Munich Re has moved forward with its dividend payment of Eur9.80 a share – or Eur1.37bn  – despite only withdrawing its 2020 profit guidance earlier this month amidst the Covid-19 crisis.

The dividend marks an increase on the 2018 payment to shareholders of Eur9.25 a share and comes after the German financial regulator BaFin has taken a more selective stance than some other European regulators over capital returns to shareholders in response to the pandemic.

Earlier this month, the EU supervisory body Eiopa urged the continent’s (re)insurers “to take measures to preserve their capital positions and be prudent around dividends”.

Different countries have taken alternative interpretations to the call, leading to the CEO of Europe’s largest insurer recently criticising the inconsistency.

2019 dividends and sharebuybacks (% of opening equity)

“I… note that there is no unanimity among European regulators on this point. We cannot be subject to rules that would not be imposed on our European competitors, particularly German ones,“ Axa Group CEO Thomas Buberl said earlier this month.

A new share buyback scheme was also approved at the firm’s first virtual AGM earlier today (29 April). The German reinsurer also received approval to issue convertible bonds, bonds with warrants, profit participation rights or profit participation certificates, and hybrid financial instruments.

The decision to move forward with the increased dividend payment follows Munich Re’s withdrawal of its profit guidance for 2020 last month citing the “great uncertainty” surrounding Covid-19.

Munich Re also said on 31 March that its first quarter P&C reinsurance results will include “a considerable claims burden from losses in connection with the effects of the significantly worsened Covid-19 crisis”.

Total capital at 2019 year end...

Munich Re said it expects its profits for the period will be “in the low three-digit million Euro range”. In comparison, Munich Re’s profit for 2019’s first quarter was Eur633mn.

Changes to the board

Elsewhere at the AGM, Carsten Spohr, chairman of the executive board of Deutsche Lufthansa AG was elected to the Supervisory Board. 

Spohr succeeds Kurt Wilhelm Bock, who retired from the AGM and is set to remain in the role until 2024.

Munich Re CEO Joachim Wenning said: “Munich Re’s capitalisation remains very solid. With our strong balance sheet, we remain a reliable partner to our clients. 

“We are furthermore confident of emerging relatively stronger from the coronavirus crisis and of being able to avail of the opportunities likely to arise.”

“Retroactive intervention in contracts is incompatible with the principles of the rule of law”

Joachim Wenning, chairman of the board of management of Munich Re, added “Although we cannot yet foresee the exact effects of the coronavirus at this time, one thing is certain: our Group is in a solid economic position. 

European (re)insurers react to dividend constraints…

“The probable short-and long-term costs of the pandemic are substantial. But for Munich Re, these will stay financially well manageable.”

Wenning opposed the suggestions of some politicians that insurers ought to be liable for the pandemic-related costs of businesses and private individuals – even if their policies explicitly or implicitly exclude the costs.

“Reliability is a virtue Munich Re holds very highly. And there are things which we too must be able to rely upon, including the rule of law,” Wenning said.

“Retroactive intervention in contracts is incompatible with the principles of the rule of law, and would severely damage the foundations of insurance and hence its benefits to progress and growth. We are relying on governments not to call these fundamental principles into question,” he concluded.