Munich Re Breaks a Taboo: €1.5bn Defence Fund Bet as Shares Slip 15% from Peak

Munich Re pivots to defence investment amid rising European military spending, while currency headwinds and pricing pressure weigh on its stock and premium volume.

Europe’s largest reinsurer is making an unlikely pivot. Munich Re, through its asset manager MEAG, has signed on as an anchor investor in a new European defence and security investment platform launched by US private equity firm Warburg Pincus. The fund targets majority stakes in established European mid-cap defence companies, with an ambition to raise up to €1.5bn.

The move marks a striking departure for an industry that has long treated the defence sector as a moral minefield. But with European governments ramping up military spending, the calculus is shifting — and Munich Re is betting early.

Currency Headwinds and Pricing Pressure

The timing is anything but straightforward. Munich Re’s stock closed at €513.20 on Friday, roughly 15% below its 52-week high of €605 and about 7% lower than where it started the year. A strengthening euro is the primary culprit: the group generates a significant chunk of its revenue in US dollars, and a firmer single currency eats into reported premiums and earnings.

There’s also a structural drag in property-casualty reinsurance. A benign first quarter — with few major natural catastrophes — has reduced claims, but it has also weakened clients’ willingness to pay up for cover. Munich Re responded by shrinking its premium volume by 7.8% to €13.7bn as of January 1, 2026, deliberately walking away from unprofitable contracts.

CEO Joachim Jurecka is nonetheless standing by the full-year target of €6.3bn in IFRS net profit. That would top last year’s €6.12bn, which itself beat the company’s own forecast. The longer-term “Ambition 2030” strategy calls for a return on equity above 18% and annual earnings-per-share growth of more than 8%.

Record Capital Returns — and an Auditor Shake-Up

Shareholders are being courted with firepower. A new share buyback programme of up to €2.25bn began in late April, running through April 2027, with all repurchased shares to be cancelled. Combined with the dividend, total capital returns for 2025 amount to roughly €5.3bn — nearly 90% of net profit.

The annual general meeting on April 29 also sealed a change in external auditor. KPMG takes over from EY for the 2026 financial year, including the sustainability reporting required under the EU’s Corporate Sustainability Reporting Directive. EY had been the group’s auditor since 2020 but came under fire after the Wirecard scandal; Germany’s audit watchdog APAS imposed fines in 2023 and temporarily barred EY from taking on new mandates at public-interest entities.

Boardroom Tensions and a Succession Question

The AGM also saw Clement B. Booth step down from the supervisory board with immediate effect. A successor has been proposed for the remainder of his term.

But a bigger governance debate is brewing. Supervisory board chairman Nikolaus von Bomhard is pushing for former CEO Joachim Wenning to succeed him when von Bomhard’s own mandate ends — though that is still two years away. Wenning stepped down as chief executive at the end of 2025 after nearly nine years at the helm. Under German corporate governance rules, a cooling-off period means he could not join the supervisory board before the 2028 AGM.

Proxy adviser ISS has warned that installing a former CEO as chairman risks weakening independent oversight. A final decision on whether Wenning will stand is expected by the end of the year.

What to Watch on May 12

All eyes are now on the first-quarter results, due on May 12. The numbers will reveal whether currency headwinds and pricing pressure have already taken a meaningful toll on the operating base — and whether the defence pivot wins favour with institutional investors who have long kept the sector at arm’s length.