Mathematics 480, Spring 2011

Illinois State University Mathematics Department

Instructors

Classes Meet

Tuesdays and Thursdays 4:00-5:50 p.m., in Stevenson Hall, room 310, with a ten minute break in the middle of the time period.

Office Hours

Tuesdays and Thursdays 3:00-3:50 p.m., held by Dr. Ostaszewski. Please ask for an appointment at other times.

Textbooks

There will also be study notes provided online by Dr. Krzysztof Ostaszewski, as well as materials provided by Mr. Dale Hall. Study notes by Dr. Ostaszewski can be downloaded by clicking on links next to dates of classes.
Supplementary textbooks:

Valuation of Life Insurance Liabilities, 4th Edition, by Louis Lombardi, Actex Publications, 2006, ISBN 156698560-9.

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.
Introduction to Ratemaking and Loss Reserving for Property and Casualty Insurance, (Second Edition), 2001, by Brown, R.L., Chapters 1-5.
Group Insurance, (Third Edition), 2000, edited by Bluhm, Chapters 1, 5-10, 14-15, 19-21, 23, 30-31, and 36.
The 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.

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 only quantitative in nature and will only contain actuarial calculations. 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 such extensive opportunity for extra credit, tests will be difficult and active student participation in the class is expected.

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 2011 semester is given here: http://www.registrar.ilstu.edu/downloads/calendars/spring2011cal.pdf.

Schedule of classes

• Tuesday, January 11, 2011. Current issues in actuarial practice.
• Thursday, January 13, 2011. Life insurance valuation.
• Tuesday, January 18, 2011. Life insurance valuation.
• Thursday, January 20, 2011. Life annuity valuation.
• Tuesday, January 25, 2011. Life annuity valuation.Spreadsheet with calculations for exercises.
• Thursday, January 27, 2011. Exercises in life insurance and life annuity valuation.
• Tuesday, February 1, 2011. Cash flow testing.Principles-Based Reserving.
• Thursday, February 3, 2011. Principles-Based Reserving.Exercises.
• Tuesday, February 8, 2011. Fair value accounting and international accounting standards.Exercises.
• Here are some additional links with readings on valuaton of life insurance 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:
  Most recent Practice note: http://www.actuary.org/pdf/life/c3p2_july09.pdf
  Addendum http://www.actuary.org/pdf/life/c3p2_addendum_dec09.pdf
  Prior practice notes http://www.actuary.org/practice.asp#life
  Actuarial Standards of Practice: http://www.actuarialstandardsboard.org/asops.asp
  IRS notice 2010-29 (AG43 tax issues): http://www.irs.ustreas.gov/irb/2010-15_IRB/ar09.html
  SOA article: http://www.soa.org/library/newsletters/taxing-times/2010/february/tax-2010-vol6-iss1-sup-bush.pdf
  Milliman articles on AG43:
  http://publications.milliman.com/research/life-rr/pdfs/discussion-actuarial-guideline-43-RR04-01-09.pdf
  http://publications.milliman.com/research/life-rr/pdfs/implications-of-actuarial-guideline.pdf
  American Academy of Actuaries resources: http://www.actuary.org/life/phase2.asp
  Instructions from the National Association of Insurance Commissioners:
  http://www.naic.org/committees_e_capad_lrbc_c3_market.htm
• Thursday, February 10, 2011. Optimal funding of a liability.
• Tuesday, February 15, 2011. Overview of U.S. pension system.Pension Benefits Act of 2006.
• Thursday, February 17, 2011. Pension funding and valuation. Class taught by Mr. Dale Hall. Pension funding materials from Dale: Part 1,Part 2, and Part 3.
• Tuesday, February 22, 2011. Pension funding and valuation. Class taught by Mr. Dale Hall.
• Thursday, February 24, 2011. Pension funding and valuation. Class taught by Mr. Dale Hall.
• Tuesday, March 1, 2011. Pension funding and valuation. Class taught by Mr. Dale Hall.
• Thursday, March 3, 2011. Test No. 1, on material covered through February 15, 2011.
• Tuesday, March 15, 2011. Pension funding and valuation. Class taught by Mr. Dale Hall.
• Thursday, March 17, 2011. Pension funding and valuation. Class taught by Mr. Dale Hall.
• Tuesday, March 22, 2011. Group and health insurance.
• Thursday, March 24, 2011. Group and health insurance.
• Tuesday, March 29, 2011. Test No. 2, covering material taught through March 24, 2011.
• Thursday, March 31, 2011. Ratemaking and loss reserving for property and casualty insurance. Class taught by Mr. Dale Hall.
• Tuesday, April 5, 2011. Ratemaking and loss reserving for property and casualty insurance. Class taught by Mr. Dale Hall.
• Thursday, April 7, 2011.  Ratemaking and loss reserving for property and casualty insurance. Class taught by Mr. Dale Hall.
• Tuesday, April 12, 2011. Ratemaking and loss reserving for property and casualty insurance. Class taught by Mr. Dale Hall. 
• Thursday, April 14, 2011. Ratemaking and loss reserving for property and casualty insurance. Class taught by Mr. Dale Hall. 
• Tuesday, April 19, 2011. Theoretical foundations of reserving methodologies.
• Thursday, April 21, 2011. Theoretical foundations of reserving methodologies. We will also do some exercises on ratemaking and loss reserving, posted here.
• Tuesday, April 26, 2011. Test No. 3, comprehensive.
• Thursday, April 28, 2011. Test No. 4, comprehensive.Friday, May 6, 2011, 10:00 a.m. — 12:00 noon in STV 310. Test No. 5, comprehensive.

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All information contained here is, to our best knowledge, correct, but it is merely a representation, and should not be considered to be any form of professional advice. This electronic publication should not be misconstrued as the official position of Illinois State University, or its Department of Mathematics. We are glad to provide as much information as possible here, but we kindly ask that in any decision related to matters listed here you seek additional counsel and information. Comments on this Home Page are welcome and should be sent to Dr. Krzysztof Ostaszewski  at his e-mail address: krzysio@ilstu.edu.