Standard & Poor’s (S&P) has affirmed its ratings of A+ on IAG and AA- on its core operating companies including IAG New Zealand, based on management initiatives that the ratings agency says could reverse the insurer’s ordinary recent fortunes.

The ratings outlooks on IAG and the core operating companies remain stable.

The ratings actions follow a $261 million loss reported by IAG for the 2008 fiscal year, attributed chiefly to claim costs, one-off write downs and widening credit spreads.

S&P accounted for most of those factors in May when downgrading the insurer. It says IAG has excellent market positions in Australia and NZ and expects recent initiatives announced by CEO Mike Wilkins to help restore profit margins.

“While acknowledged as poor results, difficulties in the UK business and the sustained impact of volatile weather and investment market conditions were already factored into our ratings downgrade on May 7,” S&P credit analyst Thomas Cherian said.

It also noted prudent reinsurance and reserving practices and a robust risk management framework.

But it noted that while IAG’s capitalisation is well above regulatory minimum levels, it is not as high as levels typically associated with those ratings.