AM Best has affirmed the financial strength rating of A- (Excellent) and the long-term issuer credit rating of “a-” (Excellent) of Delvag Versicherungs-AG (Delvag). Delvag is the captive insurer for Deutsche Lufthansa Aktiengesellschaft (Lufthansa), a global aviation group domiciled in Germany. The outlook of these credit ratings is stable. The ratings reflect Delvag’s balance sheet strength, which AM Best assesses as “very strong”, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management. The ratings also reflect a rating drag due to the company’s association with its financially weaker parent, Lufthansa. The captive’s balance sheet strength is underpinned by its risk-adjusted capitalisation, as measured by AM Best’s capital adequacy ratio, which remained at the strongest level at year-end 2022. AM Best expects the captive’s prospective risk-adjusted capitalisation to be maintained at the strongest level further supported by a profit and loss absorption agreement with Lufthansa, which provides Delvag with added balance sheet protection. A partly offsetting rating factor is Delvag’s moderately high dependence on reinsurance to protect its aviation fleet business. However, the associated credit risk is mitigated by the use of a financially strong and diverse reinsurance panel. Delvag has a good historical earnings track record, as demonstrated by a five-year weighted average operating ratio of 65 per cent (2018-2022), as calculated by AM Best. The captive continues to leverage its experience in the aviation and transport sectors to write a book of third-party business alongside its core Lufthansa portfolio.
