Actuarial Studies Certificate Program GuideMarch 3, 2010by Trevor Aeschliman and Daniel Heffron1

Contents1 Introduction22 Starting Off33 The3.13.23.3Preliminary ExamsExam P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Exam FM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Exams MFE, MLC, and C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55664 Studying for the Exams4.1 Manuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.2 Study Advice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7785 Actuarial Certificate Program and VEEs96 Resumes and Cover Letters126.1 Resumes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126.2 Cover Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 How to Get an Internship7.1 Benefits of Internships .7.2 Getting an Internship .7.3 Acing the Interview . .7.4 Extra Advice . . . . . .14141416178 How to Get a Job189 Being an Actuary2010 Author Biographies211

1IntroductionSo you just heard the word “actuary” and you’re not sure how to take it. Don’t worry; you are just likeeveryone else, except that the profession has become a lot more relevant to your future.Actuaries do several things, but what you really need to know at this point is that they work in riskmanagement. Actuaries use probability, interest theory, and various other high-level mathematical andfinancial topics to forecast risk and plan high cash-flow events accordingly. In general, one will hear ofactuaries in the insurance or retirement industries, constructing and working with insurance or pensionplans. They also work in property and casualty, enterprise risk management, and financial consultingamong other areas. Really, any time a thorough understanding of the expected financial effects of currentstatistics is needed, an actuary is the person for the job.Now, you need to ask yourself what you are doing here. Have you always found yourself near the top ofyour math classes? Do you have an interest in economics, probability, or finance? Would you consideryourself a good communicator with a genuine interest in other people? If any of these fit you, you are offto a good start. If all of them, you’re probably in the right place. The actuarial profession runs on strongproblem solving skills, a wide and deep understanding of business concepts, and the ability to explain andcommunicate difficult ideas to others.The most characteristic aspect of the actuarial profession is the exam process. In order to become certifiedas an actuary you must complete several extraordinarily challenging and time-consuming exams, coveringmany layers of difficult mathematical, economic, and financial theory. The good side: You are rewardedvery well (both financially and personally) for the work that you will be putting in. The bad side: Theexams are HARD. More detail on the exams will be given in Sections 3 and 4.This short guide is intended to aid you in your decision to become an actuary, and if that indeed is thepath you choose to follow, to help you get there with as little confusion as possible. Inevitably, you will runacross some frustration here and there that isn’t covered by this guide. The profession requires both brainsand perseverance; understanding and work ethic. However, if you can carefully consider the informationin this manual, as well as put in the work to sit for at least one exam, you will hopefully have a solid graspon whether being an actuary is right for you.If indeed you do decide that the actuarial profession is right for you, you have a lot of work ahead of you,but also a lot of opportunity. If you can graduate with 2-3 exams, a good GPA (above 3.4/4.0), and 1-2internships, you will have a very good chance of getting a job as an actuary. If you can also interview well,you’re set. Thus, this guide will largely focus on getting through the first few exams, getting internships,and getting a job.2

2Starting OffInstead of attending three years of law school, or six to eight years of medical school, actuaries take examswhile working. In the United States, these exams are administered through the Society of Actuaries (SOA)and the Casualty Actuarial Society (CAS) and are required in order to officially be considered an actuary.Here are a few reasons why taking these exams is such a good deal (these are true for most companies):– Salary increases for each exam passed, and for reaching A.S.A. and F.S.A. designations– Bonuses for passing exams on the first and sometimes second try– Paid study hours– Reimbursement for study materialsAll of this can be incredibly appealing, because the 100,000 that would otherwise have been spent ontuition for graduate work, medical school, etc. becomes 100,000 of salary and bonuses. So, in effect, youare a couple hundred thousand dollars ahead of someone who just graduated from law or medical school.The downside to this is that you will be working 40-60 hour weeks while attempting to study an averageof 3 hours per night for exams (during study season).There are several actuarial exams that you can potentially take, with later exams focusing on a specificarea within the actuarial profession. Every actuary, however, needs to take the preliminary exams. Theseexams are as follows:– Exam P/1: Probability– Exam FM/2: Financial Mathematics and Interest Theory– Exam MFE/3F: Actuarial Models – Financial Economics– Exam MLC/3L: Actuarial Models – Life Contingencies– Exam C/4: Construction and Evaluation of Actuarial ModelsThe letters in the exam names are their designated names through the Society of Actuaries, while thenumbers on the right side of each slash represent their names in the Casualty Actuary Society, which isthe organization you need to become certified in if you want to work in Property and Casualty. Most ofthe preliminary exams are interchangeable, so taking them all through the SOA will qualify you withinthe CAS as well. This manual will mostly cover certification through the SOA.The first designation that you should understand is the Associate of the Society of Actuaries (A.S.A.)designation. This designation is achieved upon completion of the five exams listed above, Fundamentalsof Actuarial Practice e-learning courses (FAP), an Associateship Professionalism Course (APC), and thefollowing Validation by Educational Experience (VEE) courses:– VEE in Applied Statistics– VEE in Economics– VEE in Corporate Finance3

These VEE courses will be explained more thoroughly in Section 5.You will also need to at least be familiar with the Fellow of the Society of Actuaries (F.S.A.) designation.After reaching A.S.A., there are two 6-hour written exams to be taken in one of five areas: Finance orEnterprise Risk Management, Investment, Individual Life and Annuities, Retirement Benefits, and Groupand Health. There are also a few modules, and a Fellowship Admissions Course (FAC).If you happen to go the retirement route, you will eventually come across the term “Enrolled Actuary.”You need to achieve the E.A. designation to sign off on certain pension work in the U.S. This designationis achieved by passing exams EA-1, EA-2A, and EA-2B.Finally, a new designation that was created in 2007 (the first new actuarial designation since 1949) calledthe Chartered Enterprise Risk Analyst (C.E.R.A.) is achieved by passing Exams P, FM, MFE, C, anOperational Risk Module, the Economics VEE, and the Advanced Finance/ERM exam that is taken onthe Investment track to F.S.A. Most notable about this is that MLC is NOT required, though you willsimultaneously earn both the A.S.A. and C.E.R.A. credentials. Thus, if you would like to be more involvedin business and corporate risk management than actuarial work, this is a possibility. However, if youwant to become an actuary, you will almost certainly end up taking Exam MLC and the remaining F.S.A.exam/s.4

3The Preliminary ExamsNow, on to the important stuff: the exams themselves. Attempting to describe the exams to someone whohas not taken them is difficult. Almost everyone taking the exams has excelled in college, often even inthe most difficult undergraduate math courses. Consequently, the difficulty of the actuarial exams is veryfrequently underestimated by first-time exam-takers. The best thing that you can do before takingan exam is to over-prepare.One common rule to go by when preparing for these exams is to spend 100 hours of studying for each hourof the exam you will be taking. For example, Exam P is a 3-hour exam with 30 multiple choice questions(at the date of this writing), so you should put in 300 hours of studying to have a good shot at passing.More on how to study will be mentioned in Section 4.Currently, exams P, FM, and C are offered through computer-based testing, while MFE and MLC arepencil and paper. With computer-based tests, you will know whether you passed immediately afterward(though the official results won’t be known until later), while with paper and pencil you must wait for thefull 8-10 weeks that it takes to complete the thorough grading process.The exams are scored on a scale of 0-10. A score of 6 is the minimum passing score, or the pass mark, andis set by the SOA. The SOA usually determines a specified number of correct answers as the pass mark,and this pass mark can vary by exam and even by each administering of the exam. For Exam P the passmark is usually about 19/30, for Exam FM it’s about 25/35, and for Exam MFE it’s about 15/25. A scoreof 6 means you met the pass mark and answered the exact number of questions (100% of what you neededto get correct) required for a passing score. A 7 is 110% of the passing score, and a 3 is 70% of the passingscore. Generally, each exam has about a 40% passing rate, or roughly 40% of those who sit for an examend up passing (Exam P is usually lower because it is so frequently underestimated).Very few universities have actuarial science majors available, so unless you are attending one of these, youneed to figure out how to get started in the profession mostly on your own. The University of Coloradohas an actuarial certificate available, which is a great start. Graduating with the certificate will ensurethat you finish college with your VEE requirements met, which can be a huge hassle to get out of the wayonce you’ve graduated and started working. Even so, the exams are almost 100% an individual pursuit.Following is a quick overview of the preliminary exams and a strategy to use within CU’s curriculum.3.1Exam PThe first exam (though you are allowed to take them in any order you choose) covers probability. Itis a 3-hour, 30-question multiple choice exam. The learning objectives for each exam can be found, after clicking the Education tab, and by clicking on the exam you want to know about withinthe A.S.A. or F.S.A. requirements sections. For Exam P, an overview of the main learning objectives isbelow:– General Probability (set functions, combinatorial probability, conditional probability, Bayes’ Theorem, etc.)– Univariate Probability Distributions (binomial, geometric, Poisson, exponential, etc.)– Multivariate Probability Distributions (joint probability functions, moments, the Central Limit Theorem, etc.)5

Before you take Exam P (or while you prepare for it), we highly recommend you take Applied Probabilitythrough the Applied Math department, APPM 3570, or the equivalent Mathematics department course,MATH 4510. The course will give you a very good introduction to the type of thinking you will need forthe actuarial profession. We would also estimate that it will count for about 125 hours of studying towardthe exam; some of the only studying for which you will be provided an instructor for the material andhomework for practice.It is important to understand that the course will not fully prepare you for the first actuarial exam. Itwill get you familiar with many of the concepts, but will only cover about 60% of the material for ExamP and not as deeply as you will need to know it. You will learn to attack problems one way in APPM3570, yet teach yourself a different attack style while studying for Exam P. This attack style should includeproficient use of an approved calculator, and a list of these can be found on the SOA’s website.We also suggest that you begin studying for Exam P while taking the course. If you can put in 10-20 hoursper week reading through a manual and doing all of the problems in the manual for the second half of thesemester, you can be prepared by the time the exam rolls around. You will need a manual.3.2Exam FMThe second exam is a 3-hour, 35-question exam and covers Financial Mathematics–specifically interesttheory, annuities, loans, bonds, immunization, and an introductory look at financial derivatives.For this exam, you will need a business calculator, and the TI BA-II Plus/Professional calculator worksvery well. Becoming proficient with a good calculator is a must on any actuarial exam, but it’s also a sideeffect of studying, so don’t worry about not knowing how to use one when you start; you will figure it outquickly while working through your manual.Exam FM deals a lot with the concepts of present and future value. You will learn how to do this inyour Introduction to Finance and your Corporate Finance classes (currently BCOR 2200 and FNCE 3010,respectively). However, these courses will do little to aid you, and you can start studying for Exam FMwhenever you like. Exams FM and P are fairly equivalent in difficulty, so you can actually take whicheverone you like first. The analytical thinking required for understanding probability is essential to havingsuccess as an actuary, and knowing interest theory and how to discount cash flows is something that willpop up on a daily basis on the job. Both contribute to a good basis for a future as an actuary.3.3Exams MFE, MLC, and CSurprisingly enough, the exams get more difficult as you progress. Once you have learned how to studywell and feel confident with your mathematical prowess, you are again thrust into an intense challenge.Once you have gotten through the Exams P and FM, you can decide for yourself what you would like todo next.Exam MFE covers the pricing of financial derivatives, and this will involve extensive use of the interesttheory that you learn in FM. The financial derivatives course in the business school (currently FNCE4040) covers what derivatives are, how to use them, and it somewhat covers pricing them. However, thisexam is mostly on the pricing of derivatives, and the course only covers a small fraction of what youwill need to know. We each took Exam MFE before taking the course, and believe that it will make an6

extremely difficult course significantly easier. However, the course on derivative securities will give you asolid foundation for continued learning on some very confusing concepts. If you can’t take Exam MFEuntil after you graduate, the derivatives course will give you a great start.Exam MLC involves discounting cash flows while including the probabilities of the cash flows occurring.Exam MLC is often considered to be more difficult than MFE, and it is also a 3-hour exam while MFE is a2.5-hour exam. A decent portion of the exam covers Markov Chains, which you will learn about in APPM4560, Markov Processes and Queues. Neither of us has taken the exam, though, so we can’t tell you howhelpful the course is. It certainly will provide some benefit, but likely will only serve as an introductionfor material that will be covered in much more depth.Exam C is 3.5 hours and covers a wide range of material, including several methods for fitting models tostatistics; this exam is almost always described as the most difficult of the preliminary exams. Most peoplesay that it is the immense amount of material that makes this exam so difficult, rather than an equivalentlevel of intensive analytical problem-solving as is required for Exam MLC.To conclude this section we offer you a rather dramatic yet surprisingly accurate way of describing theexams to someone else (from a post on“Tell them you’re taking a graduate-level course and: 1. There is no teacher. 2. You never have class. 3.Your classmates are some of the top analytical minds in the world. 4. There is only one exam. 5. 60% ofthe class will fail. 6. The class is only offered [twice] a year. 7. Repeat that very same process 10 times.8. Oh, and you’re competing against the top 40% from the previous class.”44.1Studying for the ExamsManualsDifferent actuarial students (anyone who has started taking exams) use many different methods in theirattempts to learn the material and pass the exams. There are many different companies that createmanuals (BPP, ASM, Actex, and Actuarial Brew to name a few) and tons of different books, flashcards,study guides, etc. So where does one start?As has been stated before, it’s really up to you to find what works best for yourself. That said, the majorityopinion does seem to support a few specific choices. ASM is often the preferred company from which topurchase a study manual, followed by Actuarial Brew, BPP, and then Actex.A study manual can be a huge help, but is not 100% necessary. The authors of this college guide highlyrecommend that you start with a study manual, as each manual will give you a comprehensive walkthroughof the material that will be on the exam and nothing more. If you spend your time solely studying books,some material will be covered either more or less thoroughly than you need, and you also might end upstudying material that you don’t need at all.For many people, supplementing the manual with textbooks or other manuals can be very helpful. Thoughthe manual that you purchase will cover almost all of the required material (not all because the SOAwill inevitably ask you a couple of absurd questions), it is useful to see the material presented in anotherway. Different writers and mathematicians learn and teach differently. Your goal should be to find whichauthors present the material in a way that you can best learn from.7

We recommend starting with the ASM manual for the exam that you are planning to take, and supplementing it with a book or a different manual if you feel that you should be grasping the material better.This is another place where it comes in handy to know other people who are studying for exams; you canask questions about the material and possibly share study materials (and expenses). Another resource,Actuarial Outpost, is a good place to read about preferred manuals for certain exams.4.2Study AdviceAs we said before, the goal is to be over-prepared when you take the exam. There is a lot resting on theoutcome. So, overdetermine success. When it comes to choosing a start date, you may hear to be waryof starting too early. This is for the most part untrue; its a matter of keeping the material fresh in yourmind, and you can do this with consistent review. If you apply even a few of the following suggestions toyour study schedule, your chances of passing will increase significantly:1. Start 16-20 weeks before the exam. This will allow you to study a more comfortable 20 hours perweek.2. Try to understand every detail your first time through. This will make things much easier to remember, and you will be able to see connections in the material that you might otherwise miss withouta good foundation.3. Think about the material when you’re not staring at a book. If you keep some of the ideas in yourmind as you go about your daily activities, you will be surprised at how much better you rememberthem. For example, if you are studying for Exam P, try to think of each distribution, its name, andhow it works when you get bored somewhere or while you’re walking around.4. Keep track of problems that you had difficulty with (and write down why you found them difficultand what you learned) so that you can redo them once you finish the manual.5. As you go through the material, keep a running sheet of equations and things you will need to know.They add up, and this will help you keep track.6. After every two weeks of studying, set aside 3-4 hours to go back and do a few difficult problemsfrom each previous section. The repetition will drill the information into your brain.7. Try to finish the manual with 4-6 weeks left. Spend a couple weeks reviewing each section and doingproblems.8. For the last month, take many practice exams. Practice, practice, practice doing problems. This iswhere you truly prepare yourself.9. Try to be prepared to take the exam with a week or so left. It’s best to not make that last week ascramble.10. Get adequate sleep and eat well the few days before the exam. Take at least the afternoon off beforethe exam; clear your mind and relax, knowing that you are ready to pass.Make sure to read over the syllabus for each exam so you know which topics to focus on. The syllabias well as example questions can be found on the SOA website. Also, check out some of the forums onActuarial Outpost under the section for the exam you are studying for. Students will often discuss whichtopics under the syllabus are covered most on exams, as well as offer suggestions and answer questions forthe material.8

5Actuarial Certificate Program and VEEsThis section will attempt to cover the courses that should be taken at CU in order to meet the VEErequirements and to prepare for the exams.Getting the VEE credits finished before graduating is beneficial for several reasons. First, the courses thatsatisfy the VEE requirements simultaneously satisfy some of the requirements for the Actuarial StudiesCertificate given by CU. Second, since you already have to take the majority of these courses and arepaying to get a degree, why not get these courses out of the way and avoid spending extra time and moneylater? On top of that, it will put you even closer to having your A.S.A., and employers will appreciate(reward you for) that.Below is a list of the courses through CU that satisfy the VEE requirements if a grade of B- or higheris obtained (from the SOA website, 12-28-09; the following list was found on the Applied Math website,under Recommended Options, and Actuarial Option).Once you have completed the two courses for each VEE credit with a grade of B- or better, you are donewith the necessary coursework for the A.S.A designation and can focus on the exams and then the FAPmodules and the APC. It is important to note, however, that you can not apply for your VEE credit untilyou have passed two SOA examinations. You should talk to your advisor during your senior year aboutwhat you will need to do to verify with the SOA that you have completed the VEE requirements.In order to receive the Actuarial Studies Certificate at the University of Colorado, you will need to takecertain courses. The necessary and suggested courses are listed on the next page.9

A. The courses listed below are the minimum required in order to complete the Actuarial Studies trackof the CU program. Please note that you must score a “B ” or better in Calculus 1, 2, and 3. You mustscore a “C-” or better in all other courses (you also need a “B-” or better in all VEE courses to get creditthrough the SOA).Required Mathematics Courses1. MATH 1300/APPM 1350Calculus 15/4 cr.2. MATH 2300/APPM 1360Calculus 25/4 cr.3. MATH 2400/APPM 2350Calculus 34 cr.4. MATH 3130/APPM 3310Linear Algebra5. MATH 4510/APPM 3570Probability3 cr.6. MATH 4520/APPM 4520 Statistics3 cr.7. MATH 4540/APPM 4540 Intro to Time Series3 cr.3 cr.Required Economics Courses1. ECON 1000Intro to Micro/Macro2. ECON 3070Intermediate Micro4 cr.3 cr.3. ECON 3080 Intermediate Macro3 cr.4. ECON 4070 Topics in Microeconomics3 cr.Required Finance/Accounting Courses1. BCOR 2000* 2. BCOR 22003. FNCE 3010 Intro to AccountingIntro to Finance4 cr.3 cr.Corporate Finance3 cr.* BCOR 1020, Business Statistics, is a prerequisite for BCOR 2200. Students are advised to substitute aMath or Applied Math prob/stats course for this prerequisite. The Society of Actuaries requires students to take certain college courses which will earn the Validationby Educational Experiences (VEE). Credit Courses marked with a satisfy this requirement, provided agrade of B- or better is obtained.B.Recommended courses:1. APPM 4560Markov Processes2. MATH 4120/APPM 41203. MATH4650/APPM 46503 cr.Operations Research3 cr.Numerical Analysis3 cr.4. FNCE 3020Financial Markets & Institutions3 cr.5. FNCE 4030Investment Management6. ECON 3818Computational Methods in Statistics7. ECON 4818Econometrics8. APPM 4580Applied Statistics9. FNCE 4040Derivative Securities3 cr.3 cr.3 cr.3 cr.103 cr.

Students wishing to take courses in the College of Business cannot register until the first day of classes.Students may also take BCOR/FNCE courses in summer sessions. Alternatively, students may apply foradmittance to the Actuarial Studies and Quantitative Finance Certificate Program which requires grades ofB or better in their three semesters of Calculus. Students accepted into this program receive preferentialtreatment with respect to other non-business students when registering for business courses.The last paragraph is important to note. If you choose to endeavor on this path to becoming an actuarythrough CU, it is very wise to earn the Actuarial Studies Certificate. In order to enter the program, youmust have a B or better in all three semesters of Calculus (alternatively, you are granted admittance ifyou pass one of the exams). Once you enter the program, you are allowed to register for classes in thebusiness school at the same time or even before business students. You can find the requirements for theActuarial Certificate at: /index.html.11

6Resumes and Cover LettersWhen applying online to companies, the first thing that HR or the email recipient will see will be your coverletter and your resume. A good resume is extremely important, and a cover letter, though not necessary,may be very helpful. When emailing a representative for a company, attach your resume and cover letter,but also write a pleasant and brief introduction about yourself saying you look forward to speaking withsomeone from the company (try to use a different phrasing than you do in your cover letter). ALSO, copyand paste your resume at the bottom of the email, as this will allow the recipient to very quickly see yourqualifications.6.1ResumesWhen it comes to getting an internship or a job, the first thing that you absolutely need to do well is toconstruct a good resume.The resume is basically your 30-second explanation to a company of why they should consider you foremployment. This is where it all starts. Companies often dig through stacks of resumes, sometimeshundreds of them. The goal is to stand out as a good candidate.1. First, keep the presentation simple and not too wordy, and try to keep it to one page early on. If youend up eventually needing two pages, it’s fine as long as what you are presenting is relevant. Don’tuse flashy pictures or font, because your resume will come off as cheesy: a company is looking to hirea professional, so their first look at you should assure them that they have found one.2. Start off with your name, address, and phone number (this might be obvious), but after that you wantto organize the information in order of importance. Often, the first thing a company will consider isthe reputation of your college, your major, and your GPA. Thus, put this information first, perhapsbolding information such as a strong GPA, major, or minor. Early in your college career, you canalso put a little bit about your high school GPA and achievements after your college information.3. Next, it is highly suggested that you display your progress with the exams. Even if you sat for thefirst one and failed, employers want to know how dedicated to becoming an actuary you are, so tellthem what you’ve done. Scores, however, are unimportant for passes, so unless you happened to geta couple 10’s, you shouldn’t worry about mentioning them. It would also be useful to mention thatyou will have completed your VEEs when you graduate, if that happens to be the case.4. After your exams, put any significant coursework and skills that you have developed that might berelevant to the profession you seek. Experience with any type of computing program such as Matlabor Mathematica is useful, because it signifies that you are capable of constructing things such asloops and other basic algorithms. In the actuarial profession, you will be working extensively withMicrosoft Excel, a little bit with Microsoft Access, and also quite a bit with whatever proprietarysoftware the company uses. Always be prepared to explain your proficiency with Excel and/or Access.5. After expressing your skills, display any relevant work experience, or any jobs that helped you todevelop any important skills such as leadership or communication. If you’ve only worked a few jobs,you could probably write them all down; if many, pick out the important ones. If you happened tohave an internship in the actuarial field, it may be wise to place information about this internshipdirectly below your exam information.12

6. Finally, display any honors you have received, and then any extracurricular activities such as intramural sports, clubs, newspaper writing, mentoring or tutoring, etc. As we said earlier, always beable to explain how each experience made you into a better candidate for the position.This list is not very strict. Depending on what you’ve done, you may want to arrange some parts differently,or add in

Every actuary, however, needs to take the preliminary exams. These exams are as follows: { Exam P/1: Probability { Exam FM/2: Financial Mathematics and Interest Theory { Exam MFE/3F: Actuarial Models { Financial Economics { Exam MLC/3L: Actuarial Models { Life Contingencies { Exam C/4: Construction and Evaluation of Actuarial Models