Global reinsurance giant Munich Re has withdrawn its profit guidance for 2020 as a result of the significant macroeconomic and financial uncertainty caused by the COVID-19 pandemic.
The reinsurer states that during the opening quarter of 2020, its property – casualty reinsurance division experienced considerable claims burden from losses related to the impacts of the ongoing and worsening coronavirus outbreak.
Munich Re notes that the majority of the claims expenditure is from cancellation and postponement of large events. “Hence, 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),” explains the firm.
As a result of the uncertain impacts being driven by the global pandemic, combined with the assumption of a normal claims burden from both man-made and natural catastrophe losses, Munich Re has said that it will not attain its profit guidance of €2.8 billion for 2020 as a whole.
The reinsurer continues to add that regardless of capital-market and loss developments, its solvency ratio remains comfortably within the optimal range of 175% – 200% of the requirement.
Munich Re still plans to go ahead with the proposal to the Annual General Meeting on 29 April, that the dividend is raised to €9.80 per share. However, the implementation of the 2020/2021 share buy-back programme announced on February 26th, 2020 will be discontinued until further notice, and until there is greater understanding around the actual claims burdens arising from COVID-19 and also on capital requirements for both organic and inorganic business opportunities.
With many countries around the world in lockdowns of various intensities, events from across numerous industries have been either cancelled or postponed. It remains to be seen just how impactful the coronavirus outbreak will be for global insurers and reinsurers, as well as which lines of business experience the most claims burden.
As the situation accelerates and intensifies, it could be that more and more re/insurers announce changes to their expected profits in the coming weeks as the impacts of the COVID-19 pandemic continue to drive macroeconomic uncertainty and financial market volatility.