LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of A (Excellent) and the issuer credit ratings of “a” of Delvag Luftfahrtversicherungs-AG (Delvag) and its subsidiary, Delvag Rueckversicherungs-AG (Delvag Rueck) (both domiciled in Germany). The outlook for all ratings is stable.
The ratings of Delvag reflect its strong risk-adjusted capitalisation and robust operating performance. The ratings also take into consideration Delvag’s role as the insurance captive of Deutsche Lufthansa-AG (Lufthansa), its ultimate parent. These positive rating factors are further reinforced by a profit and loss absorption agreement provided by Lufthansa.
The ratings of Delvag Rueck benefit from a full rating enhancement to the level of Delvag’s ratings, reflecting the reinsurer’s strategic importance to the Delvag group, its integration with the parent company in terms of business strategy and management, as well as the profit and loss absorption agreement between both companies.
Prospectively, Delvag’s risk-adjusted capitalisation is expected to remain very strong. Whilst an existing profit and loss absorption agreement with its parent, Lufthansa, limits the potential for earnings retention, it offers protection for Delvag’s balance sheet and consequently for Delvag Rueck. Delvag Rueck's risk-adjusted capitalisation remains stable, strengthened by its equalisation reserve and silent claims reserve.
Operating results for 2014 are expected to remain robust, albeit somewhat lower than the pre-tax profit of EUR 19.9 million reported in 2013. However, the company’s disciplined underwriting approach and comprehensive reinsurance programme are expected to result in continuously stable claims levels going forward. In 2013, Delvag Rueck reported a pre-tax profit (after the equalisation reserve transfer) of approximately EUR 0.5 million (2012: EUR 0.1 million).
Positive rating actions are unlikely at present.
Negative ratings actions would arise from a significant deterioration in risk-adjusted capitalisation, and/or a prolonged weakening in the operating performance of either Delvag and/or Delvag Rueck. Additionally, any deterioration in the financial strength of Lufthansa could lead to negative rating actions for Delvag and Delvag Rueck.
A.M. Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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