Monthly Archives: December 2010

In India, younger appointed actuaries

Appointed actuaries in India are getting younger. (As in most countries, an Indian insurer must appoint an actuary to certify the adequacy of loss reserves.) IANS news service:

‘Earlier, Indian actuaries in the age bracket of around 45 years were hired to head the offices,’ said G.L.N. Sarma, the managing director of Hannover Re Consulting Services India, speaking about these experts who assess the financial impact of future events.

‘But in the recent times the age of recruits for the top post has come down to around 35 years,’ Sarma, who in 2007 was himself named actuary at Bharti Axa Life Insurance at the age of 36, told IANS.

Salaries for actuaries in India are typically between 5M and 7M rupees, which translates to about $125,000.

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Attention, sports fans: Winning streaks

UConn’s women’s BB team lost to Stanford, ending its record 90-game winning streak. Its previous loss, two years ago, was also to Stanford.

UCLA has the men’s record, 88 games. Again, the same team bookended the streak. Notre Dame was the last team to beat UCLA before the streak and was the team that ended it.

And in football, Oklahoma has the longest major-college winning streak, 47 games. That streak began after a loss to Notre Dame and ended with a loss to Notre Dame.

So each streak ended and began with the same opponent.

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Is “Obamacare” pejorative?

Via Megan McArdle, and James Joyner defend their use of Obamacare, which I gather some call “wingnut terminology.”

Interesting. I use the term and I have never meant to demean the program. I think it is a good American-style private/public approach to a real public health problem. I think the program has a good chance of achieving at least one of its key goals, universal coverage. Its model, Massachusetts, recently announced that 98% of residents have health insurance. I worry that it could die the death of a thousand self-inflicted paper cuts if politicians back away from the cost controls it will put into place, as they recently did with the “doc fix.”

The fact that I like the program is the reason I call it Obamacare. I thought politicians want to have things named after them. Don’t you think FDR would have loved to call Social Security a Roosevelt pension? Would Johnson have balked at the term LBJ-care?

Instead, we name highways after our favorite politicians, which has never made sense to me. Then the politicians’ name is only used in vain: “I got stuck on the *$&##@* Kennedy,” or “I crawled across the f@##@&* George Washington Bridge.” And I’ve never forgiven Eisenhower for the Chicago expressway bearing his name.

We should name highways after politicians we hate. Directions like “Take the Aaron Burr through the Nixon Tunnel” give the driver an idea of what he’s in for.

 

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Is your birthday special?

Only quants can have fun with dates that doesn’t involve snogging.

Financial expert/blogger David Markel defines a special birthday as one where you can create a simple math equation from the date.

For example, David was born Dec. 5, 1960. That, of course, is 12/5/60, and 12 x 5 = 60. There are also special days for:

  • Addition (1/1/02 is an example)
  • Subtraction – (12/5/07)
  • Division – (8/1/08)

Fun idea, right? Not sure how you count European dating, where the date precedes the month, i.e., 12/5/07 would be 5/12/07.

Brushing that aside, here’s the big question: Over a 400-year arc (has to be 400 to properly handle the leap-year cycle), how many birthdays are special?

The answer, and the methodology, are here.

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Third quarter results: the good, the bad, the ugly

Highlights from the Q3 earnings release for property-casualty insurers:

The good:

  • Business is growing again, with net written premiums 0.8% higher than they were at the same time last year. Second quarter premiums were 1.3% higher than a year earlier and third quarter’s were 2.3% higher, the first back-to-back increase in premium writings sinxe Q1 2007. This year will mark the first increase in premiums since 2006.
  • Surplus is growing, up $33.4 billion (6.4%) from year-end. That means the industry has more capital to survive whatever megacatastrophes lurk.
  • Stock prices are recovering, sending industry capital gains higher, with $4.4 billion in gains through September, compared with $9.6 billion in capital losses a year ago.

The bad:

  • Though return on surplus was 7.7%, cost of capital is about 10.4%. That means earnings aren’t hefty enough, adjusted for risk, to please investors. That means capital could be heading for the exits. It also could mean raising capital after the next catastrophe could be difficult.
  • Rates continue falling in commercial insurance, with the most optimistic estimates saying rates are flat, while the most pessimistic say rates fell about 5% in the quarter.
  • Low bond yields and dividends will make it harder to generate healthy earnings.
    History provides an example: In 2009, the industry booked a 101% combined ratio and generated a 5.8% return on surplus. In 1979, the industry booked 101% and generated a 15.9% return. The difference? Interest rates in the late ’70s were above 10%. Last year, they were below 5%. Earning more interest on the float tripled earnings.

The ugly:

  • Financial/mortgage insurers, the guys who guaranteed that mortgages would be paid back. For the nine months they booked a combined ratio of 192%, up from 175% last year. This year’s mark was good for a negative 36% return on average surplus.

Further analysis here and here.

Help select Actuary of the Year – vote now!

Too often we actuaries think of ourselves as the little guy. But some of us do great things.
So now, an award for those who touched greatness: Actuary of the Year. Make your choice below.


Below the fold is a little about each nominee, courtesy of Liz Lynch (my wife), who blogs about genealogy at The Ancestral Archaeologist. Continue reading

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Claim of the Week: Sartorial fraud edition

To sum up, this guy bought 200 silk ties, worth around $15,000. Then he reported the lot of them stolen. Three separate times.

Carlton H. Wopperer was charged with two counts of insurance fraud in Snohomish County Superior Court in July. Last week, he paid restitution of $33,370.67.

If you follow the math, the crook up about $15,000 on the deal, but that’s because the “ties” were first “stolen” 10 years ago, and that money is probably long gone.

Details here.

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U.S. life expectancy falls slightly

With details, Reuters:

[The CDC]  said a baby born in 2008 could expect to live about one month less than one born in 2007, falling from a record high of 77.9 years in 2007.

[snip]

The CDC said that overall, women were expected to live 80.3 years and men 75.3 years.

It’s a blip, mostly. But the big news is that stroke fell to fourth-leading cause of death, from third. Lower respiratory disorders (asthma/emphysema/bronchitis) took over third, perhaps helped – if that’s the right word – by a change in data collection.

Heart disease and cancer remain 1-2.

(Via InsuranceERM.)

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The year-end catastrophe scorecard

Today, in words, I got nothin’. Fortunately, Aon has released its encyclopedic analysis (pdf) of 2010 catastrophes, which caused $38 billion in insurance losses. So I got this chart:

Well predicted.It compares the pre-season hurricane forecasts of Colorado State, the federal government (NOAA) and Tropical Storm Risk, an Aon-sponsored forecaster. All in all, three accurate forecasts. Fortunately, the storms tended to stay at sea.

I also have this time series from Swiss Re, whose 2010 cat overview put insured losses at $36 billion:

Inclining upwards

Insured cat losses have been creeping upward steadily the past three decades. (The chart is inflation-adjusted.) Not sure why Swiss Re charts losses from manmade disasters and earthquakes but not hurricanes, which is obviously providing the contours to the top line.

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Insurers with happy customers

National Underwriter reports on University of Michigan’s American Customer Satisfaction Index for property-casualty insurers. I turn the numbers into a little chart:

Lots of satisfied customers

The article notes that Farmers “does much of its writing in California and the Gulf Coast, where it could have difficulties with policyholders due to challenges with weather and economics.”

 

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