OSK 'neutral' on insurance sector

OSK Research Sdn Bhd expects more consolidation in the local insurance space in the future.

The
research firm said that local insurance companies had become attractive
mergers and acquisition targets for foreign players, after Bank Negara
Malaysia raised the foreign ownership limit to 70 per cent from 49 per
cent.

"The industry's premium income has been on an uptrend and
is likely to stay that way, whether in good or bad times, based on
historical trends," OSK said in a statement today.

Overall, it said, premium income growth is positively correlated with the consumer sentiment index (CSI).

"When consumer spending weakens as economic activity slows, demand for insurance products will correspondingly be sluggish.

"However,
the downside risk is likely be offset partially by the central bank's
upward adjustment in motor insurance tariffs starting from 2012 to 2015,
which will benefit the motor insurance players," it added.

OSK has maintained its "neutral" call on the insurance sector as there are no immediate catalysts.

"When
the market sentiment turns sour, investors tend to look at more
defensive plays. But when the market is bullish, they turn to the bigger
blue chip stocks rather than insurance companies," it added. -- Bernama