Rating agency AM Best says it does not expect Hollard’s operations to be impacted by its holding company’s acquisition of CommInsure, the general insurance arm of Commonwealth Bank (CBA).

It has maintained the insurer’s financial strength rating at A- (Excellent) and long-term issuer credit rating at a-. The outlook of the insurer’s credit ratings is stable.

As reported in a Breaking News bulletin last week, Hollard Holdings Australia has entered into a deal to acquire the CBA arm, a move that will expand its business by about 50%.

Hollard Holdings will pay some $625 million upfront, plus further amounts later for the business, which has gross written premium (GWP) of about $800 million focusing on home and contents and motor.

The transaction includes a 15-year agreement with Hollard for the distribution of products to CBA retail customers in Australia, with the insurer expected to make additional investments “to drive innovation and enhance the customer experience”.

The deal is expected to close in the middle of next year, subject to Australian Prudential Regulation Authority approval.

AM Best says it will continue to monitor the progress of the transaction and consider any impact on the consolidated financial position of Hollard Holdings, including as a result of the funding structure for the transaction.

It says the rating fundamentals of Hollard Insurance Company incorporate an assessment of its holding parent’s consolidated financial position.

Hollard Holdings MD Richard Enthoven says the deal is “very significant” for the business.

“It gives us access to a segment of the market we currently don’t have access to, and for Hollard we think that is enormously exciting,” he said.

He says after its first year the combined business would likely have GWP of close to $3 billion, with the deal “very squarely” positioning Hollard as one of the big five insurers in Australia, and possibly in the top four for personal lines.