Reinsurers Slide as Q1 P&C Revenue Misses Hit Margins

The share prices of Europe's three largest reinsurers fell into negative territory after the companies reported lower first-quarter revenues in early May. Munich Re, Swiss Re, and Hannover Re each posted declines in property and casualty (P&C) revenue, a core earnings driver for the sector.

Munich Re's P&C revenue dropped 4% year-over-year to €9.2 billion, missing analyst expectations. Swiss Re's P&C segment revenue fell 3% to $8.1 billion, while Hannover Re's P&C revenue slipped 2% to €5.3 billion. The declines were attributed to lower premium volumes in North American and European markets, where competition for large commercial accounts has intensified.

Investors reacted swiftly. Munich Re shares fell 3.2% on the day, Swiss Re dropped 2.8%, and Hannover Re lost 2.5%. The selloff erased roughly €4 billion in combined market value across the three firms.

Analysts at JPMorgan said the revenue miss reflected a broader trend of softening pricing in the P&C market, particularly in casualty lines. "The first-quarter numbers confirm that the pricing cycle has peaked," the analysts wrote in a note. "Underwriting margins are compressing faster than expected."

Swiss Re's CFO John Dacey told investors on the earnings call that the company had deliberately reduced exposure to certain large corporate accounts where pricing no longer met its risk-return thresholds. "We walked away from business that didn't meet our margin requirements," Dacey said. "That shows up in the top line."

Munich Re's CEO Joachim Wenning struck a similar tone, saying the company was prioritizing underwriting discipline over volume growth. "We are not chasing market share at the expense of profitability," Wenning said.

The selloff also reflected broader concerns about the sector's exposure to natural catastrophe losses. The first quarter saw above-average storm activity in the U.S. and Europe, which could pressure second-quarter results. Hannover Re's CFO Clemens Jungsthoefel said the company had already booked €200 million in catastrophe losses for the quarter, in line with its budget.

Despite the revenue declines, all three reinsurers maintained their full-year profit guidance. Munich Re reiterated its target of €5 billion in net profit for 2025, while Swiss Re and Hannover Re kept their targets of $4.5 billion and €2.3 billion, respectively.

Traders said the guidance hold was not enough to stem the selling. "The market is focused on the revenue miss, not the reaffirmed guidance," said a London-based insurance analyst at Berenberg. "If pricing continues to soften, the profit targets become harder to hit."

The sector's next major test comes with the July 1 renewal season, when reinsurers negotiate annual contracts with primary insurers. Early indications suggest pricing could fall another 5-10% in property lines, according to a survey by Willis Towers Watson.

Munich Re reports second-quarter results on Aug. 7. Swiss Re and Hannover Re follow on Aug. 14 and Aug. 21, respectively.