(Adds background, possible sale proceeds)
MILAN Jan 21 Italian insurance group Unipol has agreed to exclusive talks with Allianz to sell the German insurer assets carrying premiums worth about 1.2 billion euros ($1.63 billion).
A statement from Unipol and its main operating unit UnipolSai said they expect to agree a deal by Mar. 15.
Unipol agreed to buy its troubled rival Fondiaria-SAI in 2012 in a complex rescue that created Italy's second-biggest insurer with about 37 percent of the domestic auto insurance market.
As part of the merger, which was finalised in December, the Italian antitrust authority ordered the sale of a portfolio of assets with premiums worth about 1.7 billion euros.
Unipol did not say how much it would raise in the sale, but Italian newspaper MF said on Tuesday that the insurer could earn about 500 million euros by selling 1.3 billion euros of the premiums.
The assets belong to former Fondiaria unit Milano Assicurazioni, now part of UnipolSai.
On Jan. 15 Unipol rejected a separate offer from Belgium's Ageas to buy assets.
For Allianz, Europe's biggest insurer, a deal with Unipol would mean a further expansion in Italy, where it already ranks among the top six companies in terms of premium income. ($1 = 0.7383 euros) (Reporting by Stephen Jewkes; Editing by David Goodman)