The company had previously given a range of €3.0-3.4 billion but a statement said that turmoil on financial markets had "led to an appreciable reduction in the group's investment result in the first half of 2008."
Shares in the company plunged 12.58 percent to €101.78 in late morning trade on the Frankfurt stock exchange where the Dax index of leading stocks was 1.55 percent lower.
Munich Re said it estimated that second quarter profit had fallen by nearly one half from a year earlier to around €600 million.
Financial director Joerg Schneider said in the statement: "We have always stated that our result forecasts are conditional on normal capital market fluctuations and claims burdens.
"Now, a strong fall in share prices has occurred. As one of the most significant investors in our industry, we cannot escape the current capital market turmoil."
The second biggest German re-insurance group, Hannover Re, said that it too would also have trouble reaching its 2008 targets.
"If financial markets do not calm down, it will also be harder for us to reach our targets," a spokesman told Dow Jones Newswires.
Hannover Re has been aiming for a net profit of around €525 million this year.
Its shares lost 17.65 percent to €26.59 on the second-tier MDax index, which was off 1.87 percent overall.
Insurance companies and the re-insurance companies that underwrite them are traditionally large holders of stock and bond portfolios, which makes them particularly vulnerable to the financial market volatility sparked by the US subprime home loan crisis.
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