Actuarial Exam Strategy

Jeffrey Stock FSA, MAAA Matthew Wininger FSA, MAAA

Actuaries Club of Hartford/Springfield Monday, May 21, 2007

Requirements for ASA

Event Exam P Exam FM Exam M-LC Exam M-FE Exam C VEE Topics Probability and Statistics Interest Theory Life contingencies, stochastic processes Financial economics, option pricing, interest rate forecasting models Loss models, credibility theory, financial simulation Validation by Educational Experience Economics and Finance Time Series & Regression Fundamentals of Actuarial Practice Eight modules covering Actuarial Control Cycle Associate Professionalism Course Format 3 hours, multiple choice, online 2.5 hours, multiple choice, paper & pencil 3 hours, multiple choice, paper & pencil 2 hours, multiple choice, paper & pencil 4 hours, multiple choice, paper & pencil College credit or thirdparty administered test 2-hour MC online exam at end of mod 5 Final assessment project at end of mod 8 One day seminar Frequency 3 times / year May and November May and November May and November May and November 6 times / year

FAP Modules

Several times per year

APC

4 times / year

Requirements for FSA

Event FSA Exam 1 FSA Exam 2 Topics Practice-specific tests covering specific products or functions: Finance/Enterprise Risk Management Health, Group Life & Managed Care Investment Individual Life & Annuity Retirement Benefits Offered intro & advanced test FSA Modules FAC Strategic Business Management topics, module tied to the FSA Exam 1 & 2 Fellowship Admission Course Professionalism, Ethics, Verbal Communication Skills 4 modules Internet-based project 3-day seminar On demand (?) 4 times / year Format 6 hour exam, essay 6 hour exam, essay Frequency Once per year Once per year

Requirements for ACAS

Event Exam P Exam FM Exam 3 Exam C VEE Exam 5 Exam 6 Exam 7 CP Statistics and Actuarial Models (Exam M-LC &FE also accepted) Loss models, credibility theory, financial simulation Jointly administered with SOA. Introduction to Property Casualty Insurance and Ratemaking Reserving, Insurance Accounting Principles, Reinsurance, & Enterprise Risk United States: Nation-Specific Examination: Annual Statement, Taxation, and Regulation Course on Professionalism 4 hours, multiple choice & essay exam 4 hours, multiple choice & essay exam 4 hours, multiple choice & essay exam One day seminar Once per year, Spring Once per year, Fall Once per year, Spring Twice per year 4 hours, multiple choice, paper & pencil 4 hours, multiple choice, paper & pencil Twice per year, Fall & Spring Twice per year, Fall & Spring Topics Jointly administered with SOA. Format Frequency

Requirements for FCAS

Exam 8 Investments and Financial Analysis 4 hour exam, multiple choice & essay exam 4 hour exam, multiple choice & essay exam Once per year, Spring Once per year, Fall

Exam 9

Advanced Ratemaking, Rate of Return, and Individual Risk Rating Plans

Strategic Exam Considerations

Choosing whether and which exam to take Learning the Material vs. Passing the Exam Achieving the optimum score Choosing the best study aids Find an adaptable study method

Taking Multiple Exams

After failing an exam, some students will double down and take two exams the next sitting to catch up We recommend you think carefully before taking multiple exams at the same time Probability Example:

45% 85% 35% 30%

Exam M-LC pass probability, given first attempt Exam M-LC pass probability, given second attempt Exam M-FE pass probability, given first attempt Distraction Ratio

Actuarial Exam Study Curve

10

pass mark 6

Exam Score

different approaches will result in more efficient learning

burnout, overthinking, etc.

study approach A study approach B 0

Begin

background knowledge

Studying Effort

Exam Date

The Long-Term View

Passing exams in perspective How to bounce back after failing an exam Work considerations

Creating A Study Plan

Get feedback from prior exam-passers List learning objectives in syllabus Daily task set Maximum effective studying per day Practice under exam conditions

Sample Daily Task Set

Monday May 5 AM Difficult 2 hrs Lunch Easy 1 hr PM Medium 3 hrs
learn FAS 97 GAAP accounting method

Tuesday May 6
learn about using hybrid debt securities for risk management Review FAS 97

Wednesday May 7
drill lists related to US GAAP accounting

practice cost of capital calculations

break

review reasons for using reinsurance

practice lists - leverage tax benefits, advantages and disadvantages, free cash flow problems

review other dividend models: residual theory, agency cost / contracting model, signaling model

Core Exam Knowledge

Visualize Exam Content Must be proficient with core knowledge to pass Will be able to answer some questions testing non-critical topics Great, but not at expense of critical topics Some non-critical topics will be difficult to learn Skip it and dont look back
Core Exam Knowledge

Entire Syllabus

Prioritization
Make tradeoffs on material balancing exam likelihood and difficulty to learn Low Difficulty measure is an individual preference Likelihood is difficult to objectively measure Difficulty Likelihood Hi Low ? ? ? ? ?

1
?

Hi

Seminars & Group Studying

Review seminars Group studying Exam buddy Details matter Last minute advice

Multiple Choice vs. Essay Exams

Computational Exams Passing Strategy Solve computational problems correctly. All-or-nothing. All questions carry equal point values. Essay Exams Written answers. Fast recall of concepts to frame the answer, fill in details later. (Grammar doesnt count.) Additive. Partial credit possible. To gain points, your *written* statements must match the grading outline. Questions graded individually and carry different point values. If you can get a 8 in three minutes, dont spend 15 minutes to get the 10. Do not lose credit for guessing, but dont gain any for guessing incorrectly. Do not contradict yourself.

Grading Approach

Time Strategy Guessing Strategy

Avoid sand trap questions. No penalty for guessing. Eliminate incorrect answers to boost likelihood or guessing correctly. Can get full credit by luck.

Multiple Choice vs. Essay Exams

Computational Exams Precision Needs Source Material Memorization Read-though High enough to differentiate between answers. Not helpful nor necessary. Formulas only. Not permitted. Essay Exams Generally low. Can get a good score just by writing formulas. Necessary and helpful. Formulas and lots of lists. Permitted.