Lufthansa wants to separate from its in-house insurer Delvag and the insurance broker Albatros. According to SZ information, the airline has hired consultants for the sale, including the auditing and consulting firm Deloitte. First the news agency had Bloomberg reported on sales plans.
Lufthansa does not want to comment officially on the plans, and Deloitte also declined to comment. According to company sources, however, Delvag and Albatros are for sale.
Delvag Versicherungs-AG provides aviation insurance for Lufthansa, but also for other airlines. The subsidiary Albatros Versicherungsdienste operates as an in-house insurance broker, primarily in employee business and company pension schemes. With 80 million euros in premium income, Delvag is a medium-sized specialist insurer. The broker Albatros is also not a small provider with 27 million euros in commission income.
The Lufthansa strategy goes completely against the trend of other companies
The fact that Lufthansa wants to separate from its insurance division follows the logic that CEO Carsten Spohr has been using to restructure the group for years. In the future, Lufthansa is to be essentially a group of airlines, led by the main brand Lufthansa Airlines. In addition to the actual flight operations, only the maintenance division of Lufthansa Technik is to be part of the core business, but Lufthansa is even looking for a minority shareholder for the technology.
However, the Lufthansa strategy in the area of insurance goes completely against the trend at other groups. VW, Bayer, BASF, Siemens and many other large companies have their own insurers, known as captives in the industry jargon. Others dealt with the foundation.
The reasons for this are the sharp rise in prices in industrial insurance and the rigid policy of some insurers, also towards large customers: they reject many more risks or limit the amount of cover. High prices and insufficient insurance capacities cause problems. With its own insurer, a group can react much more flexibly.
“We currently have more captive inquiries than ever before,” reports Oliver Cullmann at a specialist event. He is a managing partner at the Bremen insurance broker Krose and helps companies set up captives. “That has to do with the fact that premiums have risen significantly in recent years and everyone is groaning and wondering whether there are other ways of managing the risk themselves.”
Delvag board members Martin Schmatz and Tobias Winkler have just realigned the company. It has divested itself of business with customers outside the group and has placed a greater focus on the risks within the Lufthansa group. A possible sale should contain agreements on how long Lufthansa will continue to use Delvag and Albatros. Because the Lufthansa business makes up their actual value for a potential buyer.
Insurance experts doubt that Lufthansa is doing itself a favor in the long term
Lufthansa should achieve decent prices for the insurer and the broker, because such companies are sought after. But insurance experts doubt that the group is doing itself a favor in the long term – it will be much more dependent on insurers than it is today. “Ten years after the sale, they have their own insurer again,” says a broker active in aviation.
In any case, Spohr Delvag and Albatros no longer want to have in the group. In the future, the group will consist of the airlines Lufthansa, Swiss, Austrian, Brussels Airlines, Eurowings, Lufthansa City-Line, Lufthansa Cargo and Lufthansa Technik. In addition, Lufthansa has agreed with the Italian government to initially buy a minority stake in the state-owned ITA Airways. After an estimated three years, the group intends to take over ITA completely.
In addition, the privatization of TAP Portugal, a Lufthansa partner in the Star Alliance, is pending. Like most airlines, TAP suffered badly in the corona pandemic and only survived thanks to large amounts of state aid. TAP is important for Lufthansa because it operates a dense long-haul network to South America, a weakness in Lufthansa’s own offering. But Air France-KLM and International Airlines Group (IAG), the parent company of Iberia and British Airways, are also interested in getting involved with the Portuguese.
Spohr is trying to get rid of business sectors that have belonged to the group for decades, but which Lufthansa ultimately does not know well enough about. In two stages, Lufthansa parted ways with the catering specialist LSG Sky-Chefs, which it founded itself in the 1960s and allowed to grow strongly through the acquisition of the American Sky-Chefs. The company recently sold the payment service provider Air-Plus to the Swedish bank SEB for 450 million euros.
The idea of selling a minority stake in Lufthansa Technik came about during the worst times of the corona pandemic, when the group urgently needed every euro. In view of the currently enormous demand in air traffic, the pressure has decreased. In any case, Lufthansa still wants to be in charge of technology, which makes entry less attractive for an investor. Lufthansa Technik not only maintains many of the aircraft in the Group, but also offers the services to other airlines.