"The largest player in the history of Russian insurance segment" will be created after state-controlled VTB Bank sells its insurance assets to Sogaz, the country's largest insurer, the bank announced on May 25.

The deal will be closed in the third quarter of 2018 for an undisclosed amount and VTB will get 10% in the merged insurer, according to the head of Russia's second largest bank Andrei Kostin. 

Current president of Sogaz Anton Ustinov will head the merged company, while most of the team of VTB Insurance will migrate to the new insurer as well. 

Sogaz underwrote RUB158bn ($2.5bn) of premiums in 2017, making it the country's largest insurance company. VTB Insurance had RUB80bn in premiums in 2017, Russia's fourth largest premium portfolio.

Previously VTB promised the shareholders to "extract considerable profit from the [Sogaz] deal," Vedomosti daily reminded on May 25. On the same week VTB also said it is selling its stake in major retailer Magnit "at a profit."

Analysts surveyed by RBC business portal estimated that the merged insurer will take 20% of the market, and up to 45% of the market in certain segments such as medical and property insurance. The "gigantic" player will be able to benefit from vast economies of scale, such as absorbing some re-insurance risks without re-insuring brokerage abroad.

Notably, Sogaz has a stable portfolio in state companies and state institutions, such as in the Defence Ministry and other security agencies, Federal Customs, Sberbank, Rosneft, Russian Railways, and others.