Tower has reportedly abandoned plans to buy Royal & SunAlliance’s financial services assets, which have been on the market for several months. The New Zealand-based life insurer is now experiencing the sort of problems which have forced R&SA’s British parent to put its Australian assets out to market.

Standard & Poor’s has lowered its long-term insurer financial strength and counterparty credit ratings on various Australian and NZ subsidiaries of Tower to A-minus from A. The ratings were also placed on CreditWatch with negative implications. The BBB long-term and A-2 short-term credit ratings on Tower Ltd., Tower Financial Services Group and various holding companies were lowered to BBB-‚ and A-3, respectively.

The S&P’s wallop follows Tower’s announcement that financial results for the year to September 30 will be “adverse to current market expectations”.

S&P’s director Michael Vine said the negative results statement “is outside the tolerance for the maintenance of the existing ratings, which were contingent on supportive earnings”. He cited concerns over new business growth in Australia and the challenges of leveraging off Tower’s distribution network.