Munich Re will not attain its profit guidance of €2.8bn for 2020 due to COVID-19

Munich Re, the world's largest reinsurer, has withdrawn its stated profit guidance for 2020 blaming "considerable claims burden" from coronavirus (COVID-19) pandemic, and has cancelled its share buy-back programme for the year.

The announcement comes just a month after its CEO Joachim Wenning set out a profit guidance of €2.8 billion for 2020, up from the €2.7 billion profit it made in the financial year 2019 beating its original profit guidance by €200 million.

The reinsurer said that its property/casualty segment saw a considerable claims burden from losses in connection with the effects of the significantly worsened COVID-19 crisis in the first quarter of 2020.

The claims expenditure is mainly due to the cancellation and postponement of large events. Earlier in March, the company revealed significant exposure to the Tokyo Olympic games which have now been postponed to 2021.

"Even though work on the quarterly accounts has just begun, Munich Re only anticipates profits in the low three-digit million euro range for the first three months of 2020 (Q1 2019: €633m)," Munich Re said in a statement.

"Owing to the great uncertainty concerning the macroeconomic and financial impacts of COVID-19, from today’s perspective – and assuming a burden from major man-made and natural-catastrophe losses that is otherwise in line with expectations – Munich Re will not attain its profit guidance of €2.8bn for 2020 as a whole," it noted.

Additionally, the company has discontinued its 2020/2021 share buy-back programme announced in February.

"It 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."

Munich Re stated that even after the impacts of capital-market and loss developments, its solvency ratio is still comfortably within the communicated optimal range of 175–220 percent of the requirement.

The proposal to the Annual General Meeting on April 29 will remain unchanged - that the dividend be increased to €9.80 per share.