Phoenix Actuarial Department

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My career as an actuary - Kihong (Sam) Sung, FSA

My career as an actuary - Kihong (Sam) Sung, FSA
© 2003 Kihong Sung



1. How I became an actuary. I majored in physics as an undergraduate at Bates College in Lewiston, Me. In my senior year I had a few interviews with on campus corporate recruiters. While I intended to pursue Ph. D. in physics in a graduate school, I wanted to earn some money during the summer after my graduation as I needed money desperately in order to pay unpaid dorm expenses at Bates. While I had some scholarship, it wasn't sufficient to pay all my expenses and my family couldn't send any money to me. At that point my intention was to apply for a permanent programmer's position with any company. At one interview with an insurance company, the recruiter told me that I was overqualified as a programmer therefore he wouldn't hire me. Then he advised me to apply for an actuarial trainee. Until then I had no idea about an actuary. The recruiter gave me several brochures about actuary. He also explained about career paths available to an actuary as well as its compensation potentials. Based on that interview, I applied for an actuarial trainee position with Aetna Life and Casualty and also took the first examination in May, 1962. Upon my graduation I joined Aetna in its life division with a monthly salary of $500. As I passed my first examination my salary was increased by $25. However, all along I intended to go to a graduate school in September. Therefore I left Aetna to enroll in Ph.D. program in physics at University of New Hampshire. Meantime in November I took the second actuarial examination and passed while I was in UNH. At UNH, I was a teaching assistant making $200 a month. In 1962 I also married my Bates College sweetheart. However unexpectedly, she became pregnant. At that point I realized that I needed a good paying job. Thus I joined MONY in February of 1963 at an annual salary of big jump from $200 a month.

2. Actuarial Examinations. Among companies I chose MONY primarily because of its generous study time allowed to its actuarial students. It generally offered about 220 hours of the company time each year. In 1963 I was able to pass 3 more exams and became an ASA. Because I was one of the most successful students at MONY, I made a good impression among actuaries as a smart trainee. I passed the next 3 exams, one every six months. At that time the first 8 exams were based on multiple choices only, therefore one's writing ability played no part in the exams. However the last two fellowship exams involved essays only. In addition one must choose between Individual or Group topics. As my experiences at MONY were Individual only, I thought that I could expand my knowledge by selecting Group. In hindsight it was a mistake. Not only was I handicapped by my writing capability but also by the lack of practical knowledge in Group. I came to this country in 1959 at the age of 26 and I was still thinking sometimes in Korean. Therefore I wasn't able to write fast enough to make a passing curve. Thus I failed both 9th and 10th exams in the 12 months period. From this experience I switched the topic to Individual and also memorized the most of study materials almost word by word so that I didn't have to pause to compose sentences during an exam. Thus I passed the last 2 exams in succession and became a FSA in July, 1967. I was the first Korean FSA and in 1967 there were only 5 Asian fellows in the Society(3 Chinese, 1 Japanese and myself). However in 1970s many Chinese were successful in becoming fellows. Regrettably Korean actuarial students weren't successful during 1970's and there wasn't any new Korean fellow until 1984 when Jeong S. Han became the second Korean FSA (He is currently VP of MetLife and Exec. VP of MetLife,Korea). From my experiences I think Koreans tend to be impatient with the grinding nature of the fellowship exams and give up too easily. Also for a first generation Koreans language handicaps are a big hurdle. On the other hand Chinese tend to be very patient and well disciplined. Also structurally Chinese language may be a less of handicap than Korean language.

3. Career with MONY I started with MONY in the early February of 1963. At that time the most actuarial trainees' job can be described by one word-boring. My beginning was no exception. In those days there wasn't any pc.s. We worked with electro-mechanic calculators made by Friden. Our job usually involved adding, subtracting, multiplying or dividing between columns of numbers in an actuarial caps (many of you probably aren't familiar with the term-it is a spread sheet). Usually we didn't even know the rational behind our tasks. We simply followed instructions at the top of each column. Occasionally we may get assignments requiring some brains such as computation of surrender cash values or summarizing various companies' field compensation contracts, etc. The most companies' actuarial training program involved a rotational assignment from one area to another. My second assignment was in the EDP. There my responsibility was to assist an actuary to convert the company's individual valuation system from punch cards to tapes. The company's central computer was 40k memory IBM machine! After a year there the company decided to move the company's policyholder service functions including EDP to Syracuse, New York where MONY built large twin office towers. As no actuaries including the actuary in charge of the tape conversion wanted to move to Syracuse, the company asked me to move to Syracuse to complete the conversion. It was my first meaningful job with a lot of responsibilities. While Syracuse was cold with a lot of snow in winter, I stayed there for 2 years and the tape valuation system was successfully implemented. Also there I finished the actuarial exams and became a fellow. Following the assignment in Syracuse, I returned to New York home office as an assistant actuary in charge of financial statement, which involves preparation of the annual statement, short and long term financial projections and various financial analysis. I was quite fortunate that I had very fine and fair actuaries as my superiors at that point. As I came to the United States at the age of 26 and my English pronunciations were taught by Japanese educated English teachers, I had and still have heavy almost incomprehensible accents. Despite this handicap in spoken English, I had one of the fastest career paths at MONY. By 1976 I became a full VP in charge of the Controller's Department and one the top 15 officers of the company. During 30 years with MONY, I never personally experienced any racial discrimination. Actually I was the first minority full VP in MONY's 135 years' history. In 1981 at the height of my career, there was an unfortunate event in the tax department which was under my supervision. Due to a certain technical error the company was exposed to lose substantial sums of tax savings achieved by careful tax planning. As the result of this incidence my career was stymied and more or less stood still for a number of years. Ironically the company eventually prevailed over IRS and didn't lose the tax savings. During the second half of 1980's MONY undertook reckless diversification activities to grow. This together with the souring of mortgage portfolio, MONY fell into financial difficulties in the late 1980's. In order to survive MONY sold off the most of non-core business and also implemented a voluntary early retirement program in 1989 in order to cut expenses. Under the program a number of old-timers including the Chief Actuary retired from the company. I also volunteered to retire but the CEO persuaded me to stay and I became senior VP and Chief Actuary. My experience as Chief Actuary was difficult one. The company was financially weak and the bankruptcy of Mutual Benefit and a downgrading of the company by Moody's exposed the company to a liquidity crisis. With sustained efforts the company was able to overcome the crisis and became financially stable by 1993. I retired from MONY in March of 1993 after more than 30 years of service. The reason for my early retirement was several. The first, my wife of 30 years passed away in 1992 after a long illness. As I was offered a job in Korea by MetLife, I felt that a change of scenery might alleviate my deep sorrow. Secondly by that time all of my colleagues were gone and the management was dominated by a young outsiders. I felt quite lonely inside the company. Finally MONY's pension formula was such that I could maximize my pension benefits retiring at the age of 60. Actually I retired at the age of 59 1/2.

4. Career with MetLife and Korean operation. I joined MetLife as of March 1, 1993 and named as president and representative director of Kolon-Met Life Insurance Company, Seoul, Korea. The company was a joint venture of MetLife and Kolon Group, a textile manufacturer in Korea. It was established on June 1, 1989 and commenced operations in October, 1989. While MetLife had 51% majority shares, the board was represented evenly, 3 to 3. The management had no tie-breaking mechanism. The company's distribution system was mostly based on part-time female agents (mostly housewives). It was typical of Korean life insurers. The female agency system usually had a low productivity (around 2 policies a month), very low persistency (13th month persistency rate of around 50%) and very low agent retention rate (13th month rate of around 15%). Financial consequences of such distribution system were obvious. When I joined, it accumulated 'realistic' statutory deficit of around $40 million vs. $18 million of total paid-in capital. The company was technically bankrupt. However under the Korean law at that time a new company was allowed to defer 50% of all expenses in addition to a modified reserve valuation system. For that reason its statutory surplus was still positive. The company was projecting a loss of around additional $20 million in 1993. Prior to my joining the company it went through a tumultuous period due to management disputes between partners. The Kolon Group's coCEO was involved in setting aside slush funds to be used for briberies as well as his personal expenses. For that reason MetLife sued the coCEO and after a lengthy negotiation co-CEOs from both partners were dismissed and new coCEOs were appointed and I was one from MetLife. Thus there were still lingering animosities between partners when I joined the company. I knew the situation well because I went to Korea few times in 1992 at the request of MetLife and reported my assessment of the company to MetLife. My first effort to reform the company was to persuade my partner to restructure the company's distribution system. Under the partnership agreement Kolon side had primary responsibility for sales and marketing. Therefore I lacked the authority to change its distribution system. My partner had very little knowledge of life insurance and was also suspicious of MetLife's intent stemming from prior disputes. He was influenced by the prevailing industry belief and practices of 'hire as many agents as possible at any cost then the company will grow past a critical mass and become profitable'. He was also heavily influenced by the company's sales management who were hired by Kolon. Needless to say I failed. At that point all I could was to prevent the company's distribution system from deteriorating further. I mainly concentrated my efforts to preach importance of agents selection process, improvement of policy persistency and a sound product pricing. After 3 years of frustrations, I persuaded MetLife to sell its share to Kolon and start a new company. However Kolon wouldn't even give us an opportunity to discuss the sale. Earlier Aetna Life which had a joint venture with a Korean partner gave up its share without compensations. Kolon was probably hoping that MetLife would do the same. At the end of 1995 Kolon replaced its representative to the company (president by that time I became chairman). He was former secretary to the Kolon Group's chairman. Therefore he was quite influential within the Group. He also had very little knowledge about insurance but he was quite analytic and eager to learn. By 1987 he realized that the company had no future as it was, therefore he agreed to persuade Kolon Group management to negotiate to buy MetLife's share. We started the process in the fall of 1997 involving an actuarial valuation as well as other assessments. However in the midst of the negotiation Korean foreign currency and the ensuing economic crisis arrived and changed the process. Now Kolon wanted to sell its share to MetLife. I really didn't want MetLife to buy Kolon's share because it would be very difficult to restructure the company. It accumulated cumulative statutory loss of around $80 million and still had very inefficient distribution system. Also under Korean labor law it was impossible to dismiss any employees including field management personnel. However MetLife was willing to take such risks and the buyout was finally consummated in March of 1998. We started restructuring right away. First, branch offices were consolidated into 40 from 120. And through a voluntary termination program about 25% of salaried employee (mostly field management) were terminated. Number of agents were reduced from 2700 to 1600 with a modest reduction in sales(we terminated unproductive agents). New selection process and training program were introduced. Also sales quality control program was implemented to reduce incomplete sales. In July we also introduced a professional male agency system where highly selective well educated males were hired as captive agents. While we struggled at the beginning and had many failures throughout, the restructuring and new agency system was unqualified success. By July, 2002 when I retired, MetLife, Korea had 1000 female agents with average productivity 6 times higher than before. It also had 700 professional male agents with average productivity 10 times higher than that of female agents before restructuring. MetLife, Korea's 13th month policy persistency is now around 93% which is better than that of MetLife in the United States. Last year MetLife, Korea earned around $35 million in statutory profits. While I am happy about how MetLife, Korea turned out, I have had many frustrations and disappointments in Korea. First it is still a corrupt society. Corruption is not only prevalent with politicians and governments but it also spread all over including educational system, religious organizations and judicial system. Bribery, in one form or another, is a norm rather than exception. I like to state one example how Korean Jaebuls are corrupt. You all may know Kim Woo Joong, the fugitive former Daewoo chairman, who was convicted twice for briberies to Roh Tae Woo and Chun Doo Whan amounting tens of million dollars. During the 1998 economic crisis, the industry organization representing all Jaebul groups elected Kim Woo Joong as its chairman! You may know what happened to Dae Woo Group. It routinely falsified its books and siphoned funds for briberies as well as his personal account. As the result it cost taxpayers in billions of dollars. Of course many companies had habit of understating liabilities and overstating assets. This custom was prevalent among life insurance industry too. Until recently many life insurers inflated its sales results as well as their assets. At one point I used to discount by about 25% of the industry's sales figure. Some companies also understated reserves too. Also many life insurers made fraudulent or illegal loans to related parties, friends, relatives or management. The result of this corrupt practices as well as the inefficient distribution system was many bankruptcies of life insurers between 1998 to date. It cost the government and taxpayers over $5 billion to bail out policyholders. Of course for Koran banks the figure may reach $100 billion. Korea Life, the third largest life insurer with assets of over $10 billion went into bankruptcy in 1999. The major causes of the bankruptcy were an extravagant home office building as well as illegal related company loans. The company contacted me in Dec. of 1997 asking whether MetLife could bail them out. We negotiated over a year how MetLife might take over the company and make it a sound insurer. MetLife performed a due diligence in the fall of 1998 and found its net assets deficiency to be several billion dollars. After a lengthy discussion with Korea Life's management we brought it to the government's attention in January of 1999 since without the government's infusion of funds survival of the insurer wasn't possible. The government attitude was quite hostile towards MetLife. It openly suggested that MetLife was in collusion with Korea Life's management to defraud the government. It didn't believe that Korea Life's net deficiency was so large. In the end we withdrew from the process. The government put Korea Life for an auction twice but failed to find any credible bidder. For 2 and half years Korea Life was run by the government and it infused over $3 billion into the company. In the fall of 2001 it was again put to an auction. While MetLife was one of 2 finalists, we didn't succeed. It is quite curious that HanWha Group which was owners of a bankrupt merchant bank as well as a bankrupt local bank (the bankruptcies cost taxpayers several hundred of million dollars) wound up as the new owner! I was going to retire in 1998 after the take over of MetLife, Korea. However I was involved with a project in Japan to find out whether MetLife should get into Japanese market. Throughout 1970's and 80's I developed an extensive network of Japanese contacts because I offered many useful information and advices to Japanese insurers as I was one of few actuaries who could speak Japanese. In 1998 we were negotiating with a major Japanese insurer to form a joint venture in Japan to distribute new products through its extensive female distribution system. MetLife asked me to stay to help stabilize Korean operation as well as to pursue Korea Life and Japanese joint venture. By 2002 Korean operation was on a solid ground but the acquisition of Korea Life and Japanese joint venture were failures. Thus I retired at the end of June of 2002. When I went to Korea, one of my objectives was to help life industry modernize its operations. I had been advising Korean companies since late 1970s as their representatives visited me quite often in my New York office. In 1980 I was invited by Samsung Life to conduct classes for a week. I gave speeches several times to industry representatives in Seoul in 1980's. In 1994 the Korean Insurance Supervisory Board asked me to write a paper how insurance laws and regulations could be improved. When the paper was printed in its quarterly publication, it was greeted with some skepticism. In 1995 at the request of the Insurance Supervisory Board I gave a speech to the regulators how to approach then looming industry solvency crisis. At that time I urged swift actions to rescue or dissolve weak insurers. But the Board didn't act. If it acted then, cost to the government would have been only around $1 billion compared to the eventual over $5 billion. After the 1998 Korean economic crisis the most of my recommendations were implemented. I couldn't take a personal credit for the change as advisers from IMF also made similar recommendations.

5. My philosophy as an actuary and a person. As I look back at almost 70 years of my life, the most important thing guiding my life was and still is the sense of personal integrity. This alone would deter me from doing wrong things under most circumstances. Although I did my shares of foolish things and mischief in my younger days, I think that I conducted myself with dignity most of the time. I say 'most of the time' because I am a human being after all. It is important for a person to establish a sense of what is right and what is wrong and try to do right things all the time. It was most difficult to maintain personal integrity while I was in Korea because the traditional Korean relationship dictates doing personal favors to your friends and relatives regardless of merits of such actions. I was called 'cold' by many of my personal friends and relatives as I would never mix company business with personal relationships. An actuary is a highly esteemed profession. Therefore I always felt that I should be responsible and accountable in conducting the company business. My philosophy was that as long as an employer pays for your service, you should do your best to fulfill your responsibilities. In my 40 years of service I never asked for a raise. I always felt that if I wasn't appreciated by the current employer, I should seek a new employment. Luckily I felt that I was almost always appreciated and treated fairly. However I, in general, didn't bring company work home. I always thought that when I was home, my family needed my undivided attentions. To me it was right things to do. When I became the CEO of MetLife, Korea, I also preached this doctrine to all of the company's employees. Some officers were upset because such preaching affected his department's performance. I also never believed in habitual long office hours. I was in general 9 to 5 person. Actually it was more like 7 to 4 person as I tried to avoid rush hours. When any of my subordinate kept habitual long hours, I asked him or her to keep time records to see how he or she spent time. If it was warranted, I reduced his or her work loads or hired an additional person. However in most cases they were just workaholics. I emphasized to all of my subordinates that as long as they fulfilled their job responsibilities, time spent at office wasn't important. While job performance was important, it is crucial to treat your subordinate fairly and with compassion. I did my best to accommodate my subordinate's personal tragedies or family circumstances. Whenever my subordinate wanted to leave the company, I always tried look at his or her situation objectively and gave an advice accordingly even when it was against best interest of the company. Becoming a FSA is an arduous task. It not only requires a high level of mathematical aptitude (Majority of FSAs probably had 800 score in the math section of SAT), but also requires unusual amount of discipline. It is well recognized that most of FSAs are well disciplined and have high degree of perseverance. Most FSAs are proud of their profession. On the other hand many FSAs are intellectually arrogant because they tend to overvalue their accomplishment and ability. It is one thing for an actuary to think that himself or herself is superior to non actuaries, but to show such feelings outside would be quite detrimental to one's career. However once he or she is convinced, it is hard not to show. An actuary should train himself or herself to think that he or she is simply a professional, otherwise he or she is no better than others. Having the sense of humility is very important in life. Humility and Integrity have been two pillars of my personal philosophy that have guided my professional and personal life.



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