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UPDATE 1-France's Groupama says would look at Fiat's Toro

(Adds background, other potential buyers)

PARIS, Feb 19 (Reuters) - French mutual insurer Groupama, which aims to expand in Italy, said on Wednesday it would look at the insurance operation of Fiat if the troubled Italian car maker put the business up for sale.

The unit, Toro, is Italy's sixth-largest insurance group and carries a reported price tag of 2.0 billion euros to 2.5 billion euros ($2.15 billion). Groupama is the largest property and casualty insurer in France but has more limited life insurance and international scope.

Italy's insurance market is seen as having great potential but it is difficult for foreign insurers to gain a foothold there because local agents, who only sell products offered by a single insurer, dominate the business.

"In the context of our strategy, we hope to develop in the Italian market," a Groupama spokeswoman told Reuters. "If a sale of Toro is confirmed, we would look at the dossier."

Other European insurers also might be interested in Toro, including RAS , the Italian arm of German insurer Allianz . RAS has said it would consider buying Toro though a spokeman added he was not aware the unit was for sale.

Fiat meanwhile said on Wednesday it had not yet made a decision on a widely-expected capital increase. Speculation about such a plan pushed down the car maker's stock price.