SLF Sun Life Financial Inc

Canada's Sun Life Financial Inc. and Malaysian sovereign-wealth fund Khazanah Nasional Bhd. are in discussions to buy majority stakes in two Malaysian life insurers in a deal worth around 3.2 billion ringgit ($800 million), people with knowledge of the deal said.

The companies are in negotiations with Hong Leong Financial Group Bhd. to buy its 70% stake in Hong Leong Assurance Bhd. and 65% stake in Hong Leong MSIG Takaful Bhd., the people said. Japan's Mitsui Sumitomo Insurance Co. owns the remaining stake in both companies.

The discussions are still at an early stage and its possible a deal may not happen or other bidders could emerge, the people said. Reuters earlier reported the deal was under discussion.

Hong Leong Assurance is the fourth-largest life insurer in Malaysia, after AIA Group Ltd., Great Eastern Holding Ltd. and Prudential PLC, in terms of annualized new business premiums, according to analysts.

Hong Leong Financial, controlled by Malaysian tycoon Quek Leng Chan, said last month that Malaysia's central bank had no objection to it starting talks with certain parties on the sale of its stakes in the two insurance units.

Sun Life and Khazanah declined to comment. Hong Leong didn't respond to a request to comment.

Malaysia has seen a drought in deal making activity as a slowing economy has weighed on investor confidence. Last week, the country's central bank unexpectedly cut interest rates for the first time in seven years, in a bid to boost growth.

For Sun Life and Khazanah, the potential deal would be its second joint bid in Malaysia after they teamed up to buy 98% of Aviva PLC and CIMB Group Holdings Bhd.'s Malaysian insurance joint venture for 1.8 billion ringgit in 2013.

Write to P.R. Venkat at venkat.pr@wsj.com

(END) Dow Jones Newswires

July 19, 2016 08:15 ET (12:15 GMT)

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