IAI Actuarial Core Principles · Business Management · Using data, company functions, people skills, influence and clear communication

An actuary must explain to a pension fund's trustees, who are retired teachers, why the funding level fell despite positive investment returns. Which technique is most likely to make the explanation understood and acted upon?

Use a simple analysis of change with a chart showing how each factor, such as lower discount rates or longer life expectancy, affected the funding level, and invite questions to check understanding. This matches the lay audience and explains the true cause rather than overwhelming or misleading them.

1. APresent a table of fifty parameters and ask the trustees to identify the cause
2. BUse an analysis-of-change walkthrough with a simple chart showing the effect of each factor, such as lower discount rates and longer life expectancy, and check understanding by inviting questionsCorrect
3. CSay the result is the output of the valuation model and cannot be simplified
4. DReplace the explanation with a long list of formulae from the valuation basis
5. Avoid explaining the fall and concentrate only on the positive investment returns