CRAIG T. KOJIMA / CKOJIMA@STARBULLETIN.COM Being an actuary has made Mary Kate Smith "risk aware," she says, which helps her when she's walking to work every day from Waikiki to Thomas Square.

Actually I’m an actuary

Mary Kate Smith applies her love of mathematics to assess the risks of life

Mary Kate Smith loves mathematics, and while going to graduate school figured out a way to turn it into a rewarding career: She became an actuary for an insurance company. The job lets her revel in regression analysis, forecasting, model building, probability distribution and similar such things that most people barely understand. Her employer is First Insurance Company of Hawaii Ltd. in Honolulu, which she joined last year after working for an insurance brokerage in Chicago. A native of Los Angeles, Smith has a master's degree in mathematics from the University of Virginia and a bachelor's degree in mathematics from California State University, Northridge. She is married to Norman Rhines, with whom she lives in Waikiki. Smith, 42, said she walks to her offices near Thomas Square from home every day. "I walk to work and I love it," she said. "It's 40 minutes each way, so I get lots of exercise and I don't have to fight the traffic."

Answer: Well, I work for a property casualty insurance carrier that does business in the state of Hawaii, and what I do for this company is evaluate the loss reserves, which is part of financial reporting. There's a lot of regulations surrounding insurance, so we're here to support the loss-reserves estimates, to basically make sure the company has enough money to pay all its claims.

Q: So there's some law saying the company has to have so much in reserve?

A: There's uncertainty. For example, in workers' comp, the ultimate value of a claim might not be known for many years. We have a claim from 1960 that we're still paying off. So these claims go for many years, and it requires an actuary to determine how much these claims will actually cost so the company can set aside enough funds to pay the claims.

Q: What kind of insurance does First Insurance sell?

A: We offer all types of insurance. We have homeowner and auto products, and then for the business community we offer workers' compensation, liability, auto ... those are our main product offerings.

Q: When did it first occur to you that you wanted to be an actuary?

A: I was in graduate school, in Virginia, and I wanted to get a job. (Laughter) And it's a career. I think that's what attracted me to the profession -- it's a career, it's intellectually challenging, we have continuous change. For example, a new risk is identity theft, and First Insurance does offer coverage for identity theft.

Q: What were you studying at the university?

A: I had initially planned to become a math teacher, but I decided for a variety of reasons that I wanted to leave school -- I'd had enough of school (Laughter) -- and get a job, find gainful employment.

Q: Do you have to really love mathematics to be an actuary?

A: Yes, I think you do. I love it. We work with the numbers all day long. So you cannot be intimated by the numbers, and I have to enjoy working and digging for trends.

Q: What came first, your desire to be an actuary or your love of mathematics?

A: Love of mathematics. Since I was a young child, I always did well in mathematics.

Q: What kinds of mathematics courses did you have to take to be qualified enough to be an actuary?

A: A general study, but I myself personally took some extra courses in statistics.

Q: So do you have to know about regression analysis and all that?

A: Yes, we have a need for that. We do forecasting, we build models, use probability distribution.

Q: What's your favorite unsolved math problem?

A: Oh, I don't know.

Q: What's your favorite solved math problem?

A: Well, the one that that guy from Princeton (Andrew Wiles) solved, not that long ago, that proved Fermat's Theorem.

CRAIG T. KOJIMA / CKOJIMA@STARBULLETIN.COM Mary Kate Smith loves math, so much that she became an actuary, joining First Insurance Co. last year. Above, she talks with Robert K. Schuessler, the company's assistant vice president and controller in its finance division.

A: (Laughter) Yeah, well, we (actuaries) work on practical problems.

Q: Besides property casualty, what other kinds of businesses could you be an actuary for?

A: The other areas are life insurance, pensions and health.

Q: What is the most common sort of claim that your company has to compensate for?

A: Our largest product line is workers' compensation. But in the event of a hurricane, that would be our largest, as it was in 1992, with Hurricane Iniki.

Q: So you guys do still offer hurricane insurance?

A: Yes, we do, if you're shopping in the market. (Laughter)

Q: In workers' comp, what's a typical payout?

A: I don't think there is a typical payout.

Q: There's no mostly common injury?

A: There's a variety of common injuries that occur, but as the population ages, you see a shift in the type of claim. It's not that you had an injury and it changes into something else; it's the type of claims that are reported.

One of the things that is interesting about workers' comp is that when I started in the industry, in 1990, 60 percent of the payouts were for indemnity and 40 percent were medical, but we're moving toward 50-50, because medical costs have become a much more important component of the claims.

Q: What's indemnity?

A: That's lost wages.

Q: How often do you make recommendations about whether a particular insurance rate should be revised upward or downward?

A: I do not handle that function in the company. I handle the financial reporting aspect. So every quarter I do a reserve review for the company. I gather up all the data that's needed. We look at frequency (of the claims), severity (the average cost of the claim), inflationary trends... .

Q: Wow, that's so interesting.

A: You're ready to sign up, huh? (Laughter)

Q: What are some of the tools of your trade, in terms of equipment? You sit there with a calculator?

A: A calculator, a computer, software packages, like a spreadsheet package. We have reserving software?

Q: "Reserving" software?

A: Yes, so we can develop the loss-development triangles, to assist us in projecting losses.

We also have modeling software. We're heavy users of software, and data systems.

Q: How much do you interact with other employees at First Insurance?

A: I interact with claims and underwriting on a regular basis.

Q: And underwriting is what?

A: Underwriters are the people who rate the policies and issue them. They evaluate the risk and decide whether the company will accept that.

Q: How has your knowledge about property casualty statistics affected the way you conduct your personal life?

A: I'm more risk aware, in terms of liability.

Q: Do you read a lot of math and statistics books?

A: I read papers generated by my society, so I can stay abreast of new trends, and those generally are very statistically intensive.

Q: What are your hobbies?

A: My husband and I own a boat, and we enjoy going boating in the immediate area.

Q: How many actuaries are there at your company?

A: We have one credentialed actuary. I'm a fellow of the American Academy of Actuary and the Casualty Actuarial Society.

Q: How many other actuaries are there in Hawaii?

A: There are a few, but not many. Most of them are the life actuaries.

Q: Do you guys ever meet?

A: Nobody here is organized. They do that in other places where there are more actuaries, but nobody is doing that here, though it would be interesting to meet the other people and see what kinds of challenges they face.