Mathematics 480, Spring 2014

Illinois State University Mathematics Department

This class is also run on ReggieNet


Instructors
Mr. Joseph Morrow, FSA, EA, MAAA
Financial Actuary, COUNTRY Financial
E- mail: jmorrow.hubbard@gmail.com
and
Dr. Krzysztof Ostaszewski, FSA, CERA, FSAS, CFA, MAAA
Actuarial Program Director
Office: Stevenson Hall, room 313G
Telephone: 309-438-7226, Fax: 309-438-5866
E-mail: krzysio@ilstu.edu
and
Mr. Ken Williams, FCAS, MAAA
Senior Associate Actuary, COUNTRY Financial
E-mail: ken.williams@countryfinancial.com


Classes Meet
Tuesdays and Thursdays 6:00-7:50 p.m., in Stevenson Hall, room 120, with a ten minute break in the middle of the time period.
Office Hours
Tuesdays 3:00-4:00 p.m., Tuesdays 5:00-5:50 p.,m., and Thursdays 5:00-5:50 p.m., held by Dr. Ostaszewski. Please ask for an appointment at other times. You can schedule an appointment with Dr. Ostaszewski at http://krzysio.acuityscheduling.com.

Textbooks
There will also be study notes provided online, which can be downloaded by clicking on links next to dates of classes.


Supplementary textbooks:
Fundamentals Of General Insurance Actuarial Analysis, by Jacqueline Friedland, Society of Actuaries, 2013.

Valuation of Life Insurance Liabilities, 4th Edition, by Louis Lombardi, Actex Publications, 2006, ISBN 1-56698-560-9.

Financial Risk Management for Pension Plans by Leslaw Gajek and Krzysztof Ostaszewski, Elsevier, 2004, ISBN 0444516743.
A Problem Solving Approach to Pension Funding and Valuation, (Second Edition), 1996, by Aitken, W.H., Actex Publications, ISBN 1-56698-200-6.
Actuarial Aspects of Individual Life Insurance and Annuity Contracts, by Timothy F. Harris and Albert E. Easton, Actex Publications, ISBN 1-56698-346-0.
Group Insurance, (Fifth Edition), 2007, edited by William F. Bluhm, Actex Publications, 5th edition (2007), ISBN: 1-56698-613-3.

Introduction to Ratemaking and Loss Reserving for Property and Casualty Insurance, (Second Edition), 2001, by Brown, R.L., Chapters 1-5.
These supplementary books should be available at Actex Publications, or The Actuarial Bookstore.


Objective
The objective of this class is to help you learn about applications of actuarial models in practice. The main emphasis of the class in the practical methodology of calculation of actuarial liabilities, as well as pricing of insurance products, in all key lines of business of insurance, including defined benefit pensions.
Grading
There will be five tests and any of the last three comprehensive examinations can count as the final examination. No make up tests will be given. All regular tests will be quantitative in nature. The final will count as 40% of your grade, and the best two of the remaining five tests will count as 30% of your grade each. You will also get up to 10% extra credit for the best of the remaining tests. The grading scale will be as follows: 90% or better -- A, 80% to 90% -- B, 70% to 80% -- C, 60% to 70% -- D, below 60% -- F. Students can also earn extra credit by making presentations of readings listed below. Because there will be opportunity for extra credit, no make up tests will be allowed. This is a graduate level class, and therefore active student participation in the class, through presentations and discussions is expected. All tests will be quantitative, and while we will study variety of specific regulations for life insurance, life annuities, pensions, property-casualty, health or group insurance, you will be tested on principles and mathematics of those regulations, not detailed specifics.
Disability concerns
Any student needing a special accommodation for a documented disability should contact Disability Concerns at Fell Hall, Room 350.

Important dates

Illinois State University important dates information for the Spring 2014 semester is given here: http://www.registrar.ilstu.edu/downloads/calendars/spring2014cal.pdf.


Schedule of classes

  • Tuesday, January 14, 2014. Review of some topics on Course MLC examination.
  • Thursday, January 16, 2014. Current issues in actuarial practice. Dodd-Frank Act of 2010.
  • Tuesday, January 21, 2014. Life insurance valuation.
  • Thursday, January 23, 2014. Life insurance valuation. 
  • Tuesday, January 28, 2014. Life annuity valuation. Spreadsheet with calculations for exercises.
  • Thursday, January 30, 2014. Exercises on life insurance and life annuity valuation.
  • Tuesday, February 4, 2014. Principles-Based Reserving.
  • Thursday, February 6, 2014. Principles-Based Reserving. Notes on VACARVM.
  • Tuesday, February 11, 2014. Exercises on principles-based reserving. Additional Readings on Life Insurance, Life Annuities and Principles-Based Reserving. Here are also some additional links with readings on valuation of life insurance and life annuity liabilities, addressing current issues, and while not required in the class, are possible extra credit presentation topics and good sources of learning about the topic:
  • Actuarial Standards of Practice: http://www.actuarialstandardsboard.org/asops.asp

    American Academy of Actuaries practice notes http://www.actuary.org/category/site-section/public-policy/practice-notes

    American Academy of Actuaries Principle Based Reserving: http://www.actuary.org/risk.asp

    National Association of Insurance Commissioners Committees and Activities: http://www.naic.org/index_committees.htm

     

  • Thursday, February 13, 2014. Optimal funding of a liability.
  • Tuesday, February 18, 2014. Test No. 1, on material covered through February 13, 2014.
  • Thursday, February 20, 2014. Overview of U.S. pension system. Pension Protection Act of 2006.
  • Tuesday, February 25, 2014. Pension funding and valuation. Class taught by Mr. Joseph Morrow. Pension funding materials: Part 1, Part 2, Part 3, Part 4, Part 5, Part 6, Part 7. Part 8. These materials are for all classes on pension funding and valuation. There are also pension funding exercises for practice for examinations.
  • Thursday, February 27, 2014. Pension funding and valuation. Class taught by Mr. Joseph Morrow.
  • Tuesday, March 4, 2014. Pension funding and valuation. Class taught by Mr. Joseph Morrow.
  • Thursday, March 6, 2014. Pension funding and valuation. Class taught by Mr. Joseph Morrow.
  • Tuesday, March 18, 2014. Pension funding and valuation. Class taught by Mr. Joseph Morrow.
  • Thursday, March 20, 2014. Pension funding and valuation. Class taught by Mr. Joseph Morrow.
  • Additional pension readings for possible presentations are here. We may also review two presentations by Dr. Ostaszewski, one on global pension systems issues, and one on public pension plans in the United States.

  • Tuesday, March 25, 2014. Health insurance pricing and reserving.
  • Thursday, March 27, 2014. Health insurance pricing and reserving. Health insurance pricing and reserving. Accompanying spreadsheet.
  • Tuesday, April 1, 2014. Special presentation on Workers Compensation by Mr. Aaron Hillebrandt and Mr. Patricka Newell of Pinnacle Actuarial Resources. This class will be held in Stevenson Hall room 401.
  • Thursday, April 3, 2014. Special presentation by health insurance actuaries at State Farm: Glen Simpson and Emily Ehrstein. This class will be held in Stevenson Hall room 401.
  • Additional health insurance readings for possible presentations are here.
    Additional group insurance readings for possible presentations are here.

    In the following material on ratemaking and loss reserving, the following two monographs may be very useful:

    Basic Ratemaking, Fourth Edition, 2010, by Geoff Werner and Claudine Modlin, published by the Casualty Actuarial Society, available as a free download.

    Estimating Unpaid Claims Using Basic Techniques, Third Version, July 2010, by Jacqueline Friedland, published by the Casualty Actuarial Society, available as a free download.

  • Tuesday, April 8, 2014. Ratemaking and loss reserving for property and casualty insurance. Class taught by Mr. Ken Williams.
  • Thursday, April 10, 2014.  Ratemaking and loss reserving for property and casualty insurance. Special presentation on stochastic reserving by Mr. Chris Holt of Pinnacle Actuarial Resources. This class will be held in Stevenson Hall room 121.
  • Tuesday, April 15, 2014. Ratemaking and loss reserving for property and casualty insurance. Class taught by Mr. Ken Williams.
  • Thursday, April 17, 2014. Test No. 2, covering material taught through April 4, 2013.
  • Tuesday, April 22, 2015. Ratemaking and loss reserving for property and casualty insurance. Class taught by Mr. Ken Williams.
  • Thursday, April 24, 2014. Ratemaking and loss reserving for property and casualty insurance. Class taught by Mr. Ken Williams.
  • Some additional exercises on ratemaking and loss reserving are posted here. Additional property/casualty readings for possible presentations are here. Also, past Casualty Actuarial Society Course 5 examinations are here: http://www.casact.org/admissions/studytools/exam5/.

  • Tuesday, April 29, 2014. Test No. 3, comprehensive.
  • Thursday, May 1, 2014. Test No. 4, comprehensive.
  • Test No. 5, comprehemsive, is scheduled at MyIllinoisState.com for Tuesday, May 6, 2014 at 5:30 p.m. This conflicts directly with the Actuarial Banquet. Becasue of this, we will hold the final examination on Wednesday, May 7, at 10:00 a.m. in regular class room.