Bermuda-based specialty lines insurer Arch Capital Group has its sights on the Australian lenders’ mortgage insurance (LMI) market after making possibly its biggest local acquisition to date.

Last week the business said it sealed the purchase of Westpac’s lenders’ mortgage insurance (LMI) unit for $350 million at book value.

When the deal was announced in March, the two parties said the sale price would be determined at completion of the transaction.

Westpac says the sale price includes a pre-completion dividend of $52 million and is subject to completion adjustments.

Arch Capital Group says with the completion of the deal, it will to proceed to combine the operations of Westpac Lenders Mortgage Insurance (WLMI) with its existing Australian LMI company, Arch LMI.

WLMI will retain its existing risk in-force and the newly combined entity under Arch will become Westpac’s exclusive provider of LMI on new mortgage originations for a period of 10 years.

The deal with Westpac includes an exclusive 10-year agreement for Arch to provide LMI to the bank’s customers.

S&P Global Ratings says it views WLMI as a highly strategic subsidiary of Arch and recognises that Arch has had an affinity with WLMI and the Australian market since 2011, acting as a key reinsurer to WLMI.

“We also consider the strategy of the businesses to be highly aligned, as they operate in the mortgage insurance sector, and believe the acquisition expands Arch’s international footprint and improves its geographic diversity,” the rating agency said.

S&P says it expects WLMI to maintain its narrowly focused competitive position under the exclusive 10-year distribution agreement with Westpac, along with solid capital adequacy.

“Our view is likely to remain unchanged under the proposed plans to combine WLMI with Arch’s modest existing Australian mortgage insurance business, Arch LMI, with WLMI as the enduring underwriting entity and a noncaptive insurer,” S&P said.

Arch says the acquisition augments Arch LMI’s position as the only globally diversified insurer of mortgage credit risk.

In addition to Australia, Arch has mortgage insurance and reinsurance operations in Bermuda, Europe and the US.

“We look forward to continuing our partnership with Westpac and leveraging this acquisition to further establish Arch LMI as a market leader that provides innovative solutions and excellent service to clients across Australia,” CEO Global Mortgage David Gansberg said.

The sale of the LMI unit is part of Westpac’s efforts to focus on its core lending business. The bank has already sold a chunk of its non-banking assets including its general insurance arm to Allianz and life business to TAL Dai-ichi Life Australia.