PEC 2007

[dec]

PEC will be held June 3-6, 2007. When do they usually post the passing candidate numbers for the June session?

Thanks.

[Paul Brand]

I don't know for sure, but I think it will take about 2 months, maybe 2.5 months for results. I understand that noone will be marking exams in June in preparation for the CIA Annual Meeting.

See you there.

[asdfasdf]

Has the registration form been posted yet?

[Paul Brand]

I just looked, and it isn't there. I've heard it will start next week. The dates and location are listed on the www.actuaries.ca website.

[Paul Brand]

Registration is up now on the website.

[dec]

When will we receive the study material?

[Kayleigh]

website says the study material will be up March 2007

[gymkam]

My observation: results take six weeks to get published on the website...

[dec]

The format of PEC is going to change next year, do you think it will be easier or harder than the current format?

How are they going to do with the people passing exams under the old and new exam systems as the new CSP and DP exams have nation-specific contents while the old C8 didn't?

[Paul Brand]

The format of PEC is going to change next year, do you think it will be easier or harder than the current format?

How are they going to do with the people passing exams under the old and new exam systems as the new CSP and DP exams have nation-specific contents while the old C8 didn't?

It's possible that the new format will not be an exam, but a written paper. When I heard about it, it sounded like a Course 7 Seminar. Integrating with the Capstone Module may be one option (and its learning objectives).

However, they haven't figured out for sure what is going on next year.

[dec]

Has anyone received the CIA mailings yet?

[dec]

For those who have attended the PEC before, how much of the general session material is being tested?

Thanks.

[Paul Brand]

For those who have attended the PEC before, how much of the general session material is being tested?

Thanks.


I had begun starting studying for the PEC last year, but didn't get into the June session, and I decided not to do the October sessions because of Course 8. Anyway, when I looked at the prior exam, there didn't seem to be any content from the General Session being tested. But, don't take my word for it, you can check the exam for yourself. It should be fairly easy to distinguish the practice specific content from the general session.

[Paul Brand]

Has anyone received the CIA mailings yet?

I haven't received them yet. I hope to begin studying next week, so there should be a lot to work on before the CIA mailings come.

[dec]

Where can we get the solution to the past PEC exams?

[Paul Brand]

Where can we get the solution to the past PEC exams?


http://www.actuaries.ca/membership/study/syl_ila_e.pdf

[dec]

How's everyone doing with the preparation? I'm not doing well at all :(

Are we allowed to produce an index to use for exam?

[Hawkshaw]

How's everyone doing with the preparation? I'm not doing well at all :(

Are we allowed to produce an index to use for exam?

I've been doing some reading, but I've been procrastinating too much. I only found out on Friday that my company doesn't provide any study time for the PEC. I was under the impression that it did.

Informal poll - does your company provide study time for the PEC, and how much?

[Paul Brand]

How's everyone doing with the preparation? I'm not doing well at all :(

Are we allowed to produce an index to use for exam?

I have the understanding that you can bring your notes into the exam, and I see no reason why that would exclude an index.

As far as how I'm doing. I've read the General Session study notes, the law and taxation books, as well as valuation and solvency. I have financial reporting and product design and pricing remaining, which is about 30% of total readings. So, I think I'm doing okay. I'm away at the FAC next week and I likely will be studying very little during that week, and the surrounding two weekends. That means I have two full weekends remaining before the exam.

I hope to have at least one full weekend to work on organization instead of just reading and highlighting.

[Paul Brand]

I've been doing some reading, but I've been procrastinating too much. I only found out on Friday that my company doesn't provide any study time for the PEC. I was under the impression that it did.

Informal poll - does your company provide study time for the PEC, and how much?


No I don't get time for the PEC. There probably should be some study time, as it is a real exam. On the bright side, the level of preparation for this exam is significantly less than for an FSA exam. On the other hand, 1000+ pages of required reading isn't a small amount.

[Toronto2]

I wasn't able to find solutions on line. Does anyone want compare answers? I'm having difficulty with question 4a) from June 2006.

[Paul Brand]

I wasn't able to find solutions on line. Does anyone want compare answers? I'm having difficulty with question 4a) from June 2006.


I'm just about done my first reading through the syllabus. Hopefully this weekend, I can start taking a look at the June 2006 exam.

[Paul Brand]

I wasn't able to find solutions on line. Does anyone want compare answers? I'm having difficulty with question 4a) from June 2006.

Here's a summary of what I came up with.

1)Solve for required capital = Total Capital / MCCSR Ratio

Company A = 240/197%=121.83
Company B = 150/217%=69.12
Total = 190.95

2)Revise Shareholder Capital Statement after purchase

Retained Earnings = 50+35-80=5
Common Shares = 130+75=205
Subordinated Debt = 60+40+60=160

3)Subordinated debt and new debenture all meet the qualifications for Tier 2 Limited Life. (or so I think)

4)Apply Limited Life limitation of 50% Tier 1 Capital = 210 * 0.5 = 105. Thus only 105 out of 160 of Subordinated Debt can be used in the mccsr ratio calculation.

5)MCCSR ratio = 310 / 190.95 = 162.35%

----

I'm not guaranteeing I did this correctly. There may be more limitations than what I found.

Here are some more questions I have:

Am I doing the right thing by taking the $80M out of retained earnings?
Am I doing the right thing by ignoring the $70M from the parent company?
Are there any problems with the subordinated debt that I haven't noticed?

-----

Regarding 4b), here are some of the tricks I noticed:
1)I think we need to group non-adjustable from both companies before doing the S calculation.
2)Given 1), need to recalculate A, D, E, and F. A = sqrt of the squares. D = weighted average based on E. E and F are both summed.
3)For adjustable, B is subject to the max of 1.

[asdfasdf]

How is the studying going for people. I did CSP last week, and really don't feel like getting back into it. I have enough work experience to be familiar with most of the concepts, and we can bring books in so there is no need to memorize. I guess I'm looking for someone to say "don't worry, most people pass so it really won't be that bad, and the 3 day seminar itself is good preparation".

(my Co. gives 60 hours of study time, much of which I used for CSP, perhaps that wasn't the greatest plan)

[Paul Brand]

How is the studying going for people. I did CSP last week, and really don't feel like getting back into it. I have enough work experience to be familiar with most of the concepts, and we can bring books in so there is no need to memorize. I guess I'm looking for someone to say "don't worry, most people pass so it really won't be that bad, and the 3 day seminar itself is good preparation".

(my Co. gives 60 hours of study time, much of which I used for CSP, perhaps that wasn't the greatest plan)

I finished reading through all the material on Friday, and took a look at the June 2006 exam on Saturday. For myself, I don't think one reading is sufficient preparation. I'm planning on doing a quick second read through (i.e. mainly read my highlights), and I'll try to get to a point where I know where to find just about everything. I think it could be easy wasting a lot of time trying to look up the answers to questions. I think there is time to look up some stuff, but I think we also need to know how to answer at least some of the questions without looking the answers up. I've heard one person suggest there really isn't time to look stuff up, but I think that's at least somewhat hyperbolic. 4.5 minutes per mark does seem like a decent sized cushion. 3 minutes per mark was the norm for SOA exams.

I have heard that the Seminar is helpful for the exam (i.e. covering a lot of the actual exam content), but perhaps not itself sufficient. I think I will get a lot more out of the Seminar if I come ready to write the exam. I hope to get to the point where I can go into the exam with a reasonable level of confidence.

[dec]

Is the check-out time for the hotel 1pm? Could I leave my stuff in the hotel room and check out after the exam on Wed (the exam should be done around 11:30 or 12)?

[Toronto2]

Hi Paul,

It doesn't seem like your solution satisfies Assets-Liabilities = Total Shareholder Capital. (it should right??)

I've adusted your solution with mine below - I'm not sure mine is correct either... :-|

1)Solve for required capital = Total Capital / MCCSR Ratio

Company A = 240/197%=121.83
Company B = 150/217%=69.12
Total = 190.95

2)Revise Company A's balance sheet as follows after issue of 60m debenture and injection of 70m from parent:

Assets* = 1140+70 from parent+60m (from sale of debenture)=1270
Liabilities = 900

Retained Earnings = 50 + 70 (from Parent)=120
Common Shares = 130
Subordinated Debt = 60+60=120
Total Shareholder Capital =370

Check: Assets-Liabilities=Total Shareholder Capital=370 yes.

*note - I ignored the sale of assets here as the distribution would change from equities to cash, however, the total Asset amount should remain unchanged

3) Revise Shareholder Capital Statement after purchase:

Assets= 1270-[70+20+60] for Company B +600=1720
Liabilities=900+450=1350


Retained Earnings = 120
Common Shares = 130
Subordinated Debt = 120
Total Shareholder Capital=370


Check: Assets - Liabilities=Shareholder Capital=370 yes.

4)Subordinated debt and new debenture all meet the qualifications for Tier 2B Limited Life. (agreed)

5)Apply Limited Life limitation of 50% Tier 1 Capital = 250 * 0.5 = 125. Thus the Tier 2B capital is fine.

6)MCCSR ratio = 370 / 190.95 = 193.767%

----

[asdfasdf]

Is the check-out time for the hotel 1pm? Could I leave my stuff in the hotel room and check out after the exam on Wed (the exam should be done around 11:30 or 12)?

Your probably safer checking out before the exam and getting the hotel to hang onto your bags. You know how exams can last longer than they're really supposed to, and leaving the exam early because you have to check out would be brutal. You could also talk to the hotel and try to get a late checkout on the last day.

[Paul Brand]

Assets = 1140 (A) +600 (B) +70(Parent) -70 (transferred to B's owners)-20(sale of common shares, cash given to B's owners)+60(New Cash from SD)-60(transfer to B's owner's)=1720
Liabilities = 900 (A)+450(B)=1350
Capital = 370
1720=1350+370 (check)

Toronto, I actually thought you were right for a few minutes, but I've changed my mind.

When you transfer all the assets and liabilities, by transitive properties, you are also transferring the shareholder's capital (capital is a component of the assets). So, I think you need to combine A and B's capital together, and subtract the purchase price from Retained Earnings.

Also, if the capital wasn't transferred, I think B's subordinated debt would need to go somewhere. (This was the first problem I realized when I thought your answer was correct).

I'm still not sure I'm right, so let me know what feedback you (or anyone else) has.

---

I did find one problem with my solution.

MCCSR Ratio = 315/190.45= 165%

On paper I wrote 210+105=310. I'm not sure how I figured that.

----

More second guessing...

I would guess that B's common shares would be part of B's owners. So, I think the 75M should be transferred to Retained Earnings. Now, the question is what to do with that Subordinated Debt from B. I think that is just transferred over. But I don't really understand how Subordinated Debt works when the issuer is bought out by another company.

---

Let's presume that the Subordinated Debt is redeemed by B (and a corresponding decrease in B's Assets).

Capital:
RE: 50(A)+35(B)+75 (B CS)-150 (Purchase)+70(Parent Injection) =80
CS: 130(A)
Tier 1: 210 (80+130)
SD/Tier 2B: 60(A)+60(New debenture)=120

Max Tier 2B = 50% Tier 1, or 50% x 210 = 105.

Total available capital = 80+130+105=315
Required Capital = 190.95

MCCSR Ratio = 315 / 190.95 = 165% (same as without sale of Subordinated Debt because the marginal 40M of subordinated debt doesn't qualify for Available Capital for MCCSR)

Assets = 1720 (See above)- 40 (SD Redemption) = 1680
Liabilities = 1350 (see above)
Capital = 330 (= 210+120)

[asdfasdf]

Good luck all, my powers of perception are strong enough that I think I can spot a fair number of actuaries in the Marriot Ottawa

[Paul Brand]

:party:

Looks like about 70% of those registered pass.

http://www.actuaries.ca/membership/pec_success06-07_e.cfm

I'm finished all the educational requirements now for the FCIA. Is there anything else I need to do before attaching letters by my name?