Munich Re's €2.25bn Buyback Fails to Halt Slide as Strong Euro Clouds Q1 Outlook

Munich Re’s shares fall 10% YTD to €495.60 on euro strength, even as it targets €6.3bn net profit, €64bn revenue by 2026, and an 80%+ payout ratio.

The gulf between Munich Re's operational heft and its languishing stock price has rarely been wider. The Dax-listed reinsurer is targeting record revenues and a generous payback to shareholders, yet its shares continue to slide, hitting a fresh 52-week low of €495.60 on Monday — a drop of nearly 10% since the start of the year.

On Friday, the stock had already touched a one-year trough of €503.80, extending its monthly decline to more than 8%. The culprit is the same headwind that has dogged the group for months: a surging euro that eats into the value of dollar-denominated premiums.

With first-quarter results due on Tuesday, analysts expect earnings per share of €13.51. But the currency effect, which saw the euro briefly trade at $1.20, is set to weigh heavily on the reported figures. Munich Re generates a large chunk of its premiums in dollars, and a strong single currency erodes those revenues when converted back to euros.

The pricing environment has added to the pressure. Renewal premiums contracted by nearly 8% to €13.7bn as the group walked away from unprofitable contracts — discipline that led to a 2.5% drop in renewal prices. The natural catastrophe segment was particularly weak, as a recent lull in major claims has reduced clients' willingness to pay for cover.

Yet the fundamental picture tells a different story. The group is standing by its full-year target of €6.3bn in net profit and has laid out ambitious medium-term goals under its "Ambition 2030" strategy. By the end of the decade, Munich Re aims to increase return on equity above 18% and deliver annual earnings-per-share growth of more than 8%.

To achieve that, the company is reshaping its portfolio. Volatile property-casualty reinsurance is being pared back to 40% of earnings, while steadier businesses — primary insurer Ergo and specialty lines — will contribute the remaining 60%. Ergo itself is cutting around 1,000 jobs by 2030, with compulsory redundancies ruled out. Instead, the unit is investing heavily in artificial intelligence, retraining staff for new roles. The total cost-savings target across the group stands at €600m.

On the turn of the year, Munich Re also unveiled a revenue target of €64bn in 2026 — a figure that outstrips market expectations. That is backed by an aggressive capital return policy. The payout ratio is set to exceed 80%, funded by both dividends and share buybacks. A new €2.25bn buyback programme began in late April, a move that was applauded by analysts at Jefferies, who highlighted the plan's ability to sustain distributions even in weaker market phases.

"The shares look cheap," said one analyst, noting a price-to-earnings ratio of roughly 9. But cheap can stay cheap until the currency cloud lifts. Rivals such as Swiss Re have recently shown stronger momentum, and if Munich Re can maintain its operating margin despite the euro headwind, the valuation discount could close quickly.

Tuesday's results will provide the clearest test yet. A better-than-feared quarterly profit could see the stock bounce from its one-year low. Disappointment, however, risks a swift break below the psychologically important €500 mark.