LONDON, Jan 29 US bank Citigroup has agreed to buy British insurer Prudential's loss-maki

LONDON, Jan 29 (Reuters) US bank Citigroup has agreed to buy British insurer Prudential's loss-making Internet bank Egg for 575 million pounds ($1.13 billion) in cash, the two sides said on Monday.

Prudential, Britain's second largest insurer, has been reviewing its underperforming UK operations since last summer.

Egg accounts for only a fraction of Prudential's group business, but the bank is facing a full-year loss, a potential embarrassment for Prudential Chief Executive Mark Tucker, who took the decision to buy out minority shareholders.

Egg has been hit by tough conditions in the UK personal loans market and Prudential has said it expects Egg to post a second-half loss close to its 39 million pound operating loss in the first six months.

News of the Egg sale lifted Prudential shares over 2 percent, with the stock trading at 704 pence by 1106 GMT, up 2.1 percent, well above a 0.6 percent rise in the European sector.

''I think the market will view this deal as good news,'' analyst Kevin Ryan at ING said. ''It's a sensible thing for them to have done. They seem to have got two times book value for it, which is a great price. So I think they've done well.'' Last month, after a British newspaper reported Citigroup was considering a bid for Egg, Prudential confirmed it had received an approach, but declined to comment on the identity of the bidder, saying only the approach had been rejected.

REUTERS PV PM1659