* AXA to buy 33 pct and subscribe to capital hike
* AXA says deal to make it China's top foreign P&C insurer
* Shares up 1.8 pct, outperforming sector
* Deal at estimated price-earnings multiple of 26-analyst (Adds context on Chinese market, analyst comment)
By Christian Plumb and Kazunori Takada
PARIS/SHANGHAI, April 24 (Reuters) - Europe's No. 2 insurer, AXA, has agreed to pay 485 million euros ($631 million) to buy 50 percent of Chinese insurer Tian Ping, betting the country's fast-growing ranks of car owners will help turbo-charge its auto insurance market.
AXA, which earlier this month sold a portfolio of old life insurance policies in the United States for $1.1 billion, has been expanding into emerging markets as developed markets remain sluggish in the wake of the global financial crisis.
The company has pledged to double its size in "high growth" markets, which last year accounted for 14 percent of its property and casualty (P&C) revenues worldwide. P&C includes car insurance.
AXA and Tian Ping's current shareholders will jointly control Tian Ping, while AXA's existing Chinese P&C operations are expected to be integrated within the new joint venture, AXA said on Wednesday.
AXA said the takeover would make it China's largest foreign P&C insurer and strengthen its position as the biggest P&C insurer in Asia excluding Japan. Europe's second-largest insurer after Germany's Allianz is already present in the Chinese life market through a joint venture with Industrial Bank of China, the country's biggest lender.
Unlike in the life insurance space, where foreigners are barred from owning more than 49 percent of a company in China, Beijing imposes no ownership restrictions on overseas P&C players, though foreign companies' market share remains tiny.
Twenty one foreign P&C insurers, including AIG, Chubb Corp and RSA Group split about 1 percent of the market, which is dominated by local players including PICC and Ping An.
Buying Shanghai-based Tian Ping, one of China's oldest auto insurers, would help AXA to expand in a fast-growing market. China, where car sales totalled 19 million in 2012, overtook the United States as the world's largest car market in 2009.
Last year, China fully opened the auto insurance market to foreigners, allowing them to sell mandatory auto insurance policies to customers.
"The deal is strategically interesting because it allows them to penetrate the P&C market in China, which has a substantial growth potential," said Natixis analyst Benoit Valleaux.
"The acquisition allows them to grow in direct insurance in particular, an expertise they're developing elsewhere in Asia," he said, referring to insurance sold via the internet or telephone rather than through brokers.
Still, the deal does not come cheap. AXA is paying in the area of 26 times 2011 net earnings for Tian Ping, Valleaux said, above developed market multiples but in line with other Chinese insurers.
Tian Ping's gross written premiums surged 28 percent in 2011 to 4.02 billion yuan, with about 20 percent coming from sales by internet and telephone.
AXA shares were up 1.8 percent to 13.89 euros at 1155 GMT, outperforming a European sector up 0.3 percent higher.
Under the terms of the agreement, which is subject to regulatory approval, AXA will buy 33 percent of Tian Ping from its current shareholders for 1.9 billion yuan ($307 million) and also subscribe to a 2.0 billion yuan capital hike aimed at funding future growth, AXA said.
($1 = 0.7683 euros)