Sources told Bloomberg that Insurance Australia Group Ltd or IAG is thinking of bidding for the insurance business of Wesfarmers. IAG is an Australia-based general insurance group whose insurance products include personal and commercial products. It is the largest motor vehicle and home insurer in Australia. Wesfarmers Ltd, meanwhile, has various businesses. It owns operates mines, retail chains, supermarkets, an investment bank and chemical producers. It also makes and distributes industrial products and writes insurance, among others.

The people said IAG was in discussions with Wesfarmers about a possible purchase of the Perth-based firm's insurance unit. It is currently evaluating the financial details of the business, according to the people who spoke on the condition of anonymity because the matter is confidential. Two sources said the deal may fetch a price tag of over AUD 2 billion or USD 1.8 billion.

The sources said an offer would not likely be given by insurance company Suncorp Group Ltd after it had reviewed the unit's business information. Based in Brisbane, Suncorp has been divesting corporate lending, commercial property lending and leases worth AUD 18 billion in 2009 in order to reduce risk, Bloomberg reported.

Last year, the insurance arm of Wesfarmers posted earnings before interest and taxes of AUD 205 million. It has over 200,000 policies.

Bloomberg reported that IAG has been looking to expand its operations in  Australia and Asia after it had agreed to a sale of its UK unit last year. Wesfarmers, meanwhile, has also shifted spending to Coles, the retail chain it acquired in 2007 in what was then the biggest corporate takeover in Australia.  

On the other hand, the Street Talk column of The Australian Financial Review reported today that Wesfarmers had halted talks about a possible bid with Zurich Insurance Group. The report did not say where the information came from.