WARSAW (Reuters) - Polish insurer PZU (>> Powszechny Zaklad Ubezpieczen SA) is looking at whether to focus on small deals outside its home market after efforts to spend its $3.3 billion (2 billion pounds) cash pile on big takeovers came to nothing, its chief financial officer said.

PZU, the biggest insurer in eastern Europe, was outbid last year in a race for Croatian insurer Croatia Osiguranje (>> Croatia osiguranje d.d.), while another Balkan target - Slovenia's No.1 insurer Triglav (>> Zavarovalnica Triglav dd), has not been put up for sale.

"We have to revise our strategy," PZU's Przemyslaw Dabrowski told Reuters. "It's a question of whether we say OK, and stay with the opportunistic approach, or whether to realise the strategy of smaller buys and organic growth."

"It (the latter option) is an alternative today," he said.

State-controlled PZU is the dominant player in its home market of Poland, so if it makes acquisitions there it is likely to encounter obstacles because of anti-monopoly rules.

The former communist monopoly is also under pressure at home from a price war with local rivals in Poland, including Warta, which is owned by Germany's Talanx (>> Talanx AG).

Those factors prompted PZU, which has a market capitalisation of $12.1 billion, to look to other markets.

PZU had long cast a covetous eye on ING's (>> ING GROEP) regional insurance business. But the Dutch firm floated its whole European insurance arm, instead of selling it off in smaller chunks, which quenched PZU's interest.

The insurer also considered a move into banking in search of new clients. It teamed up last year with Polish lender Alior Bank (>> ALIOR BANK SA) to buy Poland's No.11 bank BGZ (>> Bank Gospodarki Zywnosciowej SA), but it was outbid also here, by BNP Paribas (>> BNP PARIBAS).

TIE-UPS WITH BANKS

Dabrowski said PZU was still interested in combining banking and insurance services, known as bancassurance, but may now try a different approach.

"Today we have to consider if there's a possibility to build value by acquiring a bank only as an investment case ... or also by building synergies between an insurer and a bank," Dabrowski said. "When it comes to bank issues, we can imagine not buying a bank, but building joint-ventures with banks."

The bancassurance model, once favoured in Europe by ING, has been left aside in Poland after Belgium's KBC (>> KBC GROEP) divested its local banking and insurance businesses to help to clean up balance sheets during the European debt crisis.

"Only a large takeover could be visibly reflected in PZU results," Trigon DM analyst Hanna Kedziora said.

"With no such takeovers in sight, the strategy shift is necessary and therefore forced. PZU has to specifically decide what to do with excess cash. Aliances with banks are one of the ways of searching for new revenue, but I wouldn't expect some great scale here."

Now PZU is seen as a frontrunner in the race for a bancassurance partner for Poland's No.1 bank, state-controlled PKO BP (>> PKO Bank Polski SA), and as a potential bidder for the insurance arm of the country's No.4 lender, mBank (>> mBank SA).

"We have for years observed very strong development of outside channels on the Polish market, ... channels which are not owned by insurers," Dabrowski said. "We have to consider developing outside channels also by PZU."

(Writing by Adrian Krajewski; Editing by Christian Lowe and Jane Merriman)

By Pawel Florkiewicz and Adrian Krajewski