Changing gear

Andrew Gibson is anxiously awaiting 4 September. That's the day when Ockham Holding's shareholders will vote on Gibson's proposal to drop Ockham completely and rename the group Highway - after the group's insurance company.

Highway is the trading name the company uses, so Gibson thinks it makes sense to change the holding company's name to be the same. "It is almost like a reversal of a Consignia or Aviva," he says.

"Hopefully it will be approved by the shareholders," he says.

Driving seat
Even though Gibson has only been managing director since July, the former chartered accountant has been in Highway's driving seat for a lot longer.

Gibson was appointed managing director of Ockham's motor division, Highway, 18 months ago.

"When I came down, Highway had been through a tough two- or three-year period. I think it is fair to say that from 1996 to 1999 it lost its way slightly and, along with the rest of the market, it lost quite a lot of money.

"Although we had created our insurance company, it was still operating very much as a Lloyd's syndicate," he says.

He describes the last 18 months as a period of renewal, in which he has been building on the company's strengths and eliminating its weaknesses.

And the results are impressive. In the space of a year, Highway turned around a loss of £2.1m in 2000 to profits of £7.2m after tax for 2001.

Gibson attributes this largely to motor premium rate increases of around 15% that made the underlying business more profitable.

But he also sees it as the hard work of the last 18 months paying off. Gibson talks proudly of what the company has achieved. Rivals confirm that Gibson has every reason to be proud, saying he done well so far and has an excellent team working with him, as well as making practical moves like successfully implementing several IT systems.

The senior management team has been changed and Chris Hill was recently promoted to underwriting director. Costs have been cut. Some of the underwriting offices have been closed and the head count reduced to 600 from 750.

"We exited a number of under-performing areas of business where we could not make our required return on capital."

Highway stopped writing household, private hire, young driver and French private motor lines in November last year.

"We are also benefiting from the better quality of business coming through," he adds.

Gibson says they have redesigned their private car product to replace the 13 niche products they used previously and says they plan to launch two new products over the coming months.

The decision to concentrate on motor was taken in 1995 for a variety of reasons.

"One reason was we were concerned about US trust requirements and felt if there were any big exposures the risk would be quite considerable which, on 12 September, looked like it was the right thing to have done," Gibson says.

He notes that some of Highway's competitors have followed suit. When asked if he thinks Cox will do this as successfully as Highway he smiles and says: "It is a very good business, I am a great admirer of Cox."

An area he feels passionate about, Gibson says, is maintaining broker relationships. "We are very strong with our broker relationships, although we have not always done as well as we should have done by them. Thankfully they forgave us. It is my job to make sure it never happens again."

Uninsured loss recovery partner Crusader, which is 60% owned by Highway, hit the headlines last September when Wisecall Claims Assistance claimed Highway passed non-fault claims on to Crusader, which then appointed a legal firm to organise a conditional fee agreement (CFA) policy if there were an injury involved, even if a client already had legal expenses cover from another insurer.

Leaving Lloyd's
Adding to this controversy, Topaz Insurance Services claimed Highway insisted that policyholders use credit hire cars from Drive Assist following non-fault accidents, something arranged by Crusader.

Gibson falters when asked whether Crusader is a thorn in Highway's side but stands by it, saying: "I think the press was slightly unfair. It is a good business."

Another area Gibson is focusing on is Lloyd's, or rather getting out of it. "It is cheaper to operate outside Lloyd's. As a margin business effectively, the Lloyd's costs are meaningful to our bottom line. We estimate that it costs somewhere between 2% and 3% of premium income."

"We have been reducing our business at Lloyd's since 2000 and, with a fair wind, we would like to exit so that we underwrite all our business in 2003 as an FSA insurance company.

"Obviously the Lloyd's open years would need to be run off and we also have a small Names syndicate that underwrites as part of the Highway Group that will probably stay.

"So, we will not exit Lloyd's completely by next year, but the objective is that by 2003 all of our underwriting will be done outside Lloyd's."

While he thinks the Chairman's Strategy Group proposals are a "good sign" as Lloyd's has acknowledged the need for change, he is not hopeful they will change things enough to make staying in the market attractive to Highway.

"I am not sold on the idea that the franchise model will reduce the regulatory reporting and those extra costs. As far as I can see, it must actually increase it," he says.

Looking forward, things must change in the motor market, says Gibson.

"Premium rate increases are slowing down, so we are at an interesting point in the market. We need to continue to push premium rates through."

This is because, he explains, insurers can no longer rely on high levels of investment income. Meanwhile, personal injury costs are rising at well above the rate of inflation.

"If claims costs are going up dramatically, investment income is going to be lower, and combined operating ratios are averaging at 104%, you need to bring back discipline," he says.

But Gibson is confident: "I think we as a business are quite well set, but the marketplace as a whole needs to be more disciplined."