<p> Microsoft Cloud Services Partner Solution Case Study</p><p>Actuarial Firm Works to Transform Insurance Industry with Cloud-based Solution</p><p>Overview “Windows Azure helped us create a powerful cloud-based Country or Region: United States solution that not only meets the needs of one insurance Industry: Financial Services company, but also could transform the way that the entire Partner Profile Milliman is a leading independent industry performs compute-intensive, mission-critical work.” actuarial firm that provides both software Patricia Renzi, Global Practice Leader for MG-ALFA, Milliman and consulting services. The Seattle- based company has about 2,500 employees and is a Microsoft HPC (High- With increased regulation of insurance companies—including Performance Computing) Global ISV. the upcoming Solvency II Directive in the European Union—the Business Situation insurance industry has a strong need to control the cost and Milliman was approached by an insurance industry customer seeking a complexity of IT systems used for actuarial analysis and more affordable and scalable way to regulatory reporting. To help insurance companies manage their manage compute-intensive actuarial and reporting tasks. high-performance computing needs, Milliman, a global provider of actuarial software and consulting services, launched a client Solution Milliman moved core components of its project that uses Windows Azure to distribute highly complex, flagship application, MG-ALFA, to mission-critical computing tasks across cloud-based resources. Windows Azure for greater scalability, availability, and high performance. The result is supercomputer-level processing capability that is enormously scalable and powerful, yet can be delivered at a Benefits Provides massive scalability on demand lower cost and with fewer IT resources than through traditional Cuts IT costs by 30 percent or more on-premises IT deployments. Delivers reliability, enhanced security Situation industry. The challenge is not only the scale Milliman is one of the world’s largest required, but also the uneven nature of the independent actuarial and consulting firms. demand. Usage tends to spike during The Seattle-based company has 55 offices reporting periods and at variable other around the world that provide actuarial and times, depending on the customer’s risk management advice and solutions to a business. Insurance companies face the full spectrum of business, financial, dilemma of whether to provide IT resources government, union, education, and for the peaks and suffer the cost of low nonprofit organizations. utilization, or to provide a lower level of capacity and then deal with delays in The firm’s flagship software solution for the obtaining results. life and financial services industry is MG-ALFA, a sophisticated financial The dilemma has reached the crisis point modeling tool used around the world. MG- for many insurers. In Europe, for example, ALFA, which was first released in the mid- insurance companies are preparing for the 1990s, helps insurance firms with tasks such Solvency II Directive, a European Union as product pricing, risk management measure that goes into effect in 2014. analysis, and responding to regulatory Solvency II includes vastly increased model reporting requirements. complexity, imparts a strict timeline for results, and mandates quarterly reporting. Due to the nature of the risks that are part of insurance products and the interactions “Solvency II leads to even greater needs for with the assets backing them, MG-ALFA computing power, which creates more uses stochastic simulations to measure the financial challenges for insurance firms,” financial results. Stochastic analysis involves says Patricia Renzi, Global Practice Leader evaluating financial outcomes across for MG-ALFA at Milliman. “It puts a lot of thousands of randomly generated pressure on companies to balance the cost economic scenarios that might play out versus timely and accurate information to over 30 or more years. This kind of actuarial manage their business effectively. Our analysis requires very high-performance clients are looking to us for solutions.” grid-computing capabilities, which in turn require a specialized—and expensive—IT In late 2009 a Milliman client—the Phoenix infrastructure. Group, which is based in the United Kingdom—was considering its options for “For a typical company doing advanced managing the Solvency II requirements but actuarial modeling using an on-premises did not like any of the choices available. deployment or a traditional hosting Phoenix and Milliman collaborated to provider, the cost of a grid—including design an innovative solution that provides hardware, electricity, cooling, rack space, IT significant value to both Phoenix and support staff, and other costs—can reach Milliman. $3 million or more per year,” says Brian Reid, MG-ALFA Global Sales Director at “What Phoenix recognized,” says Renzi, “is Milliman. that the workloads required to meet the new regulations would be significantly It’s an expense that insurance companies higher than anything they were currently must manage carefully to compete in the doing, but they would be intermittent. The size of the infrastructure required each </p><p>25 quarter would be quite significant, but it also introduced a web-based modeling would be idle for the rest of the year. The paradigm. result would be a major cost for an infrastructure that would be terribly “For Phoenix, we used the desktop version underutilized.” of MG-ALFA to customize the mathematics behind their specific calculations and the Solution business logic used to make projections on Milliman developed a proof of concept with their assets and liabilities,” says Renzi. “That MG-ALFA running on Windows Azure in the part of their solution is built and summer of 2009 and presented it to maintained on the desktop, and then sent Phoenix as a potentially cost-effective to the cloud for the calculations.” solution for the computationally intensive work required to manage its business The company also designed the solution so effectively. “As we reviewed the concept, that third-party system integrators and one thing became clear,” says Renzi. customers’ internal enterprise developers “Windows Azure offered a powerful cloud- can write software that provides input to based solution that not only meets the the MG-ALFA cloud system for model needs of one insurance company, but also details, such as economic scenarios or the could transform the way that the entire value of assets and liabilities on a specific industry performs compute-intensive, valuation date. “Working out the details in mission-critical work.” advance enables full automation of the process, eliminating potential human error Milliman took a strategic approach in and wasted time that can happen with the designing how its MG-ALFA application manual updating of models,” says Renzi. would work on Windows Azure. The development team used the core elements The Milliman solution is architected to of the existing MG-ALFA software so that distribute compute tasks across the companies already running MG-ALFA on Windows Azure global network of the desktop could also run jobs in the Microsoft data centers to achieve the best cloud. possible performance. To date, the company has scaled up to more than 8,000 The technologies used for the solution compute nodes simultaneously. include Windows Azure Compute, which provides highly available compute capacity To ensure high availability for the pilot that allows application code to run in the project for the U.K.-based Phoenix Group, cloud, and Windows Azure Storage, which Milliman hosts its MG-ALFA application at a is used to store persistent data. The Microsoft data center in Ireland and mirrors solution was crafted to include web-based it to another data center in the workflow, assumption management, Netherlands. The application is designed so versioning, resource management, and that hundreds or even thousands of jobs other capabilities that are critical for are rapidly distributed across Microsoft making efficient use of the increased data centers around the world to take computing capacity. In this way, the advantage of virtualized grid-computing solution became not only a new product network. for the desktop version of MG-ALFA, but </p><p>35 Benefits intensifies the computing capacity crunch,” By turning to Windows Azure, Milliman he explains. “For Phoenix and other helped one client tackle a significant IT and companies complying with Solvency II, that regulatory challenge—and in the process, means every three months there will be a created a solution that can help insurance massive spike in demand. With Windows companies transform the way they handle Azure, our clients can quickly scale up for mission-critical actuarial work. The cloud- the massive computations involved in based version of MG-ALFA is massively running scenarios, and then just as quickly scalable, providing enormous flexibility for scale down when the processing is not companies that must deal with the ebb and needed.” flow of their actuarial computing needs. It is cost effective, helping companies save Cuts IT Costs by 30 Percent or More money over traditional IT infrastructure With the MG-ALFA cloud-based solution, solutions. It also provides the kind of Milliman clients pay only for the processing reliability and enhanced security needed for and storage capabilities they need, without critical business operations involving having to deploy, manage, and upgrade confidential data. hardware.</p><p>“Windows Azure offered the platform to “We estimate that if a grid is used 60 create a powerful cloud-based solution that percent of the year, running MG-ALFA not only meets the needs of one insurance operations on Windows Azure can cut the company,” says Renzi, “but also could traditional $3 million cost for a traditional transform the way that the entire industry on-premises system by at least one-third,” performs compute-intensive, mission- says Reid. “With Windows Azure, critical work.” companies avoid large capital expenses, because the MG-ALFA solution can access Provides Massive Scalability on Demand high-performance computing resources on MG-ALFA is a complex, powerful software demand at a small fraction of what it would solution that can distribute calculations cost to own and operate those resources.” across thousands of processors. By porting the solution to Windows Azure, Milliman Delivers Reliability and Enhanced eases computational workloads for its Security business clients by taking advantage of Security and reliability are major concerns Windows Azure Compute capabilities, for financial services companies. That is why which can be scaled up or down as needed. Windows Azure, which is run in Microsoft data centers, is a good choice for an Van Beach, Product Manager for MG-ALFA industry solution, says Renzi. at Milliman, notes that a typical Solvency II reporting cycle can involve over 2 million “Windows Azure is an enterprise-grade simulations involving a complex range of platform with attendant security and variables. reliability,” she says. “And, because Microsoft has data centers worldwide, “The Solvency II process involves incredibly information can be hosted in jurisdictions complex calculations requiring intense appropriate to the client.” computing capabilities to meet the prescribed reporting deadlines. That further Milliman employs numerous measures to maintain high availability of its computing </p><p>45 resources. Milliman staff provides 24x7 Microsoft Cloud Services monitoring of services using proprietary Microsoft offers a complete set of cloud- diagnostics, event management, and other based solutions to meet business needs, service management techniques. With the including solutions for advertising, built-in replication functionality in Windows communications (email, meetings), Azure, Milliman can quickly recover from collaboration (document storage, sharing, any individual data-center service workflow), business applications (customer interruptions in the rare event of an outage. resource management, business productivity), data storage and Renzi says the solution delivered an management, and infrastructure services. In impressive performance running on addition, customers can take advantage of Windows Azure. During a six-month period an entire ecosystem of solution providers beginning in late 2011, Phoenix had several and Microsoft partners. periods during which it operated 10,000 compute engines on Windows Azure for For more information, please visit multiple days and ran smaller jobs in www.microsoft.com/cloud between.</p><p>“The jobs had a 99.98 percent completion rate,” says Renzi. “Windows Azure delivers great reliability while freeing companies like Phoenix from the processing bottlenecks that occur in single hosted services. Windows Azure was instrumental in helping us deliver a robust, dynamic risk management solution that stretches the boundaries of what is possible in enterprise computing.”</p><p>55</p>