Munich Re’s Boardroom Bet: Insiders Buy €81M in Shares as Reinsurer Cuts Cat Cover and Volumes by 18%

Insider purchases near YTD lows signal confidence as Munich Re slashes external protection, sheds unprofitable volume, and bets on strong capital reserves despite a 14.79% stock decline.

Five members of Munich Re’s management board have been snapping up shares near the stock’s year-to-date lows, putting roughly €81 million of their own money behind a strategy that is reshaping the world’s largest reinsurer in two bold strokes. The purchases, which included Mari-Lizette Malherbe picking up stock at an average price of €479, signal a vote of confidence even as the company takes on more risk and walks away from business it considers too cheap.

The most dramatic move is a sharp reduction in the external protection Munich Re buys to guard against large losses. Ahead of the Atlantic hurricane season, the group has slashed its so-called “safety shield” from $1.55 billion to just $600 million. Management expects 12 to 13 named storms in the Atlantic — below the long-term average — while 27 are forecast for the Pacific, shifting the focus to Asia. By keeping more premiums on its own books, Munich Re is betting on its capital reserves: its Solvency II ratio stood at a robust 292% as of the first quarter.

At the same time, the reinsurer has been shedding volume in the primary underwriting market. When April renewals saw risk-adjusted prices fall by roughly 3%, management refused to chase unprofitable terms. The result was an 18.5% drop in new business written, which tumbled to €2.0 billion. Chief executives chalked the revenue decline up partly to currency effects, but the real driver was a deliberate decision to sacrifice short-term top-line growth for portfolio quality. Overall premiums fell to €15 billion in the first three months of the year.

Operationally, the core business is running smoothly. Net profit for the first quarter hit around €1.7 billion, up sharply from a year earlier, with earnings per share reaching €13.41. The combined ratio in property and casualty reinsurance improved to a strong 66.8%, while investment income contributed nearly €1.7 billion. For the full year, management is sticking to its €6.3 billion profit target — a number that reflects confidence that the pricing discipline and reduced storm cover will pay off.

The stock market, however, remains unconvinced. Munich Re shares closed at €465.40 on the recent expiry day, down 14.79% since January. The price sits well below its 50-day moving average and remains a long way from the 52-week high of €605.00. Technical analysts now eye the 52-week low of €437.50 as a critical support level; if that breaks, a deeper sell-off could follow.

Alongside the insider buying, the company is pressing ahead with a buyback program that had accumulated roughly 856,000 shares by early June. That first tranche is part of a multi-billion-euro authorization due for completion in August. The next big test comes on 7 August, when Munich Re publishes its half-year results. By then, the first hurricane damage claims will show whether management’s aggressive risk-allocation strategy — trimming the shield, shrinking volumes, and betting on its own capital — is as smart as its board members apparently think it is.