Description: This report provides estimated savings for several of the options that are available to plan sponsors after implementation of the Medicare prescription drug program.

Description: This paper reviews the process performed in the actuarial department at one company as an illustration of the process of complying with Sarbanes-Oxley. It also discusses costs and benefits.

Description: This paper illustrates a current approach to capital allocation, referred to herein as Tail Contribution Analysis TCA, using it to evaluate the impact of changes in an insurer’s operations by allocating capital to individual lines of business. It then highlights a common problem in the implementation of the procedure arising from reserve volatility and briefly notes the failure of the methodology to account for a firm’s changing levels of risk under various strategies. Finally, it introduces an alternative method for analyzing business segments and strategies called Economic Profit Analysis EPA. We will discuss EPA’s key feature, “volatility replication,” an intuitively appealing process of building investor expectations and capital market information into the risk-and-return measurements used to evaluate strategic decisions. Finally, we will illustrate the benefit of using EPA in overcoming the problems of TCA and thereby providing concise reliable information for business decision making.

Description: This paper considers the problem of actuaries acting as advisers to individuals. This activity is covered by regulations, discussed in the paper, that currently recognize other professions but not actuaries. The paper recommends that actuarial organizations lobby the relevant legislative and regulatory bodies to provide actuaries pursuing an investment-focused career path with the same exemption status as other professionals.

Description: This paper introduces a rich stochastic modeling framework for understanding risks in multiple-decrement contracts. The example in the paper is a 20-year Term insurance contract. Not only are mortality and lapsation considered stochastic, but the parameters governing them are. For example, mortality risk is composed of four risk elements, including error generated in the underwriting process, volatility around the best estimate, catastrophic events that impact mortality, and the trend in mortality improvement or deterioration. When stochastically modeled, the relative contribution and risk profile of each risk element can be evaluated. Generating stochastic mortality results provides a distribution of results that an organization faces and the severity and incidence of the tail events.

Description: This paper defines health expectancy as that part of life expectancy where the person is expected to be healthy. It also breaks down the remainder of life expectancy into two unhealthy categories, one where assisted living will be necessary, and one where a skilled nursing facility will be necessary. These expectations are calculated for many combinations of age, other demographic characteristics, and current health issues.

Description: In any model, assumptions are necessary to generate output. Typically, the model is run with varying assumptions to determine how sensitive the output is to the input. But what if the philosophy of generating assumptions is flawed?

Description: Here are a few topics to be discussed in this article: Risk is opportunity; Strategic and business risks are not captured in models; Incentive compensation should not be paid too soon; Enterprise risk management is board responsibility, ERM is compliance.

Description: Investment Fallacies: The Myth of Time Diversification

Description: Investment Fallacies: Future Equity Returns