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

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.

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.

http://realbusinessatxerox.blogs.xerox.com/2010/05/25/966/

Added a link to my blogroll

www.insurecan.com 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.

One view of hell

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.

Open Letter to the SOA Board

Disagree with a portion of their new board policy.

http://home.comcast.net/~cscg/20100225OpenLetter.pdf

Pension Funding as of 12/31/2009

AAA on Health Care Reform

http://www.actuary.org/pdf/health/differences_jan10.pdf

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.

Modeling the Forward Surface of Mortality

http://longevity-risk.org/presentations/Workshop_Session6/6A_Daniel_Bauer.pdf

Plagiarist Doris Kearns Goodwin to speak at actuarial meeting

For all the gory details, you can go to:
http://authorskeptics.blogspot.com/2004/09/professor-doris-kearns-goodwin.html
Disgraceful!

Xerox to buy ACS for $6.4B

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

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.

http://www.soa.org/files/pdf/fem-letter.pdf

http://www.soa.org/files/pdf/fem-faq.pdf

http://www.casact.org/admissions/FEM-Expanded-FAQs.pdf

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 http://home.comcast.net/~cscg/OpenLetterBoard.pdf.

What is the Proper Role of a Consultant?

http://www.pensionriskmatters.com/2009/07/articles/pension-consultants/what-is-the-proper-role-of-an-investment-consultant/

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.

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."

Towers Perrin and Watson Wyatt will merge

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

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]

Federal Regulation of Insurance?

At a hearing of the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, US lawmakers discussed what kind of role the federal government should have in regulating the insurance industry. "The events of the last year have demonstrated that insurance is an important part of our financial markets," said Rep. Paul E. Kanjorski, D-Pa., chairman of the subcommittee. "The federal government, therefore, should have a role in regulating the industry." [Source: InvestmentNews]