Significant revenue surge, yet concerning sales figures
In a significant development, Munich Re, the renowned German reinsurance company, reported impressive financial results for the second quarter of 2025. Despite facing challenges in the market, the company managed to deliver a record net profit of €2.1 billion, marking a 30.2% year-over-year increase.
The strong earnings were driven by unusually low major loss expenses and a disciplined approach to portfolio management. This approach prioritised profitability over premium growth, which has been a key factor in maintaining positive earnings outlook despite reduced revenue guidance and falling risk-adjusted prices.
The company's core business, however, remains under pressure. Munich Re reported a 2.5% average price decrease at the latest contract renewal, and a 3.2% volume decrease as a result of withdrawing from unprofitable business. However, these measures have helped improve the combined ratio in the property and casualty segment, which significantly improved from 93.6% in the previous year to 77.9%.
The company also revised down its insurance premium guidance for the year, from €64 billion to €62 billion, due to market and exchange rate effects. Despite this, Munich Re maintains its forecast net profit of €6 billion for fiscal 2025, reflecting confidence in operational performance and investment results.
Shareholders have benefited from this robust profit and earnings growth, with EPS up 32.9% year-over-year at 15.94 euros in Q2. This signals efficient operations and profitability, which typically supports share value and potentially dividends.
It's worth noting that the depreciation of the US dollar negatively impacted currency translation results, a factor that investors need to monitor given Munich Re’s global footprint.
In other news, the management and majority shareholder of the publisher Boerse-Medien AG, Mr. Bernd Foerst, has entered into direct and indirect positions in the financial instruments of Munich Re. This development, however, does not seem to have significantly affected Munich Re’s long-term investment story, which remains unaffected by the short-term disappointment.
In the initial reaction to the profit presentation, Munich Re's share initially lost around two percent. However, the company's strategic focus on profitability and portfolio quality should help maintain or improve combined ratios, benefiting shareholders by bolstering earnings quality despite softer revenue.
Sources:
- Reuters
- Bloomberg
- Financial Times
- Insurance Insider
- Business Insider
Investing in Munich Re's stocks could be an attractive proposition considering the impressive 30.2% year-over-year increase in net profit and the company's focus on maintaining profitability over premium growth. The company's strategic decisions, such as withdrawing from unprofitable business and prioritizing portfolio management, have improved combined ratios, signaling long-term business health. Additionally, the solid financial results are reflected in the earnings per share (EPS) of 15.94 euros in Q2 2025.
