Welcome to Mind Matters week of 14 Feb 2022  

MM has been running for almost five years now although for some of you it will be the first time you have access to it.  Briefly the reasoning behind the weekly postings is to expose you to articles and papers out there that either touch directly on actuarial science or are useful to know about and understand to develop a bigger picture of what is going on in society, insurance, related industry and the world at large.

Be sure to read the last section which focuses on you. 

Enjoy!

Global news 

Stocks End Lower as Investors Weigh Ukraine War, Rate Increases

Oil prices rise to highest levels since 2014 on concern Russian crude supplies could be curtailed

U.S. stocks fell for the third straight day on Monday as investors braced for a possible war between Russia and Ukraine and monitored for signs that the Federal Reserve might step up the pace of interest-rate increases.

After weeks in which the Ukraine conflict appeared to have little impact on Wall Street, U.S. stocks tumbled Friday after the White House warned that Russia could invade its neighbor at any moment. On Monday, stock and bond markets reacted skittishly to headlines about Ukraine and the diplomatic efforts to resolve the conflict.

This Wall Street Journal article may only be available via your institution's library subscription, but take note of the influence of geo-politics on the markets and rate increases. A three and a half minute read. 

More Airlines Avoiding Ukraine Airspace Amid Insurance Issues

More airlines are likely to avoid Ukraine’s airspace amid insurance issues and a decision by leading European carriers to stop overflights after a U.S. warning that Russia could invade at any time, a flight operations advisory firm said on Monday.

Malaysia Airlines flight MH17 was shot down over eastern Ukraine in 2014, killing all 298 people on board, two-thirds of them Dutch citizens. Some airlines were already avoiding the airspace after earlier shoot-downs of military aircraft.

This Reuters article from Carrier Management shows us how important the response of airlines and their insurers is in mitigating loss of lives where there is geo-political contexts. A two and a half minute read.  

As China welcomes the world to Winter Olympics, its economy is ever more isolated from the west

As the Beijing Winter Olympics get underway, all eyes are on China. There has been lots of coverage about China’s chilly relationship in the west and its persecution of the Uighur and other minorities, but there is also much to be said about the Chinese economy.

China’s great rise over the past several decades has been the great economic success of our times, lifting hundreds of millions of people out of poverty and giving the global economy wheels in the years after the financial crisis of 2007-09.

This article came out on 4 Feb but is not out of date, it places you right in the middle of understanding some of the elements at play in global economics. 4 min, 30 sec read. Full article available below courtesy of The Conversation and Creative Commons. 

A brief history of African nations at the Olympic Winter Games

A record number of eight African countries competed at the 2018 Olympic Winter Games in PyeongChang, South Korea. At the 2022 Beijing winter games, currently underway, Africa is represented by six athletes from five countries: Eritrea, Ghana, Madagascar, Morocco and Nigeria. Five are competing in Alpine (downhill) skiing and one in cross country skiing.

An historical account of our (African) participation in Winter Olympics, something you may have wondered about. 4 min read. Available below. 

Local news 

Call to action: Know how every cent misspent, squandered, stolen or unused hurts vulnerable people

This is an edited extract from the speech notes of the AG Tsakani Maluleke, as presented to the SA National Editors’ Forum Council meeting in Cape Town on Saturday, 12 February 2022.

Tsakani Maluleke took office as  South Africa’s auditor-general on 1 December 2020. She is the first woman to hold the position in the institution’s 109-year history.

A 10 min read, actuaries are also accountable to the office of the Auditor -General, so if you have the time it is worth noting what it has been up to the past year. 

How Nedbank was a bedfellow with Gupta-linked Regiments Capital

Not only has the business arrangement caused serious damage at Transnet but it also targeted the Airports Company South Africa (Acsa) – two state-owned entities (SOEs) that are important for the country’s economy.

But the governance of the SOEs and their economic contribution to the country were weakened, as they were the sites of State Capture during Jacob Zuma’s nine-year presidency.

Further to the AGs speech above, note how governance should play its part through due diligence. 10 min read. 

Discovery, AIA establish insurtech Amplify Health in Asia

South Africa’s biggest health insurance company Discovery Health has joined forces with AIA Group to establish a new health insurtech business, Amplify Health, in Asia, which will operate as a joint venture.

The partnership will operate in Asia, excluding China, Hong Kong and Macau. Discovery will own 25% of the joint venture’s equity, with AIA owning the balance of 75%.

Find out why Discovery has partnered with AIA, maybe think about before you read the article. A 3 min read. 

Insurance matters

Creating value, finding focus: Global Insurance Report 2022

The past two years may have been the most peculiar recession and recovery in living memory. In 2020, the human tragedy of the COVID-19 pandemic triggered a global economic downturn that was initially sharper than the Great Depression. As government support programs took shape, the recession rapidly bottomed out, leading to a strong economic recovery in 2021. Global financial markets took a roller-coaster ride as well.

The impact on the insurance industry was noticeable: in 2020, premium growth slowed to approximately 1.2 percent (compared with more than 4 percent per year between 2010 and 2020) (Exhibit 1). Profits fell by about 15 percent from 2019. The decline was sharpest in Asia–Pacific (down 36 percent) and was particularly driven by falling profits in life.

Preliminary data suggest that premium growth and profits rebounded in 2021, especially in regions where strong vaccine rollouts have made many activities possible again, at least periodically.

This is a 40 page report with a lot of illustrations. The illustrations bring the data to life and tell a story. It is a serious but relevant read for anyone heading out into the industry. 

Agriculture, technology, and economic growth

“South Africa’s agricultural sector has expanded notably over the past decade and is currently enjoying another good season”.

Liza De Beer
Product Development Manager, Old Mutual Insure

The Covid-19 pandemic has brought new appreciation for the pivotal role that South Africa’s agriculture sector plays. The pandemic has also helped people to have a new appreciation for what farmers do every day and to start thinking about where their food comes from.

Agriculture is not always a sexy insurance topic, but definitely a relevant one. Not the use of technology in products and processes. 3 min and 30 sec read

Yes, there are opportunities in Marine Insurance

When one thinks of marine, the word, you tend to think of water, the sea and boats but, that is only half the story of marine insurance.

Marine insurance has three main classes. The first is cargo insurance, which our business specifically focuses on. The second class is Marine Hull, where you insure the actual boats in terms of whether it is commercial or private. Private, for example, would be something like a jet-ski. The third class of marine insurance is marine liabilities, where you insure a charterer’s liability or Stevedore’s liability. So, those are just the three basic classes of marine and we at Terra Marine currently fall under the cargo section, where we only specialise in cargo.

As an aspiring actuary understand why Colin Moodley would say there are opportunities in this sector, which would have to underwritten by big insurers. A 3 min 30 sec read. 

Hat tip:

The underwriting management agency (UMA) concept is uniquely South African. Where similar structures are encountered in other parts of the world they are typically referred to as underwriting and claims binder facilities. In the simplest possible terms a UMA is an agent of an insurer.

How the pandemic has accelerated the industry’s move to needs-matched insurance

The events of 2021 made it a challenging year for all industries, and life insurance was no different. But they also represented a huge opportunity for our sector to deliver on its promises and show our value.

The pandemic has put the spotlight on the quality of cover and the value of insurance and has also made people more focused on understanding exactly what they’re buying.

Read the article and find out more about "neds - matched" insurance. A 3 min read. 

Finance and investments

...successful investing isn't the preserve of the super intelligent. Rather, it belongs to those able to control their emotions. Alec Hogg Biznews

Momentum study finds investors are 3.5% worse off due to switching funds last year

The report also noted that Covid-19 movement restrictions and lockdowns increased savings rates worldwide. In South Africa, the savings rate increased by nearly 22%.

A study by Momentum Investments found that its investors lost millions of rand from switching between funds over the year to October 2021. The fund manager’s head of behavioural finances, Paul Nixon said this showed the risks of switching in volatile markets.

The report also looked at investor behavioural archetypes and identified four investor archetypes: avoider, anxious, assertive and market timer.

Such an interesting article with figures that demonstrate the impact of of our behaviour when it comes to investments. A 3 min read. 

TFSAs – helping to maximise your retirement income and minimise your estate duty liability

Tax-free savings accounts (TFSAs) are a great initiative from government to encourage savings in South Africa. The tax advantages are well documented: you pay no tax on dividends and interest received, and no tax on capital growth. As a result, you benefit from increased compounding of returns. After 20 years, TFSA investors realise an additional 20% return due to these tax benefits. But little continues to be said about the potential retirement and estate planning tax benefits.

This is a good article to get you thinking about TFSAs as a financial instrument together with an annuity. An example is provided to make this clearer.  4 min 30 sec read.  

Look out for our new multi-strategy funds: Stanlib

Stanlib will soon roll out two multi-strategy products, in partnership with JP Morgan Asset Management, said Stanlib head of investments Mark Lovett.

In an interview with Citywire South Africa, Lovett said Stanlib is planning a local and a global multi-strategy fund. In contrast to traditional balanced funds, multi-strategy funds are designed to use the greatest possible number of assets.

Lots of financial jargon to get your head around, but if you're a quantitative analyst you will enjoy it. 2 min 30 sec read. 

How asset managers can make female managers more visible

Manuela Froehlich, co-founder of the Fondsfrauen network, explains what firms can do to help their female talent speak up

LONDON: There are a number of experienced female professionals in the fund industry, but many lack the confidence to speak up.

Speaking to Citywire Selector, Manuela Froehlich, co-founder of the Fondsfrauen network, said media training is key in promoting talented female voices in the industry and can help them deal with imposter syndrome.

A great podcast, just under 30 mins. 

Technology and Finance

InsTech London - insurance & innovation with Matthew Grant

Predictions for Insurance in 2022 (172)

A podcast for your interest recommended by one of our senior academics. 28 mins. 

Fintech start-up Stitch raises R316m in new funding

South African-based application programming interface (API) start-up Stitch has raised $21 million (R316 million) funding.

The Series A funding round was led by The Spruce House Partnership for the start-up to continue building the future of money movement in Africa. Stitch says it will use the funding to continue building the future of money movement by linking bank accounts, wallets and other stores of value.

Note that these are all young people, fairly diverse although not many female, "building the future of money movement in Africa" exciting! A 2 min 30 sec read. 

Humans v AI: here’s who’s better at making money in financial markets

Artificial intelligence (AI) has now closely matched or even surpassed humans in what were previously considered unattainable areas. These include chess, arcade games, Go, self-driving cars, protein folding and much more. This rapid technological progress has also had a huge impact on the financial services industry. More and more CEOs in the sector declare (explicitly or implicitly) that they run “technology companies with a banking license”.

A case for combining the best of both worlds - do you think this is feasible? How would that likely pan out? A 5 min read available below. 

Technology and Health 

Babbage from The Economist

Babbage: The smartwatch will see you now

Be informed by how the smartwatch has the potential to change health care in 2022. A 40 min radio interview

More about you and the way you think and feel 

The Single Best Interview Question You Can Ask

In Peter Thiel’s book, Zero to One: Notes on Startups, or How to Build the Future there is a great section on the single best interview question you can ask someone.

When Peter Thiel interviews someone he likes to ask the following question: What important truth do very few people agree with you on?

This is a short but powerful read, insight on whether growth is the best measure of success given the world has limited resources. 3 min read

The Myth of Finding Your Life’s Passion

Why “Follow Your Passion” is Bad Advice

Self-help gurus often preach that the key to career happiness is to “follow your passion” but this advice is not applicable to most people. In a Forbes article published in 2021, the magazine indicated several reasons why telling someone to just “follow your passion” is poor career advice. 

Read this 6 min article and find out why this is poor career advice.  It also shows why searching for our “life’s passion” can make us depressed and what to do instead. 

1 Question For You

Entrepreneur and investor Sam Altman says some of the best advice he ever received was, "If you can't figure out what kind of work you like, pay attention to what's easy to concentrate on and gives you energy vs. what makes you tune out and feel tired."

What is easy for you to concentrate on?

This question comes from James Clear and his blog can be accessed here: https://jamesclear.com/3-2-1/february-10-2022?rh_ref=9d812651

Writer Ashley C. Ford on getting started:

"Your first step is just that: the first of many steps. For so long I would stand still, afraid to move in any direction because I wasn’t sure which was the course I wanted to follow for the rest of my life. Finally, someone explained to me that my first steps did not necessarily determine one path for all my tomorrows. There would be more decisions, and more opportunities to make a shift should I need to do so."

Source: In the Company of Women courtesy of research by James Clear. 

If small changes create big results, then why is success so elusive?

The answer boils down to a single word: discipline. Not many people have consistent discipline when times are good. Even fewer in times of stress.

Anyone can do something once. Not everyone can do it consistently. Eating healthy for a meal is common. Eating healthy all week is not. Working out occasionally is common. Working out a few times a week is not. Going to bed on time is easy. Doing it for a week is not.

Positioning yourself for future success is simple but not easy. The hardest part is the discipline required to do otherwise ordinary things for an extraordinarily long period of time, even when the results are barely noticeable.

When people say you need to love the process, this is what they mean. Can you do it when it’s hard? Can you do it when other people stop? Can you work on something long enough to let it compound? Can you do it when the results aren’t visible?

Putting yourself in a position for success is simple. Doing it day in and day out is hard.

Extraordinary results come from ordinary people with uncommon discipline.

Shane Parish from Farnam Street blog. His weekly newsletter is worth subscribing to!