The world’s largest reinsurer has published quarterly figures. Management had some bad news for investors.
With a significant burglary, the Munich share reacted to the submission of the quarterly figures on Friday, August 8th. The world’s largest reinsurer had informed investors by ad hoc report on July 21 that the profit for the second quarter with 2.1 billion euros was significantly above the estimates of the analysts of 1.6 billion euros. In addition to the gratifying operational development, a very low damage burden in the area of damage/accident insurance contributed.
In the publication of the quarterly report, however, investors found a few hair in the soup.
In the second quarter, insurance sales, i.e. the premium income, dropped by 1.2 percent to 14.8 billion euros, which was significantly below the analysts of 15.5 billion euros.
The reason for the decline was currency effects. As a reminder: In the first half of the year, premium revenue outside of Europe contributed EUR 13.4 billion of 43.8 percent of the group -wide insurance sales. Unfortunately, I could not find any special information on the second quarter in the half -year report.
On the other hand, the profit at Group level – as written above – climbed by 30.2 percent to EUR 2.1 billion in the second quarter. The profit in the area of reinsurance, which is strongly increased in the area of reinsurance for 1.8 billion euros, was responsible for this.
The damage-cost rate in the damage/accident reinsurance division had been significantly improved, from 73.7 to 61.0 percent. The burdens from natural disasters were only 20 million euros, in the previous year it was more than 500 million euros.
On the other hand, the profit at the first insurance daughter Ergo decreased slightly, to 251 million euros.
Investors were also not very pleased that the prices in the renewal of reinsurance contracts – after several years with strong price increases – decreased by 2.5 percent on July 1st. The group in July was particularly renewed in North and South America, as well as in Australia.
The outgoing CEO Joachim Wenning said that the price level was still attractive. “The results of the July renewal show: We are still in an attractive market environment. It is still important to use this with great discipline,” said Wenning. He was also confident that there would be no price war in the industry. Wenning hands over the post on January 1 to the previous CFO Christoph Jurecka.
“We see stabilization at this level,” said Wenning at the press conference. “Every year is full of major damage, and that has its price,” said the company boss. In addition, alternative capital, for example in the form of catastrophic bonds, is not increasingly entering the market.
Since the Munich Re also waived business that did not meet the margin ideas, the business volume in the renewal round has decreased by 3.2 percent to 3.2 billion euros.
“For the next round of renewal in January, Munich Re expects a market environment with continued attractive business opportunities,” says the press release. In my opinion, this does not indicate that this does not exactly indicate early price increases.
Sales forecast reduced
There was even greater disappointment that Wenning has shortened the sales forecast for the year as a whole. According to this, the premium revenue should only be 62 billion euros instead of the previously announced 64 billion euros. In 2024 there were 60.8 billion euros, which means that growth of only 2 percent is planned for 2025.
The reason is that business in reinsurance 2025 is developing a little weaker than expected – the price decline greets greetings, while the area is at the same time burdened by currency effects. Therefore, he should generate income of 40 billion euros instead of the planned 42 billion euros.
On the other hand, Wenning confirmed the profit view for the group for the full year of 6 billion euros. “With a half -year result of 3.2 billion euros, we are very on course to reach our annual target of 6 billion euros,” said the company driver. In 2024, almost 5.7 billion euros were booked.
What’s next with the stock?
After the share had previously been on the record, the paper broke in after the half -year figure was submitted before it recovered a bit.
The 2026 CGV is therefore 11.3.
In my opinion, investors could need something to digest the reduction in sales forecast, which is why the munich re share could run sideways at short notice – especially if the euro should continue to increase, which should continue to dampen the premium revenue from foreign business outside the euro area.
Afterwards, however, the paper could go back to the record because investors are likely to focus on the good development of profitability. Additional tailwind would result if the euro turns down.
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