Insurance Australia Group (IAG), a car and home insurer, is reportedly considering bidding for Wesfarmers’ (WES) insurance business.

Three people with knowledge of the matter were quoted by Bloomberg as saying that IAG is negotiating with Perth-based Wesfarmers about a possible takeover of its insurance business.

IAG has been studying the financial health of WES’s insurance business in detail, to get better insight about pricing of the business, the sources told the news agency.

The proposed sale of the unit, which concentrates primarily on the commercial insurance business, is likely to fetch over A$2bn ($1.8bn) for WES.

The Wesfarmers insurance business manages more than 200,000 policies, and registered A$205m earnings before interest and taxes in 2012.

Most recently, Wesfarmers scraped its agreement with Zurich Insurance Group, signed in October, for the proposed sale of its insurance arm, the Australian Financial Review (AFR) reported.

IAG’s Australian operations distribute a range of personal and commercial insurance products, both directly to the customer and indirectly through a network of intermediaries.