture, the unexpected events and some of his learnings.

Peter recounted the leadership challenge when his submarine lost power during the Cold War and descended toward the sea bed. Although nuclear submarines are highly regulated, the unusual circumstances meant that normal processes didn’t work and 20 pairs of eyes all more technically proficient in their areas of speciality, looked to him for guidance.

As an organisational psychologist, Colleen Guray discussed people’s changed behaviours during a crisis, suggesting that organisations need to recognise these different reactions.

Feedback and Ongoing InvolvementFeedback indicates the seminar was a great success with the focus on the practicalities of ERM in a business, leadership and culture

28 report

ERM 2010Second Enterprise Risk Management Seminar

– It’s All About Opportunity

Craig Dunn

Warwick Young


29

▲

report

sense very welcome. The organising committee is very thankful to the speakers for the quality of their insight.

The Institute would like to thank sponsors Goldman Sachs and Milliman for their support and extend our appreciation to our Supporting Partner the Risk Management Institute of Australasia for promoting this event to their members.

Special thanks go to Wayne Brazel (AMP) Chair of the Risk Management Practice Committee’s Events organising committee, Eric Cheng and members of the committee who put in a huge amount of time and effort to make this seminar such a success.

While we believe this was a great Seminar, it is only the start! We encourage members to be involved with the ERM Community through its periodic Community Sessions, LinkedIn forum (http://www.linkedin.com Group: ‘ERM Community of IAAust’) and the periodic newsletter. See you next year.

Session podcasts are available on the Institute’s website together with a more detailed version of this

article. ▲

Contributors: John DeRavinBernard SmithMark TurnerNadine WilmotRMPC Events Committee

Chartered Enterprise Risk Actuary (CERA) Update There are several things happening with the Chartered

Enterprise Risk Actuary (CERA) qualification that I thought I would update members on in this month’s edition of the Education Update.

Institute of Actuaries of Australia achieves Award Signatory status At its meeting held on 19 August 2010, the international CERA Treaty Board unanimously granted the Institute of Actuaries of Australia the status of ‘Award Signatory’. The granting of this status represents a key milestone towards the awarding of the CERA designation. The Institute is only the second actuarial association to be granted this status.

Now that this major hurdle has been cleared, I can confirm that, subject only to certain legalities being completed (described below), we will be able to award the CERA designation to those who have met our criteria. These criteria are:● completing the Course 7A Enterprise Risk Management course

(comprised of UK ST9 exam + a two-day ERM workshop); and● achieving 2010 Associate status or ‘actuary’ designation. This is

comprised of:• Part I;• Part II;• the Investments Bridging Course (those who completed

Part I and II by the end of 2009 are exempt from this requirement);

• the three year Practical Experience Requirement; and• the Professionalism Course.

Registering trademarks for CERAThe remaining legal step is for an application to be made to the relevant authorities to approve the transfer of the ownership of the CERA certification mark to its new owner. Agreement has already been reached with the current mark owner to facilitate the transfer. The CERA Global Association is responsible for these steps in the

process, both here in Australia and in other countries. This step may still take some time to complete and unfortunately, the timing is out of our control.

University Pathway to CERAThe University of New South Wales (UNSW) applied to the Institute to have two actuarial post-graduate courses ACTL5301 and ACTL5302 formally recognised as the equivalent of Course 7A Enterprise Risk Management. This application has been considered by the Education Council Committee and the Risk Management Practice Committee (RMPC) and a decision has been made to approve this application in principle. UNSW have been asked to complete a detailed mapping of these courses to the learning objectives of the CERA syllabus and to indicate the level of learning using the Bloom’s Taxonomy scale. The Institute will appoint an independent consultant to review this mapping.

The Institute has approached the CERA Treaty Board for clarification on accrediting a university to award the CERA qualification. The UK Institute has already received recognition from the CERA Treaty Board for a university pathway to CERA. If the Institute is satisfied that the UNSW course meets the required standards and can satisfy the CERA Board that all due diligence has been conducted then the course can be approved for the award of CERA.

Experienced Practitioner Pathway (EPP)The RMPC is now preparing an update of the guidelines on an Experienced Practitioner Pathway (EPP) to CERA in accordance with Council’s recommendations at their December 2009 meeting. The next step will be to prepare an application to the CERA Board for the EPP. ▲

Philip LathamEducation [email protected]

education update

Michael Thornton, Mark Baxter, Robert Stribling, Fred Rowley

Melinda Howes, Warwick Young, Colleen Guray, Peter Clarke, Wayne Brazel


30 report

T he Commercial Actuarial Practice (‘CAP’) course, with its residential component, has been a part of the education program for some years now. My own thoughts about

the residential course were initially a mix of nostalgia in returning to study at the Macquarie campus, where I had studied in my university days; and hope that it would present a great opportunity to meet many of my peers. As with previous semesters, the residential course was hosted at the Macquarie Graduate School of Management (MGSM). As it turned out, although I didn’t get much of a chance to revisit my youth, I did indeed have the opportunity to meet many of my fellow budding actuaries from various backgrounds and locations around the world.

The CAP course itself has been refined over the semesters based on input from past participants and continued development from the Institute and its staff. However, the main purpose has remained to address the point that simply “producing the numbers is not enough.” The course focuses on bringing out and further developing our communication skills, in order to teach us to be better actuaries (which, after all, is the ultimate aim of the actuarial education system). Hence, assuming we had the technical skills (hopefully a safe assumption) the focus was directed to “then what?”

Taking a step back, it should be pretty clear to us that actuarial work is not just about crunching out numbers, but to convert the mindsets of so many of us who have been comfortably nestled within our numbers and models for so long would definitely be no walk in the park and I commend both David Service and Colin Priest for leading the charge. Nevertheless, I believe that the message did get through to everyone by the end of the four-day course, either through reason or the threat of examination (it is open to interpretation as to which works best for actuarial students).

The practical component of the course revolved around eight case studies covering the ‘traditional’ areas of expertise, i.e. General Insurance, Life Insurance, Global Retirement Income Systems, and Investments and Finance; and some ‘non-traditional’ areas of practice, namely Enterprise Risk Management, Environment, Banking and Health Financing. Discussions of these case studies within our smaller groups and larger streams gave us the chance to witness, in practice, the true calibre of our peers and highlighted the multitude of perfectly acceptable views and approaches to addressing the same business question.

In summary, it is safe to say the CAP course is very different from the other Part III subjects, but is consistent with the aim of developing well-rounded actuaries. The overall aim of the course being to enable us to communicate better as actuaries and equip us with practical skills, such as being able to step out of our pure technical shoesand into those of our business clients.

A big thank you to Susana Pui for sharing her photos from the course. ▲

Revsion [email protected]

Fellow students enjoying a beer at the end of a long day

One of the many coffee breaks

Stretching out on campus

CAP Course


31

R arely does society find itself with an idealistic solution to a major issue, which doesn’t eventually elicit a vicious circle, for example, the rise of communism, Germany’s

solution to the Great Depression and the development of nuclear warfare. Somewhat an exception to this, however, is the impact of the European Union (EU), which has transformed the way in which the world operates in the social, environmental, political and financial arenas. By exploring the progress, operations and mechanisms of the EU, we can gain an understanding on the current status of non-EU states, the shared currency of the Eurozone and the recent downfall of this currency.

Following the devastations of World War II, many European countries sought some form of amalgamation within the continent, as a means of distancing themselves from the atrocities caused by extreme nationalism. In 1957, the first attempt for integration was through the European Coal and Steel Community, which aimed to merge the control of coal and steel of the Community’s members, and originally consisted of only West Germany, France, Italy, Luxembourg, Belgium and the Netherlands. This alliance eventually developed into other pacts, such as the European Economic Community and the European Atomic Energy Community, which eventually expanded to include many other Western European countries. Only in 1993 did the European Union officially form, which now extends across 27 countries throughout Europe.

The steep growth in population of the European Union is not indicative of the ease of joining the EU; the conditions of entry into the EU are nothing short of stringent. A future member must satisfy the Copenhagen Criteria, which ensures the country’s political system is democratically predicated, the economy is efficiently operated and that there is unequivocal compliance with EU laws and obligations. This includes the members’ internal markets, social policy, marine conservation, environmental sustainability, energy and transportation, amongst others. For many countries, this bears comparison with portfolio theory, as the weaknesses of one country may be offset by the strengths of another and essentially the country diversifies away any specific risk which it holds. But for some countries, who may feel stable enough not to join the financial, social and political amalgamation of the EU, being dragged into the continental pool may serve as more of an expense than a benefit.

Two notable examples of countries who have perhaps strategically avoided becoming members of the EU are Switzerland and Norway. On a recent trip to Europe, both Switzerland and the Scandinavian

countries emerged as the most expensive areas, which may be a consequence of their highly comprehensive level of health care, as well as other government initiatives. Switzerland, which prides itself on its political neutrality, has distanced itself from any political pressures which may be exerted if they were to join the EU. Also, the advanced and efficient banking system in Switzerland may be decelerated by some of the EU’s stringent banking laws. Unlike Switzerland, it was Norwegian voters who expressed their discontent with their country’s consideration of joining the EU through a referendum. A likely cause for this was the country’s dependence on the fishing industry which, for EU members, is exclusively controlled by the union.

One of the most important mechanisms, over which some EU countries have no control, is their Monetary Policy. In the case of the Euro, the shared currency of sixteen of the 27 current EU members, the movement of their currency is contingent on the economic climates of all the member states. Similar to entry into the EU, potential member states for the Eurozone must fulfil rigourous entry criteria: the state’s inflation rate, balance of trade, exchange rate and long-term interest rate must be stable. After a contraction of 18% in their economy during the 2008 financial crisis, Latvia’s adoption of the euro has now been delayed to 2014, unlike its neighbour Estonia, who have been accepted into the Eurozone as the third ex-Soviet states (following Slovenia in 2007 and most recently Slovakia in 2009).

Recently, however, we have seen the possibilities of what could happen with member states’ with faltering economies: Portugal, Italy, Greece and Spain, pejoratively known as the PIGS, exhibited a struggle in recovering from the financial crisis. The most publicised of these peripheral nations was Greece, as their looming deficit levels peaked at just over 12% of its GDP following the financial crisis, much steeper than the estimated 3.4%. Its uncontrollable debt level soon became known to the public and speculators eventually began purchasing credit default swaps (CDS), which pay the investor upon the default of the financial instrument, that is, Greece. Theoretically, the problem is that speculators, who now have an incentive for Greece to default, have the power to drive up the power for a CDS by increasing demand, and driving up the price of this cover will consequently deter investors from purchasing Greek bonds, which then drive up the bond yields. The two-year bond yield rose above 13% this year, alluding to the changes by these financial mechanisms.

However, the political strength within the EU resulted in a 30 billion Euro bailout for Greece, which may not only act as a financial safeguard but also as a symbol of the unity within this alliance. The foundation upon which the EU is predicated seems to prevail throughout most of its actions and is perhaps why countries like Cuba, North Korea and Syria have used it as a form of political dollarisation. More importantly, will the once idealistic ethos of the EU be able to continuously survive in practice, just as it has in the last ten years? Perhaps; but nonetheless, it has so far successfully endorsed the concept that in the long-run, an ideal political and economic system can, with careful regulation, remain ethical and stable. ▲

Arun [email protected]

student column

The European Union: A MODERN-DAY FAIRYTALE


32 obituary

One word to describe Tig Melville is ‘intrepid’. He looked for new ideas and new challenges. He had the courage to develop them. In an earlier age he might have been an explorer.

Tig was born in Adelaide, South Australia, the first son of Leslie and Mary Melville. Leslie (later Sir Leslie) was a prominent economist and actuary who worked for the South Australian and Federal Governments including a three year stint at the World Bank.

Tig was a strong family man. He is survived by his daughter Jenny, his wife Patricia, stepdaughters Kay, Donna and Josephine, and nine grandchildren.

He completed the leaving certificate as Dux of the Shore School in Sydney, with an exhibition to Sydney University where he took an arts degree majoring in mathematics. He resisted pressure to take an honours degree in mathematics because he did not want an academic career. He took a pass degree and decided on an actuarial career.

Throughout his life Tig suffered from severe asthma. While this prevented him from participating in the sports for which Shore was well known – cricket, rowing and rugby – he was a keen tennis player at school and beyond, playing badge tennis with the Killara Tennis Club

After University, Tig commenced work with the AMP Society in 1946. With short periods in Sydney, Adelaide and then back to Sydney again, the first adventure took him to New York with the New York Life in 1952. Tig qualified as a Fellow of the Institute of Actuaries in 1953. His enthusiasm and ability saw him gravitate to a relatively new area in New York Life, dealing with group life. Where previously life insurance had dealt in individual policies, even for group superannuation, health, and annuity business, New York Life was developing strongly in deposit administration, i.e. the bulk administration of such polices, with material savings in expense and much improved efficiency. By the end of 1957 Tig was faced with a choice: to commit to a senior position in New York Life or return to Australia.

He chose Australia. He expected his US knowledge and experience would be invaluable to a major Australian life office. However, the conservatism of the time in society generally and in the insurance industry in particular, which was focused on tied-agency forces and high-commission products gave Tig no opportunity. He had to take a different path.

He threw himself into the development of a consulting actuarial practice based on a significant involvement in health insurance

Galfrid Leslie ‘Tig’ Melville17 June, 1926 – 19 August, 2010


▲

33obituary

with HCF. His timing was fortuitous, just at the start of a golden era for consulting actuaries. The practice began to flourish with an influx of small life offices each needing actuarial advice and in addition the parent companies of Australian subsidiary companies were expecting to find deposit administration contracts to be provided by Australian life insurance companies. The Australian industry was forced into deposit administration by client pressure.

Tig’s next venture was to establish a SE Asian actuarial consulting practice. The unstable political situation and the Indonesian ‘sabre rattling’ at the time caused that venture to fold. Once again Tig was ahead of his time.

In 1964 he went to London, planning a year to explore the opportunities there. This led to a consulting role with Save and Prosper, out of which arose a proposal to expand into life insurance with an agency force selling investment trust units with linked life insurance cover. The Board of Save and Prosper accepted Tig’s recommendations on the condition that he took the responsibility for the whole operation as General Manager and Actuary. Tig retired from the firm he had established in Sydney to take up this challenge. Starting in late 1966, by 1968 he had taken Save and Prosper to the point that the new business written was second only to that written in the UK by Prudential.

There were several keys to this remarkable success. The investment linked approach gave a transparency to costs which imposed a discipline on the organisation. The agency force was recruited deliberately from people with no experience in traditional insurance selling, who achieved a high rate of sales given the established investment name of Save and Prosper. In addition, he introduced direct selling through newspaper advertisement, which was also successful. Tig wanted to make a further change to the structure to simplify the administration, a change the Board rejected – only to adopt a few years later.

Notwithstanding this success, which defied conventional practice and opinion, Tig left and returned to Australia at the beginning of 1969. In his Recollections, Tig said that after two years his job was done and given his tendency to seek new adventures, it seems he had decided to return home and try his hand again in Australia.

Back in Australia he once again tried to bring his new knowledge to the Australian market. He wrote a prize-winning paper for the Institute of Actuaries of Australia titled ‘The Unit-Linked Approach to Life Insurance’. He was further honoured by a request to present the paper in London at Staple Inn Hall to the Institute of Actuaries. The success of Save and Prosper meant that the paper gained considerable recognition in the UK and has arguably influenced developments there and in the US but not in Australia where life offices continued to focus on selling old-style traditional whole life and endowment insurance.

Tig was disappointed that he found no opportunity in Australia for the unit–linked approach to insurance. He spent the next few years in a variety of short-term consulting and management roles until 1977 when he took on the role of Life Insurance Commissioner in Canberra. This was perhaps a surprising decision for him to make but filling this role with a person of his stature was welcomed by the industry and the profession. One can only speculate on his motivation to enter a bureaucratic world, so alien to his adventurous nature. Whatever the motivation, Tig coped with the frustrations and difficulties and succeeded in making material changes. One particularly significant result was the introduction of Financial Condition Reports to be produced by the Actuary on the affairs of his/her life insurance company. There was opposition from the major companies of the day but Tig carried the profession and then the industry. This materially raised the standards of the industry and the standing of the profession.

In other matters he adopted a consultative approach using the industry and the actuarial profession to develop guidelines and regulations. Where there had often been an adversarial approach previously, his consultative approach was very successful and was maintained after his retirement.

After retirement in 1984 Tig returned to Sydney and maintained his interest in many current activities. His support for the Institute of Actuaries of Australia was manifold and evidenced in particular by the establishment of the Melville Prize Fund – partly to honour his family but primarily to support prizes for outstanding contributions to the profession. His view was that prizes should be maintained in real terms, an objective not met by establishing a trust fund, conservatively-invested, which loses its real value over time. Tig has established continuing trusts from which an annual donation is made to support the granting of prizes.

The professional recognition for Tig’s support of the profession is evident in his election as President of the Institute of Actuaries of Australia in 1979 and then his election as a Life Member in 1990.

Tig will be remembered within the profession in Australia for his many contributions often challenging existing practices and encouraging changes. Elsewhere he will be remembered for the pivotal role he played in the development of unit linked life insurance.

Shortly before his death, Tig completed his Recollections, which recount his professional career in some detail; a copy can be downloaded from www.actuaries.asn.au ▲

Owen [email protected]

Tim [email protected]


Why the new actuary designation will save our professionHaving had the chance to read this month’s editorial

before the magazine went to print, I would like to strongly dispute Editor James Collier’s comment at the end of his first paragraph.

The new actuary designation was not “decided by a handful of people against the dissent of the majority”. Council did not take this decision lightly. Below are the results of the plebiscite to which more than 1,600 people responded – a response rate of 45%. The dissenters were a minority in every membership category.

The Fellow and Accredited Fellow categories showed the least strong support, being the only categories where the ‘no’outweighed the ‘yes’ – although by a slim margin. When you add the ‘support council decision’ votes to the ‘yes’ votes, Fellows and Accredited (Fellows from overseas) also supported the change.

If we break down the Fellows vote by age, an interesting pattern emerges. Younger Fellows who had just qualified were least in favour of the change, and the older they got the more supportive they were. The only age category with more than 50% dissent was the under 30s.

I can understand the reasons for this. Those younger actuaries who have finally made it across the moat to Fellowship are very keen to take up the drawbridge behind them. I suspect that our Editor was represented in one of the younger age brackets on this graph.

For those of you who have not caught up on this, the new

‘Associate/Actuary’ level is at a higher standard than the old Associate level gained prior to 2010 and, most importantly, it is in line with the ‘Actuary’ designation in other countries. To gain the qualification from 2010, members must complete Part I, Part II, an Investments Bridging Course and a three-year experience requirement. They must also attend our Professionalism Course. Those who completed Parts I and II before 2010 must complete the three-year practical experience requirement and attend the Professionalism Course. This is not an easy set of requirements to complete. Being able to call oneself an actuary is a recognition of the hard work our members have done to get to this level and we should be welcoming them with open arms.

I have had the privilege of attending all four of the Professionalism Courses we have run so far this year (there is another taking place in October). The new actuaries’ commitment to, and engagement with, the actuarial profession was evidenced by the high quality of discussions at the course, building on their strong business acumen and grasp of ethical issues. The more (and more varied) people that engage in such discussions, the more the quality of debate generally is lifted. Those involved in running and presenting at these courses, including our three Presidents, have remarked on the higher quality of the discussions, this year with the new actuaries in the mix.

Many of the new Actuaries attending these courses are senior people who have been working for many years in a range of fields. As a group they are accomplished, articulate and have a diversity of business experience in Australia and overseas, in a range of industries. Quite a number of them hold very senior positions that many of us can only dream about.

I cannot disagree strongly enough with the Editor’s statement that we are “devaluing the actuarial qualification to Associate status”. If these members are an example of the new Associate level Actuary, then we are increasing the value of the brand of Actuary by including them. We should be honoured to have them amongst us. It’s also important to recognise that failing to embrace the new designation might discourage new Associates from becoming Fellows, as they will feel spurned by those elements of the profession to whom they look up to with respect, honour and a desire to emulate. Our profession will be richer with the new Actuaries in it. It broadens us out, it heightens our quality, it brings in different and complimentary skill sets. It positions us to take on our strategic goal of expanding “beyond the mandate” (see last month’s column on the Strategic Plan or visit the website).

If we continue to denigrate and exclude from our ‘club’ extremely talented and intelligent people with a diverse range of skills, it is we who will be diminished. There are only 25 Appointed Actuary roles left in Life Insurance in Australia, a number more in General Insurance, around a dozen in Health Insurance and whilst there is still quite a bit of work in Defined Benefit Superannuation, these funds are being closed down at a rapid rate. Where do you think the growth in our profession will be in future? It will be the Actuaries who will play a major role in taking the profession into the 21st Century.

I, for one, am honoured to be welcoming these new Actuaries to the profession. Creating the new Actuary designation was a positive step, a necessary step, and a step which I believe will save our profession. ▲

Melinda [email protected]

7

The Result of the Plebiscite – Fellow Response by Age

N = 701

6

The Result of the Plebiscite – Membership Status

N = 1,636

34

▲

report from the CEO

Strategically placing Actuaries around the globe.

Our client, a leading General Insurance company in Australia, is looking for an experienced personal lines pricing actuary or statistician to join their team based in Sydney. The role will have a very strong technical component with emphasis on statistical modelling and data mining for the home and motor lines of business. You may be an actuary, actuarial student or someone with a Mathematics or Statistics background but with some strong technical pricing experience.

• At least 3 years experience up to team leader level

• Actuarial or Statistical/Mathematical degree

• Ability to communicate clearly and effectively with team members and other internal stakeholders

• Candidates with consulting backgrounds are highly desired

Sydney – Personal Lines Pricing Actuary

Contact Claire Street for more information.

A well established international consulting firm is rapidly expanding its actuarial practices within the Asia Pacific region. There is an immediate need to find exceptional junior actuarial consultants to help build the teams in Singapore and Hong Kong. Working on projects within the life insurance sector it is essential that you have a modelling background and the desire and skill set to become a consultant.

• Between 1-3 years actuarial Life Insurance experience

• Actuarial/Mathematics degree from an internationally recognised university and pursuing actuarial qualification

• Strong modelling skills preferably in Moses, Prophet or Alpha

• Communication skills must be very strong

Singapore/Hong Kong – Consultant, Life Insurance


This fast growing Reinsurance Company, based in Singapore, is looking for an experienced actuary to manage their ERM framework. Reporting directly to the Head of Pricing you will be responsible for developing and reviewing the ERM framework and drafting reports to Senior Management and the Board. You will also be required to keep abreast of new ERM methodologies and reinsurance risk related issues.

• Fellow or Associate of a recognised Actuarial Institute

• At least 5 years general insurance or reinsurance experience

• Strong Excel and VBA experience

• CERM qualification would be a plus

• Excellent communication skills in English and an Asian language preferred

Singapore – Actuarial Manager - ERM


EUROPE | ASIA | AUSTRALIA & NEW ZEALAND | MIDDLE EAST | NORTH AMERICA | SOUTH AMERICA

Lesley Traverso James Lecoutre Claire StreetT: +61 (0)2 9226 7459 T: +61 (0)2 9226 7412 T: +61 (0)2 9226 7418 M: +61 (0)433 129 390 M: +61 (0)404 397 503 M: +61 (0)401 606 [email protected] [email protected] [email protected]

1300 22 88 279 (1300 ACTUARY) www.dwsimpson.com

The demand for actuaries continues to grow in most parts of the world. In the UK and Europe this has been fuelled by people moving from traditional areas into Solvency II, leaving gaps that urgently need filling. In Asia, which had led the resurgence following the GFC, organisations are continuing to expand and we have seen an increase in hiring over the past few months. Australia’s activity is also on the rise and is spread throughout the market with interesting, newly created roles at both junior and senior level being offered. There are some notable shortages however, particularly at nearly/newly qualified level. More active hiring doesn’t mean an increase in salaries though, with hiring managers still being firm about their limitations. We are however noticing that organisations are more open to considering candidates from overseas and assisting with visas, particularly those with hard to find skills and experience.

Contact Lesley Traverso for more information on trends in the global Actuarial market

Market Update

Contact James Lecoutre for more information.Contact Lesley Traverso for more information.

Great opportunity to join this major banking organisation at a key point in its growth. Working with leading edge software you will have the opportunity to really unleash customer intelligence, and ensure that customer insight is at the heart of all business and marketing activities and a key driver of profitable growth and customer satisfaction outcomes.

• Build a price modelling and optimisation team

• Develop an Australia market leading price modelling capability

• Design pricing models, tools and systems

• Participate in informed debate with intra-company teams

• Be outcome focused

Sydney – Head of Price Modelling and Optimisation

Niche Insurance provider is looking to hire a senior Actuary to be the in house Actuarial expert. The successful candidate will manage the relationship with the firm of external consultants that the company currently uses for the valuation and AA responsibilities. However, you will also have the opportunity to use your Actuarial skills in broader areas of the business for example Risk Management.

• A preference for GI experience, however as you will be dealing with non traditional, niche products, consideration will also be given to those from a Life background with the necessary commerciality and drive

• Minimum of 10 years Insurance Actuarial experience

• Opportunity to create your own role and expand in house Actuarial capabilities

• Strong communication skills, creativity and business acumen

Sydney – Senior Actuary, GI or Life Insurance

DWS_Actuary Ad_Oct2010.FINAL.indd 1 30/09/10 4:01 PM

Our office in France is the centre of our European operation

Our subsidiary covers the gamut of the financial services sector, but biased by its

parentage, can satisfy all your actuarial needs

We are truly international and have consultants from Europe, South Africa, China, Middle East, India and Australia

Our Australian office covers both the Australasia

and Asia Pacific markets

GAAPSAUSTRALIA

GAAPSEUROPE INTERIMGAAPS

All CV’s are treated in the strictest confidence and are not sent to prospective employers without prior permission. Please remember there is no charge to candidates.

Australian Office: Level 18, Riverside Centre, Brisbane, Australia

Call: +61 (0)7 3112 2657 or email: [email protected]

For the most up to date Australian and global opportunities, register today

www.gaaps.com

Gaaps group ad-australia.indd 1 29/6/09 12:23:58

17th general insurance seminar – risk and reward banking ... · katrina mcfadyen publications...

Documents