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Delvag continues to grow and closes 2019 with good results

Overall result of EUR 12.8 million achieved, premium volume increased to EUR 107.9 million // Outlook 2020: Impact of corona crisis on business operations can only be roughly estimated // Focus on optimizing earnings potential

Press Release / 30.04.2020

In the 2019 financial year Delvag continued to build on the good results of previous years and further increased its premium volume. Overall, Delvag generated a profit on ordinary activities of EUR 12.8 million, which, as expected, is slightly below the previous year's result of EUR 13.8 million.

"In 2019, we increased our premiums by 4.5 percent and again achieved a good result of EUR 12.8 million. Both aviation and transport insurance, as our two core business segments, contributed significantly to this growth. Especially in transport insurance, we were able to record growth in almost all market segments," says Lorenz Hanelt, member of the Delvag Management Board.

"The present result shows that our growth strategy continues to bear fruit. Accordingly, we have further expanded our activities in the core insurance business in 2019. However, our role as risk manager of the Lufthansa Group remains our top priority and we already started to expand this role last year. We will continue to do so in the future," says Roland Kern, member of the Executive Board of Delvag.

Premium volume in aviation and marine insurance increased
As forecast, Delvag slightly increased gross premiums written in 2019 to EUR 107.9 million (previous year: EUR 103.2 million). The increase was driven by higher premiums in aviation and marine insurance. In the Reinsurance Division, net premiums in life insurance declined sharply - as expected - owing to the termination of a large portion of life reinsurance business.

At 73.6 percent, the claims ratio was significantly higher than in the previous year (64.3 percent) and contrary to expectations. Within the direct business written, the positive claims development in the aviation insurance class (claims ratio: 51.6 per cent) could not compensate for the increased claims burden in the transport insurance class (claims ratio: 94.7 per cent).

A slight decline in earned premiums for own account was recorded in the year under review. Premiums here fell to EUR 67.3 million (previous year: EUR 71.7 million). At EUR 0.2 million, the underwriting result before equalisation reserve was significantly below the previous year's result of EUR 13.5 million. A total of EUR 2.7 million was withdrawn from the equalisation reserves (previous year: EUR 1.3 million withdrawal). Overall, the underwriting account closed the year under review with a profit of EUR 2.9 million (previous year: EUR 14.8 million).

Equity base strengthened by EUR 6.6 million
Non-underwriting business in 2019 continued to be characterized by low interest rates and strong stock markets. The year-on-year improvement in income from investments compensated for lower income from fixed-interest investments and lower interest income from deposits.  The investment result thus fell slightly to EUR 10.7 million (previous year: EUR 11.9 million). After deduction of the sharp drop in technical interest income due to the reduction in life reinsurance business, the investment result of EUR 10.5 million was, as expected, significantly higher than the previous year's figure of EUR 7.4 million.

This was mainly due to the stronger result of the Albatros subsidiary compared with the previous year. Thanks to positive sales development and reduced personnel costs Albatros achieved a result of EUR 8 million (previous year: EUR 4.2 million). Overall, the non-technical account for 2019 closed with a profit of EUR 9.8 million (previous year: EUR 1.0 million loss).

As expected, Delvag was able to close the 2019 financial year slightly below the previous year and achieved a total profit on ordinary activities of EUR12.8 million. The total net income of EUR 6.6 million (previous year: EUR 1.5 million) was allocated to retained earnings to further strengthen Delvag's equity. At the end of the financial year the company's equity base now amounts to EUR 59.9 million.

Corona crisis: effects on business operations can only be roughly estimated
Since the beginning of the year, the global corona crisis has been developing dynamically. The effects on business operations can only be roughly estimated at the present time and depend mainly on the duration of the reduced air traffic. As a result, Delvag expects lower loss figures, which could at least partially compensate for a potential decline in premiums. The General Aviation and marine insurance segments are currently still showing stable demand. However, volatile capital markets resulting from production stoppages and lower demand in many sectors, as well as further interest rate cuts by central banks, may have a sustained impact on the investment result.

In 2020 Delvag will continue to pursue the course it has already embarked on in a much more difficult environment and will focus its activities on optimising earnings potential. The captive function within the Lufthansa Group will also be further strengthened.

Further information on earnings and the individual divisions will be published in the Annual Report. This will be published simultaneously with this press release on 30 April 2020 at www.delvag.de/publications.