The phrase “favorite actuarial exam” may sound like a paradox – how could any of the exams be considered enjoyable?
However, when you finish your Fellowship credential, you have the luxury to contemplate this question knowing that the painful exam process is over.
For many actuaries, their favorite exam may be the one that was easiest to pass (and vice versa for the least favorite).
However, I find that certain exam topics/structures are more enjoyable than others, so I will describe my favorite preliminary and Fellowship exams.
Preliminary Exam: MLC (now LTAM)
MLC (LTAM) had one of the largest syllabus requirements out of all the preliminary exams, and many students think this is the hardest one. So, what interested me about this exam?!
I love how practical the material is to financial services. In this exam, you learn about premiums (cash inflows to insurance companies from customers), reserves (portions of these cash inflows that are set aside for future payments to customers), benefits (payments from insurance companies to customers), and other relevant actuarial concepts.
These concepts form the building blocks for the calculations used with insurance and annuity products. You learn how these cash inflows parallel cash outflows and how reserves bring the two concepts together. You also dig deeper into learning how mortality projections and specific product features influence reserves and projected benefit payments.
I enjoyed learning these topics to the extent of being able to work problems from first principles. I recall starting my studies very late for this exam, so developing an understanding of these themes served me well in accelerating my knowledge of the syllabus.
The best part about studying for MLC was seeking to understand the connections between syllabus concepts. This allowed me to quickly grasp new concepts that I encountered.
This is similar to the “knowledge tree” analogy from our book. I developed a strong understanding of the foundations (trunk and branches of the tree), so it became very easy to attach new details (leaves) as I worked through the syllabus.
Creating these connections allowed me to further reinforce the concepts that I learned early on in my studies, while accelerating through the new syllabus topics. This was the first exam where I fully realized the benefits from the “knowledge tree” approach of focusing on fundamental concepts.
Fellowship Exam: Strategic Decision Making (SDM)
The Strategic Decision Making (SMD) Exam is typically taken last out of the three fellowship exams on the ERM/Corporate Finance track. For this exam, I most enjoyed learning how the various syllabus objectives interrelate. It was interesting to connect the dots, and I always look forward to finding ways to expedite my path to understanding the material.
Some of the main topics on SDM (when I took it), included risk management, managerial accounting, capital management, and strategic decision making (of course). The risk management and managerial accounting sections tie nicely into capital management decision making (how companies divide total resources across different business and product lines).
The accounting provides background on metrics and other quantitative considerations that impact these decisions. Capital management considerations have a strong influence on strategic decision making, and company leaders must prudently account for risk in striking a quality balance between risk and return.
In the final sections, I remember going through several short case studies, which reinforced the previous concepts that I mentioned in this article. Overall, I loved the fact that this exam did not go into too many specific details and number crunching; I appreciated the higher-level conceptual frameworks that came into play while studying for this specific exam. Some may prefer exams that are more numerical in nature; it will probably come down to preference.
Final Thoughts
In reflecting on both exams, I had a particularly good experience by finding many connections between syllabus topics. This allowed me to more quickly grasp the readings, and it increased my engagement with the material.
More specifically for MLC, my goal was to become a guru on reserves, so that I could calculate reserves at any point in time for any product description thrown at me. For SDM, I strived to become as strategically sound in risk, capital, and accounting, and this made the end goal more exciting.
I recall that my fellow exam takers disliked both of these two specific exam sittings because there were a lot of curve-balls and “unfamiliar” questions tested on the actual exams, particularly in my MLC sitting. My experiences were very good for that same reason; my study approach to these two exams made me much more effective to address test questions that deviated from typical practice problems found in exam manuals.
Perhaps most importantly, connecting the higher-level concepts made the study process more fun for these two exams, and this is a critical factor for maintaining momentum and achieving exam success!
Study Smart, Pass Fast, Live Life
Mike & Roy