THE local insurance sector may have long remained in the shadows of the broader financial industry, but Maybank’s move to take full control of Etiqa could put the sector firmly back on investors’ radar.
Despite attractive dividend yields, improving growth prospects and healthy profitability, insurance counters continue to trade at relatively subdued valuations compared with their regional peers.
While regulatory complexity, earnings volatility and rising healthcare costs remain concerns, several indicators point to a potentially stronger outlook for the industry.
For some reason, the Malaysian insurance sector sees less attention. It could be due to its complexity, constant regulatory overhang, and high degree of volatility.
Apart from LPI, sector dividend yields are in the mid-single-digit range. But we expect higher payout ratios in 2026. ALLZ will likely increase its payout, while STMB intends to raise it.
Healthy GDP and a recovery in TIV bode are promising indicators, though MAT may continue seeing weakness if logistical disruptions persist. However, some insurers point out that the GDP to GWP growth multiplier has been weaker than usual.
Life insurance has staged a comeback. Protection items are in trend, and the employee benefit and bancassurance segment are ramping up as drivers.
MediAsas take-up could provide some uplift, though the products themselves have very thin margins. The adoption of co-pay programme products has already lowered industry health loss ratios.
Initiatives are constantly rolled out to target healthcare inflation, implying that the fight is backed by a degree of regulatory will.
Also, BNM’s premium inflation cap will end by 2026, which implies better pass-through of costs for insurers. Higher pricing pressures, geopolitical risk, and abnormal weather events are negative drivers.
The motor and medical segments will likely be hit hardest, as cost inflation is most evident due to logistical disruption.
The threat of the MYR falling behind could result in overseas products being more expensive. Smaller insurers that are unable to capitalise on economies of scale will continue to have it rough.
Maybank announced its plan to fully acquire Maybank Ageas Holding Bhd (MAHB), the holding company of Etiqa MY and SG.
The acquisition price is notably higher than the valuations commanded by Etiqa’s listed peers, although the premium could partly reflect the value of its takaful licence and its leading position in the market.
With the deal, Maybank will gain full control of Etiqa and its subsidiaries, potentially giving the banking group greater flexibility should it decide to pursue a listing in the future.
A listing of this scale could also put the spotlight on Malaysia’s often-overlooked insurance sector. Despite offering attractive dividend yields, strong growth prospects and healthy profit margins, insurance stocks have consistently traded at a discount to their regional counterparts.
Several factors may be behind the sector’s muted valuations, including concerns over fluctuations in quarterly earnings, rising healthcare costs and the complexity of the insurance business.
A major listing involving Etiqa could help change investor perceptions and draw greater attention to the sector, potentially prompting the market to reassess the value of insurance companies.—Sept 3, 2026
Main image: insurancebusinessmag.com
