IAG’s AA- financial strength rating for its core operating companies has been affirmed by Standard & Poor’s (S&P), with a stable outlook.

The group’s core operating subsidiaries include IAG NZ, CGU Insurance, Insurance Australia, Swann Insurance and key distribution brands NRMA Insurance, CGU, State and NZI.

Melbourne-based credit analyst Michael Vine says the AA- rating “reflects the very strong competitive position the group has been able to maintain in its key Australian and NZ markets, in the face of continuing competitive pressures, with the group being supported by strong local brands”.

“IAG also benefits from business diversity in its key markets, through a balance of personal and commercial product lines, retail and intermediated distribution channels and geographic spread that includes Asia.”

Acknowledging the under-performance of the group’s UK business, Mr Vine says IAG is focused on restoring it to profitability “and is undertaking remedial action that we believe will produce a gradual return to profitability”.

Meanwhile, AM Best has affirmed the A- (excellent) financial strength rating of New Zealand insurer Tower Insurance.

It says the rating reflects Tower’s “solid operating performance and improved risk-adjusted capitalisation”.

AM Best also noted Tower’s negative rating factors such as the accumulation of retained catastrophe losses and reinsurance recoverables, as well as potentially higher catastrophe reinsurance reserves in the future.

“However, supportive capital management by Tower could significantly reduce the influence of these negatives on Tower’s risk-adjusted capitalisation,” the ratings agency said.