A working life: the actuary

The numbers Robin Houghton crunches really are deadly serious. But, he tells Jill Insley, his efforts often result in a much-improved income for clients
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Jill Insley guardian.co.uk, Friday 7 October 2011 23.03 BST Article history

Robin Houghton is a senior actuary at Partnership Insurance. Photograph: Graham Turner

Want the good news? "It's better for you to be moderately overweight than underweight. And drinking? Being a heavy drinker will only have an impact on you if you get liver damage." This is not an excuse to go on a binge but an analytical assessment of health risks by Robin Houghton, a senior actuary for Partnership Assurance, a company that specialises in financial products for people with impaired health. Houghton spends his days poring over data relating to the company's customers, specifically whether they have died within the expected timeframe. Analysis of this data enables Houghton and his colleagues to work out how much income they can afford to pay new customers suffering from the same illnesses and conditions. It's like the old joke: how many actuaries does it take to change a lightbulb? Answer: how many did it take last year? Partnership Assurance is one of just two companies in the UK selling retirement and longterm care annuities designed for people who are already ill, or have suffered a critical illness, or have a lifestyle that is likely to result in a shortening of their life: people with socalled "impaired lives". The company asks far more detailed questions about the health and lifestyle of its customers than is typical for a normal insurance company. As a result it has a data bank that makes Houghton smile like the cat that has got the cream. It enables him to boost the

income of some annuity purchasers by up to 40% compared to traditional annuities. "Annuities with steroids," he says. This must be one of the few purchases you can make where ill health is a benefit. The more health issues you have, the higher the income you are likely to receive. The information is very valuable. Houghton shows me a typical page of tables row upon row of tiny figures showing what percentage of those who have suffered a particular illness and were expected to die in a certain year have actually died. In 2010 and 2011, for example, 0% of people in a particular grouping who have suffered a stroke have not died, but in a few other columns I spot percentages of more than 300% (possibly people who have heart problems). It's quite fascinating, but he won't let me take the page away for further scrutiny. Doesn't exposure to all this information about ill health make Houghton paranoid about his own fitness? "I think I was an obsessive about my health before I became an actuary," he says. Houghton studied pure maths at the University of Exeter (he got a 2:1, "sport and other distractions were far more appealing"), and after working as an internal auditor for an investment bank he joined, insurance company Winterthur Life, as a trainee actuary. "I knew what I wanted to do in my last year at university, probably through someone coming in a describing a job where I could actually use maths. You don't use maths in accounting," he says. Being a trainee actuary is like being a posh apprentice. You are paid a very decent starting salary between 25,000 to 30,000 is typical and work most of the time on low-level duties with study time thrown in. Houghton says he worked four days a week and studied on the fifth. Most students take about four years to complete the training but Houghton took two and a half: he did a lot of studying in the evenings, too. The subjects studied include economics, accountancy, financial mathematics, life contingencies (estimating how long people are going to live) and construction of mortality tables. "There were 11 exams, but now they've split some of them up and shortened the length. One of the six-hour exams has been shortened so it's not so hard on the students," he says. The rewards for qualifying are rich. Actuaries are in short supply in the UK, right now: although Houghton points out that none of the UK life insurance companies struggled during the 2008 banking crisis "that's a testament to the regime that the Financial Services Authority [the insurance company regulator] had in place" the EU wants even greater protection for consumers in the form of capital reserves and risk management standards that will replace the current solvency requirements in October 2012. Houghton regards this as "massive over-protection" that will prove bad news for policyholders, as the tying up of money in reserves means it cannot be used to generate big returns for them. But it has proved very good news for actuaries, as it has bumped up demand even more than normal, and a qualified fellow of the Institute of Actuaries (the regulatory body in England and Wales) can expect to earn in the region of 65,000 while those at the top of their profession can make in excess of 250,000.

The demand for actuarial skills is worldwide. "Every insurance company and every government around the world needs actuaries," says Houghton, who spent enough time in Switzerland while working for Winterthur to develop a passion for skiing. In 2001 he moved to a consultancy, Watson Wyatt now part of Towers Watson to work on financial management and mergers and acquisitions, including the purchase of UK giant Pearl by Sun Capital, an investment vehicle set up by Punch Taverns founder Hugh Osmond. He enjoyed this work because it enabled him to "work out what made insurance companies tick, what makes them a success or not, and where cost savings could be made". His role at Partnership is very different. "Basically, I make sure we have enough money to pay policyholders and try to estimate how long they are going to live, and what kinds of things are going to cause financial stress for us worst case scenarios," he says. "We're continually trying to find new risk indicators. Looking for that one in every 200-year event." These might involve using generalised linear models and complex mathematical modelling programs, talking to experts and doctors, and following medical research. "For our particular company it could be a cure for all cancers. There isn't [any immediate prospect of this], unfortunately for people with cancer. There's been very little breakthrough in the last 30 to 40 years medical improvements have all been very slow and gradual, with the biggest improvements being in circulatory diseases. "You do tend to concentrate on things that go wrong, rather than right. Actuaries are a depressing lot really," he goes on. "There are lots of things that could be good for us like a flu epidemic." Most people expect actuaries to be how can I express this politely? a little nerdy, dusty, living in suburbia and definitely wearing outdated, wire-framed spectacles. Any sense of humour would be extremely dry and well hidden. But while Houghton seems very disciplined, he doesn't match the rest of this model. He is lean no doubt from the countless marathons and ultra-marathons he does (he came 4th equal in a 100-mile race around the Lake District last year and is running the Florence marathon in November) and there are no glasses in sight. His eyes have been lasered, a treatment taken after careful consideration of the operational success statistics and cost compared to buying glasses for the rest of his life. He also laughs easily and lives on the Kent coast in a home which has a big garden and orchard with some New England hybrid hens. Partnership employs seven qualified actuaries and 15 students a big number for what is still a small but fast growing insurer (insurance giant Aviva would have hundreds of actuaries, in comparison). So what is the company after when recruiting a trainee actuary? "What we look for is not necessarily people who have worked in this area, but those who are bright and adaptable and that you think you can mould into good actuaries. They need to be very accurate in all the work that they do, hard-working and have intelligence about the way things are done, able to untangle complex problems, inquisitive about the way things work and not afraid to speak out."

Many doctors complain that they spend dinner parties being quizzed by their fellow diners about their ailments, while estate agents face endless questions about house prices. Does Houghton get asked how long his fellow-diners are likely to live? "No, I'm much more likely to be asked about the running and skiing," he says. "But the thing that really gets me, when in those situations, is seeing someone smoke. That can knock four or five years off their life." Curriculum vitae Pay From 30,000 for a trainee to 65,000 for a qualified actuary, up to 250,000. Hours Houghton arrives at the office by 7.30am, usually eats lunch at his desk, and leaves at 5.30pm ("if I'm lucky") or later. He also works on the train for at least an hour in each direction. Work/life balance "Running is a huge stress reliever, but I sometimes have my best ideas at the same time so I end up solving a work-related problem." Best thing "It allows me to use my mathematical back ground, common sense and intellect to solve real problems." Worst thing "Probably commuting one and three quarter hours." Overtime Robin keeps bees and can produce 30kg of honey per hive, "but I've been lazy lately the bees had it all." He believes older people should use their assets to pay for long-term care, not save it for the next generation. Robin enjoys indoor climbing, usually followed by curry. A fellow ultra-runner wrote of the Lakeland 100: "I have no idea how I got around last year, let alone finish 5th [well, joint 4th]. Ian Bishop led me around the first half and Robin got me through the second. Without them, there's no doubt I would have really struggled to finish."