In the third quarter, Munich Re benefited from a significantly lower burden of major losses than in the previous year and a strong result from primary insurer Ergo.
The reinsurer confirmed its profit target for the full year, but is again becoming more cautious when it comes to sales.
In the third quarter, Munich Re recorded a profit of almost 2 billion euros after 907 million in the same period last year, when there were high costs for natural disasters. Analysts had expected 1.93 billion euros in a consensus published by the company itself.
Munich Re continues to expect a net profit of around 6 billion euros for 2025, after 5.7 billion in the previous year. After nine months, the group earned 5.18 billion euros. The Visible Alpha analyst consensus was most recently at 6.5 billion for 2025.
The group now sees insurance sales at around 61 billion euros, roughly at the same level as the previous year. Munich Re recently lowered its forecast to 62 billion.
Munich Re is now becoming more confident about the combined ratio in property and casualty reinsurance. The ratio that relates expenses to income in the insurance business is now seen at 74 instead of 79 percent.
Munich Re has maintained its outlook due to balance sheet strengthening and caution
According to the CFO, the lack of an increase in the profit forecast at Munich Re is due to uncertainty and the possible strengthening of the balance sheet. “We definitely see opportunities to further strengthen our balance sheet in the fourth quarter,” said CFO Christoph Jurecka in a conference call. That could potentially dampen profits. In addition, the quarter is not yet over, so major losses could still have a negative impact on the result.
One way to strengthen the balance sheet would be to sell fixed-interest securities that bear an unrealized loss, Jurecka explained. We have “very specific plans” for this. The funds would immediately be reinvested at a higher interest rate. However, the loss would first be recorded.
The group result also depends heavily on the claims experience, Jurecka continued. Hurricane season is currently underway in the North Atlantic. The manager expects a burden in the mid-three-digit million euro range for Hurricane “Melissa,” which devastated Jamaica at the end of October. The profit target of 6 billion euros is not at risk, he added.
Munich Re shares are turning positive – profit target in sight
Munich Re shares shook off their initially significant losses on Tuesday as quarterly figures and forecasts were more precisely classified. At the end of trading they were trading at 545.40 euros via XETRA, up 0.18 percent, after a loss of 3.3 percent at the start.
Analyst Ben Cohen from RBC spoke of a solid third quarter for Munich Re. He was initially a little surprised that the market reacted negatively to the fact that the company had not raised its profit outlook to 2025.
The next event in focus is Capital Markets Day on December 11th. Expert Cohen sees the event as a much bigger driver for the shares than the figures now presented. He then expects a significant increase in share buybacks.
Like Munich Re, its competitor Hannover Re also benefited from a summer with few disasters. Unlike Munich Re, the Hanoverians raised their profit target for 2025 when the figures were presented the day before, which investors rewarded with a price gain of 3.5 percent. On Tuesday, Hannover Re’s share price rose moderately. Munich Re’s business trends are similar to those of its competitors, wrote Philip Kett from the analysis firm Jefferies, while also emphasizing: Profitability remains excellent.
In the chart, both stocks show a striking similarity. With an increase of 10.6 percent, Munich Re is currently doing slightly better than Hannover Re with an increase of 6.9 percent since the beginning of the year. But while Hannover Re has probably overcome the weak phase since the beginning of October for the time being, this is currently still questionable for Munich Re.
DOW JONES / dpa-AFX Broker
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