Munich Reinsurance's Q4 profit fell short of expectations due to unfavorable exchange rate headwinds, but solvency exceeded expectations

Investing.com - Munich Re reports fourth-quarter profit decline exceeding expectations, attributed to negative exchange rate effects from a weaker US dollar.

Upgrade to InvestingPro for in-depth analysis of Europe’s Q4 earnings reports.

Net profit for the quarter decreased 12% year-over-year to €945 million, below last year’s €1.068 billion and also below analysts’ forecast of €1.03 billion. Operating profit was €1.5 billion, only €20 million above the market consensus compiled by the company.

The German reinsurance company’s full-year net profit was €6.121 billion, higher than the €5.690 billion in 2024 and surpassing its €6 billion target. Full-year operating profit reached €8.9 billion.

Jefferies analysts stated in a research report: “The operating profit in Q4 was only marginally above the market consensus by €20 million, and net profit was short by €85 million. Compared to the full-year net profit of €6.121 billion, these are insignificant deviations.”

Munich Re also announced an unexpectedly high Solvency II ratio of 298%, up from 287% last year.

“Clearly, the solvency ratio will be a key focus today for three reasons: first, because it exceeds expectations by 11 percentage points; second, at 298%, it is very likely to surpass 300% in 2026; third, after two consecutive years of adding about €1 billion in returns, the growth this year has significantly slowed,” analysts continued.

“All of this raises an increasingly urgent question — how will management utilize this capital?” they added.

Munich Re’s insurance income from signed contracts in Q4 was €15.25 billion, roughly in line with the €15.3 billion forecast and last year’s level. Its investment income increased 10% to €1.62 billion, corresponding to an investment return of 2.8%.

Net financial performance declined about one-third to €327 million, reflecting the impact of a weaker US dollar.

CEO Christoph Jurecka, who took over after Joachim Wenning’s retirement at the end of last year, stated: “2025 is a critical year for Munich Re.”

The group reaffirmed its 2026 guidance first announced at the December investor day, targeting a net profit of about €6.3 billion, insurance income of approximately €64 billion, and an investment return exceeding 3.5%.

Munich Re also announced plans to return capital to shareholders through a €24.0 per share dividend and a buyback program of up to €2.25 billion.

This article was translated with the assistance of artificial intelligence. For more information, see our Terms of Use.