AM Best has reaffirmed Tower Insurance Limited’s financial strength rating at A- but revised its under-review rating from “developing” to “negative implications”.

The ratings agency has also revised the under-review status – from “developing” to “negative implications” – for the long-term issuer credit rating of bbb- on Tower Insurance’s parent, Tower Limited.

AM Best says the changes follow the New Zealand Commerce Commission’s decision to reject Vero’s proposal to buy Tower.

“The negative implications status reflects [Tower’s] relatively weak balance sheet strength for its current rating levels,” it says.

The concern is partly offset by management considering a capital raising to strengthen the group’s position.

“The Tower board is pleased that AM Best has maintained Tower’s A- rating and, as previously indicated, is considering conducting a capital raise to accelerate the transformation of the underlying business and ensure the long-term sustainability of Tower,” Chairman Michael Stiassny said.

“Tower retains an adequate and stable capital base and continues to improve the underlying business.”