* Competition, regulations fuel merger pressures
* Health insurers fight price war for market share
* Mutuals so far not interested in selling shares
By Leigh Thomas
PARIS, Feb 2 (Reuters) - Tight health budgets, regulatory revolutions and the threat of Google have unleashed a surge of competition among France's mutual insurers, triggering a wave of mergers in the usually staid corner of the financial sector.
Malakoff Mederic and La Mutuelle Generale were the latest not-for-profit mutuals to ink a tie-up creating a combined group this month with annual revenues of 4.6 billion euros ($5.2 billion).
"There're about 400 institutions today," Malakoff Mederic head Guillaume Sarkozy told Reuters, "I wouldn't be surprised if it's less than 50 in the coming years."
The merger came weeks after the biggest mutual health insurers, MGEN and Harmonie Mutuelle, agreed to merge, eager to keep costs down through economies of scale.
"This is a very compelling point for us," Harmonie Mutuelle chief Joseph Deniaud told Reuters, estimating that the group would have annual revenues close to 5 billion euros.
In France, the state provides basic health insurance, but it is looking to cut health spending by 10 billion euros over three years. That leaves insurers providing additional coverage to foot an ever bigger portion of the health bill.
Size can also be an advantage as fierce competition sweeps into the sector before new rules starting next year under which small firms have to offer employees health insurance as bigger companies already do.
Competing with listed for-profit insurers like AXA and CNP Assurances, mutuals already have 54 percent of the highly fragmented market for health insurance as well as sizable chunks of other insurance markets.
The new regulations have triggered a price war with some mutuals offering health coverage for as low as 16 euros a month, even though it is all but impossible to break even at that level, said Matthieu Stankowiak, head of development at mid-sized mutual M comme Mutuelle.
"Everyone's trying to get market share now because once you get it, it doesn't change much over time," he told Reuters.
Non-mutual insurers do not want to be left behind. CNP Assurances said on Friday it had set up a joint venture with insurance broker Alptis targetting small companies.
In the absence of shareholders to fall back on for more capital, weaker mutuals are also flocking to better capitalised rivals before new EU insurance rules enter into force next year, requiring more capital than now.
Additionally, mutuals are increasingly worried that data-savvy technology firms will began treading on their turf as the likes of Google test the waters in some insurance markets.
"I absolutely don't want to be overtaken by a non-insurance company," Malakoff Mederic's Sarkozy said, citing Google.
Despite the sector's shake-up, so far none are following the example of U.S. or British rivals by becoming for-profit firms and seeking outside capital.
"This subject is not on the table in France," said Sarkozy, brother of former French president Nicolas Sarkozy. "If a company needs capital there are different solutions: it can issue financial instruments or merge with other institutions."
$1 = 0.8830 euros Reporting by Leigh Thomas; Editing by Andrew Callus and Susan Thomas