Munich Reinsurance Shares Surge After Positive Outlook

Shares of Munich Reinsurance (ETR:MUVGn) jumped over 5% on Friday after the reinsurer announced its goal to achieve a net profit of €6 billion by 2025, citing strong operational performance across its business segments.

The company projected group insurance revenue of €64 billion by 2025 with an improved return on investment exceeding 3.0%.

Analysts at Jefferies mentioned, “Our assumption had been that management would opt for a prudently low forecast, lower than consensus (which forecasts €5.9bn). However, this is still marginally lower than the €6.1bn we believe will eventually be achieved.”

Munich Re detailed its growth expectations for its core reinsurance business, planning for insurance revenue to climb to €42 billion and net profit to reach €5.1 billion in 2025. The reinsurer aims to capitalize on favorable market conditions while maintaining a robust sector position.

The company predicts that its property and casualty reinsurance segment will achieve a combined ratio of 79%, signaling continued profitability. Global Specialty Insurance, which will be reported as a separate IFRS segment starting in 2025, is expected to post a combined ratio of 90%.

These projections lead to a combined ratio of 83% for the P&C reinsurance segment under the current classification.

In the life and health reinsurance sector, Munich Re expects to generate a technical result of €1.7 billion in 2025, indicating steady performance within this segment.

The ERGO segment, Munich Re’s primary insurance business, is also expected to achieve continued growth, forecasting €22 billion in insurance revenue and a net profit contribution of €0.9 billion in 2025.

Operational efficiency is a focus for ERGO, which anticipates combined ratios of 89% for its German operations and 90% for its international units. Starting in 2025, ERGO will streamline its financial disclosures by combining its German life, health, and property-casualty divisions into a single reporting unit.

Despite these optimistic projections, Munich Re acknowledges potential uncertainties, including geopolitical and macroeconomic risks, as well as possible volatility in currency and capital markets. The company also noted that its forecasts depend on major losses remaining within expected levels and the absence of significant one-off impacts like tax changes or severe market disruptions.