In 2012, Milliman implemented a groundbreaking cloud-based industrialization solution that promises to revolutionize the way the world's leading life insurers model risk.
Nick Watkins (Head of Non-profit and With-profit Actuarial Reporting, Phoenix Group): We’re a company that’s grown from acquisitions. With every new fund, every new company that we acquired—another process, another system, a different system, another way of doing things.
Andrew Rendell (Deputy Chief Actuary, Phoenix Group): For us, sticking with our legacy systems just wasn’t an option. We have lots of different legacy products on lots of systems, and managed in different ways. And our strategy has been to buy those businesses and then take on board the knowledge.
Andy Moss (Finance Director, Phoenix Life): However, as you grow bigger and bigger that becomes more and more unwieldy. So, for us, transforming to one actuarial system was absolutely essential to help us get some better synergies, to have a process which is actually workable.
Pat Renzi (MG-ALFA Global Practice Leader, Milliman): You have systems and they work to a certain point, and then somebody needs a Band-Aid to try and fix something and that thing takes on a life of its own. And then you end up with hundreds or thousands of these quick fixes that end up living for years and years.
Tony Kassimiotis (Managing Director, Operations, Phoenix Life): I wince a little bit when I see all of those spreadsheets. Excel® has a role to play in any business, but I think it’s got to be a balance. You don’t want to drive your executive decision-support framework off the back of Excel. You want to make sure that you’re driving it off the back of some proper systems, proper data, integrity— and ultimately something that’s been tested to destruction.
The problem with status quo
Mark Hutton (AST Business Lead, Phoenix Group): There is a huge risk in doing nothing. You can chip bits off here and there and patch systems up and make them achieve the current requirement for so long.
Nick Dumbreck (UK Practice Leader, Milliman): Particularly when economic conditions or other market conditions are changing quickly, and being able to produce results quickly and reliably is a huge advantage.
Nick Watkins: Since I’ve been here nine years we’ve bought or merged with lots of different companies, changed the way that we do processes and our attitude to things, but without having the systems to actually back that up. So it was really no surprise when we looked and said this is our time to completely revolutionize the systems that we’ve got and to make such a big change.
Pat Renzi: When we first arrived at Phoenix, our expectation was that they were looking for a new software system— just a quick fix, switch from one software package to another. We quickly realized that they were really looking to completely transform their business. So it was a revolutionary change instead of an evolutionary change.
Andy Moss: We very much have a culture where change is part of what we do. Continuing to improve is part of what we do. However, to transform our actuarial systems was a big investment, both in terms of money and in terms of time. So we had to do a lot of prepositioning of people, a lot of convincing people that there is a right thing to do and to stress the benefits of doing that.
Streamlining the workflow, harnessing the cloud
Andrew Rendell: I think what we were really looking for from the Milliman build is to get a harmonized approach that applies across all of our systems so that staff can easily move between one chunk of business and another. And that we can produce better results, faster.
Nick Watkins: I’ve never experienced any system change quite as big as this. We’re talking about all of our modeling systems overhauled all in one go. So if you consider our biggest fund, the Phoenix nonprofit fund, 26 models turned into one, that’s a big enough change on its own without all of the other 20 funds being considered.
Tony Kassimiotis: The environment which we’ve jointly built now is a streamlined, simple, well-documented, flexible environment that we can interact with from a Phoenix Life standpoint. But it also is able to tap vast amount of computing power within the Microsoft Azure cloud.
Pat Renzi: The buzzword associated with cloud computing is its virtually unlimited resources. And the expectations when you think about that are that I’m going to be able to get 1,000 or 2,000 cores to work on. We’ve been scaling that up and up. And recently we had 50,000 cores that we were running. And to visualize what that means, the amount of computing power that that represents is just amazing.
Katherine Meakin (AST Program Manager, Phoenix Group): There was quite a eureka moment when calculations were done so quickly and the results came out so quickly. And I remember someone saying to Mark Hutton, well, what is it that’s doing all of this. And Mark took them to the window and pointed to the sky and said, “See that cloud there.” So, that was a total mindset change that we didn’t have a box whirling away in the corner, we were utilizing processing power that we didn’t have to purchase. We paid for what we needed when we needed it.
Tony Kassimiotis: It was a huge eye opener, tapping into a vast array of resource capacity that allows us to deliver the actuarial modeling significantly faster than anyone had seen before.
Redeploying key talent
Mark Hutton: One of the key factors driving AST was to use people in a smarter way. To use the very best people to determine what the inputs to the model were, understanding the outputs and actually adding some value. In the past, on our old models we’ve used some relatively expensive and skilled people just to make those models work.
Nick Watkins: It just seems a waste of actuaries’ talent for them to be checking detailed spreadsheets and processes. It’s much better if we can use them to use their knowledge and experience to really help make the big decisions that are going to be of benefit for the company later on.
Nick Dumbreck: Calculations have become more complex over the years. Making sure that they’re right and that the results are understood is important. And having the systems being able to be run very simply will allow the qualified staff to concentrate on understanding and analyzing the results.
The power of collaboration
Andy Moss: In terms of us building our actuarial systems I think it is going to place us into a fantastic position in terms of our ability to acquire in the future. It will give us a platform which I think will be the best in the U.K. And that will inevitably give us a better advantage in terms of our future acquisitions.
Katherine Meakin: One of the main factors that has made AST a successful program has been the fact that Phoenix and Milliman have worked very well together. There’s been a lot of teamwork. It’s been a real partnership.
Tony Kassimiotis: We set a very ambitious program to build not only a transformational actuarial capability within our business but also to use it as the platform for growing through further acquisitions. And I think we’ve done both of those things.
Andrew Rendell: One of the things that has really made it work for us is the interaction between the teams of Phoenix and Milliman. It’s just clear there’s enthusiasm on both sides to get a product that works and to think of the best solutions.
Pat Renzi: We spent quite a bit of time working side by side with Phoenix to establish what is it that they’re looking to do? What are their objectives? How would we approach that? And it was a very collaborative experience. Through that I think that Phoenix recognized what a great partner we would be, that we were very collaborative, that we wanted to work together, that we saw the benefits for both Phoenix and for Milliman in this project. And that resonated well with both companies.