Citibank has approached the Indian group on behalf of AIG about buying the American International Assurance (AIA) unit, the paper said. Qoting unnamed sources, it said the asking price was around $10 billion, while an ADAG source said the group was looking at a valuation of $5 billion to $6 billion.

"The deal is still at a nascent stage, and there's no certainty that it will go through," the paper quoted the ADAG source as saying.

The deal, which would exclude AIG's Indian life insurance joint venture with the Tata group, would make ADAG the largest life insurer in southeast Asia. the report said.

ADAG, through its Reliance Capital runs India's largest asset management firm, a stock brokerage and insurance business.

(Reporting by Prashant Mehra; Editing by John Mair)