Tower's poor earnings result and its uncertain future have caused credit agency Standard & Poor's to lower the insurer's ratings.
Tower this week revealed a hefty $154.4 million half-year loss and plans to embark on a capital raising that would give Guinness Peat Group a controlling 30 percent stake in the company.
The $200 million raised by the issue of new shares would be used to reduce Tower's debt - a move S&P regarded as positive.
But the credit agency described Tower's Australian operations, from which it gains 70 per cent of its revenue, as "pressured" and said they had failed to deliver on promised growth.
S&P lowered its insurer financial strength and long-term counterparty credit ratings to BBB+ from A-.
The ratings outlook was negative.
S&P said that Tower was operating in a difficult market environment. Although its operating performance in the last half-year had improved, S&P considered that its performance remained poor and its earnings outlook was constrained.
S&P said that the new ratings reflected the uncertainty of Tower's new business model and strategies for growth in Australia.
It would closely monitor Tower's latest efforts to restructure and raise more capital, and if they were successful then the rating outlook could eventually revert to stable.
But the negative outlook now in place showed that Tower was facing a challenge. If its restructuring efforts were not successful the ratings could fall further.
Tower's plans to recapitalise hinge on an extraordinary meeting of shareholders planned for July 4.
Some large investors have signalled displeasure at the planned deal.
