FRANKFURT Allianz (ALVG.DE) is mulling a bid for Germany's second-biggest public sector insurer but would need to win over the company's wary shareholders before it can seal the deal.
Two sources close to Provinzial Nordwest's owners confirmed to Reuters the approach from Allianz, after a Financial Times Deutschland report earlier said Allianz was prepared to pay the insurer's book value of 2.25 billion euros ($2.92 billion).
Germany's public sector banks and insurers have a special status under German law and traditionally have closed ranks to ward off any threat of influence from the private sector.
Provinzial Nordwest belongs to regional savings banks in the North of Germany and had a premium volume of more than 3 billion euros and bottom line earnings of 116 million euros in 2011.
Allianz and Provinzial Nordwest declined comment.
However, one of Provinzial Northwest's large shareholders, Landschaftsverband Westfalen-Lippe (LWL), on Friday said it was not looking to cash in on its 40 percent stake.
"We currently have no plans to sell our stake in Provinzial Nordwest," LWL director Wolfgang Kirsch said in a statement.
"There have been repeated offers in the past," Kirsch said, adding that all of Provinzial's owners would have to agree to a sale.
A financial source told Reuters on Friday that a move by Europe's biggest insurer on Provinzial Nordwest was credible and consistent with an effort two years ago to buy fellow public sector insurer Provinzial Rhineland, an approach that was rebuffed by Rhineland's owners.
Insurance observers say that gaining access to new sales channels is a priority for Allianz and other players trying to make headway in the German market but argue that reaching product development deals may be more effective than buying whole companies or portfolios.
Allianz has been on the lookout for takeovers in mature markets, given the high asking prices for acquisitions in emerging markets such as eastern Europe and Asia.
Allianz board member Dieter Wemmer in May said that smaller takeovers could provide good and relatively inexpensive growth opportunities.
Many listed European banks and insurers are trading below their book value as investors worry about the overall health of the finance industry in the wake of the euro zone debt crisis.
Provinzial Nordwest has around 3 million customers, with premiums largely balanced between property-casualty and life insurance businesses, at 1.6 billion euros and 1.4 billion euros, respectively.
The Financial Times Deutschland said Allianz Chief Executive Michael Diekmann met with Provinzial Northwest's owners -- the paper named the individuals at the meeting -- in the northern city of Muenster to personally present Allianz's offer.
The paper also said that accountants are pressuring savings banks to take write-down's on their insurance holdings next year, which may encourage the lenders to sever ties with their insurers.
Allianz's share rose 0.6 percent to 100.35 euros by 8:30 a.m. EDT, slightly outpacing a 0.3 percent rise in the STOXX Europe 600 insurance index .SXIP.
(Reporting by Jonathan Gould, Alexander Huebner, Matthias Inverardi, Andreas Kroener and Arno Schuetze; Editing by Hans-Juergen Peters and Mike Nesbit)