Munich Re reiterates 2020 profit miss but 'optimistic' about future

Munich Re, the world's second largest reinsurer, has restated that it will not issue a new profit guidance for 2020 in light of the uncertainty caused by the global COVID-19 pandemic, but the company is "optimistic about the future".

The reinsurer announced in April that it will not meet its profit guidance of €2.8 billion for the whole of 2020, "owing to losses and high levels of uncertainty" regarding the further economic and financial impact of the pandemic.

The German reinsurer's first quarter 2020 profit plummeted 65 percent year on year, with COVID-19-related losses totalling nearly €800 million, particularly in event cancellation insurance.

"COVID-19 is causing insured losses owing in particular to the cancellation or postponement of large events. Losses are also being seen in other lines of business as a result of the economic downturn," the company said in a statement.

The company admitted that the losses caused by coronavirus and the economic downturn will have a "significant short-term impact on Munich Re", but is likely to open up good business opportunities in the medium and long term.

"The coronavirus has clearly demonstrated the value of insurance," said Munich Re. "We are optimistic about the future."

In the life and health insurance segment, the reinsurer's loss expectations depend heavily on the development of death rates, particularly in North America.

"While we still cannot fully rule out the possibility of the kind of death toll expected for a 200-year event - this would be equivalent to the claims expenditure associated with a medium-sized natural disaster - many factors currently indicate that the impact of this pandemic will be less dramatic," it noted.

Earlier in June, S&P Global Ratings revised down its earnings projections for Munich Re as analysts expect the reinsurer's performance "will decline" due to COVID-19 related P&C losses, with its combined ratio reaching 103 percent for the financial year 2020.