European insurers Allianz and AXA SA are among the potential bidders for HSBC Holdings Plc's sale of its general insurance business, which could fetch more than $1 billion, sources familiar with the matter told Reuters.

HSBC <0005.HK>, Europe's biggest bank, has sent out information memorandums to potential bidders for the sale of its non-life insurance business, as CEO Stuart Gulliver streamlines a mammoth business aimed at cutting costs by $3.5 billion.

QBE Insurance Group Ltd , an acquisitive Australian insurer, China's PICC Property & Casualty Co Ltd <2328.HK> and Tokio Marine Holdings <8766.T> are the other companies likely to be interested in the auction, sources added.

AXA, Allianz and QBE declined to comment, while PICC and Tokio Marine were not immediately available for comment.

HSBC declined to comment. Sources were not authorised to talk to the media.

The first round bids for what is expected to be a competitive auction is due in mid-October.

Earlier, South China Morning Post reported that Prudential

, medical insurer Bupa, Allianz , AXA , Zurich Financial and Mitsubishi Sumitomo Insurance Group <8725.T> have been approached to buy HSBC's unit.

The newspaper said that insurers mentioned in report declined to comment.

However, sources have played down Prudential's interest in the sale process, given the company's preference for selling life insurance products.

In May, HSBC announced plans to sell non-core businesses, which included shrinking its network of 475 U.S. branches to focus on the international business of U.S. clients and the sale of several European retail banking businesses.

HSBC is selling non-life insurance operations in Hong Kong, Singapore, some Latin American countries and France. The company has already sold its non-life business in U.K. The non-life insurance businesses earned profit before tax of about $1 billion in 2010, from about $750 million in 2009, according to a company presentation made in June.

The non-life insurance premiums totaled $1.3 billion in 2010, according to HSBC balance sheet.

Some sources also mentioned Italian insurer Generali SpA as a likely suitor but some analysts played down Generali's interest, saying it was unlikely to undertake big transaction at this time due to market uncertainty and other capital requirements.

Generali also declined to comment.

HSBC manufactures and distributes general insurance products in Panama, Honduras, El Salvador, Argentina, France and Mexico. But it earns a portion of its premiums from Hong Kong and Singapore, with the two centers alone producing about $300 million, one source previously said.

HSBC's planned sale follows recent deals to exit non-core businesses, including the disposal of its credit card unit in the United States, the closure of underperforming U.S. branches, and the sale of 195 branches to First Nigara Financial Group Inc .

British media reported that private equity funds could be interested in the sale, although some bankers played down that prospect.

This is hard-core insurance stuff...knowing how to sell insurance products at bank branches. It's a hard-core skill set that you need to bring to the table, said one person familiar with the matter.

The real question is who is able to take everything. As a seller you want to have everything out of your hand in one package. So finding a buyer who will be able to pay the maximum price and the highest number of properties is going to be tricky, the source added.

(Additional Reporting by Narayanan Somasundaram, Julien Ponthus, Jonathan Gould, Nigel Tutt and Noriyuki Hirata; Editing by Ken Wills)

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