Kuala lumpur: 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.
According to BERNAMA News Agency, the bank highlighted in a research note that healthcare inflation remains a ‘tricky issue to fix’ as higher spending on the sector appears inevitable. The bank expressed concerns about the potential ramifications at the end of Bank Negara Malaysia’s three-year cap on medical insurance premium hikes. However, MBSB IB identified multiple tailwinds, including a cheap price point, attractive dividend yields, potential windfall in investment income, and encouraging progress by insurers in addressing healthcare inflation, which could lead to a positive re-rating of the sector.
The bank emphasized that companies within its coverage are market leaders, positioning them to better withstand challenges. MBSB IB noted that medical cost pressures are being driven 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.
Additionally, the bank pointed out Malaysia’s relatively low preventive healthcare spending and intensifying competition in healthcare tourism from neighboring countries such as Thailand, Indonesia, and Singapore. Despite these challenges, progress in tackling medical inflation was noted, including the Price Control and Anti-Profiteering (Price Marking for Drug) Order 2025, which mandates mandatory medicine price displays in the private sector by 2026. This initiative aims to enable informed choices and encourage competitive medical pricing, although it has faced resistance, with several medical groups filing a judicial review.
Furthermore, the bank mentioned the decline in active pharmaceutical ingredient (API) raw material prices to pre-pandemic levels, following a surge during the pandemic due to logistical constraints, factory closures, and increased demand for healthcare products. MBSB IB’s top picks in the sector include 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’.