Ratings agency Standard and Poor’s has revised the outlook of Wesfarmers’ insurance units from negative to stable.

Ratings for the three entities – Wesfarmers Federation Insurance, Lumley General Insurance and Lumley General Insurance NZ – have also been affirmed as A-.

The outlook upgrades come after the insurer completed capital and structural initiatives to maintain the financial strength of the insurance subsidiaries.

Wesfarmers Insurance Division MD Rob Scott told insuranceNEWS.com.au the company planned the actions at the time of the Coles acquisition.

“It was important for us to retain our A- rating given that Lumley’s business is delivered through brokers that deal with an A- rating,” he said.

To achieve the rating Wesfarmers had to retain some additional capital within businesses, demonstrate compliance with regulatory and government factors within its businesses and make some changes to the financing of Wesfarmers’ businesses in NZ.

“This is good news for our insurance arms,” Mr Scott said. “We continue to grow our businesses and a strong capital base is important.”

S&P credit analyst Thomas Cherian says the ratings affirmations reflect the insurance entities’ continued strong positions in their respective niche markets and good track records of underwriting and operating profitability.

Despite the current difficult environment, S&P expects insurance earnings to stabilise as premium rates increase and normal weather patterns resume.

Wesfarmers will announce its quarterly results this week.