Standard & Poor's (S&P) has assigned a negative outlook for Wesfarmers' wholly owned insurance subsidiaries, but has retained their vital A- ratings.

Parent company Wesfarmers has had its rating downgraded from A- to BBB+ by S&P after Coles Group shareholders approved Wesfarmers' proposed takeover offer.

Wesfarmers has begun initiatives to "ringfence" the financial strength of Wesfarmers Federation Insurance, Lumley General Insurance, and Lumley General Insurance (NZ).

But S&P assigned a negative outlook to the subsidiaries because some of the initiatives may not be implemented or effective until July 2008.

The ratings agency says the $20 billion acquisition will fundamentally impact the size and complexity of the Wesfarmers group.

S&P expects the ratings to be revised to stable on or near completion of the ringfencing process.