* Shares rise in biggest German IPO since 2010
* Talanx IPO eyed in run-up to British Direct Line IPO
* Talanx CEO says no big takeovers planned in next 2 years
(Adds comments from fund manager, CEO, analyst)
By Jonathan Gould
FRANKFURT, Oct 2 (Reuters) - Shares in Talanx , Germany's third-biggest insurer, inched higher on their Frankfurt stock market debut on Tuesday, vindicating the company's decision to go ahead with the share sale after dithering last month over the state of Europe's fragile IPO market.
Shares in the group started trading at 19.05 euros per share on Tuesday, up on the offer price of 18.30 euros, before easing back to trade at 18.60 euros by 1045 GMT.
Owned by mutual insurer HDI, Talanx surprised markets last month by announcing its IPO only to then cancel it, and then revive it again within days after investors convinced the company that they would buy the shares after all, after a pick-up in global share markets.
Talanx's IPO, Germany's biggest since chemicals distributor Brenntag launched itself onto the market in 2010, comes just ahead of Royal Bank of Scotland's flotation of its Direct Line insurance arm.
Insurers have been trading below book value in the euro zone sovereign debt crisis as investors worry about the potential hit to the value of the government bonds in which insurers invest, as well as the long-term drag on performance from globally low interest rates.
Direct Line, Britain's biggest motor insurer, expects to price its shares on or around Oct. 11 in what looks set to be the biggest London's biggest IPO for over a year.
Analysts said that while reinsurance-focused Talanx and retail insurer Direct Line had little in common, both were offering their shares cheaply to tempt investors amid volatile stock markets and lackulstre industry growth prospects.
"To the extent that there is a read-across for general IPO appetite, I think it's encouraging, although Talanx was priced at the lower end," said Eamonn Flanagan, insurance analyst at British stockbroker Shore Capital.
"I think you've got to remember Warren Buffet's adage that you should leave ten percent for somebody else."
Talanx's offer price was at the lower end of its 17.30 euro to 20.30 euro price range. Direct Line would be worth 2.66 billion pounds at the mid-point of its 160 pence to 195 pence price range, compared with analysts' estimates of between 2.5 billion and 3.5 billion pounds.
British spread betting firm ETX Capital was on Tuesday quoting a spread of 177 pence to 187 pence on Direct Line shares, giving investors the opportunity to bet the stock will either rise above 187 pence or fall below 177 pence when it starts trading.
"Direct Line and Talanx are hardly comparable. Direct Line is a market leader in motor and home insurance while Talanx is very dependent on reinsurance, a business that Direct Line lacks", said Holger Stremme, fund manager at LBBW Asset Management.
Other investors agreed. "Direct line is much bigger and has a higher free float and therefore will be of interest to a different type of investor," a Germany-based fund manager said.
"(The IPO) is not a big bang but one of the most important moments in our 109-year company history", Talanx's chief executive Herbert Haas said on Tuesday at the listing ceremony at the Frankfurt stock exchange.
He said that Talanx was not planning any large takeovers over the next two years and that HDI would let its stake dilute over time to 50 percent plus one share.
Talanx has said it will use the cash raised to finance growth, particularly in industrial insurance and in emerging markets, as well as to repay loans linked to recent acquisitions in Poland.
Asked about Talanx's dithering on the flotation, Haas highlighted the difficult role of being the first large company to list this year.
"If you are an ice breaker, you have to slalom to find the right way through drift ice", Haas said, standing in front of a white and black checkered flag with the Talanx logo.
The insurer pared back the originally planned volume of around 700 million euros ($903 million) and late on Monday said it planned to raise at least 467 million euros in the IPO.
Talanx, which owns a 50.2 percent stake in the world's third-largest reinsurer, Hannover Re , was aiming to sell 25.5 million new shares in the flotation with an additional 2.7 million new shares earmarked in a so-called greenshoe option.
Originally Talanx had aimed for inclusion in the German market's mid-cap MDax index , which investors said remains within reach if HDI places more shares.
Fund manager Holger Stremme said the current free float should suffice for Talanx to make it into the small-cap index SDax by the end of the year.
(Additional reporting by Arno Schuetze and Alexander Huebner in Frankfurt and Myles Neligan in London; Editing by Greg Mahlich)
Keywords: TALANX IPO/