Munich Re Hauls In €1.71bn Profit but Shrinks Its Book as Pricing Discipline Sends Shares to 52-Week Low

Munich Re posts strong Q1 profit of €1.71bn, but premium volume drops 5% as selective underwriting spooks investors, sending shares to a 52-week low.

Munich Re delivered a powerful first-quarter profit, yet the market’s gaze fixed firmly on the volumes it chose to walk away from. The stock slumped to a 52-week low on Tuesday, closing at €472.40 in one data feed and €473.10 in another, with a year-to-date decline ranging from 13.83% to 13.95%. The trigger: a conscious retreat from new business that investors read as a brake on future growth.

The re/insurer’s net income for the opening quarter jumped to approximately €1.71bn, a 57% leap from the €1.1bn posted a year earlier. Operating profit climbed to €2.23bn, while the technical underwriting result reached €2.7bn. The combined ratio in property/casualty reinsurance came in at a sparkling 66.8%, or 80.3% on a normalised basis. Large claims were a modest €108m according to one source, and €130m per another — a far cry from the more than €1bn hit a year ago from California wildfires.

The earnings power inside the existing portfolio is evident. Return on equity hit 19.7%, up from 13.3% in the prior-year period. Investment income contributed €1.7bn, though fair-value changes in bond and equity holdings weighed on the line. The investment return stood at 2.9%, still shy of the full-year target of above 3.5%.

Yet the top line painted a different picture. Premium volume fell 5% to €15.0bn, from €15.8bn a year earlier, hurt by a weaker US dollar and, more tellingly, by the company’s selective underwriting stance. At the April renewal, Munich Re cut the amount of business it wrote by 18.5%, with the signed premium volume dropping to €2.0bn. Adjusted for inflation and risk changes, prices declined 3.1%. The group simply declined to accept terms it deemed inadequate.

Chief Financial Officer Andrew Buchanan defended the discipline, pointing to the quality of the portfolio and the centrality of nat-cat pricing. The message is clear: margin trumps volume, even if it means ceding ground to rivals. The contrast with Hannover Re, which expanded its book in the same environment, sharpened the market’s focus.

Capital gives Munich Re room to wait out the cycle. The solvency ratio stood at 292% after deducting the new share buyback programme of up to €2.25bn. The annual general meeting on 29 April approved a dividend of €24.00 per share. That payout, however, has not been enough to arrest the stock’s slide — the share now trades 12.34% below its 200-day moving average.

ERGO, the primary insurance arm, added €235m to the group result, with €157m from German operations and €78m from international business. Outside the reinsurance lines, the group booked roughly €90m in claims related to the conflict in the Persian Gulf, about two-thirds of which fell under Global Specialty Insurance.

Management is sticking to its full-year target of €6.3bn in net profit and €64bn in premium volume. The investment return goal remains above 3.5%. To buttress margins against potential further price erosion, Munich Re has laid out plans to cut costs by around €600m by 2030.

The next test comes with the July renewal season. Buchanan expects largely stable pricing, a result that would vindicate the hard-line underwriting approach. Any weakening, however, would pile additional pressure on both revenue and the already depressed share price. For now, the group is betting that disciplined shrinkage will prove more valuable than chasing market share.