The deal will go ahead after Banco BPM takes full ownership of its insurance business, which is valued at around $1.6bn, the sources said.
The talks are at an early stage and the deal may not materialise after French banking group Crédit Agricole acquired a 9.18% minority stake in Banco BPM last week.
The French bank had also expressed interest in Banco BPM’s insurance units, and they had even held informal talks over it earlier this year.
The insurance business was one of the reasons why Crédit Agricole acquired a minority stake in Banco BPM as it is likely to deter competitors and expand the scope of new partnerships, some of the sources said.
AXA, Banco BPM and Credit Agricole representatives declined to comment on the news.
Banco BPM, which was formed by merging Banco Popolare and Banca Popolare di Milano in 2017, has been working to strengthen its consumer credit, private banking, asset management and insurance business.
Last month, Banco BPM CFO Edoardo Ginevra informed that the lender has accelerated its efforts to retain full control of its bancassurance business.
At the time, Ginevra also revealed that the bank was looking to sell or form a joint venture for its payments business.