Munich Re’s Balancing Act: Record Earnings, Currency Drag, and a Reinsurance Market in Retreat
Published on 06/24/2026 at 18:15 | Redaktion boerse-global.de
Munich Re is posting numbers that would make most rivals envious — yet its shares are trading near the bottom of a 12-month range. The German reinsurance giant booked a net profit of €1.714 billion in the first quarter of 2026, a sharp jump from roughly €1 billion a year earlier, and its combined ratio stood at a rock-solid 66.8%. But two forces beyond the company's control are eating into reported revenue and scaring off investors: the strengthening euro and a glut of capital that is crushing pricing across the sector.
The currency hit was specific and painful. In Q1 alone, foreign-exchange effects cost the group around €162 million. With the euro gaining ground against the US dollar, premiums earned in dollars shrank when converted back into the reporting currency. As a result, insurance revenue fell by 5.0 percent. Management is holding its annual profit target of €6.3 billion, but an encore of a weak dollar in the second half remains the biggest single risk to that goal.
Pricing discipline in the face of a capacity flood
The broader headache is the sheer volume of money chasing reinsurance risks. Global reinsurance capital hit a record $805 billion. That abundance has turned the market heavily in favour of buyers. At the June renewal round, property-catastrophe rates dropped by 15 to 20 percent, and on loss-free programmes the decline reached as much as 25 percent. Howden Re, a leading broker, flagged the same magnitude of falls.
Munich Re is refusing to chase business at any price. Its premium volume written in the June round fell 18.5 percent to €2.0 billion. The group is consciously walking away from underwriting that does not meet its return hurdles. Jefferies analysts argue that nothing will break the downward rate spiral until a single loss event exceeds $100 billion. Until then, discipline is the only defence.
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Cutting the safety net
At the same time, Munich Re is dramatically reducing the amount of risk it offloads to third parties. Its retrocession programme — the reinsurance the company buys for itself — has been slashed from $1.55 billion to $600 million. The vehicles Eden Re and Leo Re have been wound down entirely. This is possible because the firm’s own capital position is exceptionally strong: the Solvency II ratio stands at 292 percent, well above the internal target range.
The decision also reflects meteorological forecasts. Atlantic hurricane activity is expected to be subdued, with analysts predicting five to six hurricanes, of which two could reach major status. In the western Pacific, the risk is higher: an updated study projects 18 typhoons, with 11 potentially becoming severe storms. Munich Re is betting that holding more risk on its own books will be profitable, not punitive.
Buybacks and the August milestone
The stock has been under pressure all year. At Wednesday’s close it stood at €479.30, well below the 52-week high of €605. The year-to-date decline stands at 12.7 percent. To counter that, the company is running a buyback programme of up to €2.25 billion. Since the programme began in May 2025, more than one million shares have been repurchased and cancelled. Between 10 and 18 June alone, the group bought back nearly 170,000 shares. For income-focused holders, the current price offers a dividend yield of roughly 5 percent on the last payout of €24.00 per share.
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All eyes are now on 7 August, when Munich Re publishes its half-year results. The report will include the outcome of the crucial July renewal round, when most of the group’s North American and international business is priced. If the euro stays strong and the July rates disappoint, even a record earnings base may not be enough to lift the stock.
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