Allianz Malaysia Bhd has been chosen to progress in talks to acquire Malaysia’s second-biggest car insurer after edging out Japanese rival Mitsui Sumitomo Insurance Co, people with knowledge of the matter said.

AmGeneral Insurance Bhd’s owners have decided to enter detailed discussions with Allianz on a potential deal, according to the people, who asked not to be identified because the information is private.

They have applied for Bank Negara approval to allow Allianz to conduct due diligence on the business and formally proceed with negotiations on terms of a transaction, one of the people said.

The insurer could be valued at about US$800mil (about RM3.29bil) in a sale, the people said.

Representatives for Allianz and AMMB said they couldn’t immediately comment, while representatives for IAG and Mitsui Sumitomo Insurance declined to comment.

Any deal could encourage Prudential Plc and Tokio Marine Holdings Inc, which have also been considering selling stakes in their Malaysian insurance units.

Bloomberg News reported last month that Allianz Malaysia and Mitsui, a unit of Japan-listed MS&AD Insurance Group Holdings Inc, were shortlisted to bid for AmGeneral.

Bursa Malaysia-listed AMMB owns 51% of AmGeneral, while IAG holds the remainder.

An acquisition could also include a bancassurance agreement, which would give the buyer the right to distribute insurance products through AMMB’s branch network, people familiar with the matter said last month.

AmGeneral is the country’s second-biggest auto insurer with a market share of 15%, its website shows. It ranked fifth in the overall Malaysian general insurance market as of the first half of 2018.

The company has more than four million policies and a network of 7,000 agents and dealers. — Bloomberg