Allianz logo
The Allianz logo is pictured on a main office building of Germany's largest insurance group Allianz AG in Cologne

German insurer Allianz has agreed to acquire Yapi Kredi Sigorta, the property and casualty insurance unit of the Turkish banking group Yapi Kredi, to become the largest insurer in Turkey in terms of premiums.

The deal, valued at €684m (£580m, $880m), will allow Allianz to displace French insurer Axa to become the number one insurance provider with a market share of nearly 15 percent of the Turkey's $9.4bn insurance sector.

Further, Allianz made a 15-year deal with Yapi Kredi, the fourth-largest private bank in Turkey, for the exclusive distribution of its products to the bank's customers through latter's 928 branches. The move was in line with the growing role of banks in selling life insurance and pension products in the country.

Under the terms of the transaction, Allianz will acquire the Turkish bank's 93.9 percent stake in Yapı Kredi Sigorta. The remaining 6.1 percent shareholding, which is listed on the Istanbul Stock Exchange, will be acquired by Allianz through a mandatory tender offer following the closing of the transaction.

Allianz will also acquire 80 percent of the stake in life and pension business Yapi Kredi Emeklilik, which is a subsidiary of Yapi Kredi Sigorta, while Yapi Kredi will retain the remaining 20 percent stake.

The Europe's biggest insurer, which considers Turkey as a strategically important market has a 90-year history in the country and operates through its unit Allianz Turkey with headquarters in Istanbul.

The acquired businesses will be combined to Allianz Turkey, which will become the largest non-life insurer, the second-largest pension products provider and the third-largest life insurer in the country.

Yapi Kredi Sigorta is currently the fifth largest property and casualty insurance company in Turkey with total premiums of €531m. Yapi Kredi Emeklilik is the fourth-biggest life insurance company in Turkey with premiums of €90m. Its pensions business is ranked third in the country with assets of €1.5bn.

"Turkey is one of the fastest growing insurance markets worldwide, supported by a robust economic outlook and a large, young population of 75 million people," said Allianz management board member Oliver Bäte in a statement.

"The transaction with Yapi Kredi is a unique opportunity to move into a market-leading position in one of Europe's key growth markets which is also an important bridge between Europe and Middle East/Central Asia."

Bäte added that the deal was in line with the company's strategy to strengthen its position in growth markets.

The market penetration of insurance sector has been low in Turkey, with premiums at just 1.3 percent of GDP, compared to 7.9 percent in Western Europe and 2.6 percent for Central and Eastern Europe, Allianz noted.

The Organization for Economic Cooperation and Development (OECD) earlier predicted that Turkey will grow 4.1 percent in 2013, while the euro area will contract 0.1 percent.

The transaction is expected to close during the second half of 2013 upon receipt of regulatory and competition board approvals.