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UPDATE 1-Fiat says not in talks to sell Toro insurance

(Releads with Fiat denial of talks)

MILAN, Nov 21 (Reuters) - Italy's Fiat denied a report on Thursday that the industrial group was in talks to sell its profitable Toro insurance arm to beef up a plan to pull clear of losses piled up by its core car-making unit.

Italian papers reported Fiat was open to selling Toro, and Il Sole 24 Ore said the group was already in talks with possible buyers including German reinsurer Munich Re . Il Sole said Toro was worth at least 2.5 billion euros ($2.51 billion).

Munich Re declined to comment on the report.

By 1110 GMT, Fiat shares were trading up 1.4 percent at 8.87 euros, underperforming a 1.9 percent rise in the DJ Stoxx index of European auto stocks . Munich Re was up 2.7 percent, less than a sectoral rise of 3.5 percent.

Fiat has been selling investment stakes and a handful of non-core assets to raise money and slash debt as agreed with creditor banks, which extended a three billion euro rescue loan to Italy's biggest private employer earlier this year.

Soon after the loan was agreed, sources told Reuters that if Fiat did not cut net debt to below 3.6 billion euros by early 2003, it was willing to sell Toro -- which last year booked net profit of 152 million euros, up 79 percent.

Corriere della Sera said Italian insurer RAS could be a potential buyer for Toro as could insurers SAI and Fondiaria , whose merger is currently wading past competition regulators.

Both Corriere and Il Sole reported Toro's Director General Luciano Roasio could resign soon.

A spokesman for RAS said there was nothing to add to recent comments from Chief Executive Mario Greco who, when asked if he would be interested in Toro, has said "It doesn't look like it is up for sale".

In June, Greco told Reuters that if Toro came on to the market "we will certainly want to understand what there is and what value there is".

Last month, Fiat Chief Financial Officer Ferruccio Luppi said the company did "not expect to complete major transactions in the (fourth) quarter".

But Fiat is still under pressure, with energy holding Edison due to carry out a capital increase of up to two billion euros. A financial source has said Fiat would invest in Edison in line with its 24.6 percent stake in Italenergia, the holding that owns 91.5 percent of Italy's number two power group.

On Wednesday, Fiat met the heads of its four top creditor banks and Il Sole 24 Ore quoted financial sources as saying that Chairman Paolo Fresco and CEO Gabriele Galateri had asked them for a bridge loan to get Fiat through the next few months.

The banks are already highly exposed to Fiat and three of the four leading banks are also shareholders in Italenergia.