Standard and Poor’s (S&P) has affirmed its issuer credit rating of A on IAG, with the outlook considered stable.

The company’s core business units, including Insurance Australia, CGU Insurance, Swann Insurance, IAG New Zealand, IAG Re Australia, IAG Re Singapore and IAG Re Labuan, have had their financial strength and issuer credit ratings affirmed at AA-.

It is unlikely S&P will initiate ratings action on the group over the next couple of years, given its “very strong” business risk profile and financial risk profile.

“We view favourably the group’s direct control over the distribution of the majority of its written premium… because we consider this enhances policy retention, acquisition costs and business quality,” S&P says.

“In our view, the group has a very strong business profile across its key non-life portfolios in Australia and New Zealand, benefitting from positive brand differentiation and leading market positions in significant product lines.”

S&P does not rule out a downgrade should IAG’s competitive position erode due to a deteriorating operating performance, loss of market share or loss of brand strength.

Deterioration in capital adequacy reserves or a significant fall in earnings to below S&P’s forecast may also warrant a downgrade.

Similarly, an upgrade is possible if IAG leverages its “very strong” competitive position and consistently outperforms the industry.