Italian insurer Unipol has agreed a revised four-way merger plan to rescue debt-laden peer Fondiaria-SAI with its parent company Premafin, aiming to create one of the country's biggest insurers, Unipol and Premafin said on Sunday.

Earlier this month, Unipol struck a preliminary merger deal with Fondiaria, Premafin
and Fondiaria's unit Milano Assicurazioni , which would end the once-powerful Ligresti family's control of the group.

But the initial proposal, which included a purchase by Unipol of a 51 percent stake in Premafin from the Ligresti family, had to be redrawn after Italy's market regulator Consob indicated it would hurt minority shareholders in Fondiaria while favouring Ligrestis, newspapers reported on Sunday.

Fondiaria-SAI, Italy's biggest vehicle insurer, is 35.8 percent owned by Premafin which, in turn, is controlled by the Ligresti family. Fondiaria-SAI controls insurance company Milano Assicurazioni.

Under the new plan, Unipol will take control of more than two thirds of Premafin's voting capital by subscribing to the holding company's 400-million euro (£336.1 million) capital increase reserved for Unipol -- instead of buying the Ligresti family's stake in Premafin at a hefty premium, the two companies said in separate similar statements.

The cash injection will boost Premafin's capital, improve its debt and allow the company to take part in a subsequently planned capital increase it Fondiaria which details are yet to be approved by Fondiaria shareholders, they said.

Under the deal, Premafin's current core shareholders will see their stake diluted and its top executives will resign, the companies said.

The integration project aims to safeguard current and future solvency of Premafin and Fondiaria-SAI and create at the same time a top national insurance operator capable of competing effectively with main national and European rivals and of creating value for all shareholders, Unipol said.

The planned tie-up would create a new giant in the Italian insurance market, currently led by Assicurazioni Generali . An enlarged Unipol would control some 32 percent of the non-life segment and 10 percent of the life insurance sector, Mediobanca analysts have said.

The planned deal also includes Unipol's own capital increase of up to 1.1 billion euros, the cooperative-owed Unipol said.

Unipol's subscribing to the Premafin capital increase is subject to the regulator's approval, go ahead from the antitrust and exemption from any mandatory bid on the shares of Premafin, Fondiaria-SAI and Milano Assicurazioni

Unipol and Premafin said they expected the four-way merger to be completed by the end of 2012.

(Reporting by Svetlana Kovalyova and Stephen Jewkes; Editing by Marguerita Choy)