Affin Hwang said the positive industry growth momentum seen in 2023 is expected to carry through to 2024.
PETALING JAYA: The insurance industry in Malaysia is expected to expand further in 2024, driven by resilient domestic demand.
According to Affin Hwang Investment Bank Research, the positive industry growth momentum seen in 2023 is expected to carry through to 2024 sustained by domestic demand, recovery in business activities and the need for a higher level of life or medical coverage.
For the general insurance segment, the brokerage forecast a growth of 10% for 2023, and 7% for 2024 and 2025, based on gross written premiums.
For the life insurance segment, on the other hand, growth is projected to be 4% this year and in 2024, and 3.5% in 2025 based on new business.
Affin Hwang said insurers would continue to face competition, high claims ratios and strict environmental, social and governance compliance pressure, including mitigating climate risks and avoiding exposure to high project risks.
As such, it maintained a “neutral” call on the insurance sector.
“In 2024, we see the scope for risks to be priced effectively under a liberalised pricing environment, while efforts to reduce fraudulent claims and safe driving could help to lower the motor claims ratio,” Affin Hwang said.
“Demand for investment-linked products (under life) may recover amid a resilient economy, stable unemployment rate and higher income level (for the Top 20 and upper middle class), but we do not expect overall profitability of the insurance companies under coverage to see a significant expansion,” it added.
Affin Hwang’s preferred pick was Allianz Malaysia Bhd for accelerated profit recognition on improved dividend yields.
Allianz could also leverage its extensive distribution network (agency force and banca-partnerships) for life and general products.
TA Research reiterated its “overweight” stance on the insurance sector, with “buy” calls on Allianz and Tune Protect Group Bhd.
“Valuation appears attractive as Allianz and Tune Protect are trading at 2024 price-to-book of 0.6 times, which is cheap compared to historical mergers and acquisitions in the insurance industry, ranging from 1.4 times to two times,” it explained.
In addition, it said Allianz and Tune Protect’s 2024 dividend yields were attractive at 6.8% and 3.3%, respectively.
TA Research said the general insurance segment was expected to remain resilient anchored by the launch of new cars and higher economic activities.
In addition, it expected a positive upward trend in policyholder’s awareness regarding flood coverage.
The outlook for the life insurance segment was also positive, it added.
“We expect the life insurance business to grow by 5% to 8% in 2024. Over the medium to longer term, we are positive on the outlook of the life business as the penetration rate in the country is relatively low (only four out of 10 Malaysians have life insurance),” it explained.
“In addition, the Rahmah package will help to address some of the added threats facing the underinsured segment and educate consumers about the importance of insurance,” it added.
TA Research said the rebound of the tourism industry would benefit the travel industry segment.
“We are optimistic about the travel segment being driven primarily by an increase in seat capacity from AirAsia to capitalise on visa-free travel in China, Thailand and Malaysia,” it explained, adding that this should benefit Tune Protect.
