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Loss Models From Data to Decisions Third Edition
Stuart A. Klugman Digital Instant Download
Author(s): Stuart A. Klugman, Harry H. Panjer, Gordon E. Willmot(auth.)
ISBN(s): 9780470391341, 0470391340
File Details: PDF, 21.42 MB
Year: 2008
Language: english
LOSS MODELS
LOSS MODELS
WILEY SERIES IN PROBABILITY AND STATISTICS

Established by WALTER A. SHEWHART and SAMUEL S. WILKS

Editors: David J. Balding, Noel A. C. Cressie, Garrett M. Fitzmaurice,

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Ruey S. Tsay, Sanford Weisberg
Editors Emeriti: Vic Barnett, J. Stuart Hunter, JozefL. Teugels

A complete list of the titles in this series appears at the end of this volume.
LOSS MODELS
From Data to Decisions
Third Edition

Stuart A. Klugman
Drake University

Harry H. Panjer
University of Waterloo

Gordon E.Willmot
University of Waterloo

A JOHN WILEY & SONS, INC., PUBLICATION

Copyright © 2008 by John Wiley & Sons, Inc. All rights reserved.

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Klugman, Stuart A., 1949-

Loss models : from data to decisions / Stuart A. Klugman, Harry H. Panjer, Gordon E. Willmot. — 3rd ed.
p. cm. — (Wiley series in probability and statistics)
Includes bibliographical references and index.
ISBN 978-0-470-18781-4 (cloth)
1. Insurance—Statistical methods. 2. Insurance—Mathematical models. I. Panjer, Harry H. II. Willmot,
Gordon E., 1957- III. Title.
HG8781.K583 2008
368'.01—dc22 2008027975

Printed in the United States of America

10 9 8 7 6 5 4
CONTENTS

Preface xvii

PART I INTRODUCTION

1 Modeling 3
1.1 The model-based approach 3
1.1.1 The modeling process 4
1.1.2 The modeling advantage 5
1.2 Organization of this book 5

2 Random variables 9

2.1 Introduction 9
2.2 Key functions and four models 11
2.2.1 Exercises 19

3 Basic distributional quantities 21

3.1 Moments 21
3.1.1 Exercises 28
3.2 Quantiles 29
3.2.1 Exercises 29
3.3 Generating functions and sums of random variables 30
 vi CONTENTS

3.3.1 Exercises 34
3.4 Tails of distributions 34
3.4.1 Classification based on moments 34
3.4.2 Comparison based on limiting tail behavior 35
3.4.3 Classification based on the hazard rate function 36
3.4.4 Classification based on the mean excess loss function 37
3.4.5 Equilibrium distributions and tail behavior 39
3.4.6 Exercises 40
3.5 Measures of Risk 42
3.5.1 Introduction 42
3.5.2 Risk measures and coherence 42
3.5.3 Value-at-Risk 44
3.5.4 Tail-Value-at-Risk 45
3.5.5 Exercises 49

PART II ACTUARIAL MODELS

A.2.2 Characteristics of actuarial models 53

4.1 Introduction 53
4.2 The role of parameters 53
4.2.1 Parametric and scale distributions 54
4.2.2 Parametric distribution families 56
4.2.3 Finite mixture distributions 56
4.2.4 Data-dependent distributions 58
4.2.5 Exercises 59

A.2.2 Continuous models 61

5.1 Introduction 61
5.2 Creating new distributions 61
5.2.1 Multiplication by a constant 62
5.2.2 Raising to a power 62
5.2.3 Exponentiation 64
5.2.4 Mixing 64
5.2.5 Frailty models 68
5.2.6 Splicing 69
5.2.7 Exercises 70
5.3 Selected distributions and their relationships 74
5.3.1 Introduction 74
5.3.2 Two parametric families 74
5.3.3 Limiting distributions 74
5.3.4 Exercises 76
5.4 The linear exponential family 77
 CONTENTS VÜ

5.4.1 Exercises 79
5.5 TVaR for continuous distributions 79
5.5.1 Continuous elliptical distributions 80
5.5.2 TVaR for the linear exponential family 82
5.5.3 Exercise 84
5.6 Extreme value distributions 84
5.6.1 Introduction 84
5.6.2 Distribution of the maximum 86
5.6.3 Stability of the maximum of the extreme value distribution 90
5.6.4 The Fisher-Tippett theorem 91
5.6.5 Maximum domain of attraction 93
5.6.6 Generalized Pareto distributions 95
5.6.7 Stability of excesses of the generalized Pareto 96
5.6.8 Limiting distributions of excesses 98
5.6.9 TVaR for extreme value distributions 98
5.6.10 Further reading 100
5.6.11 Exercises 100

6 6 Discrete distributions
Discrete and
distributions processes
and processes 101

6.1 Introduction 101

6.1.1 Exercise 102
6.2 The Poisson distribution 102
6.3 The negative binomial distribution 105
6.4 The binomial distribution 107
6.5 The (a, b, 0) class 108
6.5.1 Exercises 111
6.6 Counting processes 111
6.6.1 Introduction and definitions 111
6.6.2 Poisson processes 114
6.6.3 Processes with contagion 116
6.6.4 Other processes 119
6.6.5 Exercises 120
6.7 Truncation and modification at zero 121
6.7.1 Exercises 126
6.8 Compound frequency models 126
6.8.1 Exercises 132
6.9 Further properties of the compound Poisson class 132
6.9.1 Exercises 137
6.10 Mixed frequency distributions 137
6.10.1 General mixed frequency distribution 137
6.10.2 Mixed Poisson distributions 139
6.10.3 Exercises 144
 viii CONTENTS

6.11 Mixed Poisson processes 145

6.11.1 Exercises 149
6.12 Effect of exposure on frequency 151
6.13 An inventory of discrete distributions 152
6.13.1 Exercises 152
6.14 TVaR for discrete distributions 155
6.14.1 TVaR for the discrete linear exponential family 156
6.14.2 Exercises 159

A.2.2 Multivariate models 161

7.1 Introduction 161
7.2 Sklar's theorem and copulas 162
7.3 Measures of dependency 163
7.3.1 Spearman's rho 164
7.3.2 Kendall's tau 164
7.4 Tail dependence 165
7.5 Archimedean copulas 166
7.5.1 Exercise 171
7.6 Elliptical copulas 171
7.6.1 Exercise 173
7.7 Extreme value copulas 174
7.7.1 Exercises 176
7.8 Archimax copulas 177

A.2.2 ;ncy and severity with coverage modifications 179

8.1 Introduction 179
8.2 Deductibles 179
8.2.1 Exercises 184
8.3 The loss elimination ratio and the effect of inflation for ordinary
deductibles 185
8.3.1 Exercises 186
8.4 Policy limits 187
8.4.1 Exercises 189
8.5 Coinsurance, deductibles, and limits 189
8.5.1 Exercises 191
8.6 The impact of deductibles on claim frequency 192
8.6.1 Exercises 196

A.2.2 Aggregate loss models 199

9.1 Introduction 199
9.1.1 Exercises 202
 CONTENTS IX

9.2 Model choices 202

9.2.1 Exercises 203
9.3 The compound model for aggregate claims 203
9.3.1 Exercises 211
9.4 Analytic results 217
9.4.1 Exercises 223
9.5 Computing the aggregate claims distribution 225
9.6 The recursive method 227
9.6.1 Applications to compound frequency models 228
9.6.2 Underflow/overflow problems 230
9.6.3 Numerical stability 230
9.6.4 Continuous severity 231
9.6.5 Constructing arithmetic distributions 231
9.6.6 Exercises 234
9.7 The impact of individual policy modifications on aggregate payments 238
9.7.1 Exercises 241
9.8 Inversion methods 241
9.8.1 Fast Fourier transform 242
9.8.2 Direct numerical inversion 244
9.8.3 Exercise 246
9.9 Calculations with approximate distributions 246
9.9.1 Arithmetic distributions 246
A.2.2 9.9.2 Empirical distributions 249
A.2.2
A.2.2 9.9.3 Piecewise linear cdf 250
9.9.4 Exercises 251
9.10 Compari sonofmethods 252
9.11 The individual risk model 253
9.11.1 The model 253
9.11.2 Parametric approximation 255
9.11.3 Compound Poisson approximation 256
9.11.4 Exercises 259
9.12 TVaR for aggregate losses 261
9.12.1 TVaR for discrete aggregate loss distributions 262
9.12.2 Aggregate TVaR for some frequency distributions 262
9.12.3 Aggregate TVaR for some severity distributions 264
9.12.4 Summary 267
9.12.5 Exercises 268

10 Discrete-time ruin models 269

10.1 Introduction 269

10.2 Process models for insurance 270
10.2.1 Processes 270
X CONTENTS

10.2.2 An insurance model 271

10.2.3 Ruin 272
10.3 Discrete, finite-time ruin probabilities 273
10.3.1 The discrete-time process 273
10.3.2 Evaluating the probability of ruin 274
10.3.3 Exercises 276

11 Continuous-time ruin models 277

11.1 Introduction 277
11.1.1 The Poisson process 277
11.1.2 The continuous-time problem 278
11.2 The adjustment coefficient and Lundberg's inequality 279
11.2.1 The adjustment coefficient 279
11.2.2 Lundberg's inequality 283
11.2.3 Exercises 284
11.3 An integrodifferential equation 286
11.3.1 Exercises 290
11.4 The maximum aggregate loss 291
11.4.1 Exercises 294
11.5 Cramer's asymptotic ruin formula and Tijms' approximation 295
11.5.1 Exercises 300
11.6 The Brownian motion risk process 302
11.7 Brownian motion and the probability of ruin 306

PART III CONSTRUCTION OF

EMPIRICAL MODELS
12 Review of mathematical statistics 315
12.1 Introduction 315
12.2 Point estimation 316
12.2.1 Introduction 316
12.2.2 Measures of quality 317
12.2.3 Exercises 322
12.3 Interval estimation 324
12.3.1 Exercises 326
12.4 Tests of hypotheses 326
12.4.1 Exercise 330

13 Estimation for complete data 331

13.1 Introduction 331
13.2 The empirical distribution for complete, individual data 335
13.2.1 Exercises
 CONTENTS XI

13.3 Empirical distributions for grouped data 339

13.3.1 Exercises 341

A.2.2 Estimation for modified data 343

14.1 Point estimation 343

14.1.1 Exercises 349
14.2 Means, variances, and interval estimation 351
14.2.1 Exercises 360
14.3 Kernel density models 362
14.3.1 Exercises 365
14.4 Approximations for large data sets 366
14.4.1 Introduction 366
14.4.2 Kaplan-Meier type approximations 367
14.4.3 Exercises 370

PART IV PARAMETRIC STATISTICAL

METHODS

A.2.2 Parameter estimation 375

15.1 Method of moments and percentile matching 375

15.1.1 Exercises 378
15.2 Maximum likelihood estimation 381
15.2.1 Introduction 381
15.2.2 Complete, individual data 383
15.2.3 Complete, grouped data 384
15.2.4 Truncated or censored data 385
15.2.5 Exercises 388
15.3 Variance and interval estimation 393
15.3.1 Exercises 399
15.4 Non-normal confidence intervals 402
15.4.1 Exercise 404
15.5 Bayesian estimation 404
15.5.1 Definitions and Bayes'theorem 404
15.5.2 Inference and prediction 407
15.5.3 Conjugate prior distributions and the linear exponential family 414
15.5.4 Computational issues 415
15.5.5 Exercises 416
15.6 Estimation for discrete distributions 422
15.6.1 Poisson 422
15.6.2 Negative binomial 425
15.6.3 Binomial 427
15.6.4 The (a, b, 1) class 430
 CONTENTS

15.6.5 Compound models 434

15.6.6 Effect of exposure on maximum likelihood estimation 435
15.6.7 Exercises 436

A.2.2 Model selection 441

16.1 Introduction 441

16.2 Representations of the data and model 442
16.3 Graphical comparison of the density and distribution functions 443
16.3.1 Exercises 447
16.4 Hypothesis tests 448
16.4.1 Kolmogorov-Smirnov test 448
16.4.2 Anderson-Darling test 450
16.4.3 Chi-square goodness-of-fit test 451
16.4.4 Likelihood ratio test 455
16.4.5 Exercises 456
16.5 Selecting a model 459
16.5.1 Introduction 459
16.5.2 Judgment-based approaches 459
16.5.3 Score-based approaches 460
16.5.4 Exercises 467

A.2.2 Estimation and model selection for more complex models 473

17.1 Extreme value models 473

17.1.1 Introduction 473
17.1.2 Parameter estimation 474
17.2 Copula models 484
17.2.1 Introduction 484
17.2.2 Maximum likelihood estimation 484
17.2.3 Semiparametric estimation of the copula 486
17.2.4 Theroleofdeductibles 487
17.2.5 Goodness-of-fit testing 489
17.2.6 An example 490
17.2.7 Exercise 491
17.3 Models with covariates 492
17.3.1 Introduction 492
17.3.2 Proportional hazards models 493
17.3.3 The generalized linear and accelerated failure time models 498
17.3.4 Exercises 501
 CONTENTS xiii

18 Five examples 503

18.1 Introduction 503

18.2 Time to death 503
18.2.1 The data 503
18.2.2 Some calculations 505
18.2.3 Exercise 506
18.3 Time from incidence to report 506
18.3.1 The problem and some data 507
18.3.2 Analysis 507
18.4 Payment amount 508
18.4.1 The data 508
18.4.2 The first model 510
18.4.3 The second model 512
18.5 An aggregate loss example 512
18.6 Another aggregate loss example 516
18.6.1 Distribution for a single policy 516
18.6.2 One hundred policies—excess of loss 516
18.6.3 One hundred policies—aggregate stop-loss 517
18.6.4 Numerical convolutions 519
18.7 Comprehensive exercises 520

PART V ADJUSTED ESTIMATES

19 Interpolation and smoothing 527

19.1 Introduction 527

19.2 Polynomial interpolation and smoothing 529
19.2.1 Exercises 533
19.3 Cubic spline interpolation 533
19.3.1 Construction of cubic splines 534
19.3.2 Exercises 541
19.4 Approximating functions with splines 542
19.4.1 Exercise 545
19.5 Extrapolating with splines 546
19.5.1 Exercise 546
19.6 Smoothing splines 546
19.6.1 Exercise 554

20 Credibility 555

20.1 Introduction 555

20.2 Limited fluctuation credibility theory 557
20.2.1 Full credibility 558
20.2.2 Partial credibility 561
 CONTENTS

20.2.3 Problems with the approach 564

20.2.4 Notes and References 565
20.2.5 Exercises 565
20.3 Greatest accuracy credibility theory 567
20.3.1 Introduction 567
20.3.2 Conditional distributions and expectation 570
20.3.3 The Bayesian methodology 573
20.3.4 The credibility premium 581
20.3.5 The Buhlmann model 584
20.3.6 The Buhlmann-Straub model 588
20.3.7 Exact credibility 593
20.3.8 Linear versus Bayesian versus no credibility 597
20.3.9 Notes and References 604
20.3.10 Exercises 604
20.4 Empirical Bayes parameter estimation 617
20.4.1 Nonparametric estimation 620
20.4.2 Semiparametric estimation 630
20.4.3 Parametric estimation 632
20.4.4 Notes and References 636
20.4.5 Exercises 637

PART VI SIMULATION

A.2.2 Simulation 643

21.1 Basics of simulation 643
21.1.1 The simulation approach 644
21.1.2 Exercises 649
21.2 Examples of simulation in actuarial modeling 649
21.2.1 Aggregate loss calculations 649
21.2.2 Examples of lack of independence or identical distributions 650
21.2.3 Simulation analysis of the two examples 651
21.2.4 Simulating copulas 653
21.2.5 Using simulation to determine risk measures 656
21.2.6 Statistical analyses 656
21.2.7 Exercises 658
21.3 Examples of simulation in finance 660
21.3.1 Investment guarantees 661
21.3.2 Option valuation 662
21.3.3 Exercise 664
 CONTENTS

Appendix A: An inventory of continuous distributions 665

A.l Introduction 665
A.2 Transformed beta family 669
A.2.1 Four-parameter distribution 669
A.2.2 Three-parameter distributions 669
A.2.3 Two-parameter distributions 671
A.3 Transformed gamma family 673
A.3.1 Three-parameter distributions 673
A.3.2 Two-parameter distributions 674
A.3.3 One-parameter distributions 676
A.4 Distributions for large losses 677
A.4.1 Extreme value distributions 677
A.4.2 Generalized Pareto distributions 678
A.5 Other distributions 678
A.6 Distributions with finite support 680

Appendix B: An inventory of discrete distributions 683

B.l Introduction 683
B.2 The (a, b, 0) class 684
B.3 The (a, 6,1) class 685
B.3.1 The zero-truncated subclass 685
B.3.2 The zero-modified subclass 687
B.4 The compound class 688
B.4.1 Some compound distributions 688
B.5 A hierarchy of discrete distributions 690

Appendix C: Frequency and severity relationships 691

Appendix D: The recursive formula 693

Appendix E: Discretization of the severity distribution 695

E. 1 The method of rounding 695
E.2 Mean preserving 696
E.3 Undiscretization of a discretized distribution 696

Appendix F: Numerical optimization and solution of

systems of equations 699
F. 1 Maximization using Solver 699
F.2 The simplex method 704
F.3 Using Excel® to solve equations 705

References 709

Index
Preface

The preface to the first edition of this text explained our mission as follows:
This textbook is organized around the principle that much of actuarial science consists
of the construction and analysis of mathematical models that describe the process by which
funds flow into and out of an insurance system. An analysis of the entire system is beyond
the scope of a single text, so we have concentrated our efforts on the loss process, that is,
the outflow of cash due to the payment of benefits.
We have not assumed that the reader has any substantial knowledge of insurance systems.
Insurance terms are defined when they are first used. In fact, most of the material could
be disassociated from the insurance process altogether, and this book could be just another
applied statistics text. What we have done is kept the examples focused on insurance,
presented the material in the language and context of insurance, and tried to avoid getting
into statistical methods that would have little use in actuarial practice.
In particular, the first edition of this text was published in 1998 to achieve three goals:
1. Update the distribution fitting material from Loss Distributions [72] by Robert Hogg
and Stuart Klugman, published in 1984.
2. Update material on discrete distributions and collective risk model calculations from
Insurance Risk Models [138] by Harry Panjer and Gordon Willmot, published in
1992.
3. Integrate the material the three authors had developed for the Society of Actuaries'
Intensive Seminar 152, Applied Risk Theory.
Shortly after publication, the Casualty Actuarial Society and the Society of Actuaries
altered their examination syllabus to include our first edition. The good news was that
xv'ii
XVÜi PREFACE

the first edition was selected as source material for the new third and fourth examinations.
The bad news was that the subject matter was split between the examinations in a manner
that was not compatible with the organization of the text. This led to the second edition,
published in 2004, with two major changes:

1. The first edition was written with an assumption that readers would be familiar
with the subject of mathematical statistics. This topic had been part of the actu-
arial examination process at the time the book was written but was subsequently
removed. Some background material on mathematical statistics is now presented in
Chapter 12.

2. For a long time, actuarial education has included the subject of survival models.
This is the study of determining probability models for time to death, failure, or
disability. It is not much different from the study of determining probability models
for the amount or number of claims. This (second) edition integrates that subject
and in doing so adds an emphasis on building empirical models. This is covered in
Chapters 13 and 14.

Files containing the data sets used in the examples and exercises continue to be available
at the Wiley ftp site: ftp://ftp.wiley.com/public/sci.tech_med/loss_models/.
In this third edition, we assume that users will often be doing calculations using a
spreadsheet program such as Microsoft Excel®.1 At various places in the text we indicate
how Excel® commands may help. This is not an endorsement by the authors, but, rather,
a recognition of the pervasiveness of this tool.
As in the first two editions, many of the exercises are taken from examinations of the
Casualty Actuarial Society and the Society of Actuaries. They have been reworded to fit
the terminology and notation of this text and the five answer choices from the original
questions are not provided. Such exercises are indicated with an asterisk (*). Of course,
these questions may not be representative of those asked on examinations given in the future.
Although many of the exercises are either directly from past professonal examinations
or are similar to such questions, there are many other exercises meant to provide additional
insight into the given subject matter. Consequently, it is recommended that readers interested
in particular topics consult the exercises in the relevant sections in order to obtain a deeper
understanding of the material.
The photograph on the cover was taken by Lucas Sprague-Coyle, a professional pho-
tographer in Guelph, Onterio, Canada. It was taken during a night-time fire in a historic
downtown Guelph building. As this book is devoted to the study of the cost of losses,
particularly those covered by insurance, this picture provides a dramatic example of such
an event. The authors are indebted to Lucas Sprague-Coyle for providing this photograph.
For this third edition, we have concentrated on a few evolving areas of actuarial interest
and on improving exposition where needed. The significant changes are:

1. Actuarial practice has expanded to include risk management. One area of expanding
interest is risk measures, and they are covered in Chapter 3. Particular emphasis is
placed on Tail-Value-at-Risk (TVaR), with appropriate calculations for each model
introduced.

1
Microsoft® and Excel® are either registered trademarks or trademarks of Microsoft Corporation in the United
States and/or other countries.
 PREFACE XIX

2. Risk managers often use models that are called "extreme value distributions." These
have been added and are covered in Section 5.5.
3. Previous editions of the text have included material on stochastic processes. We
have added two sections on counting processes. Coverage includes homogeneous,
nonhomogeneous, and mixed Poisson processes. These appear in Chapter 6, where
we have separated the coverage of discrete models from continuous models.

4. Multivariate models have been covered in past editions, but with the emergence of
copula models it is now appropriate to devote a full chapter to these models. This is
done in Chapter 7.

5. Chapter 9, which covers aggregate models, has been improved with better exposition
and elimination of coverage of the recursive formula for the individual risk model.

6. The review of mathematical statistics (Chapter 12) has been expanded a bit.
7. Bayesian estimation has become more popular as computing tools have improved.
Our coverage is still not sufficient to make readers experts in this method. Material
on conjugate priors and their relationship to the exponential family has been moved
here (Section 15.5) from the credibility chapter. The exponential family has been
reformulated for pedagogical reasons and is introduced earlier, at the time other
models are discussed (Section 5.4).

8. There is better coverage of methods for constructing confidence regions when there
is more than one parameter.
9. Chapter 17 is mostly new, covering estimation for extreme value models and for
copula models.
10. The material on credibility (Chapter 20) has been reorganized. The limited fluctuation
approach has been moved to the beginning. The statistical preliminaries that formerly
started the chapter have now been incorporated into the text as needed. The section
on exact credibility has also been rewritten.

11. The simulation material (Chapter 21) has been improved by adding more detail and
more applications. In particular, multivariate simulation (for use with copulas) and
financial applications have been added.

Many people have helped us through the production of three editions of this text—
family, friends, colleagues, students, readers, and the staff at John Wiley & Sons. Their
contributions are greatly appreciated.

S. A. KLUGMAN, H. H. PANJER, G. E. WILLMOT

Des Meines, Iowa and Waterloo, Ontario
PARTI

INTRODUCTION

Loss Models: From Data to Decisions, 3rd. ed.

By Stuart A. Klugman, Harry H. Panjer, Gordon E. Willmot
Copyright © 2008 John Wiley & Sons, Inc.
 1

MODELING

1.1 THE MODEL-BASED APPROACH

The model-based approach should be considered in the context of the objectives of any
given problem. Many problems in actuarial science involve the building of a mathematical
model that can be used to forecast or predict insurance costs in the future.
A model is a simplified mathematical description that is constructed based on the knowl-
edge and experience of the actuary combined with data from the past. The data guide the
actuary in selecting the form of the model as well as in calibrating unknown quantities, usu-
ally called parameters. The model provides a balance between simplicity and conformity
to the available data.
The simplicity is measured in terms of such things as the number of unknown parameters
(the fewer the simpler); the conformity to data is measured in terms of the discrepancy
between the data and the model. Model selection is based on a balance between the two
criteria, namely, fit and simplicity.

Loss Models: From Data to Decisions, 3rd. ed. 3

By Stuart A. Klugman, Harry H. Panjer, Gordon E. Willmot
Copyright © 2008 John Wiley & Sons, Inc.
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The Project Gutenberg eBook of Lover and
Husband: A Novel
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Title: Lover and Husband: A Novel

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LOVER AND HUSBAND

A Novel

BY

ENNIS GRAHAM

“The history is a tragedy as all human histories are.”

CARLYLE'S MIRABEAU.
 IN THREE VOLUMES
VOLUME I.

LONDON:
CHARLES J. SKEET, 10, KING WILLIAM STREET
CHARING CROSS
1870
(All Rights reserved.)

CONTENTS OF VOL. I.

CHAPTER

I. ANTECEDENTS

II. ACROSS THE CHANNEL

III. BLUE SKIES

IV. A FRIEND IN NEED

V. AU LION D’OR

VI. FLORENCE

VII. THE LITTLE GOVERNESS

VIII. BEAUTY AND THE BEAST

IX. “DE CAP A TU SOY MARION”

X. A SUDDEN RECALL

XI. THE LAST AFTERNOON ON THE TERRACE

CONTENTS OF VOL. II.

CHAPTER

I. AN EVENTFUL RAMBLE

II. MORE THAN HALF WAY

III. “FROM WANDERING ON A FOREIGN STRAND”

IV. THE END OF SEPTEMBER

V. ORPHANED

VI. MALLINGFORD AND AUNT TREMLETT

VII. GREY DAYS

VIII. AND RALPH?

IX. RALPH (continued)

X. THE BEGINNING OF THE END

XI. VERONICA’S COUNCIL

CONTENTS OF VOL. III.

CHAPTER

I. THE GARDEN AT THE “PEACOCK.”

II. THE BITTERNESS OF DEATH

III. THE END OF THE HONEYMOON

IV. “AT HOME”

V. A WIFELY WELCOME

VI. A CRISIS

VII. A FRIEND IN DISGUISE

VIII. COTTON CHEZ SOI

IX. “GOODBYE AND A KISS”

X. LITTLE MARY’S ADVENT

XI. MARION’S DREAM

XII. GEOFFREY’S WIDOW

 CHAPTER I.
ANTECEDENTS.
“———The children of one mother,
You could not say in one short day,
What love they bore each other.”
WORDSWORTH.

LONDON in September. A dull, close, airless day. The streets would

have been dusty enough too, no doubt, had there been a breath to
stir the dust, which one felt instinctively, was lying there in masses,
ready on the slightest provocation to rise in choking clouds. A day
when one longed for the sea, or failing that, for a breeze of fresh air.
A day when one could hardly believe in the reality of cool green
fields, or babbling, trickling brooks. Not that it was so much hot, for
there was little sun, as dry, and heavy, and intensely dull. Dull
everywhere, but especially so in one of the somewhat old-fashioned,
but unmistakably respectable squares of which there are not a few
in London, so much resembling each other as to require no special
description. The square at this season looked its very dullest and
ugliest; under these circumstances, I should suppose, the more
nearly fulfilling the aim, as regards outward appearance, of the
melancholy architects who planned it. Half the houses were shut-up,
and of the remainder, several were evidently shortly about to be so,
for in some, hot and dusty housemaids were to be seen pulling
down window curtains, and in one or two more an acute observer,
by dint of a little peeping, might have discovered business-like
trunks and carpet-bags ready packed and strapped for starting, or
else gaping open while undergoing the mysterious process called
“airing,” in some of the lower regions where such domestic rites are
usually performed.

In one of the dullest of the dull houses, in a sort of library or

morning room on the first floor, a young girl sat alone. The room
was not a pretty one. At the best of times it might have been called
comfortable, but nothing more for its furniture, though solid and
good of its kind, was like the rest of the house, heavy, dark, and
ungraceful. On this day the room looked especially uninviting, for
there was about it that peculiar look of business-like disorder, which,
even in the neatest of households, inevitably accompanies
preparations for “leaving home.” Torn letters, bits of string, and
address labels, a work-basket half emptied of its contents, all told
their own tale.

The only pretty thing in the room was its occupant. She was
certainly not beautiful, but like many people to whom that word, in
its ordinary and superficial sense, could not be truthfully applied, she
was most thoroughly pleasant to look upon. Possibly a thought too
thin, and hardly rosy enough for what one likes to see in a girl of
nineteen, but with no lack of health and vigour in her firm, well set
frame, and pale, though not sallow complexion. And with no want of
intelligence or quick perception in her grey eyes, as a glance from
them would soon have told. A good, gentle, pretty girl, just such, I
think, as one would like to see one’s own daughter, though with
rather more thoughtfulness of expression than seems quite natural
in so young a creature. This came, however, from her rather too
quiet and solitary life, and from no original dearth of the bright
hopefulness and gaiety of spirit hardly in theory to be separated
from the idea of healthy youth.

The girl sat at her writing-table, but not writing. Rather wearied
with all her little preparations, she felt glad to sit still doing nothing,
and though looking very thoughtful, as was her habit, still, to tell the
truth, she was thinking of little in particular. There was perfect
silence through the house, and the occasional roll of wheels in the
neighbouring streets sounded rumbling and heavy through the still,
drowsy air. Marion, I think, was very nearly on the point of
succumbing to these various influences by falling asleep outright,
when her reveries were disturbed by a sharp, sudden ring at the
hall-door. She started up, but sat down again lazily, saying to
herself,” Oh, I forgot, it will be only Cissy.” “Cissy,” evidently not
being a person to be treated with much ceremony. But a second
start was in store for poor Marion’s nerves, had she been conscious
of possessing any such undesirable things. A moment’s interval and
then came the sound of hasty feet up the stairs; the door opened
suddenly and an unexpected visitor entered. A boy of course. No
one but a boy, and one too in a hurry, could have come up stairs in
that three-steps-at-a-time sort of way, or opened the door with that
indescribable sort of fling, neither bang nor jerk, though partaking of
the nature of both. Though, after all, perhaps, it is hardly fair to this
particular boy, to introduce him as so thoroughly one of his rather
objectionable class; for when he was not in a hurry or very unusually
out of temper, Harry Vere, my Marion’s brother, did not by any
means forget the small proprieties of life. A good boy, in the main;
certainly neither a sneak nor a bully. His looks would have belied him
had he been either. He had a fair, open, honest face, with, however,
much less strength than his sister’s, and also less promise of future
development. He hurried in, looking flushed and travel-stained, and
anxious too, as the girl’s quick observation was not slow to discover.

“Harry!” she exclaimed, “you here! How did you get off, and what
is the matter? Is anything wrong?” asking, after the manner of
people in a hurry to get an answer, three questions, where one
would have served the purpose.

“No, no, nothing is wrong,” said the boy “at least, nothing much. I
have not been expelled, or broken my legs, as you can see for
yourself. Don’t get into a fuss. I only came up because I wanted so
much to see you before you go. You shall hear all about it in a
minute; but first tell me one thing. My father is still away? There no
fear of his seeing me today?”

“Oh no, not the least,” replied the girl, evidently by no means
surprised at the unfilial spirit of the question; “he has been away
since Monday, and won’t return till the day after tomorrow. But I am
leaving tomorrow, you know. When I heard your ring I thought it
was Cissy Archer, for I am expecting her this afternoon, to settle
definitely about our train. I see though,” she added, glancing at the
time-piece, “she won’t be here for an hour yet, so we have plenty of
time for a talk.”

“Not so very much,” said Harry, “for I must have some luncheon,
as I can’t get back to school till late, and my train goes in an hour
and a half. You can fancy how very much I wanted to see you,
Marion, for even though I came second-class, my fare will all by
clear me out; and I can’t now get leave to be away again before
Christmas, so I shall miss the match at Barrow next week.”

Before answering Marion rang the bell and ordered some cold
provisions in the way of luncheon for her brother. As the servant was
leaving the room Harry said to him rather awkwardly and
hesitatingly, “Brown, you needn’t say anything to your master about
my having come up to see Miss Vere before she goes.”

Brown being fortunately of the order of discreet domestics,

answered simply:

“Very well, Sir, I will take care that your wishes are attended to;”
muttering however to himself as soon as he was outside the door,
“Lucky for poor Master Harry that none of them other chattering
idiots saw him come, and that I got the cold beef and bread
unbeknownst to cook.”

When Harry was comfortably seated at his repast, Marion

repeated her request.

“Now, Harry, tell me all about it.”

“Well, Marion, the long and the short of it is, I’ve got into a
scrape. Not a bad one though,” added he hurriedly, seeing the
increasing anxiety in his sister’s eyes, “nothing disgraceful or
ungentlemanly. You would never fear that for me, May? It was a
good while ago; but I did not tell you about it at Midsummer,
because I thought then I should be able to set it right, but now it
has got worse. I know I was a fool for my pains to hide it from you.
Several months ago, one holiday at school, I hired a horse. Of
course it is against the rules but lots of follows do it. I am really very
fond of riding, though I don’t know about it, but I don’t think I
should have been tempted to do it in this underhand sort of way if
my father had sometimes let me have a little in the holidays. But
then—you know as well as I how he thwarts me; but that’s an old
story. Well, as ill-luck would have it I lamed the beast. I am no judge
of horses, but still I think it was above the average of a livery stable.
The man made an awful row, said he had that morning refused sixty
pounds for it, and it was now worthless. He threatened to complain
to the head-master. I don’t know what is the law in such matters,
but I was in such a fright that he would really tell on me, that I
made on the spot the best terms I could with him, which were to
pay him twenty pounds down the next morning; though when I
promised this I had not the least idea where to get the money. I
went straight to Cuthbert, my great chum, you know, Marion, and
told him all about it. He begged me not to make a fuss, and I should
have the money in time. And sure enough by next morning he had it
for me, and I paid the man, as I had promised.”
 “But Cuthbert!” said Marion, in amazement, “how could he get it,
Harry? His people are not at all rich, and I should think he has even
less pocket-money than you.”

“Yes, indeed,” replied Harry,” there’s the pull. Cuthbert knew I

would pay him as soon as I could, and he has been awfully good
about it. But only last week he came to me in great distress and told
me the whole affair. It seems he got the money in his own name
from a wretched Jew at a hideous rate of interest, trusting to my
being able to pay him, in part, any way, last mouth; as I quite hoped
I should have got something from Aunt Tremlett on my birthday. Of
course she was ill and sent me nothing. Now poor Cuthbert must
pay it before the 15th of October, and this wretch has made it
somehow or other come to thirty instead of twenty pounds. The
exposure would utterly ruin Cuthbert. That’s the horrible part of it;
to think what my folly has brought him into, good fellow that he is.
Why he never spends a sixpence he can help on himself! Now
Marion what can I do? How ever am I to get thirty pounds before
the 15th of October?”

“If only I had it,” sighed poor Marion, “but you know I never have
five pounds in my own hands, much less thirty.”

“I know that quite well. I never had the least idea of getting it
from you, May. All thought of was, that as two heads are better than
one you might help me to find out some way of getting it. Of course,
if the worst comes to the worst, rather than let Cuthbert suffer I will
go to my father. He would pay it. I have no doubt, but would
probably never speak to me again. Any way all chance of my going
into the army would be over, and just when I am so close upon it
too: leaving school at Christmas for good. Oh, what a fool I was! But
for both your sake and my own, May, I would rather do anything
than speak to my father. It would be perfectly horrible to have to do
it. I declare I would rather run away, if only I could beg, borrow, or
steal the money in the first place.”
 “Hush, Harry,” said his sister, “don’t talk nonsense, but think
seriously what to do. If only Aunt Tremlett had not been so ill, she
might have helped us.”

“Not she, indeed,” replied the boy impatiently, “or if she had even
agreed to do so, she would have been pretty sure to discover that it
was her duty to tell my father. Old idiot that she is.”

“You need not waste your time in abusing her, Harry, for as things
are, she is out of the question. But Harry, dear,” she added anxiously,
as the sound of the clock striking caught her ear, “I fear your time is
almost up?”

“All but,” said the boy, with a rather poor attempt at a laugh, “so
Marion you don’t see any way to helping me out of my trouble? And
think what a time it will be before we see each other again! You are
to be at Altes with Cissy Archer for six months, didn’t you say?”

“Six months, certainly, I believe,” said his sister, “I should like the
thoughts of it exceedingly, but for the one drawback of not seeing
you in the holidays. But that can’t be helped! And now about this
trouble or yours, Harry. Do nothing just yet. Wait, any way, till the
end of the month; that will be a fortnight from now, and I will see if
by then I can hit upon any plan to prevent your having to tell Papa;
for that would really be too dreadful. Not so much the disagreeable
of it as the after consequences, for he would never forgive it, or
trust you again.”

“Never,” said Harry, emphatically. “But Marion, I must go. Thank

you, dear, for being so kind about it. Many a sister would have
scolded or preached, but I am far more sorry than if you had done
either. Well, then, you’ll write within a fortnight and send your
address. I suppose you don’t know it yet? Good bye, and mind you
don’t fuss about me more than you can help.” And with a more
affectionate parting hug than he would perhaps have liked Brown
major or Jones minor, to be witness to, Harry departed, his heart
considerably lighter, as is the way with selfish mankind, for having
shared its burden with another.

Marion, poor child, sat down again where he had found her,
burying her face in her hands as she vainly tried to solve the
problem so unexpectedly placed before her: “Where to find thirty
pounds?” She had never before actually cared about the possession
of any sum of money, for though by no means luxuriously brought
up, still, as is the case with many young people, the comforts of life
had, as it were, “grown for her.” Her father’s peculiar ideas as to the
inexpediency of treating his children as reasonable or responsible
beings, had left her, in many practical respects, singularly
inexperienced. She had certainly often wished, like all young people
in a passing way, for things beyond her reach; but still, whatever
was really necessary to her comfort, or suitable for her position, Mr.
Vere had provided and paid for. In proportion, therefore, to her
previous exemption from anything in the shape of financial anxieties,
were her alarm and consternation at the present difficulty. And
terrible, indeed, appeared the alternative of laying the matter before
her falter. Sad perversion of what should be the most tender and
trustful of relations; that between parent and child, when, in his
distress and perplexity, or even in his shame and remorse, the child’s
first impulse, instead of being to fly for counsel or comfort to the
one friend who should never refuse it, is, at all costs, to conceal his
trouble from the parent who has indeed succeeded in inspiring him
with fear and distrust,—but alas with nothing more! And this is done
every day, not by hard or indifferent fathers only, but by many who,
according to their light, honestly enough desire to do their best by
the young creatures committed to their charge.

Mr. Vere, the father of this boy and girl, was perhaps less to be
blamed than some parents, for the fact that his children did not
regard him as their friend. An extreme natural reserve of character
and manner had, in his case, been so augmented by the unhappy
circumstances of his life, that to his children from their earliest
years, he had never appeared otherwise than hard, forbidding, and
utterly unsympathising. Yet in reality he was a man of deep feeling,
and capable of strong and lasting attachments; but along with these
healthy characteristics were to be found in him a large amount of
morbid weakness on certain points, and a peculiarity which I can
best describe as narrow-heartedness. The one passion of his life had
been his love for his wife, a lovely, silly, mindless baby, whose early
death was certainly not the bitterest disappointment she caused him.
Their carried life was short, but it lasted long enough for the
freezing, narrowing process to begin in the husband’s heart. He lost
faith in affection, or at least in his own power of inspiring it. The
want of breadth about him prevented his seeing that though he had
been so unfortunate as to make the one “grand mistake,” an
uncongenial marriage, it did not necessarily follow that every other
relation in life was, for him, to be in like manner a failure. He made
up his mind beforehand, that were he to allow himself to seek for
consolation in the love of his children, in that, too, he would but be
laying up fresh disappointment for himself. And therefore he was
weak and cowardly enough to stifle, so far as he could, the natural
outflowings of fatherly affection. He did not altogether succeed in
this, for his heart was still, in spite of himself, sound at the core; but,
alas, as time went on it proved no exception to that law of our
nature, by which all unused members gradually contract and wither.
From his children’s earliest years, as I said, Mr. Vere checked in
himself all outward demonstration of affection, and this, of course,
quickly reacted upon them. Little people are not slow to understand
when they and their innocent caresses are unsought, if not
unwelcome. Fortunately, however, for these poor little things, they
had each other; and the affection of two as honest, loving little
hearts as ever beat, refused vent in one direction, only flowed the
more vehemently in the remaining one. And to give the father his
due, he certainly was not unmindful or careless of their actual
comforts and requirements. They had everything to be desired for
their health and happiness, except their father’s love. As they grew
older, time brought no improvement to the state of matters. Extreme
strictness, not to say severity, was the basis of Mr. Vere’s theory of
education. This, and the fact that he never in the slightest degrees
confided in his children, or appeared to consider them as reasonable
and intelligent companions, extended the already wide gulf between
them. Yet he continued, solicitous about their health and comfort,
and was even scrupulously careful in his choice of their teachers,
books, and the few companions he thought it wise to allow them.
Had any one taxed him with not fulfilling to the utmost his duties as
a parent, he would have been utterly amazed and indignant; for so
one-sided and warped had his whole being become through the one
great mistake of his life, that it simply never entered his imagination
that, by not loving his children, he was denying to them the first of
their natural rights; or that his systematic coldness could possibly be
to them an actual injury and injustice.

For himself, he came in time to be so absorbed in other interests,

those of a political life, as not in the least to miss the affection he
had so deliberately stifled in its birth. In a rather narrow way a
clever, though never a brilliant man; accurate, painstaking and calm,
he gradually became very useful to his party. And thus, contentedly
enough, he lived his life, rather congratulating himself than
otherwise, on what he had made of it, and on the strength of
character which had so thoroughly thrown off and outgrown the
bitter disappointment of his early manhood.

The childhood and youth of Marion and her brother had not,
however, been on the whole desolate or unhappy. Indeed, it takes a
great deal, thank God, to crush the happiness out of healthy children
I And they don’t miss what they have never known.

The first great sorrow was Harry’s going to school; but at the
Name period, a kindly disposed and very terrible governess
appearing on the scene, Marion’s life was by no means solitary and
loveless as she had anticipated. The happiest times they
remembered, poor children, were the summer months, Harry’s
holidays, which with this kind Miss Jervis, they every year spent in
Brentshire, their father’s native county, and where he still owned,
near the little village of Bradley, a pretty cottage and a few acres of
land—the remains of a once considerable property. In Brentshire,
too, at the dull little town of Mallingford, lived the old Aunt Tremlett,
Harry’s godmother, from whom they learned the few particulars they
ever knew of their pretty young mother and her early death.

Their father never accompanied them to Brentshire. He still

shrank with a morbid horror from ever revisiting the place where he
had first met his wife, and where, so few years after, she was
buried.

The Veres had in past days been people of no small consideration

in their own county, and though for two generations the head of the
family had been settled in a different part of England, there were still
plenty of people about Mallingford to whom the name in itself was a
recommendation to show kindness to the two children who bore it.
And as they were loveable and engaging, they soon gained hearts
on their own account. There was old Mr. Temple, the clergyman,
who had married their parents, and seen the sad end of that story,
and his two young-lady daughters, in particular Miss Veronica, who
played the organ on Sundays, and sometimes invited May or Harry
as a great treat to sit up in the loft beside her, Then there was jolly
old Mr. Baldwin, of the Bank, always so merry and hearty; and
Geoffrey, his son, the great tall schoolboy, who used to carry both
children at once, when they were very small, one perched on each
shoulder. He came to see them one Christmas in London, and told
them of his kind father’s death, looking so sad and lonely that both
Marion and Harry cried when he went away. That was several years
ago, but they had never seen Geoffrey Baldwin since; for as they
grew older, their visits to Brentshire became fewer, and at last
ceased altogether. Their father sold the cottage, and the Midsummer
holidays were now spent in London, with the exception of a fortnight
or so at the seaside, if it happened to strike Mr. Were that town was
unhealthy in hot weather for young people.

I think there is very little more to tell of Marion’s early life. Simple
and uneventful enough it had been, and with but few of what are
usually considered young girls’ special privileges and pleasures. But,
on the whole, by no means an unwholesome training for a rich and
vigorous nature, though it might have crushed and stunted a poorer
one. Such society as, since she grew to womanhood, she had seen
at her father’s house, had been almost confined to that of the few
friends whom he now and then invited to a somewhat ponderous
dinner. Clever men, all of them, in their different ways; interested, if
not absorbed, in topics, much of which Marion hardly understood,
but from which, not being a common-place young lady, her quick
intelligence led her to glean much material for quiet thought and
speculation, which certainly did her no harm, and probably more
good than the “finishing” touches she would at this period have been
undergoing, had her education been more in accordance with
prescribed rules.

That anything in the shape of a “coming-out,” so called, was

necessary or even advisable for his daughter, had never occurred to
the pre-occupied mind of Mr. Vere; but as some of his friends took a
kindly interest in the girl, she had not been quite without an
occasional glimpse into the doings of the gay world. And now a very
unexpected treat was before her, in the prospect of spending several
months at the far-famed wintering place of Altes, under the care of
the pleasantest of chaperons, the aforesaid Cissy Archer.

Six or seven years before this, when Marion was a thin, shy little
girl of twelve or thereabouts, this cousin, then Cecilia Lacy, had been
to her a vision of beauty and loveliness such as she could hardly
imagine excelled by any even of her favourite fairy princesses. And
this childish admiration had not been misplaced. Cissy had been an
exceedingly pretty girl, and now at eight-and-twenty was an
exceedingly pretty woman. A good little soul, too, as ever lived.
Possibly not exactly over-flowing with discretion, but so thoroughly
and genuinely amiable, bright and winning, that it was utterly
impossible to wish her in any respect other than she was. She had
married happily. Her husband was considerably older than herself,
and by his rather overwhelming superabundance of discretion, good
judgement and all other model qualities of the kind, more than
atoned for his pretty, impulsive wife’s deficiencies, if indeed they
could be called such. There were people who called Colonel Archer a
prig, but it was well for them that loyal little Cissy never heard the
sacrilege; for, dissimilar as they were, yet the two were entirely of
one mind in the most important respect, of each thinking the other
little short of perfection. The greater part of their married life had
been spent in India, where their only trouble had been Mrs. Archer’s
extremely delicate health, which at last, about a year before this
time, had obliged her to return home to try the effects of the long
sea voyage and English air. The experiment had in a great measure
proved successful, and Cissy, now hoped to be able, before very
long, to rejoin her husband. The one winter, however, which since
her return she had spent in England, had rather tried her strength,
in consequence of which she had been advised to spend the coming
six months of cold weather in a milder climate. She was now,
therefore, on the point of starting for Altes, accompanied by her only
child, a very small boy known as Charlie, and also, to her great
delight, by her young cousin, Marion Vere. A pretty stout battle Cissy
had fought with the awful Mr. Vere, before obtaining his consent to
his daughter’s joining the little party, but Mrs. Archer had what the
old nurses call “a way with her,” and the uncle had rather a
weakness for his captivating niece. She was the child of his dead
sister, whom not so very long ago he remembered just as bright and
happy as her daughter was now. So the end of it was as might have
been expected. Mr. Vere gave in, and Cissy came off triumphant.

Master Charlie, at the age of five and a half, was already one of
that devoutly-to-be-avoided class—enfants terrible. Frightfully spoilt
by his mother since he had had the misfortune to be under her
exclusive care, and yet a loveable little monkey too, for the spoiling
had principally resulted in making him preternaturally sharp, rather
than selfish or exacting. He was a chivalrous mite in his way. He
firmly believed himself to have been entrusted by his father with the
exclusive care of his mother, and thought it simply a matter of
course that his opinion should be asked before any important step
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