LESSONS LEARNED AFTER 50 YEARS AS AN ACTUARY

LESSONS LEARNED AFTER 50 YEARS AS AN ACTUARY Frank Buck May, 2017 1

DISCLAIMER : THE VIEWS EXPRESSED IN THIS PRESENTATION ARE MINE AND NOT NECESSARILY THOSE OFFWD AND/OR PREVIOUS EMPLOYERS. 2

History 1965 September Started work as an actuarial student 1973 July Fellow of the Institute of Actuaries 1984 Member of the American Academy of Actuaries 2002 Fellow of the Society of Actuaries • • Chair Financial Reporting Section of SOA Chair International Section of SOA Joint author of US GAAP for Life Insurance Companies Speaker at many conferences on a range of topics 3

HISTORY - CONTINUED Consultant Company UK HK Canada USA 1965 – 1978 – 1983 1984 – 2000 – 2003 – 2006 – 2014 20 years 30 years Philippiness 2014 Thailand 2015 + OTHER COUNTRIES WHERE I HAVE WORKED Argentina Australia Bangladesh Brazil Chile China Germany India Indonesia Italy Japan Korea Malaysia Mexico South Africa Spain Switzerland Taiwan UAE Vietnam 4

HOW DIFFERENT WAS IT BACK THEN? § Actuaries held most senior positions in most life insurance companies § Universal Life had not been invented § Guaranteed Annuity Options did not exist § UK Government Bonds (Gilts) reached 15% § Personal Computers did not exist § To recalculate a book of endowment rates after a change in interest rates could take 10 people 1 to 2 weeks § If a typist made a mistake, the whole page had to be re-typed or, for minor errors, white-out was used § Risk Managers did not exist § Men wore suits (and ties) – Business Casual (for me) started in 2003 5

MY FIRST CALCULATOR I GOT MY FIRST COMPUTER IN 1987 6

LESSONS LEARNED - 1 Don’t be afraid to ask if you do not understand what someone else is saying § Jargon is pervasive but not universal § Speakers always assume that you know what they are talking about § Actuaries are particularly bad here 7

LESSONS LEARNED - 2 Beware of present values § Future earnings patterns are important § The following have the same present value at 5% 8

LESSONS LEARNED - 3 Don’t trust computers § Always perform a check for reasonability o Particularly with spreadsheets o Have your work checked Don’t believe the IT guy § Never accept an answer “The system can't do that” o The IT department might not know how to do it (in which case we can train them) o The solution might not be cost effective o However, the system can always do it. 9

LESSONS LEARNED - 4 Documentation is important § Start writing the report before you start doing the work o It helps you to focus on the objectives § Documentation always takes much longer that you anticipate o However, it makes the work easier next time § The act of documenting can highlight a misunderstanding or error § Take responsibility for your work o Put your name on the report (standard of practice in most mature markets) o Give credit to those who assisted you § Spreadsheets are not good documentation 10

LESSONS LEARNED- 5 Listening is the most important skill that you can develop § Everyone’s attention span is short § Focus on what your client/colleague/boss wants § Ask if you do not understand 11

LESSONS LEARNED - 6 Communication is essential § Actuaries have lost control because non-actuaries do not understand them § We have to communicate to accountants, investment bankers, auditors, rating agencies, regulators, etc. § We have to communicate to sales people, marketers, other members of senior management, boards of directors § Learn how to explain actuarial concepts to non-actuaries § You will understand your work better if you have to explain it 12

LESSONS LEARNED - 7 Develop a general sense for your business § Calculating numbers is only the first step § What do the results mean? § What management actions do you recommend? § Be pro-active in presenting results 13

LESSONS LEARNED - 8 Don’t be afraid to try something new § You can always go back (to some extent) if the new challenge does not work out § The first move is the most difficult § Stretch yourself by taking on different responsibilities 14

LESSONS LEARNED - 9 When you take over a role from someone else, make sure you understand how the previous person performed the role § Assumptions used and how derived § Spreadsheet linkages § Interaction with others § Approximations used 15

LESSONS LEARNED - 10 Don’t be afraid to make a mistake § We often have to make a decision with limited information § We don’t always have time to prepare the perfect answer § Qualified decisions are OK HOWEVER, DON’T MAKE THE SAME MISTAKE AGAIN 16

LESSONS LEARNED - 11 Teams usually achieve more than individuals § It is important to bounce ideas off each other § Different disciplines bring different perspectives § But the teams have to be well organized and well led § Consultants often “hunt in packs” 17

LESSONS LEARNED – 12 Regulators always react too late § Nobody tested the impact of declining interest rates and many jurisdictions struggled to respond § Before the US financial crisis most models had property values increasing or staying level Regulators always overreact § Solvency II requires 1, 000+ scenarios § IFRS 17 requires major systems changes § Is stochastic really necessary for Thai par business? § Forcing disclosure of sales commissions destroyed the Australian life insurance market 18

LESSONS LEARNED - 13 Celebrate success § Reaching a goal deserves recognition § Always compliment team members on work well done § Have fun 19

LESSONS LEARNED - 14 Always have outside interests § Doing other things keeps the mind fresh § Maintain a work/life balance § Resist pressure to overwork § Try different things § Don’t be a workaholic My hobbies § I started karate when I was 60 § I started yoga when I was 64 § I learned to scuba-dive when I was 70 § I now play golf, practice yoga and cook 20

SUMMARY § Don’t be afraid to ask if you do not understand § Beware of present values § Don’t trust computers § Documentation is important § Listening is very important § Communication is essential § Develop a general sense for your business § Don’t be afraid to try something new § Don’t be afraid to make a mistake § Celebrate success § Always have outside interests 21