At a conference call with some actuaries and financial analysts:
Financial Analyst: My DAC is too small. And I'm not happy with it
Actuary A: Excuse me, your what is too small? I can't hear you!
Actuary B: I think you may need to call some helpline or counseling service, we can't help you with that. And it's not that appropriate to discuss such private matter in a conference call, don't you think?
DAC (pronounced as "Dack") means Deferrable Acquisition Costs. It's a common daily GAAP term in our work. In FAS 60, the acquisition costs vary with and are primarily related to the acquisiton of new and renewal insurance contracts, e.g. commissions, issue costs and underwriting costs.
Sometimes if you don't say the word clearly, other people may think you are saying another word which means a human body part.
Your DAC
Who's the MAN?
In Generally Accepted Accounting Principles world, there are three main standard setters:
AICPA = American Institute of Certified Public Accountants
FASB = Financial Accounting Standards Board
SEC = Securities and Exchange Commission
If you are playing a game, you want to know who makes the rules and what the rules are, right?
Can you meet me half way?
Fergie singing...Can you meet me half way.....right at the borderline.....
Actuary: Can you meet me half way....er....in statutory reserves approximation?
Nemesis
Joint Policy Statement was issued by Canadian Institute of Actuaries and the Canadian Institute of Chartered Accountants in 1991 to address how the actuary and auditor should interact in meeting their professional responsibilities and how their roles should be disclosed to readers of financial statements.
Not your kind of Blue Book when you are selling your car
Each year a life insurance company is required to submit financial statements to the insurance department of each state in which the life insurance company has issued a policy that is still in force.
The cover of the annual statements is blue, namely, the Blue Book.
Where do reserves come from?
Trying to post some stuffs that I'm learning from the reading material.
Question to a Perpetual Exam-taker
Q: I don't understand why people decided not to be an actuary after they finished taking all the exams...
A: You really want to know why and let me tell you this, the best hidden secret- people take the actuarial exams so that they can defer getting a life or getting in shape (don't confuse with getting a deferred life annuity).
Think about it, what a good excuse when you can tell people,"I've been taking the actuarial exams all these years and that's why I'm single/over-weight/not a home-owner etc." In fact, I think they should have set up more exams to be an actuary.
I know it sounds cliche- it's really about the journey, not the destination! Now that I'm' going to finish my actuarial exams (both SOA and CAS ones) soon, I need to start looking into taking CFA exams, CPA exams or part-time MBA classes now...
News from my Alma Mater
My friend W just forwarded this article to me. Though it's not very recent, it sums up the job prospect of actuarial science students.
The Actuarial Revelation
When I was brushing my teeth morning, looking at my reflection in the mirror, I finally paid attention to the design of the t-shirt I was wearing. I remembered I ordered this t-shirt from the actuarial club when I was a sophomore. Since it was too big for me, I always tried to avoid wearing it.
Finally I realised the D.A.S.S. letters are four actuarial symbols. (As you can see from the toothpaste stint on the left hand side, you can imagine my jaw was dropped when I had the actuarial revelation. :))
nDx - I don't think I learned about this big nDx in Course M. I used ndx more often.
ndx is the number of people die between age x and age x+n.
a double dot x- This is the annuity that pays a unit amount at the beginning of each year that the annuitant at age x survives.
s double dot- an actuarial accumulated value at the end of a life annuity-due of 1 per year, payable while (x) survives.
Actually these symbols came a long way.My professor used to tell us that- once upon a time, some actuaries decided to develop some symbols in order to have a "common language" for actuaries from all over the world to communicate the actuarial concepts.
Do you love your Actuarial work?
I was reading some quotes of Donald Trump at No Limits Ladies this morning. Somehow the quote on "loving what you do" stucked in my head. K wrote, "His point was that the person who takes a month off and doesn’t think about his work or the office, is never going to be truly successful because frankly, he doesn’t care enough."
There are quite a lot of people taking vacations during the holiday season (myself included). One of my co-workers went to Hawaii for two weeks right after the actuarial exam. I wonder if he ever thought about "his work or the office" (I bet he didn't. I don't think I would neither. Who do, really, when you are in Hawaii?)
From another article, Trump wrote, "If you don’t have passion, everything you do will fizzle out, or be mediocre, at best. "
Do you really love the actuarial work you do every day? Or you are in the actuarial field just because of the job pays the bill?
Everyday at work, whenever I remember, I ask myself, "Is this the work I really enjoy doing? What's the meaning behind the work that I do? Does it make a difference to the world?"
Concept Mapping: Actuarial Reserves vs. Emergency Funds
As a recent college graduate who just started out working, when you first save up $10,000, what would you do with the money?
Among my friends, I see there are two extreme cases---The case of spending it--two of my friends, one bought a BMW (this one is a special case, he bought it half a year before he graduated from college because he knew how much he would be making after graduation) and the other one bought a Lexus recently.
On the other hand, there's a case of saving it- another friend is putting her first 10k to a money-market fund and setting up her first appointment to meet with her family financial adviser.
I know each of us have different priorities in life and I can't say who's doing it right and who's doing it wrong.
For me, the first thing I would do (and am actually doing) , is to build my emergency fund. If an insurance company keeps an actuarial reserve to pay off future liabilities, it makes sense for an individual to save. According to this article from bankrate.com, it is recommended that your emergency fund should equal to "at least 3 to 6 months living expenses", in case of any unexpected happens in your life. (Of course you will build your house on rock so it won't collapse, right?). And come on, some of us are working for insurance companies and you know how life can be totally unexpected.
I've been telling my parents about this theory of building my financial foundation. Perhaps they don't really understand it (which I don't really expect they can fully understand it, because I'm living a life they've never experienced before).
Perhaps, this time, they can understand the importance of having an emergency fund (especially since I'm here, all by myself (literally)). For some of us here, your family are just too far away to look after you and you are solely responsible to take care of yourself (physically and financially).
Maverick Actuaries
I was reading Maverick at Work by William Taylor and Polly LaBarre last night, just the first few chapters though. It mentioned that to be outstanding as an organization, you need to find out your true calling. Look at Southwest, they are in the "freedom business" to democratize the skies and people who work with southwest are the freedom fighters.
What values do actuaries stand for? Can actuaries be mavericks too? Other than dealing with numbers and reports everyday, what's the bigger picture? I remember one of my bosses told me that we are not just in the pension consulting business, we are not just merely pension actuaries who sign the funding valuation reports. We are in the retirement business.
In a way, we are in the freedom business too, an average person may work about 33 years (start working at 22 and retire at age 55). After all these years of hard work, all he/she wants, perhaps, is to have enough money to live through the retirement and do something he/she loves.
As a pension actuary, we can safeguard their retirement funds (i.e. make sure the company pension funds are well-funded and making contributions on time). Hence, when an individual retires, she has the freedom to do what she loves because she knows that her retirement fund is there for her.
What about other actuaries? For P&C actuaries (Property & Casualty), are they not in the lifestyle business? Since what type of cars and what house you live in is all about your living style, and hence, the need of auto and home insurance is part of the deal to your lifestyle right? (Just a thought)
P.S. I bought this book after reading the blogpost by Lori @ SmartLemming. Thanks Lori, I'm glad that I bought and read this book!
Personal Actuarial Service
I was reading the CRUSAP executive summary about two weeks ago. (It's not the most interesting read. Since I participated in one of the focus group while I was still in school, I thought it's worth a read to see what the result was.) In the report, it was mentioned about the potential areas for expansions of actuarial service to individuals.
I wonder what kind of actuarial service can be sold on a B2C basis. Who might need a personalized actuarial service/expertise other than buying an insurance or knowing how much benefits you will get at retirement?
Yesterday I read an article about a group of top executives from California State University system used an actuarial consulting firm to compare their compensation packages to other universities. And hence the top executives can use this research to their advantage during the time of negotiation.
This makes me think---what if we can sell this compensation research services to other executives individually before they negotiate their pay raise next time?
Well, this is just my attempt to link what I read to what I see it's happening.
An Actuarial Business Idea
Last week, during a company lunch, I was mentioning my actuarial-related business startup idea to some of my co-workers on my table.
Wouldn't it be cost-saving if you have your surgery or other medical services in other lower cost countries, such as India and China? So if you need an operation, your insurance company gives you an air ticket and you are on your way. I'm sure the cost will be so much lower even we include the air tickets and operating costs.
Some people thought it was a funny idea because they cannot imagine a bunch of sick people are taking a flight at the same time.
But still, I jotted down this idea in my idea notebook for future reference.
Just now, I was reading a blogpost by Tom Peters about outsourcing surgery. And I went on to check out the company which provide this service. It turns out, as I expected, the average medical cost can be lowered by 1/3.
Hm, this makes me think...can we outsource our retirements as well? Or how about outsourcing your college experience?
A Healthcare/Actuarial related article
RM, thanks for the link to an article about the healthcare system written by Malcom Gladwell. This article is a little bit over a year ago and it was about the US healthcare system. Gladwell brought up the difference of universal healthcare vs. the actuarial healthcare.
You may not agree with the conclusion in the article. I do feel that I'm more aware of this healthcare issue after reading the article. I feel that I can put myself into the shoes of those people who live without health insurance. (Though I have covered by the company insurance, the deductible for every doctor visit is still 200 dollars! And this is not the cheapest plan among the selection.)
Is there a way that a universal healthcare system can be managed under the actuarial direction? Is there a way that actuaries can come out with an affordable healthcare plan for everyone?
UDD vs. ADD
Yesterday, I was talking to CL on the phone.
Me: CL, do you know what UDD is?
CL: No, what is it?
Me: You know it's a syndrome which makes people hyperactive and restless?
CL: Oh, do you mean ADD?
Me: Yes, that's what I'm talking about. Ooops, what did I say? Did I say UDD? Well, I might be studying too much for my actuarial exam. UDD is terms in Exam M which means Uniform Distribution of Death. No wonder you don't know what it meant!
Quite a few terms (jargons) that I learned from actuarial science and from my job are very similar to those daily terms that you hear often. For example: UDD vs. ADD, MSVP vs. RSVP, PBGC vs. Pubic....Don't mix it up!
