PETALING JAYA: General insurance players, including LPI Capital Bhd
, are expected to benefit from significant opportunities on the back of growing infrastructure and renewable-energy (RE) projects.
“The road ahead presents significant opportunities for Malaysian general insurance players – this is the beginning of a new phase of growth driven by on-going construction projects, foreign direct investment (FDI), data centres and the adoption of electric vehicles (EVs),” said Affin Hwang Investment Bank Research (Affin Hwang Research).
The research house pointed out that the country is seeing the proliferation of infrastructure projects including expressways, mass rapid transit and light rapid transit projects and RE projects. Meanwhile, Johor and Selangor have become hotbeds for data-centre investments.
“The transition to EVs, which is in its early stages, and the government’s aim to transform Malaysia into the largest EV hub in South-East Asia, present massive business opportunities to general insurance players such as LPI Capital.
“We foresee gross written premiums (GWP) in the country growing at 9% to 10% a year in the next three years, while LPI’s overall GWP is projected to expand at 8% to 9% a year,” the research house added.
Affin Hwang Research said LPI, which saw its combined ratio average at an all-time high of 76.9% in 2023 (due to one-off claims in the first and second quarter of 2023), may see the trend normalising to between 73% and 74% in 2024-2026.
“We also foresee that lower global reinsurance rates, in line with expectation of a US Federal Reserve rate cut in September and lower catastrophic incidences to be potential catalysts for a return to a pre-pandemic combined ratio of less than 70%.
“The upcoming implementation of Bank Negara’s requirement to have a co-payment feature in its medical product is deemed to be a win-win situation for both the insured and the insurer,” it added.
The research house explained that co-payment divides the risk between the insurer and the insured. Although the insured has to bear a minimum amount of the claim, it nonetheless reduces the burden of large payments.
“Senior citizens with pre-existing diseases get adequate coverage at a lower premium with a co-payment clause. Overall, it is expected to have a far-reaching and positive impact on the entire healthcare system,” it added.
Affin Hwang Research is maintaining a “buy” call on LPI, raising its target price to RM15 from RM14.
It also raised its earnings forecasts by 17.7% to 21.8% for 2024-2026 while dividend yields remain attractive at 6.9% to 7.6% for the same period.
