Munich Re said its property/casualty reinsurance segment is facing considerable strain due to the coronavirus pandemic, largely because of losses connected to widespread cancellation and postponement of large events.
As a result, the German reinsurance giant has withdrawn its profit guidance for 2020 and has paused its share buyback program until further notice.
Munich Re said it now anticipates profits for its 2020 first quarter “in the low three-digit”-million-euro range. That compares to €633m in the 2019 first quarter, or just under$700 million
For 2020 as a whole, the situation could be much worse. Munich Re noted that COVID-19 is causing tremendous macroeconomic and financial impacts. The reinsurer said that this reality, combined with the assumption of “a burden from major man-made and natural catastrophe losses that is otherwise in line with expectations, means that it will not reach its profit guidance of €2.8bn (just over $3 billion) for 2020 as a whole.
At the same time, Munich Re said it remains on solid ground. Munich Re pointed out its solvency ratio is still comfortably within the communicated optimal range of 175 percent –220 percent of the requirement. The proposal to the Annual General Meeting on 29 April remains unchanged: that the dividend be increased to €9.80 ($10.81) per share.
However, Munich Re’s 2020/2021 share buyback program announced at the end of February will be discontinued until further notice and until there is greater clarity both on the actual burdens arising from COVID-19 and on capital requirements for potential organic or inorganic business opportunities, the company said.
Munich Re’s announcement withdrawing its 2020 profit guidance came after QBE did the same, and other insurers will likely follow suit.
Source: Munich Re