S&P has also raised the counterparty credit ratings on the group’s holding companies, Tower, Tower Financial Services Group, and Tower Group (Australia) from BBB- to BBB. The outlook on all ratings has been revised to stable from positive.

“The rating upgrades on the operating companies reflect the group’s strong capital position, improving earnings, and a strengthening in the group’s competitive position in Australia,” credit analyst Kate Thomson said.

“The ratings upgrades also take into account the group’s planned geographic separation, refinancing and capital raising, and the strength of the competitive positions in Australia and New Zealand post-separation. If Tower successfully executes its separation as currently planned, the ratings are expected to be unchanged by this process.”

Tower Australia’s market position and earnings have improved in the past 18 months, and these improvements are expected to be sustained in the medium term. The Australian operation’s capital position is strong, and based on proforma analysis of the capital structure of the Australia operations after the separation, the Australian group’s capital position is expected to remain consistent with the ratings.

In New Zealand, the combination of its life risk, investment, and general insurance operations support a solid competitive position underpinned by a strong capital structure.

The separation is currently planned to be completed in the coming three months, and will involve a capital raising, debt repayment, and new debt issue in both Australia and New Zealand.