Battle against Bupa

Keith Gibbs is in rude health. Buoyant because his football team Arsenal won the Double, he is also happy that his company, AXA/PPP Healthcare, missed the swing of the axe in Peter Hubbard's strategic review.

"Peter's review will only affect some of our IT systems, but little else," he says. When he replaced Mark Adams as chief executive six months ago, Gibbs was eager to tackle the company's product portfolio, broadening the overall package to make private healthcare more affordable to a wider cross-section of society.

So far he has been immersed in the integration of Tunbridge Wells-based AXA/PPP Healthcare into the larger AXA Group. His weekly schedule is frenetic. He only lives 12 miles from the company's head office, but spends up to three days a week at AXA's London nerve centre on Cheapside.

"I speak with Dennis [Holt] and Peter at least three times a day," sighs Gibbs. "We are in constant contact - things are changing rapidly.

"Within the current management structure there is a great willingness and desire to work together. I think this is best served by people doing that voluntarily - which is very much Dennis' style. He doesn't want to lose the entrepreneurial spirit he is trying to build within the business."

Pure luck, he says, brought him so close to home. He is one of Lloyd's TSB Insurance's `gang of four' that now oversees the prime divisions of AXA Group UK. Group UK chief executive Dennis Holt reformed his successful team of Hubbard, Gibbs and John Bines (now AXA's corporate brand strategist) last November.

Did Gibbs opt for AXA/PPP because of the location? "No - Dennis just gave us all a brown envelope with the job descriptions inside."

Those who know Gibbs always compliment him on his marketing ability. His CV documents a life in high-flying consultancy work with Citibank, Royal Bank of Scotland, Barclays and GE Capital.

With such platinum-plated credentials in the banking world, could the rumours that AXA's hierarchy is planning to push the insurer more towards an affinity or bancassurance operation be true? Or is AXA poised to emulate Munich Re in its aspiration to buy a bank?

"You don't have to buy a bank to work with banks. I think we will always will be open to using the banking industry for our distribution. A channel concentrated like that can make a big change to your business very quickly.

"I do anticipate that, in the near future, we will work much more closely with more banks, which I think will be across all three UK businesses."

Branding challenge
Branding is the company's biggest challenge. Gibbs is aware of the value of PPP Healthcare's heritage and wants to phase in the AXA branding slowly. But he is up against Bupa - a brand so strong it is virtually synonymous with the private medical insurance (PMI) sector.

AXA/PPP Healthcare has been losing market share against Bupa for some time, he admits. AXA/PPP Healthcare lost around 2%-3% in the past year, leaving Bupa with 43% of the UK PMI market. AXA/PPP Healthcare has only 28% now.

"I don't want to get into a war over market share. I want to narrow the gap, not just to change the share ratio, but to increase profitability in the group.

"I see us closing that gap. But not by moving large chunks of what we do offer to just fall into a price war with Bupa. It won't be doing anything for us in the short-term, and it does nothing to help the customer in the long-term."

Hard task
One rival thinks his plans are friable: "Gibbs has a hard job because he has identified the small and medium enterprise (SME) market as a rich target for the business. The problem is Bupa has virtually bought out the whole SME market. There is no where to go or grow."

In contrast, Gibbs says: "In truth, the only area we can push quickly to attack Bupa on market share on is the corporate market, because we can't get the same rate on return from the SME or the individual market. We can also immediately tackle Bupa on marketing. Can we do better marketing than Bupa? The jury is still out."

Future diagnosis
Gibbs admits that PPP's "narrow church" customer base has to expand and that SME is growing "slowly", but he sees a massive opportunity to cross-sell the PMI portfolio across the UK AXA business, which has long-term relationships with the SME market. This will include striking better deals with intermediaries and brokers.

"AXA/PPP is currently ahead of all targets on all measures -- both profit and premium... Overall, first quarter performance was reasonable for the start of the year, with our customer base slightly ahead of expectation.

"At the moment the individual market makes up 85% of our direct business. We hope to move this further through enhancements in the intermediary market."

The government's response to the Wanless Report was to criticise public-private partnerships. Gordon Brown pledged that NHS funding would rise by an average of 7.4% in real terms each year, increasing from £65.4bn this year to £105.6bn in 2007/2008. Is the private sector worried?

Gibbs is sceptical of Brown's promises. "Like many people, I want to actually see what happens in practice. Without doubt providing substantial additional investment is not a bad thing, but how will that money be spent? Will the projected additional funds to be invested actually be made? Is the financial investment realistic?

"If he [Brown] wants to meet the 2008 target and grow the extra supply, he will have to invest even more. And you don't just pay the extra people more, you have to pay everybody more.

"So can you deliver the extra supply without breaking through the salary cap? Will the extra money really be found in three years time?"

Gibbs says that the PMI market in general - now stagnant at 11% in the UK - has not spent enough time explaining and convincing the government of what it does.

"We need to explain the value-for-money opportunities we can offer and the return to customers."

This means finding ways of broadening the AXA/PPP Healthcare product offer. "I don't think we are going to get too far if the only product we offer is £1,000 a year. We need products that offer wide benefits, but cost less."

PMI shake-up
Gibbs plans to lift various PMI exclusions in a radical shake-up of its underwriting practices. He wants to "deliver better pricing to risk" and next year will introduce a new underwriting scheme to allow customers more choice.

"We want to make sure the underwriting risk understands what people's needs are in the modern world. Some past PMI exclusions, such as cataracts for a person with diabetes, may not remain.

"What we should say in the future is that price includes the secondary conditions that emerge from your primary illness."

His intention is to improve the data for underwriters to calculate the risk, with the results helping performance next year.

"It will involve combining data that we have in-house and data that AXA has in other European territories.

"It won't completely revolutionise the market, but it will give customers far more choice than our competitors," he said.

Keith Gibbs fact file
Keith Gibbs was appointed chief executive of AXA PPP Healthcare on 17 December 2001.

Previously, he was at Citibank Life (February 1988 - December 1993), initially as product development actuary and later as marketing director. He was sales and marketing director at Lloyds TSB Insurance and has also worked at Sun Life of Canada and Sentinel Life.

Gibbs has also run his own management consultancy, with clients that included: Royal Bank of Scotland, Bank of Scotland, Barclays, Bank of Ireland, Alliance & Leicester, Royal & Sun Alliance, GE Capital and Abbey National.

He is a qualified actuary and mathematics graduate from the University of Kent and is married with two children.

Gibbs' favourite things
Football teams: His first team is Arsenal, but his home town side, Gillingham, also has a place in his heart.

Favourite books: Naturally, as a Gunner, Gibbs loves Nick Hornby's Fever Pitch, but he recently enjoyed Bill Bryson's Down Under.

Favourite TV programme: Frasier

Companies he admires: British Petroleum (BP) - for its marketing and business strategy.

Company he would most like to work for: If not AXA/PPP Healthcare, then Disney would be perfect.