DUBAI/ABU DHABI Sept 10 (Reuters) - State-backed Abu Dhabi Investment Council is weighing the sale of its nearly 24 percent stake in Abu Dhabi National Insurance Co (ADNIC), with Allianz among groups showing initial interest in buying it, sources familiar with the matter said.
If the deal goes ahead, it will further boost Allianz's presence in emerging markets and give the global insurer a stronger position in the United Arab Emirates (UAE), a market seen as ripe for consolidation.
Abu Dhabi Investment Council might hire an adviser for the deal, one of the sources said.
The council is an investment arm of the Abu Dhabi government, with holdings in several listed companies such as First Abu Dhabi Bank and Abu Dhabi Commercial Bank .
Its mandate includes diversifying Abu Dhabi's economy and the development of the corporate sector.
The sale plan is still in its preliminary stages, one of the sources said, but could attract more bidders.
It is the latest indication of a shake-up in the fiercely competitive local insurance market that has been suffering amid tighter regulations and losses. French insurance giant AXA Group and its UAE partner, Kanoo Group, in 2014 became major shareholders in Abu Dhabi-based Green Crescent Insurance Co.
Zurich Insurance Group decided to exit its general insurance business in the UAE in 2016 after a review concluded the investment needed was not justified by its growth potential.
The UAE's third-biggest insurer by assets, ADNIC has a market value of about $377 million, valuing Abu Dhabi Investment Council's 24 percent stake at about $90 million.
The insurance firm bolstered its capital position last year by selling convertible bonds, prompting rating agency Standard & Poor's to remove it from its creditwatch list with negative implications.
Earlier this year, ADNIC also posted its first annual profit in three years for 2016, a sign the company is turning a corner and that it might be a good time to attract an international insurer as its partner, the sources said.
In the UAE, gross written premiums, or the total value of premiums written by an insurer before commissions and other deductions, hit 40 billion dirhams ($11 billion) in 2016, up from 37 billion dirhams in 2015 and 33.4 billion in 2014, according to the UAE Insurance Authority.
The recent introduction of mandatory health insurance in Dubai has helped boost demand despite a regional economic slowdown and the impact of building fires in the city.
Abu Dhabi unveiled mandatory insurance a decade ago.
The Allianz Group, one of the world's leading insurers and asset managers with more than 86 million retail and corporate customers, declined to comment.
Last month, the Munich-based company agreed to buy 98 percent of Nigerian insurer Ensure Insurance Plc.
Abu Dhabi Investment Council and ADNIC did not respond to requests for comment.
($1 = 3.6730 UAE dirham) (Additional reporting by Tom Simms in Frankfurt; Editing by Mark Potter)