MBSB IB Maintains Positive Call On Insurance Sector Despite Healthcare Inflation
KUALA LUMPUR, Aug 15 (Bernama) -- MBSB Investment Bank (MBSB IB) has maintained its “positive” recommendation on the insurance sector, citing attractive valuations and high dividend yields despite persistent healthcare inflation and delays in healthcare cost-control reforms.
In a research note today, the bank said healthcare inflation remains a “tricky issue to fix” as higher spending on the sector appears inevitable.
“Our primary concern is that if healthcare inflation is still rampant, what will happen at the end of Bank Negara Malaysia’s three-year cap on medical insurance premium hikes?
“But there are multiple tailwinds -- a cheap price point, attractive dividend yields, a potential windfall in investment income, and encouraging progress by insurers in addressing the healthcare inflation problem -- making the sector due for a positive re-rating,” it said.
The bank noted that companies under its coverage are market leaders, enabling them to withstand challenges better than most.
MBSB IB said medical cost pressures are being fuelled by private hospitals rejecting proposed cost freezes, opposing pharmaceutical price controls, and what insurers describe as “buffet table syndrome”, where high claims are linked to increased service use without clear medical need.
It also pointed to Malaysia’s relatively low preventive healthcare spending and intensifying competition in healthcare tourism from Thailand, Indonesia and Singapore.
However, the bank highlighted some progress in tackling medical inflation, including the Price Control and Anti-Profiteering (Price Marking for Drug) Order 2025, which will require mandatory medicine price displays in the private sector by 2026.
“The initiative aims to enable the public to make informed choices by knowing the prices in advance and to encourage competitive medical pricing, although it has faced resistance, with several medical groups filing a judicial review," it said.
The bank added that another factor is the decline in active pharmaceutical ingredient (API) raw material prices to pre-pandemic levels, after surging during the pandemic and staying elevated for several years due to logistical constraints, factory closures and increased demand for healthcare products.
MBSB IB's top picks are Allianz Malaysia Bhd, with a target price of RM21.59, and Syarikat Takaful Malaysia Keluarga Bhd, with a target price of RM4.59, while LPI Capital Bhd is also rated “buy”.
-- BERNAMA