Introductions

• Role of assessor and staff actuary

• Housekeeping
• Introductions
Agenda
AM
• Why Modelling?
• What to avoid
• Checking a model
• Planning a model
• Spreadsheet design and audit trails

PM
• Charts
• Summaries
• Exam marking
Why Modelling?
“The newest computer can merely compound, at speed, the
oldest problem in the relations between human beings and in
the end the communicator will be confronted with the old
problem of what to say and how to say it.”

Edward R. Murrow – American broadcast journalist

Objectives of Modelling
Expansion of business and communication skills within the
syllabus
To ensure we can:
• Model data
• Maintain an audit trail for both a fellow student and a senior
actuary
• Apply, interpret and communicate the results to a senior
actuary
Communication is the key aspect
“Do not seek to follow in the footsteps of the
men of old …
… seek what they sought”

Matsuo Basho – Japanese poet and diarist, born 1644

Day 1
• Learn and appreciate good practice
• Discuss spreadsheet design and audit trails
• Consider communicating results

We will learn together during Day 1 – but this is still part of

the exam assessment and conduct needs to be appropriate.
Warning!

Professional behaviour is mandatory

Students must NOT:

• Add screensavers/ games/ change settings/ use templates

• Surf the internet or search the hard drive
• Or otherwise misuse the IT equipment

Inappropriate behaviour may lead to expulsion from the practical exam,

with disciplinary consequences.
Recycling is good, but …
Start your model from scratch – don’t import a template!
Day 2
• To pass the examination assignment
Day 2 - Criteria for Passing

The audit trail and summary give:

• A reasonable overview of model and results

which could be:

• Followed by a senior actuary

• Corrected and worked on by a fellow student
Your audiences
Fellow student Senior actuary

Audit trail:Yes Yes

Summary: No Yes
Day 2 Environment

• We work under strict examination conditions during Day 2

• You can ask questions
• You can refer to material used in Day 1
• Core reading and tables on PCs
• Severe consequences for cheating e.g. plagiarism
• NO EXAM MATERIAL MAY BE TAKEN AWAY OR
DISCUSSED OUTSIDE COURSE
Why Bother?
• Technical Actuarial Standards (TASs)
• Actuaries’ Code
• Regulators’ expectations
• Sarbanes Oxley requirements
• Solvency II
What might go wrong?

• Not doing the assignment that was set

• Not completing the assignment
• Not understanding the assignment
• Candidates will lose marks if their answers are not clear

NORMAL EXAMINATION PRINCIPLES STILL APPLY

What might go wrong?

• Not enough detail

• Too much detail
• The summary should cover all of the issues raised

WRITE FOR THE STATED TARGET

Model Documentation, Analysis and
Reporting

Session 2 – Checking a Model

The importance of checking
Why include checks?

Two types:
– Within the model – auto/self checks
– Within the audit trail – reasonableness checks

There are 5 marks available for checks

Auto checks

Should be:
– Logically sound
– Independent of what is being checked
– Clear to another user/reviewer
– Documented
What should you do if a check fails?
Reasonableness checks
– Should be applied at every stage
– You may not always realise you are doing a reasonableness check!
– Try to think about what an answer should look like before you do the
calculation
– Document them clearly in your audit trail
– Some ideas:

• Comparison between results / scenarios

• Materiality and direction
• Adjusting parameters
Example: past exam assignment L6

For 5 minutes consider:

– What auto checks might you usefully build into this model?
– What reasonableness checks can you apply at each stage of the
modelling?
Model Documentation, Analysis and
Reporting

Session 3 – Planning a Model

Why a session on planning?

Many students appear to struggle with planning in the exam:

“I started this exercise making the situation way too complicated.

I didn’t get onto a simplified approach till after lunch and ran out
of time to complete the audit and summary. This is not trying to
make excuses; I just wished I had planned better at the start!”
Assignment S01

• Plan out how you would create your model to produce the
required results (½ hour)
• Discuss in pairs (¼ hour)
• Feedback and discussion (¼ hour)
Some points to consider …
• What is this model trying to achieve?
• How should I do the detailed calculations?
• What guesses can I make about the results?
• What data do I have? What is the source?
• What assumptions do I need to make?
• What parameters should I specify?
• How should I structure the workbook and sheets?
• What are the possible pitfalls and risk areas?
… using time well
Model Documentation, Analysis and
Reporting

Session 4 – Good Spreadsheet

Design and Audit Trails
Objectives

To consider what is good spreadsheet design

To discuss what makes a good audit trail

By considering a weak example and suggesting improvements

Summarise aspects of …

• Good design • Good audit trails

Good Design

• Specification given
• Layout clear
• Checks included
• Danger areas flagged
• Tests made
Good Audit Trail

• Specify
• Record
• Explain
• Instruct

Which is most important?

Audit approaches

• Separate or integral?
• Comments or prose?
• Write as you go, or at the end?
• Narrative style …?
• … or descriptive style?
Model Documentation, Analysis and
Reporting

Session 5 – Charts
Model Documentation, Analysis and
Reporting

Session 6 – Summaries
Good Summaries

To consider
• Features of a good summary
• The criteria for passing this module
Brainstorming Next Steps

Brainstorm the generic ‘next steps’ which could be used for any
assignment
Example from L6

• Review information from L6

• Consider ‘next steps’
• Compare with sample solution
Example from S01

• Review information from S01

• Consider ‘next steps’
• Compare with sample solution
Exam Requirements for Summaries
Drafted for a senior actuary with:
• Bullet points plus charts or other visual aids
• Using around 5 pages, well set out
• Overview of assignment
• Description of any data, method and approach
• Main assumptions
• Key results
• Main conclusions and comments/ next steps
• Answering all questions asked

Carries 40 marks
Summary versus Audit Trail
Summary
• Overview of project
• Data description
• Data validation – summary
• Assumptions
• Methods – description covering
how/ what/ why; no Excel
functions
• Results
• Conclusions + next steps
FOCUS ON AUDIENCES
Audit Trail
• Overview of model
• Data description
• Data validation – detail
• Assumptions
• Methods – detail covering how/
what/ why/ where including the
use of Excel functions
• Auto-checks of calculations
• Reasonableness checks
Weak S01 Summary

Reinforce the criteria using a weak example

Model Documentation, Analysis and
Reporting

Session 7 – Marking a Sample

Script
Aims
• Review the marking schedule
• Apply the marking schedule
• Consider how the sample solution could be improved
• Appreciate key criteria for passing on Day 2
• Look at a ‘good’ pass
Marking Schedule

• Lots of marks for audit

• Lots of marks for summary
• Few marks for technical aspects
• Few marks for independent working

So ask for help, if necessary, and focus on communicating

clearly.
On Asking Questions

“He who asks a question, appears a fool for five minutes …

… he who doesn’t ask, remains a fool”

Thomas J Connelly
Using Excel Help
Offline Help
• ? button on toolbar, or F1 on keyboard
• Click ‘show me offline help from my computer’

Insert Function
• fx button on Formulas toolbar
Criteria for Passing
The audit trail and summary give:

• A reasonable overview of model and results

which could be:

• Followed by a senior actuary

• Corrected and worked on by a fellow student
Applying the Marking Schedule

• Mark the specimen (30 minutes)

• Feedback
Criteria for Passing

The audit trail and summary give:

• A reasonable overview of model and results

which could be:

• Followed by a senior actuary

• Corrected and worked on by a fellow student
Model Documentation, Analysis and
Reporting

Session 8 – Summary and Outline

of Examination Format
Reminder

You can take away all the material from today to revise from.
And it can be referred to tomorrow …

BUT no material relating to the exam tomorrow may be

taken away!
Day 2 Examination Format

• Start exam at 8.40am

– Can work through to 4.30pm
– With lunch at 1.00pm
– Will be similar to previous assignments
– Assessor can help, if needed
• No key strokes after 4.30pm!
Feedback
• Feedback via email
• Please respond!

Any other questions?

Day 2 Examination Format

• Start at 8.40am
– Assessor can help, if needed
– Lunch at 1.00pm (at least 30 minute break)
– Can work through to 4.30pm
• No key strokes after 4.30pm
Checklist for End of the Exam
• No keystrokes after 16.30 (work time stamped)
• Save and close files and save as instructed
• See assessor and check he/she has:
– The final version of your work
– Your sign off form
– All paperwork from today (exam papers, notes, printouts), separate
from your sign off form
Do not discuss this assignment or disclose its contents to anyone (see
sign off form).
Failure to comply with this can result in disciplinary consequences.