Month: March 2019

This blog has focused strictly on the Society of Actuaries’ Fellowship track, but the SOA’s most recent FSA has started to infringe upon another credentialing agency: The Casualty Actuary Society (CAS). CAS focuses strictly on Property and Casualty, whereas SOA has historically credentialed life, health, and pension until about four years ago when it introduced the General Insurance Track. The SOA intends for the General Insurance path to compete with CAS’s FCAS in the property and casualty actuarial job market, but the track has gained the respect and accreditation of neither the companies nor the candidates it desires.

Nevertheless, the General Insurance FSA, just like the other FSAs and the FCAS, offers candidates careers in insurance and consulting primarily, with increased opportunities in reinsurance (insuring insurance companies). Exit opportunities and compensation in reinsurance mirror typical insurance, but many find the more macro-scale work more engaging. Regardless of path, property and casualty actuaries tend to have a challenging work-place due to the variable time-frame; car insurance for example: auto actuaries know the price (or price range) the company will pay given the upper price bound of the car’s value, but they do not know when, or even if, an insured will have an accident.

In both consulting and insurance, Property and Casualty actuaries follow a very normalized progression from analyst to profit sharer (either partner or vice-president, respectively). This path generally consists of varying levels of associate, manager, and director between these extremes, but every level of the path, especially with a focus on P&C, has adequate compensation.

Recently, property and casualty has experienced an increase in average salary relative to other actuarial fields, seen by the relative compensation of Liberty Mutual’s (whose pay structure mirrors many other P&C firms) senior analysts (above). Further, the effective value (NPV) of a P&C actuary’s career earnings lie over a million dollars above the average actuary, with the former’s gross earnings nearly two million dollars greater than the average actuary. Despite entry level P&C associates making $2000 less than the average actuary, the long-term salary growth and accumulation differentiates the Property and Casualty route salary-wise.

To achieve this spectacular compensation and challenging work-environment, candidates previously had to attain an FCAS, but can now pursue the SOA’s General Insurance track. Achieving this FSA requires the standard four modules and professionalism course, in addition to four exams (one more than all other tracks). Luckily, the additional exam (Introduction to general insurance) only lasts 1.5 hours and consists solely of multiple choice opposed to the other three 4-5 hour written exams. All exams in this track prepare candidates for all areas of insurance, but specifically pricing and regulation within property and casualty.

Time to discuss the “escape clause” of the actuarial profession: the enterprise risk management and corporate finance track (henceforth ERM). Many candidates pursue the ERM track because they have little interest in pursuing a more traditional actuarial role in health or life and would prefer to give the challenging and frantic world of corporate finance a try. While relatively unpopular at second to last in number of exam passers, the ERM track teaches general business acumen rather than specific actuarial regulations and techniques, which provides opportunities to continue within the actuarial profession in a less specialized role, or to leave altogether and pursue finance.

Candidates pursuing the ERM track will likely struggle to find employment in insurance due to these fields’ highly specialized nature, making general corporate finance and consulting the more typical paths. Similar to the other FSA tracks, careers in consulting can offer MBA opportunities and exit opportunities into industry (in this case, corporate finance); largely unlike the other tracks, however, corporate finance can pipeline candidates into consulting as well, making consulting both an entry level and an executive level opportunity for ERM actuaries.

Also unlike other FSA tracks, ERM better prepares candidates for strategy consulting rather than industry specific (life/health) consulting. The general business knowledge, including finance, management, marketing, and accounting, taught by the ERM track applies directly to strategy consulting rather than to specialty firms like Wakely Consulting or Oliver Wyman. Within strategy consulting, a risk specialization fits ERM actuaries best as they can apply the risk management background from most actuarial curricula as well as the business acumen from the ERM track. Most strategy consultant strive to become a partner in their firm after ten to twenty years in consulting and managing roles, but an immediate risk specialty can expedite this process by jumping directly into a more specialized role.

The terminal professions for most ERM actuaries who start and stay in finance are the Chief Financial Officer and Chief Risk Officer; these C-Suite professions offer the most compensation and the highest regard among finance professions, making them a widely held end goal.

Typical intermediate steps for corporate actuaries include financial and corporate controller or treasury manager, among other middle management positions that manage the risk and finances of a company. Regardless of entry position and progression, compensation for the finance path remains just under six figures with upper level positions seeing salaries well into the two-hundred thousands and even higher for top companies.

Since the ERM FSA must cover a broader range of material than any other track, many consider it the most difficult and “risky” of FSAs since the demand for corporate actuaries typically falls below that of insurance actuaries and other more traditional actuarial roles. Like the other FSA paths, ERM consists of three tests, four modules, and the professionalism course, with the two five hour written tests, Foundations of Corporate Finance and Strategic Decision Making contributing most of the path’s difficulty.

Falling slightly below the popularity of Quantitative Finance and Investments, but differing significantly in type of work and company, the retirement benefit track offers other unique paths for actuaries with this designation. As with the life and health tracks, retirement benefit actuaries can pursue both industry and consulting and progress to manager and director roles within both fields.

Unfortunately, retirement has the worst growth potential of any actuarial path because of the decreasing prevalence of company sponsored pension plans. This decline makes the demand for retirement actuaries greatest in consulting since a consulting firm can serve thousands of companies and make small improvements in their benefit valuations, among other issues. Nevertheless, while consulting typically offers a unique blend of challenging and fast-paced work, retirement actuaries experience the least eventful and often least challenging environment because of the known-amount, predictable duration nature of the field. For example, a company can largely anticipate when a certain worker will retire, and the company and retiree will have already agreed to a benefit plan; this makes the actuary’s job fairly simple since he already knows or can easily predict all desired information.

Regarding compensation, retirement actuaries rival their more active counterparts with entry level salaries around $75000 and just over $100000 with five years of experience. Further, retirement actuaries have the potential for drastic salary jumps due to the consulting-focus, which can see threefold salary increases for directors and partners. When working for a consultancy, retirement benefit actuaries will identify deficiencies in a company’s benefit programs, then propose cost-driven changes to increase profit and retiree satisfaction. Benefit actuaries working for a single company tend to focus strictly on that company’s retirement program, again to locate weaknesses and suggest solutions.

As with all other FSA tracks, retirement benefits requires three exams, four modules, and the fellowship course, with one module and all three exams unique to this track. The most unique  aspect of retirement benefits comes in the Enrolled Actuaries Exams, which counts as one exam but actually consists of three separate exams: EA1, EA2F, EA2L. The latter two exams, which the SOA uses from Enrolled Actuaries, cover topics such as assumptions, minimum contributions, and benefit legality; the first exam covers more basic actuarial concepts covered by exams FM and LTAM (in the Associateship track), and passing these two exams gives exemption from exam EA1. The second exam, design and accounting, covers exactly what it sounds like: the design of benefit structure using assumptive valuation techniques, as well as the accounting and financial analyses on the proposed design. Candidates have the option to take the Enterprise Risk Management exam or the Retirement Plan Investment and Risk Management exam, then finish the requirements with the Social Insurance Module. These unique exams cover retirement benefit specific regulations and analysis techniques necessary for successful risk mitigation and lawful benefit practice.