Sunday, July 15, 2018

Jeremy Gold, FSA PhD - R.I.P.

Aside from being a great actuary, Jeremy was a great person.  I will miss my friend.

The sad thing is that although Jeremy beat this drum for 30 years, almost nothing has changed in the actuarial profession.  Even the Pension Funding Task Force, which published good work based on sound financial economics for a while, turned into a shitshow and was ultimately shut down by the powers within the profession backing the old useless methodologies.

Wednesday, July 15, 2015

Shutting down this blog

No longer working as an actuary.

Monday, October 27, 2014

Society of Actuaries 2014 Annual Meeting (Orlando)

Monday October 27
Session 9 - Joint Risk Management Section Breakfast
Session 12 - Opening General Session
Session 22- Pension Management From a Risk Management Perspective (Moderator)
Session 32 - Actuarial Foundation Celebratory Luncheon
Session 38 - Economic Capital: Key Modeling Considerations
Session 58 - Defined Contribution Plans - Is There Hope and Can Actuaries Help?
Session 66 - Update on Pre-Qualification and Continuing Education

Tuesday October 28
Session 77 - Investment Section Breakfast
Session 87 - Smart and Dumb Things About Smart Beta
Session 103 - Late Breaking Developments for US Retirement Plans
Session 112 - Presidential Luncheon
Session 116 - Generating Retirement Income in DC Plans: Optimal Retirement Solutions (Moderator)
Session 133 - Tail Risk Hedging

Wednesday October 29
Session 152 - Technology Section Breakfast
Session 160 - ERM Governance Hot Topics - Risk Appetite and Model Risk Management
Session 174 - Cash Balance Valuation Techniques and Treatment of Embedded Options (Moderator)
Session 190 - Model Risk Management and Controls

Monday, October 21, 2013

Society of Actuaries 2013 Annual Meeting (San Diego)

Monday October 21
Session 10 Education & Research Section Continental Breakfast: The Highlights of the ARC
Session 13 Opening General Session
Session 27 Interactive Forum: Ethical Dilemmas for Pension Actuaries
Session 31 Joint Risk Management Section Luncheon
Session 43 Panel Discussion: Managing Frozen Pension Plans
Session 54 Panel Discussion: Pension Investment Strategy and Pension Risk Transfer
Session 64 Panel Discussion: Update on Pre-Qualification and Continuing Education

Tuesday October 22
Session 73 Management & Personal Development Section Continental Breakfast: Book Reviews
Session 83 Panel Discussion: Late-Breaking Developments for U.S. Pension Plans
Session 95 Panel Discussion: An International Look at Funding Relief
Session 103 Presidential Luncheon
Session 112 Interactive Forum: Investment Boot Camp for Pension Actuaries—Part 1
Session 127 Interactive Forum: Investment Boot Camp for Pension Actuaries—Part 2

Wednesday October 23
Session 139 Pension Section Continental Breakfast: Sound Bites on SOA Research
Session 151 Interactive Forum: Investment Boot Camp for Pension Actuaries—Part 3
Session 165 Interactive Forum: Investment Boot Camp for Pension Actuaries—Part 4
Session 179 Panel Discussion: Actuarial Software Implementation: From Planning to Success

Saturday, December 31, 2011

How many times does a stack of bricks need to fall on our collective heads?

The funded status of pension plans has been on a wild ride since 2008, experiencing major declines in 2008, 2010 and 2011. The drops were due to the “double whammy of declining equity markets and lower interest rates,” said Jonathan Barry, Mercer’s U.S. Retirement Risk & Finance DB Risk Leader, during a recent webinar.  How plan sponsors manage that pension risk volatility was the subject of a joint Mercer/CFO Publishing study, “Redefining Pension Risk Management in a Volatile Economy.  Mercer conducts a monthly analysis of the S&P 1500. At the end of November, it found that aggregate S&P 1500 defined benefit pension plans were underfunded by $391 billion, which means they were funded at 75%. This was down from a funding ratio of 88% in April 2011, Barry said. (Source:

Repeat after me ... the higher expected return of equity investments doesn't come without the corresponding risk.

Repeat after me ... the only way to de-risk bond-like liabilities is to invest in bonds.

Repeat after me ... EROA is a fiction without basis in financial economics.

Tuesday, December 20, 2011

First of many? One Year Later.

Retired police and firefighters from Central Falls RI have agreed to sharp pension cuts, a step thought to be unprecedented in municipal bankruptcy and one that could prompt similar attempts by other distressed governments.  If approved by the bankruptcy court, the agreement could be groundbreaking, said Matthew J. McGowan, the lawyer representing the retirees.  “This is the first time there’s been an agreement of the police and firefighters of any city or town to take the cut,” he said, referring to those already retired, who are typically spared when union contracts change. “I’ve told these guys they’re like the canary in the coal mine. I know that there are other places watching this.” [...] Central Falls had little choice. For years, its government failed to contribute enough to its police and firefighters’ pension fund, and the fund effectively ran out of money this fall. The city, which had also promised the retirees comprehensive health benefits, could not cover the pension and health payments out of its general revenue.
(Thanks to MPC for the link.)

Sunday, October 16, 2011

Society of Actuaries 2011 Annual Meeting (Chicago)

Monday, October 17
Session 8: JRM Section Hot Breakfast –  Emerging Risks
Session 13: Opening General Session
Session 17: Is the Arithmetic Mean of Past Returns the Best Estimate of Expected Return?
Session 32: Investment Risk and Return – Theoretically Related – Empirically Not So Much
Session 41: Improving Liability Benchmarks and Pension Risk Management
Session 52: Update on Pre-Qualification and Continuing Education

Tuesday, October 18
Session 56: Education & Research Section Continental Breakfast
Session 62: The Long Run Volatility of Stocks Might Be Higher Than You Think
Session 81: Systemic Risk – Early Warning Indicators
Session 84: Presidential Luncheon
Session 89: How Regulation of Risk Can Affect Risk
Session 99: Rapid Retirement Research Initiative

Wednesday, October 19
Session 114: Investment Section Hot Breakfast – Statistical Arbitrage Is Not Arbitrage
Session 125: Actuarial Efficiency in Modeling and Valuation
Session 132: Looming Demographic Trends and Their Investment Implications
Session 147: ERM – Challenging Old Paradigms – Considering the Human Element

Note:  I was the pension representative on the annual meeting planning committee this year.

Monday, October 10, 2011

Caught between the rock (of plunging equities) and the hard place (of plunging discount rates)

The aggregate deficit in pension plans sponsored by S&P 1500 companies increased by $134 billion during September, from a deficit of approximately $378 billion as of August 31, 2011, to $512 billion as of September 30, according to new figures from Mercer. This deficit corresponds to an aggregate funded ratio of 72% as of September 30, compared to a funded ratio of 79% at August 31, 2011. [...] "The end of September marks the largest deficit since we have been tracking this information," said Jonathan Barry, a partner in Mercer's Retirement Risk and Finance business.

Thursday, December 23, 2010

First of many?

Prichard, Alabama — This struggling small city on the outskirts of Mobile was warned for years that if it did nothing, its pension fund would run out of money by 2009. Right on schedule, its fund ran dry.  Then Prichard did something that pension experts say they have never seen before: it stopped sending monthly pension checks to its 150 retired workers, breaking a state law requiring it to pay its promised retirement benefits in full. (Source: NYT)

Thursday, November 11, 2010


ING Groep NV began laying off 400 people in its US insurance operation as it prepares to sell the unit in an IPO.  The cuts amount to a 5% reduction at the unit, which will employ about 7600 people when the layoffs are complete.  In addition, ING is eliminating 200 open positions.


The plan involves the elimination of the unit's individual retirement wholesale distribution channel that sold annuities through broker-dealers. The company is also laying off workers as it continues to integrate CitiStreet, the administrator of retirement and benefit plans it acquired in 2008.


Executives of the parent company made a long-awaited announcement that it will most likely sell off its insurance operations in Europe and the US in two separate IPOs.  ING is being forced by the European Commission to sell them and nearly halve its balance sheet in return for getting approval for the multi-billion euro rescue it received from the Dutch government at the height of the financial crisis.  The selling of the insurance units, which it expects to complete before the end of 2013, will transform ING into a merely Europe-focused bank.

Source: Fox Business

Sunday, October 17, 2010

Society of Actuaries 2010 Annual Meeting (NYC)

Monday, October 18
7:15-8:15 Session 9: Investment Section Breakfast
8:30-10:00 Session 13: Opening General Session
10:30-12:00 Session 23: De-Risking Pension Plans
2:30-4:00 Session 43: Derivatives and Alternative Investments for Pension Plans (Moderator)
4:15-5:15 Session 46: SOA Qualification and Continuing Education

Tuesday, October 19
7:00-8:15 Session 51: Pension Section Breakfast (Presenter)
8:30-10:00 Session 64: PPA Update
10:30-12:00 Session 78: Late Breaking Developments for Pension Plans
12:15-2:15 Session 88: Presidential Luncheon
2:30-4:00 Session 99: Behavioral Finance in DC Plan Design
4:15-5:30 Session 104: Assumption Setting for Pension Plans

Wednesday, October 20
7:30-8:45 Session 109: Health Section Breakfast
9:00-10:15 Session 118: Statutory Hybrid Plans
10:45-12:00 Session 134: ERM and its Application to Pension Plans

Monday, July 12, 2010

Aon to buy Hewitt

The wave of consolidation in the benefits consulting/outsourcing industry is accelerating.  There will now be only three major players - Towers Watson, Mercer, Aon Hewitt.

Aon Corporation will buy Hewitt Associates, for $25.61 in cash and 0.6362 shares of AON for each share of HEW, or $50 a share at Friday's closing prices, a 41% premium.  Hewitt Associates Aon Corporation's Aon Consulting subsidiary will be merged to create AonHewitt.  Note that Hewitt is about three times the size of Aon Consulting, which should be interesting for the merger.

Wednesday, May 26, 2010

ACS acquires eHRO from HP

As one might have guessed two years ago when HP acquired EDS, HP doesn't want to stay in the benefits outsourcing space.  In June of last year (hindsight: in preparation for its merger with Watson Wyatt) Towers Perrin sold its minority stake in excellerateHRO to HP, which presumably was just looking for 100% ownership in order to be able to sell the division.  That sale took place today, as ACS attempts to grow its presence in that market.

Wednesday, March 24, 2010

Added a link to my blogroll is a Canadian life insurance broker's site. However, it has a bunch of historical actuarial research info including early work on disability waiver of premium, some of the earliest stuff on select/ultimate mortality rates, and a bunch of old mortality tables many of which aren't available elsewhere.

Saturday, March 20, 2010

Friday, March 19, 2010

JPMC getting out of actuarial business

Aon Consulting agreed to buy the Compensation and Benefit Strategies division of JPMorgan Chase (i.e., the former Chicago Consulting Actuaries) for an undisclosed amount.

Thursday, February 25, 2010

Tuesday, January 26, 2010

Saturday, October 24, 2009

Society of Actuaries 2009 Annual Meeting (Boston)

I'm leaving for Boston this morning; I'll be attending the Society of Actuaries Annual Meeting starting Monday. Below is a list of the concurrent sessions I plan to attend. If you see me, please come by and say hello.

Monday 26 October
Session 17: Why We Need to Transform Our View of Risk
Session 27: Impact of the Financial Crisis on Pensions and Investments
Session 38: Basic and Continuing Education Update

Tuesday 27 October
Session 43: Management & Personal Development Section Continental Breakfast
Session 59: Perspectives on the Financial Crisis and Enterprise Risk Management
Session 62: Using Corporate Bond Spot Yield Curves for Pension Discounting
Session 79: Market-Consistent Valuation of Pension Plans

Wednesday 28 October
Session 98: Education & Research Section Continental Breakfast
Session 111: Revised Qualification Standards and Continuing Professional Development (*)
Session 116: What's New in Employee Benefits Accounting Standards

(*) I will be one of the presenters at session 111; come hear about the new SOA CPD rules.

Monday, September 28, 2009

Xerox to buy ACS for $6.4B

I wonder what this will mean for ACS's Buck Consultants actuarial consulting subsidiary.

Friday, August 14, 2009

Joint Announcement on Future Education Methods

The presidents of the CIA/CAS/SOA have issued a joint letter to share news of and request member feedback on a proposal for developing future education methods.

I encourage anyone who cares about the actuarial profession to write the Society of Actuaries before the end of the comment period on September 10.

ETA 8/16: For the record, I am most strenuously opposed to handing ASAs to college graduates without external validation through the existing exam system. My letter to the board can be found at

Saturday, July 18, 2009

So I'm studying for the PRM4 Exam

One of the case studies concerns WorldCom. When I finished reading it, I was left wondering if this was a WorldCom that operated in some other country with which I am not familiar. The case study is by Dennis Moberg of Santa Clara University and Edward Romar of University of Massachusetts at Boston (yes, I'm calling them out; willful blindness this blatant goes beyond the pale and needs to be exposed publicly). Here are some of the highlights...

WorldCom is just another case of failed corporate governance, accounting abuses, and outright greed. But none of these other companies had senior executives as colorful and likable as Bernie Ebbers.

No palace in a gated community, no stable of racehorses or multi-million dollar yacht to show for the telecommunications giant he created; only debts and red ink - results some consider inevitable given his unflagging enthusiasm and entrepreneurial flair.

Personally, Bernie is a hard guy not to like.

All this would be just another story of a successful growth strategy if it weren't for one significant business reality - mergers and acquisitions, especially large ones, present significant managerial challenges.

All this was put in jeopardy when, in 2000, the government refused to allow WorldCom's acquisition of Sprint.

I'm sorry. I'm really confused. According to wikipedia, the story of WorldCom and Bernie Ebbers includes the following facts, not one of which is mentioned in the PRM case study.

Beginning in 1999 and continuing through May 2002, the company used fraudulent accounting methods to mask its declining earnings by painting a false picture of financial growth and profitability to prop up the price of WorldCom’s stock.

It was estimated that the company's total assets had been inflated by around $11 billion.

Bernie Ebbers was found guilty of all charges and convicted of fraud, conspiracy and filing false documents with regulators.

Shame on PRMIA. This case study is a disgrace and should be pulled from their syllabus.

Monday, July 06, 2009

Public Pensions Cook the Books (Andrew Biggs, WSJ)

Here's a dilemma: You manage a public employee pension plan and your actuary tells you it is significantly underfunded. You don't want to raise contributions. Cutting benefits is out of the question. To be honest, you'd really rather not even admit there's a problem, lest taxpayers get upset.

What to do? For the administrators of two Montana pension plans, the answer is obvious: Get a new actuary. Or at least that's the essence of the managers' recent solicitations for actuarial services, which warn that actuaries who favor reporting the full market value of pension liabilities probably shouldn't bother applying.

Public employee pension plans are plagued by overgenerous benefits, chronic underfunding, and now trillion dollar stock-market losses. Based on their preferred accounting methods -- which discount future liabilities based on high but uncertain returns projected for investments -- these plans are underfunded nationally by around $310 billion.

The numbers are worse using market valuation methods (the methods private-sector plans must use), which discount benefit liabilities at lower interest rates to reflect the chance that the expected returns won't be realized. Using that method, University of Chicago economists Robert Novy-Marx and Joshua Rauh calculate that, even prior to the market collapse, public pensions were actually short by nearly $2 trillion. That's nearly $87,000 per plan participant. With employee benefits guaranteed by law and sometimes even by state constitutions, it's likely these gargantuan shortfalls will have to be borne by unsuspecting taxpayers.

Some public pension administrators have a strategy, though: Keep taxpayers unsuspecting. The Montana Public Employees' Retirement Board and the Montana Teachers' Retirement System declare in a recent solicitation for actuarial services that "If the Primary Actuary or the Actuarial Firm supports [market valuation] for public pension plans, their proposal may be disqualified from further consideration."

Monday, June 29, 2009

Towers Perrin and Watson Wyatt will merge

This will creat the world's largest employee-benefits consultancy, surpassing current leader Mercer.

Wednesday, June 17, 2009

Bang it goes again?

In the thunderous collapse of GM, one detail seems to have gone almost unnoticed. The old GM's US pension fund, with its near-$100bn of liabilities, is being transferred lock, stock and barrel to the new entity. As a direct result, the new GM could be bankrupt again in a very few years. GM's US fund is, of course, in deficit, but the company has made no contributions since 2003. Back then, it put in $18.5bn, which it raised through a bond issue. Since this counted as a pre-payment, GM is not obliged to pay any more for the next year or two. However, it will then have to start plugging the gap, under the new rules set down by the Pension Protection Act of 2006. This, Mr Ralfe calculates, would involve diverting $1bn to $2bn annually from operating cash flows. If GM cannot do that, bang it goes again. [Source: Financial Times]