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Morning Monkeys,

For one reason or another, I've been seeing quite a few references regarding the potential benefits and downsides to being an actuary. And, unsurprisingly, there seems to be a bit of confusion as to the nature and progression of those within the actuarial profession. Hopefully, this will clear some of thse misconceptions up.

Actuaries as a group have to take an ungodly number of tests. Everyone who has ever ventured into the SOA's (Society of Actuaries) website has long since figured this out. But, as you can see, starting in July 2013, there are new FSA tracks available (we'll get to these in a moment.) What's important, especially for readers of this site, is how to get into the industry:

  1. Have a mathematics degree: Do you need to know the difference between abelian and non-abelian groups, or be able to identify connected and compact sets? No, of course not, but most practicing actuaries have math degrees, and they tend to think that if you don't have one, you might not be up to snuff.
  2. Pass the first two tests: Oftentimes, when you get your first job, you'll be expected to pass the first two within some period of time, usually 6 months. If you don't, bad times. But, if you've already passed them, that'll really set you apart and maybe, they'll ignore the fact that you don't have a math degree.
  3. Enjoy modeling: If you think bankers do a lot of modeling, you haven't seen anything until you see these monstrosities that actuaries build. In fact, modeling is so ubiquitous that it's now becoming required by regulatory authorities.

Some other key points about the actuarial profession. Unlike banking, you're not likely to work 1,000 hour days, or catch a bunch of shit from overzealous associates/senior bankers, and the pay is pretty good. One misconception I need to clear up is the "top end" of the salary range for actuaries. Many on this site have pointed out that early on, sure you're probably going to do as good, or only slighly worse than someone in banking, and work substantially fewer hours (except during year end) but that once bankers transition into private equity or a hedge fund, they'll quickly start to outpace their actuarial counterparts. In some ways this is true, but these people don't realize that the top position for an actuary is "Chief Actuary" which is a C-level position. That's nothing to sneeze at by any stretch of the imagination, and I hear that C-level guys tend to do well in the money department.

A last point of note, just in case someone is still interested in this profession, there's plenty of tests (as well as "modules," "experience," and "seminars," but we'll stick to tests) that are required:

  1. Exam P (Probability): This is unreasonably hard and is considered a "weed out" test.
  2. Exam FM (Financial Mathematics): This is like your finance tests on steriods. Way more math than you're probably used to in a finance exam.
  3. Exam MFE (Models for Financial Economics): This is likely most familiar to everyone, but not surprisingly, requires a lot of math. Unlike the CFA, they expect you to know how to use Black-Scholes at least in it's closed form.
  4. Exam MLC (Models for Life Contingencies): This is where you really get into the guts of actuarial science. If you hate this test, the profession probably isn't for you.
  5. Exam C (Construction and Evaluation of Actuarial Models): Yep, the third test in a row that has the word "Model" in it somewhere, I wasn't kidding about all the modeling.

Once you get through those tests and other requirements, you can then move forward to one of the ASA/CERA/FSA tracks. Because you're probably sick of reading this already (I'm shocked if you've gotten this far), I'll stick to the FSA tracks (for July 2013) that are available upon completion of Exam C:

  1. Corporate Finance and ERM (CFE) Track
  2. Quantitative Finance and Investments (QFI) Track (this is new, a replacement for the previous "investment track" and looks interesting...)
  3. Individual Life and Annuities Track
  4. Retirement Benefits Track (the old Pension Actuary)
  5. Group and Health Track (if you want to have a job forever that pays a lot, this is your winner, I hear heathcare is big business these days...)
  6. General Insurance Track (this is also new, which seems odd to me for some reason)

I hope this has cleared up the actuarial profession for those of you who are interested. Like others have noted, it's a pretty different life than that of a banker, but for some, it could be more preferrable, and as you can see by the picture, chicks dig actuaries. True story.

2

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Comments (32)

  • In reply to oliver13
    mikesswimn's picture

    oliver13:
    Date > Love.

    P(Seeing her naked | Date)

    "My caddie's chauffeur informs me that a bank is a place where people put money that isn't properly invested."

  • TheKing's picture

    I have a friend who considered this several years ago. He didn't pull the trigger because he was afraid if hitting a ceiling early on. He was a math major in college and al all around smart guy, but he felt he might stagnate. Ended up going to med school instead.

  • TheKing's picture

    Let me add, if you can pass several tests and last in this field, you can apparently make some legit money. There is a true scarcity of people who are both able and willing to do it amongst the greater population. It's no joke.

  • DonVon's picture

    Stopped reading at the "I date bankers" thumbnail.

    "An intellectual is a man who takes more words than necessary to tell more than he knows."
    - Dwight D. Eisenhower

    Check out my blog!

  • miermier's picture

    Huh. pretty interesting post. So when do you take these exams? When you start working for a firm, or during college? How many years does it take to prepare for all of the exams?

  • In reply to TheKing
    Dedline's picture

    TheKing:
    Let me add, if you can pass several tests and last in this field, you can apparently make some legit money. There is a true scarcity of people who are both able and willing to do it amongst the greater population. It's no joke.

    Scarcity because there are way more ways to make a living without using that much brainpower.

    I've always wondered; how much more if at all are these fields which require heavy use of mathematics compared to other white collar professions? It might just be a stereotype (or that fact I'm not the most mathematically inclined) that I think they would be hell on earth but one who may be more inclined would describe it otherwise.

    Anyone?

  • In reply to miermier
    centurionh's picture

    miermier:
    Huh. pretty interesting post. So when do you take these exams? When you start working for a firm, or during college? How many years does it take to prepare for all of the exams?

    I passed 2 of them in college (I am still in college now), usually students pass 1 ~ 3 exams in college. It takes about five years after graduation to get FSA (my boss did so). However, you are not asked to pass all exams in order to land a decent job. Studying and testing is a (great) part of junior actuary's life. Fortunately, firms are always willing to help their employee to study for exams and provide a lot PTO.

  • balls.mahoney's picture

    I still have no idea what an actuarial is.

  • 808's picture

    Just curious - what's your perception of the Actuarial Science degree, as opposed to Math?

  • In reply to Dedline
    Frabjous's picture

    Heist:
    TheKing:
    Let me add, if you can pass several tests and last in this field, you can apparently make some legit money. There is a true scarcity of people who are both able and willing to do it amongst the greater population. It's no joke.

    Scarcity because there are way more ways to make a living without using that much brainpower.

    I've always wondered; how much more if at all are these fields which require heavy use of mathematics compared to other white collar professions? It might just be a stereotype (or that fact I'm not the most mathematically inclined) that I think they would be hell on earth but one who may be more inclined would describe it otherwise.

    Anyone?

    Shittons, actually. This does not mean that you spend your days making sophisticated formulas and models, however 70% of your job requires intimate understanding of mathematical concepts which take quite a lot of time, commitment and smarts to acquire.

    Does this mean that actuaries are smarter than engineers & other heavily quant. people? Absolutely not. But they are quants, not some banker/consultant shmucks

    Source: BSc in statistics/actuarial sciences, current banker/consultant shmuck. (yeah, so I didn't want to work as an actuary, so sue me xD. It's good money, but your reach a ceiling very fast)

  • impossibre's picture

    I've done a BSc in math/actuarial science and the main difference would be that my pure math classes were extremely abstract whilst the actuarial science classes were much more practical. It is the difference between asking "prove that 1 is bigger than 0" and "how much would you charge for an annuity paying 1$/year to a couple which drops to 0.75$ when the first person dies and then continues for 5 years after the second person dies assuming different distributions for the lives of the husband and the wife as well as different starting ages".

  • In reply to DonVon
    Going Concern's picture

    DonVon:
    Stopped reading at the "I date bankers" thumbnail.

    It presents a very compelling...argument. Of course, you have to click Original to get all the...nuances.

  • mongoose's picture

    Question for the guys with knowledge/experience of the Actuarial field.

    Don't care about the pay/prestige etc.

    1. Are there any firms (I understand that most will not) that sponsor for H-1B work visas or are you shut out if you are not a US Citizen/Permanent Resident?

    2. What is more important for getting a job: A degree in Actuarial Science or passing the first tests? How many, and which tests are you required to pass in order to be competitive to get a job?

    3. If you had to choose between these options for a college Math grad to become an Actuary, what would you choose: (Is the specific degree important when it comes to hiring?)

    a. MS in Math, 2 Years. Free because of TA-ship. Let's assume will pass two Actuarial Exams.
    b. MS in Actuarial Science at the same school. 2 Years. No Financial Aid. Very difficult to pay for me; will have to take loans. Will also pass two Actuarial Exams also.

    Thanks.

  • In reply to mongoose
    Frabjous's picture

    JamesHetfield:
    Question for the guys with knowledge/experience of the Actuarial field.

    Don't care about the pay/prestige etc.

    1. Are there any firms (I understand that most will not) that sponsor for H-1B work visas or are you shut out if you are not a US Citizen/Permanent Resident?

    2. What is more important for getting a job: A degree in Actuarial Science or passing the first tests? How many, and which tests are you required to pass in order to be competitive to get a job?

    3. If you had to choose between these options for a college Math grad to become an Actuary, what would you choose: (Is the specific degree important when it comes to hiring?)

    a. MS in Math, 2 Years. Free because of TA-ship. Let's assume will pass two Actuarial Exams.
    b. MS in Actuarial Science at the same school. 2 Years. No Financial Aid. Very difficult to pay for me; will have to take loans. Will also pass two Actuarial Exams also.

    Thanks.

    Won't answer 1 and 2 because I am not familiar with how insurance companies recruit in the U.S.

    As for 3: honestly, go for Math, and if possible take courses in actuarial sciences.

    Actuarial sciences are...let's say far less sophisticated than theoretical maths. If you are able to do maths, and you can get down to practical level, you can do the actuarial stuff. But you'll need to start early, it's not something you can cram in a month of study.

  • In reply to Going Concern
    DonVon's picture

    Going Concern:
    DonVon:
    Stopped reading at the "I date bankers" thumbnail.

    It presents a very compelling...argument. Of course, you have to click Original to get all the...nuances.


    And that would be precisely why I stopped reading =)

    "An intellectual is a man who takes more words than necessary to tell more than he knows."
    - Dwight D. Eisenhower

    Check out my blog!

  • In reply to 808
    mikesswimn's picture

    808:
    Just curious - what's your perception of the Actuarial Science degree, as opposed to Math?

    Actuarial Science is a subset of Mathematics. Usually, at least in my experience, it's a concentration within an Applied Mathematics degree. That being said, if for some reason it's outside of a Mathematics major, I'd be wary of it. You can never go wrong with a straight Math degree.

    "My caddie's chauffeur informs me that a bank is a place where people put money that isn't properly invested."

  • In reply to Frabjous
    mikesswimn's picture

    Frabjous:
    JamesHetfield:
    Question for the guys with knowledge/experience of the Actuarial field.

    Don't care about the pay/prestige etc.

    1. Are there any firms (I understand that most will not) that sponsor for H-1B work visas or are you shut out if you are not a US Citizen/Permanent Resident?

    2. What is more important for getting a job: A degree in Actuarial Science or passing the first tests? How many, and which tests are you required to pass in order to be competitive to get a job?

    3. If you had to choose between these options for a college Math grad to become an Actuary, what would you choose: (Is the specific degree important when it comes to hiring?)

    a. MS in Math, 2 Years. Free because of TA-ship. Let's assume will pass two Actuarial Exams.
    b. MS in Actuarial Science at the same school. 2 Years. No Financial Aid. Very difficult to pay for me; will have to take loans. Will also pass two Actuarial Exams also.

    Thanks.

    Won't answer 1 and 2 because I am not familiar with how insurance companies recruit in the U.S.

    As for 3: honestly, go for Math, and if possible take courses in actuarial sciences.

    Actuarial sciences are...let's say far less sophisticated than theoretical maths. If you are able to do maths, and you can get down to practical level, you can do the actuarial stuff. But you'll need to start early, it's not something you can cram in a month of study.

    For #1, maybe health insurers if you've got a group/health track FSA. I wouldn't bet on anyone else, but this is all really a guess.

    For #2, passing the first TWO tests is the gold standard for new actuaries. Usually this can be accomplished prior to graduating college.

    Frabjous, my degree is in pure mathematics (i.e. theoretical math) and I think you'd be surprised at how sophisticated the actuarial sciences have become. I mean, you're not out there proving the Poincare Conjecture or the Riemann Hypothesis, but it's some pretty heavy shit. Actuaries have come a long way from tables and slide rules.

    "My caddie's chauffeur informs me that a bank is a place where people put money that isn't properly invested."

  • In reply to 808
    Cruncharoo's picture

    808:
    Just curious - what's your perception of the Actuarial Science degree, as opposed to Math?

    I don't think a math degree would actually adequately prepare you for an actuarial career. I have a straight math undergrad and there were ZERO (yes you read that correctly) required stats classes for me to get my degree. That may vary school to school but I graduated without taking stats 101. There were elective stats classes (400+) that I could have taken that would have satisfied certain degree requirements but none that I was forced to take. I'm not too familiar with actuarial sciences but I am pretty positive that they require more than 0 stats classes. You could, obviously, get a math degree and use the stats classes as math electives and be good to go but that's not what I saw/experienced for the most part. Apart from the kids who knew they wanted to be actuaries already

    This to all my hatin' folks seeing me getting guac right now..

  • In reply to Cruncharoo
    mikesswimn's picture

    Cruncharoo:
    808:
    Just curious - what's your perception of the Actuarial Science degree, as opposed to Math?

    I don't think a math degree would actually adequately prepare you for an actuarial career. I have a straight math undergrad and there were ZERO (yes you read that correctly) required stats classes for me to get my degree. That may vary school to school but I graduated without taking stats 101. There were elective stats classes (400+) that I could have taken that would have satisfied certain degree requirements but none that I was forced to take. I'm not too familiar with actuarial sciences but I am pretty positive that they require more than 0 stats classes. You could, obviously, get a math degree and use the stats classes as math electives and be good to go but that's not what I saw/experienced for the most part. Apart from the kids who knew they wanted to be actuaries already

    Really? No statistics? That seems odd, I had to take a calc based probability and a calc based stat course, but I suppose each program is different. Did you have to take topology? (Not related, just interested.)

    What may surprise you, there's not as much stat on the actuarial exams as you might expect. A lot of probability, though.

    "My caddie's chauffeur informs me that a bank is a place where people put money that isn't properly invested."

  • impossibre's picture

    We had a few stats, mathematical finance and economy classes that pure math didn't have and which help with the exams. You don't absolutely need them to be an actuary but I think that there are certain classes needed to achieve the title called "Validation by education experience" such as time series, macroeconomics, etc.

  • Cruncharoo's picture

    No topology was not required.

    This to all my hatin' folks seeing me getting guac right now..

  • In reply to mongoose
    centurionh's picture

    [quote=JamesHetfield]Question for the guys with knowledge/experience of the Actuarial field.

    Don't care about the pay/prestige etc.

    1. Are there any firms (I understand that most will not) that sponsor for H-1B work visas or are you shut out if you are not a US Citizen/Permanent Resident?

    Most of the firms provides H-1B for foreign students, a lot asians work in insurance firm. In fact, many firms (Europe based) are international and happy to hire foreigners

  • eckl0709's picture
  • randomlurk's picture

    If there are some questions ya'll would like answered by an actuary let me know.

    My brother graduated ~3 years ago from a top 20 (I'm just guessing) university with a math degree and has worked for one of the largest insurance companies since as an actuary. He has passed 7 or 8 of the 10(?) tests, all on the first time. He works roughly 35 hours and they allow him time to study at work (or to study at home? Not sure.). Basically he averages like 32hrs/wk of work. They also send them for a week to conferences to study for each test like a month before the actual test. He's been promoted once and this summer he will be promoted again, he believes. He studies about 150-200 hours on average for each test. I know in the beginning he was getting about ~$2500 bonus for each test completed (or was it an increase in salary by that much?).

    His first year he made ~50k
    Second year ~60k?
    This year I think he made ~70k?

    He feels like he's underpaid but willing to deal with it because of the benefits the company affords him to take the tests, and since he will complete the final few that he has left in the next 12-18 months afaik. Exit ops for him I think are to work for a re-insurer. Let me know if there's any real interest and I can let him know about the thread. Also from my understanding there are more players in the NBA than actuaries who've passed all 10 (9 total but there's one in 2 parts from what I remember), and he's on track to pass them all on his first try.

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  • mrb's picture
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  • mikesswimn's picture

    "My caddie's chauffeur informs me that a bank is a place where people put money that isn't properly invested."

  • huanleshalemei's picture

    The Auto Show

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