By Raymond D. Berry
We asked several actuaries who attended the SOA Annual Meeting in October to respond to the following two questions:
- What was the most interesting or your favorite thing that you learned or heard at the annual meeting that related to retirement issues?
- What was the most interesting or your favorite thing that you learned or heard at the annual meeting that related to non-retirement issues?
Here are their responses:
Anne Button, FSA:
- I really enjoyed the session, "Modeling Mortality Improvements in the Pension Arena." Larry Pinzur and Robert Howard were excellent speakers and the heat maps showing the cohort effect made a compelling argument as to why Scale AA should no longer be relied on and why Scale BB would be a vast improvement.
- As far as non-Retirement issues, I thought the meeting app for the iPad was great. Easy access to presentations, maps, schedule, etc. Allowed me to make notes on the presentation and email them to myself.
I also liked the general session speakers, especially Matthew Syed’s talk about the need for sustained practice in order to be really good at something. The fact that at one time, five or so of the top table tennis players in Great Britain lived on Silverdale Road in Reading, England (out of around 30,000 players in the country) seems amazing until he points out that that the players had access to a great coach who also lived there and had 24-hour access to a place to practice as well as equally engaged players to play against.
Eric Freden, FSA:
- Session 24 Panel Discussion: "Mortality Improvement Trends—What Does the Future Hold?" I found the research on mortality improvements quite interesting. Increases in longevity have been consistently underestimated 2-3 years per decade. Drilling down into mortality improvement shows wide variations in which groups enjoy the improvement and why. The "heat map" approach to plotting the data reveals patterns not visible in traditional line graphs or bar graphs. It is interesting that men tend to group into "cohorts" of mortality improvement by generation, and women do not. It seems that groups well-off enough to control their risk factors live longer, up to a point. Over age 85, it appears to be much tougher to maintain the mortality improvement patterns of earlier ages. Regardless of private plans, governments are the ultimate holders of longevity risk. New mortality tables to be available in 2014 will have a two-dimensional mortality improvement model based on this research.I was also impressed with the variety and quality of the pension-oriented presentations.
- From Session 56 Panel Discussion: "The Future of General Health and Medicare Insurance Programs." The Role of Public and Private Sectors, and Design and Funding IssuesU.S. health care financial systems design and most proposed "solutions" are not actuarially sound. A return to the actuarial principles of proper risk classification, limiting anti-selection, avoiding moral hazard, and confirming actuarial soundness might lead to better solutions for the country. This may lead to less insurance and more pre-funding or self-funding of health care costs for both private and public health care programs.
I was also astounded at how much more high tech the SOA annual meeting is compared to my last visit. Of course, during my last visit, presentations were still shown using Kodak slide projectors, so it has been a while since I attended an annual meeting. I found the SOA meeting app on my iPhone to be very handy for keeping up with the schedule and viewing tiny versions of the presentations. The big screens in the main ballroom helped me see what was going on. But, just like on the Internet, we had to look at pop-up ads on these screens all through the meals. I guess that is life in 2012.
Donald Fuerst, FSA:
- "Are Baby Boomers on Track for Retirement?" This session highlighted the enormous diversity within the boomer generation with insightful statistics and tongue-in-cheek humor. Retirement will likely be pleasant for the top earners of this generation, but the continued growth in disparity between top earners and the rest of the population will make retirement challenging for many and forever a dream for much of the low wage category. The presentations were filled with interesting descriptions of the events that shaped this generation, particularly the change in family structure and the evolution of the two-worker family. Despite our progress, we still face significant obstacles for the unmarried, minority groups, and the less educated.
- Outside of retirement issues, the greatest feature of these meetings is the networking. With almost 2,000 participants, there were many long lost friends I saw and colleagues from recent and distant times. Catching up with old friends and trading stories during the breaks is always a highlight for me.
Cindy Levering, ASA:
- I was interested in the presentation on the stochastic actuarial valuation of DC plans by Dimitry Mindlin in Session 76 PD, "Retirement Adequacy – Much More Than a Replacement Ratio." He sees this as an area of not only tremendous challenges but also great opportunities for pension actuaries. He envisions the emergence and development of best practices eventually leading to a formal ASOP outlining minimum requirement. This is an area the Research Team is talking about exploring, perhaps with a call for papers.
- I also went to a session on Variable Annuity Risk Management. My interest here was more personal than professional since I purchased two of these with some of my 401(k) assets when I retired three years ago! While a lot of the technical material was "over my head,," I was interested (but not particularly surprised) to learn that many insurers have taken on a lot of risk with some of these products and some weren't reserving enough to cover all the guarantees they were offering.
Martin McCaulay, FSA:
- I heard about more research that supported using the geometric rate of return rather than the arithmetic return for pension projections. At the Pension Section breakfast, Victor Modugno discussed his research on Estimating Equity Risk Premiums. His research report cites work by Jacquier, Kane, and Marcus that found that the geometric mean is a superior estimator of the mean when the sample period and projection periods are long. They "developed an unbiased estimate of the mean (U) from historical data by weighing the geometric (G) and arithmetic (A) means by the ratio of number of years in the projection (P) to the number of years in the sample (S): U = A*(1-P/S) + G*(P/S). As the projection time gets longer, the geometric mean becomes more important. When the projection time equals the sample time the geometric mean is the unbiased estimate of the mean. Since most pension work involves long projection periods, the geometric mean is a more appropriate measure for future projections." The research report is available at SOA.org/research/research-projects/pension/.
- I was surprised to hear about how successful the SOA’s global membership initiatives have been. During the general session, Brad Smith described the seismic demographic shift in our membership. He stated that "it is insightful to consider the top ten SOA exam centers in the world. And no, this is not a David Letterman top ten list, but I do think you will be surprised. Only three are in the United States: New York, Chicago and Hartford. No surprises there. Two are in Canada: Montreal and Toronto. The remaining five are surprising: Beijing, Hong Kong, Taipei, Seoul and Kuala Lumpur." The entire text of Brad Smith’s address can be found at SOA.org/research/research-projects/pension/research-est-equity-risk-premiums.aspx.
Anna Rappaport, FSA:
I really liked the session on Social Security issues. It was great to hear an update on the financial status and options for the future from Steve Goss, Chief Actuary of Social Security, and to hear Frank Todisco, Actuary of the Government Accountability Office, talk about the retirement age issue. Steve explained the options for increasing revenue or decreasing expenditures, and then provided links to find an analysis of each issue on the Social Security Office of the Actuary website. The Office of the Actuary analyzes and prices proposals made by members of Congress, and that makes the analysis available on the website for anyone who wishes to read it.
Frank asked the audience if they favored raising the retirement age, favored lowering it, or were unsure. Before he explained the options, an overwhelming majority of the actuaries present favored raising the retirement age. After he explained the options, he repeated the question, and a few people had changed their minds, but the majority still favored raising the retirement age. Some of the concerns raised included the need to coordinate with disability benefits, differences in mortality by different population subgroups, and different needs of those who do manual labor. Another option is to support phased retirement. The session handout is available on the SOA website, and includes links to several GAO and other reports that contain detailed information about the issues related to raising retirement ages. Because of the increases in longevity since the program started, this is a major issue in the United States. There are also issues related to appropriate retirement ages in many other countries. Some have raised retirement ages, and of those countries that had different retirement ages for men and women, some are making them uniform.
What I like most about the annual meeting is the diversity of the program. In every time slot there were topics of interest, usually two, three or four. This meeting allows me to balance pension and other topics, and to learn much more about what is going on in the profession generally. I was sorry that I could only attend one session in each time slot
I also really liked the general sessions on Monday morning and at the Tuesday lunch. Both sessions’ presentations offered thought-provoking content that seems very useful to me personally and that I also think is useful to many people in the profession. The first presentation focused on how much work, concentration, discipline and training it takes to become world class. It also focused on the importance of having an expert coach or other method of gaining top level expertise. The second speaker focused on the differences between introverts and extroverts, and how they can work effectively together. The speaker also focused on the role of introverts as leaders, and provided examples of introverts who are widely recognized as leaders. That presentation reminded me of the importance of being patient and thoughtful and thinking that through. Too often keynote speakers are entertaining but offer little other than what I can see on television. At this meeting I felt really good about both presentations.
Marcus Robertson, FSA:
- While all the sessions were interesting, the session I enjoyed the most, despite the fact that I helped to facilitate, was "Ethical Dilemmas for Pension Actuaries." This was an interactive session held at the end of a long day and it was great to hear animated discussions about retirement-related case studies that presented ethical issues for pension actuaries. The discussions showed me that there is a real appetite for this kind of session. They also showed the power of group input (peer review?) as several participants changed their opinions about the problems presented once they’d heard the views of others.
- I made a point of attending some non-retirement sessions and one that was very interesting was "ERM for Small Business." I was particularly interested in this session because of work I’d done on enterprise risk management for the Fundamentals of Actuarial Practice Course and the new Enterprise Risk Management Course. The speakers focused on one industry (the restaurant industry) and issues faced in that industry, so it was more narrowly focused than I had expected. Nevertheless, it was a very interesting session.
Presentations are available at the link below. Click on "Agenda and Presentations Day 2 (3, or 4)" on the column labeled "Related Links" on the right hand side of the page and then click on the session.SOA.org/Professional-Development/Event-Calendar/2012-Annual-Meeting Mark your calendar now for the 2013 SOA Annual Meeting which will be held in San Diego, CA. Dates are October 20 - 23, 2013.
Raymond Berry, ASA, EA, MAAA, MSPA can be reached at email@example.com.