Niva Bupa’s IPO Solvency, Power will fuel future expansion: Krishnan Ramachandran

“The industry will grow at 17-18% CAGR over the next four-five years and as Niva Bupa we are growing well above the market. Our ambition is definitely to move above the market,” says. Krishnan Ramachandran, MD and CEO, Niva Bupa Health Insurance.

800 crore rupees you are going to get from the IPO. We understand that you will also use it to improve solvency. What is your goal to improve your solvency from here on out?
Krishnan Ramachandran: Prior to this capital increase our solvency has been above two. With this, it should reach about three. Now, the objective, I believe if you look at the reasons why solvency capital is needed, it is primarily to fund the growth of the company. We are growing at 41% CAGR in last three years. As we all know the opportunity in health insurance is immense. Our aim as Niva Bupa is to ensure that we give every Indian the confidence to access the best healthcare. We have been investing in distribution, in talent, in products, in technology, in our brand for the last few years, so all these reasons as we continue our growth journey, this 800 crore will help us a lot to drive our growth. Solvency and be self-sustainable over time.

Let’s talk about your numbers and the past figures that we’ve seen for FY24. We have actually seen pressure in your underwriting profits. If you can give us some guidelines or help us understand when will underwriting profits improve?
Krishnan Ramachandran: So, if you look at our overall profitability, we have been profitable in FY24 as well as FY23 on Indian GAAP basis. In Q1, we improved compared to last year. Having said that, we think the right way to look at our financial statements is on an IFRS basis because the way accounting and business seasonality works through 2 accounting, which we are today, there are fluctuations, but IFRS earnings are quite simple and we use our IFRS. declared as part of our RHP and even in Q1 if you look at our IFRS results we have a profit of over 30 crores.

Another thing I wanted to understand of course was also about your FY24 premium growth which is around 40%. Do you think it is sustainable and what kind of targets have you set for your premium growth going forward?
Krishnan Ramachandran: So, look, as we become a bigger player achieving the same level of growth, the growth rate will come down. Having said that we expect the industry to grow at 17-18% CAGR over the next four-five years and as Niva Bupa we are growing well above the market. Our ambition is definitely to go above and beyond the market.

Given that you are now a listed entity, just help us understand some company details now. Firstly, what will be Bupa’s stake in the company now and given that IRDAI is pitching for 100% FDI in the insurance segment, will Bupa consider increasing the stake going forward?
Krishnan Ramachandran: Therefore, Bupa’s shareholding should fall from 63% post listing to around 56% and see Bupa as a very long-term shareholder. From the point of view of corporate structure, they are set up as limited by the guarantee company. Their raison d’être is for the customer, so they are constantly looking for opportunities to invest in growing their customer base and will continue to do so in the future. In terms of raising the stake, look frankly, I’m not in a position to comment, it really depends on whether FDI opens up. But as we stand, they are comfortable with majority shareholding and as I said they are in this business for the long term.

The government is also planning to amend the Insurance Act soon, which I think will pave the way for joint licensing as well. So would Niva Bupa be interested in this?
Krishnan Ramachandran: I will say no. We believe that health insurance is a business that requires focus, with focus comes expertise and given the complexity, talent and execution intensity of the entire ecosystem it is a business we believe we are well positioned to specialize in. We serve. Bupa operates in many countries around the world, they are more than 80 years old as a brand and they are experts and we believe that being an expert has advantages and we will continue, that will be our strategy.

Since October the insurance regulator that is IRDAI has actually disallowed long-term premium bookings especially in the non-life insurance segment. If you can help us understand what kind of impact your company will have, first of all will it affect your company?
Krishnan Ramachandran: So, two things are true, IFRS basis will have no effect because whatever is happening is coming into the business, cash flow is also there but the accounting of the business is deferred depending on the policy duration. So, in terms of business value, nothing changes in terms of accounting on an IFRS basis which is an economically sound way of looking at our business, there is no change. As far as the India gap is concerned, there will be changes, we are in the process of evaluating them, this change has come relatively recently, but really the big point I want to make is from a business and economic value point of view. Change, no effect.