PZU, Vienna Insurance in the race for Lithuania's top insurer -report

WARSAW, March 27 (Reuters) - Eastern Europe's top insurer PZU (Frankfurt: 7PZ.F - news) and Austria's Vienna Insurance Group (Other OTC: VNRFY - news) are in the bidding for their No.1 Lithuanian rival Lietuvos draudimas in a deal valued at around 100 million euros ($137 million), media said on Thursday.

Local (Frankfurt: OTQ.F - news) daily Verslo zinios quoted unnamed sources as saying negotiations between Lietuvos draudimas owner - British insurer RSA - and the two bidders stalled, but Polish state-controlled PZU offered better conditions.

According to the daily, RSA is investigating various options to spin off Lietuvos draudimas, including selling it to an investment fund with an option to buy the company at back a later date.

Earlier this week, RSA set out plans for a fully underwritten rights issue to raise 773 million pounds ($1.3 billion) to restore its capital position.

Lietuvos draudimas said in a statement that RSA had made no official decision on its companies in the Baltic states.

Neither PZU - which operates in Lithuania via its subsidiary PZU Lietuva - nor VIG's Lithuanian unit had any comment on the issue. ($1 = 0.7278 Euros) ($1 = 0.6019 British Pounds) (Reporting by Andrius Sytas; Writing by Adrian Krajewski in Warsaw; editing by Keiron Henderson)