Presidential Addresses are an opportunity to survey the actuarial landscape, and this one is no exception. The pace of change and scope of work undertaken by actuaries since the President qualified is commented upon. Many of the current and future issues are also aired, from bonus rates and pensions mis-selling to stakeholder pensions and long-term care. Regulation, in a number of areas, is also reviewed. The regular topics of education, examinations and continuous professional development also feature.

The Presidential Address celebrates the 150th anniversary of the Institute of Actuaries by recalling speeches and press comments from the time of its foundation in 1848, and goes on to draw parallels between the issues of the day and those facing the profession in 1998. Foremost of these, there is a continuing emphasis on the public interest; it remains important for the Institute to be a learned society, and educational requirements have continued to be a central part of the profession's activities. The need for the profession to become more deeply involved in investment research is identified. A particular issue highlighted in the address is the constraint placed on the profession's growth and breadth by heavy reliance on self-study; much greater involvement of the universities is recommended.

In 1848, as in 1998, the potential for actuaries to use their skills in fields beyond life assurance was recognised, but the address notes that the opportunity to become involved in banking has never been properly grasped.

The leading role of the United Kingdom in the international development of the actuarial profession has continued throughout the history of the Institute, and recent developments in the International Actuarial Association are noted.

The need to educate clients and the wider public in what it is that actuaries do and how they go about it is the remaining major theme.

The final section identifies some current issues needing urgent attention, including the need to influence the shape of national and international accounting standards.

Social security pension schemes around the world are facing a number of problems, of which demographic ageing is the most commonly discussed. This paper provides an overview of expected future demographic developments in European Union and some other OECD countries, and evaluates some of the range of solutions which have been, or are being, considered to address this and other problems facing social security in the late 1990s, drawing on examples from OECD countries, from Latin America and from central and eastern Europe. Consideration is given to the possibilities for increasing the level of funding in social security pension schemes or developing funded complementary pension schemes.

This paper considers actuarial science within the context of the framework provided by the formal study of scientific method. A review of key points of recent developments within the methodology (study of method) of science and the methodology of economics is presented. A characterisation of actuarial science and its methods is then developed using as inputs the United Kingdom actuarial education syllabus and recent work of the profession, most notably Bell et al., (1998). The methods of actuarial science are then considered within the framework provided by formal methodology to propose an articulation of the methodology of actuarial science. This methodology is explored in relation to that of other sciences, and some of the implications and opportunities for actuarial science which arise from this investigation are identified. The paper concludes that actuarial science has a distinctive and potentially powerful empirical method of applied approximation. This methodological analysis is intended, in part, to add to the momentum of the programme concerned with furthering the use of actuarial methods within broader spheres (eg Nowell et al., 1996).

Parametric graduation may fail to achieve satisfactory results without overparameterisation. Whittaker-Henderson graduation tends to constrain the graduated values towards a low-order polynomial. Non-parametric methods do not generally make direct use of true likelihood functions. This paper suggests a method of enhancing the likelihood of a parametric graduation by means of non-parametric methods, thus reducing the disadvantages of both methods.

The parametric graduation is taken to be ideally smooth by definition and is adjusted by using constrained maximum likelihood estimation to obtain better fidelity to the experience. The constraint imposes a minimum sacrifice of smoothness, in terms of a quantitative smoothness criterion, from the initial ideal. The method is not entirely objective in that, in some cases, professional judgement is required in order to assess the degree of smoothness that can be imposed. In other cases the method provides an objective optimum. In either case, by quantifying the degrees of departure from perfect fidelity and from ideal smoothness, the suggested method provides useful and theoretically sound criteria for the purposes of the optimisation process. In particular, by inverting the parametric graduation formula for the purposes of defining the smoothness criterion, the method ensures that the smoothness criterion is consistent over the whole age range, thus resolving the main objection to non-parametric graduation.

The method is applied to the 1979-82 experience for life office pensioners in the United Kingdom with positive results.

The development of stochastic investment models for actuarial and investment applications has become an important area of interest to actuaries. This paper reports the application of some techniques of modern time series and econometric analysis to Australian inflation, share market and interest rate data. It considers unit roots, cointegration and state space models. Some of the results from this analysis are not reflected in the published stochastic investment models.

On the occasion of the forthcoming total eclipse of the sun in Devon and Cornwall on 11 August 1999, the name of Baily is likely to receive much publicity because of the accompanying phenomenon of Baily's Beads. The paper explains Baily's Beads and also summarises the very considerable contribution which he made to actuarial science in the early days.