AXA, France's largest insurer, said Friday it agreed to buy half of Banca Monte dei Paschi di Siena's insurance and pensions unit for 1.15 billion euros ($1.54 billion) in cash.
The transaction will be funded with existing cash resources, AXA said.
"The Italian bancassurance market is one of the most attractive in Europe," the two companies said in a joint statement. "In addition, pension reforms introduced in January 2007 are expected to provide additional growth opportunities for the partnership."
Bancassurance is a term used to refer to the insurance-selling business at banks.
Subject to regulatory approval, the deal will be completed by the end of the third quarter of 2007.
Shares of Monte dei Paschi, founded in 1472 and one of the world's oldest banks, dipped 0.8 percent to 4.745 euros ($6.34) in Rome. AXA's stock added 0.1% to 31.9 euros ($42.65) in Paris.