Financial Case Study of a Consulting Actuarial Firm

One out of five casualty actuaries is a consultant. Increasingly large numbers of casualty actuaries are practicing in small, independent consulting firms. The finances of these firms are based on the repetitive performance of technical work and are potentially predictable. A case study of a decade of income and expense data confirms their stable nature in aggregate, while revealing significant variation by source. Particular emphasis is given to analyzing expenses. Compensation is the major expense in these firms, followed by rent, office maintenance, insurance and professional services. Productivity is measured in compensation per hour worked and may be analyzed from the perspective of both owners and staff, Productivity varied significantly in the decade examined. An extended period of rising productivity indicates that budgeting and careful management can have a positive effect on productivity in small consulting firms.