* To buy 93.9 pct in Yapi Kredi Sigorta, make offer for rest
* Drawn by growing population, rising living standards
* Allianz to sell insurance through Turkish bank branches
* Allianz shares down 3.1 pct, Sigorta down 9.5 pct
FRANKFURT, March 27 (Reuters) - Europe's biggest insurer Allianz has secured the top spot in Turkey's fast-growing insurance market by agreeing to buy Yapi Kredi Sigorta (YKS) for about 1.6 billion Turkish lira ($883 million).
The German group said on Wednesday it was buying a 93.9 percent stake in the Turkish insurer from local lender Yapi Kredi Bank. After closure of that deal, it will make a mandatory tender offer for the remaining 6.1 percent stake.
Turkey's growing population and rising standard of living have prompted a sharp increase in demand for car, property health and life insurance, but price competition among insurers is intense and many have suffered losses in recent years.
JP Morgan analysts said the price implied a much higher valuation than that paid by German insurer Talanx for deals in Poland last year, though they noted this could reflect a much faster-growing insurance market in Turkey.
The acquisition is Allianz's largest deal since 2007 and uses up over two-thirds of the roughly 1 billion euros ($1.3 billion) the group has earmarked as an annual takeover budget.
Allianz finance chief Dieter Wemmer sidestepped a question on whether the YKS takeover limited room for more deals.
"Transactions you can never force through ... but a few hundred million, plus or minus, we probably will find in our resources to pay for it," he told an analyst conference call.
Espirito Santo analyst Joy Ferneyhough said emerging market purchases had again become an option for big insurers like Allianz and France's Axa, which face sluggish developed markets in the wake of the global financial crisis.
"The larger conglomerates are becoming more comfortable that the worst of the crisis is over," Ferneyhough said in a note to clients. She retained a "neutral" rating on Allianz shares.
The stock was down 3.1 percent to 105 euros by 1315 GMT, versus a STOXX Europe 600 insurance index off 2 percent.
Allianz said squeezing out minority YKS investors would make it easier to achieve efficiencies from the deal.
YKS shares dropped 9.5 percent, having risen sharply recently in anticipation of a deal, while Yapi Kredi Bank's shares fell 0.7 percent.
Under a so-called bancassurance agreement over 15 years, Allianz will also get the right to sell insurance through Yapi Kredi's network of 928 bank branches, Turkey's fifth largest, with 6.5 million customers.
With a population of nearly 75 million whose average age is under 30, Turkey offers lucrative growth opportunities for global insurers. Government initiatives to encourage saving through private placement plans, which became effective from the beginning of 2013, have also made the business more attractive.
Property and casualty premiums in Turkey rose nearly 17 percent to 16.9 billion Turkish lira in 2012, according to data from the Insurance Association of Turkey.
Allianz already has around 1.4 million customers in Turkey, mainly motor and health insurance policy holders, while YKS has around 2 million customers. Combining the two will create the No. 1 player in non-life insurance in Turkey, as well as the No. 2 in pensions and No. 3 in life insurance, Allianz said.
Yapi Kredi Bank, owned by Turkey's Koc Holding and Italy's UniCredit, had said on Tuesday talks were continuing on a sale of its insurance unit after sources told Reuters that Allianz had agreed to buy it.
The sources said at the time that Japan's Dai-ichi Life Insurance and Zurich Insurance had also been in the race for YKS.
Yapi Kredi will retain a 20 percent stake in Yapi Kredi Emeklilik, YKS's life and pension unit, which Allianz welcomed.
"We want a strong distribution partner that also participates in the upside of the successes," CFO Wemmer said.
Allianz said it expected the deal to close in the second half of 2013, pending antitrust approval, but said it did not expect major obstacles from regulators.