(Adds S&P analyst comment)
By Mary Kelleher
PARIS, Feb 19 (Reuters) - French mutual insurer Groupama, which aims to expand in Italy, said on Wednesday it would look at Toro, the insurance operation of Fiat , if the troubled Italian car maker put the business up for sale.
Fiat said on Wednesday it had hired an investment bank to advise it on the sale of the unit, which is Italy's sixth-largest insurance group and carries a reported price tag of 2.0 billion to 2.5 billion euros ($2.15 billion).
Groupama is the largest property and casualty insurer in France but wants to widen its international scope to offset domestic market pressures.
Reuters reported on Monday that Groupama was among European insurers that were studying Fiat's insurance arm.
Italy's insurance market is seen as having high growth rates and 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."
Groupama already offers life and non-life insurance products in Italy through its GAN Italy unit. It has looked to southern Europe for growth because its core French market is highly developed and saturated, rating agencies have said.
"The Italian insurance market is identified as a growth market," said Yann Le Pallec, a credit analyst and director in rating agency Standard & Poor's insurance group. "The behavior of households on the life side is not yet mature. You see growth rates we had in France five years ago. Italian households are increasingly shifting to single premium insurance policies."
HEALTHY CASH FLOW
Groupama also derives a healthy operating cash flow from its large investment portfolio, which it could use to fund a purchase, or it could choose to issue debt, said Le Pallec.
Other European insurers that might be interested in Toro include RAS , the Italian arm of German insurer Allianz . RAS has said it would consider buying Toro, though a spokesman added he was not aware the unit was for sale.
At the same time, many major European insurers are strapped for cash after slumping stock markets have eaten into their once-enviable financial reserves.
Groupama's efforts to restructure its portfolios and exit ancillary businesses have bolstered its profits in recent years.
Fiat said it had hired MCC, the merchant banking arm of Capitalia to advise it on a Toro sale. Capitalia is a Fiat creditor.
(Additional reporting by Simon Challis in London.)