Groupama SA, France's biggest customer- owned insurer, agreed to buy the insurance division of OTP Bank Nyrt. and as much as 8 percent of Hungary's largest bank in a deal valued at about $1.75 billion, Bloomberg reported.

Budapest-based OTP sold the life and non-life insurance business of its OTP Garancia Biztosito Zrt unit to Groupama for 617 million euros ($899 million), it said today in a statement. The OTP stake being acquired by Paris-based Groupama was worth 156 billion forint ($850 million) as of the closing share price on Feb. 8.

Groupama is expanding across Europe as part of preparations for an initial share sale. The company last year bought a unit of Italian insurer Assicurazioni Generali SpA and the Greek insurance unit of Credit Agricole SA. The current purchase gives Groupama increased access to eastern Europe, where markets and incomes are growing at a faster pace than in western Europe.

OTP will book a 557 million-euro gain on the sale of its insurance business. It made the deal as part of a strategy to focus on foreign expansion rather than on its home market, where growth has slowed. Chief Executive Officer Sandor Csanyi said OTP is looking to expand in Russia as well as Azerbaijan and Kazakhstan.

The two companies will work together to sell their products across the region, said OTP, whose shares rose 1.8 percent to 7,071 forint at 12 p.m. in Budapast. They have lost 20 percent this year.

The French insurer's competitors for the stake sale included American International Group Inc., the Dutch company Aegon NV, Zurich Financial Services AG and Germany's Ergo Versicherungsgruppe AG, the Hungarian newspaper Nepszabadsag reported on Jan. 15.

OTP, which held a monopoly in Hungarian banking during Communist rule that ended in 1989, has spent more than $3 billion the past six years buying banks from Bulgaria to Russia to reduce its dependence on Hungary, where government cuts have hurt demand.

The Hungarian bank wants to use the proceeds from the sale, which is expected to close in the second quarter, for purchases.

As part of the transaction, Deutsche Bank AG acquired a 5 percent stake in OTP, which it plans to relay to Groupama, the Hungarian lender said. OTP won't issue new shares.

Groupama will buy the stake in OTP within 12 months, OTP said at the news conference. OTP didn't disclose how much the bank stake will be bought for. Groupama will hold the OTP stake for five years, Csanyi said.

OTP will have the priority to buy back the 5 percent stake in 2013. For the 3 percent stake, to be bought through the stock exchange, both companies agreed on a maximum price, OTP said without disclosing it. Groupama will use the OTP brand name for at least 6 1/2 years under terms of the deal.

In 2006, OTP Garancia was the second-largest Hungarian life insurer with a market share of 11 percent and the third-biggest non-life insurer with 9 percent of the Hungarian market, according to the Hungarian insurer association MABISZ.