Business thrives for Bechtle amidst recovery, while Commerzbank's stock continues to surge unabated.
Munich Re Reports Strong First-Half Profit, but Stock Falls Amid Pricing Pressures
Munich Re, the world's largest reinsurer, reported a net profit of €3.2 billion for the first half of 2025, marking a significant increase from the previous year. However, the company's stock fell despite the robust results, due to ongoing pricing pressures in the reinsurance market and a lowered revenue forecast.
The reinsurance market has been experiencing a decline in premium prices, with Munich Re reporting a 1.2% decline over key renewal dates. This has led to a reduction in the company's insurance revenue outlook from €64 billion to €62 billion for 2025.
Despite these challenges, Munich Re's CEO Joachim Wenning remains optimistic. He emphasized that the current price declines are a temporary adjustment rather than a sustained trend. Wenning also highlighted that the reinsurance market is not experiencing a “soft market” nor significant pressure from alternative capital sources such as insurance-linked securities (ILS), which have not increased materially.
Wenning pointed out that there have been no years without major losses recently, which supports price stability. He also stressed that the company is managing its portfolio with discipline, focusing on profitability and risk-reward optimization. If certain business lines do not meet expectations, Munich Re will reduce exposure.
In the broader market, the MDax gained 0.5% by late afternoon, and the Euro Stoxx 50 was up 0.2%. Bechtle, a company in the MDax, saw a significant gain of 9.1% to 40.22 euros by late afternoon. Commerzbank also performed well, gaining 3.7% to 34.55 euros by afternoon in the Dax.
Meanwhile, on the bond market, the benchmark Bund future fell 0.4% to 129.74%. Robert Greil, chief strategist at Merck Finck, predicts a possible renewed rise in US inflation in July, which could lead to a Fed rate cut in September. Greil also suggests that new US import tariffs are likely to be passed on to consumers and may gain momentum in August, leading to a potential series of interest rate cuts in the US this year.
Despite the challenges in the reinsurance market, Munich Re left its annual profit target unchanged at 6.0 billion euros. Bechtle now sees a recovery in the second quarter and has confirmed its full-year forecast. Jefferies analysts rate Bechtle as a "buy" with a price target of 48 euros.
The DAX has gained more than 3% in the past week, currently targeting 24,639 points. However, it closed 0.1% lower at 24,163 points in the latest session. DZ Bank continues to recommend Munich Re as a "buy" with a price target of 640 euros.
Hopes for a peace or ceasefire in the war between Russia and Ukraine are also supporting stock markets. The euro remained virtually unchanged against the dollar at 1.1653 dollars.
In conclusion, while Munich Re reported strong first-half profits, the ongoing pricing pressures in the reinsurance market and lowered revenue forecast led to a decline in the company's stock price. However, the company's CEO remains optimistic, emphasizing that the current price declines are a temporary adjustment rather than a sustained trend.
| Aspect | Details | |----------------------------|-----------------------------------------------------------------------------------------| | Reason for stock fall | Pricing pressure leading to premium declines and reduced revenue outlook | | Profit situation | Strong first-half profit (€3.2bn), full-year guidance unchanged (€6bn) | | Premium discount outlook | Temporary pricing softening but no soft market; Munich Re expects stabilization | | Market drivers | Ongoing losses and limited alternative capital prevent major price crashes | | Company strategy | Selective portfolio management, risk and profit discipline, reducing non-profitable exposure | | Market performance | MDax gains 0.5%, Euro Stoxx 50 up 0.2%, DAX gains 3% in the past week, but closes 0.1% lower | | Bond market performance | Benchmark Bund future falls 0.4% to 129.74% | | US market predictions | Possible renewed rise in US inflation in July, leading to a Fed rate cut in September | | Other factors affecting markets | Hopes for peace or ceasefire in the war between Russia and Ukraine |
- Munich Re's CEO Joachim Wenning shared that the current price declines in the reinsurance market are expected to be temporary rather than a sustained trend, demonstrating the company's focus on business decisions involving both finance and investing.
- The lowered revenue forecast for Munich Re, despite their strong first-half profit, serves as a reminder of the ongoing limitations and challenges in the broader business environment, particularly when it comes to pricing and revenues in the reinsurance industry.
