Standard & Poor’s has downgraded the financial strength and counter-party credit ratings on NRMA Insurance and IAG New Zealand from AA+ to AA. It has also revised the insurer’s outlook from stable to negative.

S&P’s said in a statement that the downgrade reflects the “heightened strategic and operational risks” associated with IAG’s growth strategy.

IAG has indicated that it intends to double premiums in five years, partly through acquisitions and entering long-tail insurance markets such as workers’ compensation and public liability.

“While IAG maintains clear market leadership in general insurance, a very strong capital position, and sound and conservatively based reserving practices, its overall business and financial strength is more reflective of the AA rating,” Michael Vine, Director Financial Services Ratings, said.

He said the stable outlook reflects S&P’s view that IAG should be able to successfully manage the risks it faces.