PETALING JAYA: There will be uncertainty over the impact to Allianz Malaysia Bhd
’s earnings pending discussions among authorities and hospitals on ways to contain rising medical costs.
“While insurance companies are likely to cap their medical premiums, it is uncertain as to whether medical costs and claims can be contained.
“Until there is some conclusion to negotiations among stakeholders, we expect uncertainty over the impact to Allianz’s earnings to prevail, thus the downgrade in our call to ‘hold’, pending greater visibility,” Maybank Investment Bank Research (Maybank IB Research) said in a note.
Bank Negara recently announced interim measures to address rising medical insurance premiums.
Insurance companies are required to spread out insurance premium increases over three years until 2026, to ensure that the majority of policyholders experience annual premium increases of not more than 10% a year.
“We understand that insurance companies will commence to cap premium increases, but with expectations that discussions among authorities and hospitals will continue to ensure that medical cost inflation, and thus future claims, are contained too,” the research house said, adding that it does not expect any material impact to earnings this year but failure to cap claims could have some negative implications on future earnings.
“A very simplistic simulation of a 10% increase in revenue but 20% increase in claims at Allianz Life, would impact Allianz’s FY26 group earnings by 2% to 4%,” it said .
Maybank IB Research has applied a 10% discount to its sum-of-the-parts valuation of RM24.85 for Allianz Malaysia to reflect this uncertainty, lowering its target price to RM22.40, capping medical premium increases to below 10% a year.
Other measures proposed by Bank Negara include a one-year pause on premium adjustments related to medical-claims inflation, for policyholders aged 60 and above as well as the permitted reinstatement of medical policies that lapsed in 2024 due to previous premium revisions, without additional underwriting requirements.
Insurers have to also make available, by end-2025, alternative medical products that offer the same or lower premiums, to policyholders who choose not to continue with their repriced plans.
