A.M. Best has affirmed the financial strength rating of A (excellent) and the long-term issuer credit rating of “a” of Delvag Versicherungs-AG (Delvag).
Delvag is the captive insurer for Deutsche Lufthansa Aktiengesellschaft (Lufthansa), a global aviation group domiciled in Germany.
The ratings reflect Delvag’s balance sheet strength, which A.M. Best categorises as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
A.M. Best expects Delvag’s balance sheet strength underpinned by risk-adjusted capitalisation to be maintained at the strongest level, as measured by best’s capital adequacy ratio, and supported by a profit and loss absorption agreement with Lufthansa that provides balance sheet protection, as well as a track record of modest annual earnings retention.
The balance sheet strength assessment also factors in Delvag’s conservative and discreet reserving practices, as well as its good liquidity profile.
Partially offsetting Delvag’s rating factor is moderately high dependence on reinsurance to protect its aviation fleet business.
Delvag has a good historical earnings track record, as demonstrated by a five-year weighted average return on equity of 10 percent between 2014 to 2018, supported by a good balance of underwriting and investment income. The company reported a combined ratio of 78 percent in 2018.
