The sale is aimed at streamlining the insurer’s portfolio and raising funds.
Notably, since the start of the year, shares of the Riyadh-based insurance company have slumped nearly 44%, giving it a market valuation of approximately $231m.
Allianz Saudi Fransi’s peers also expressed interest in buying the insurer, the sources said.
These talks are at an early stage and no deal is certain as the German insurer could still decide to retain its stake, they added.
Allianz representatives declined to comment on the development and an Allianz Saudi Fransi spokesperson could not be reached for comments.
The unit up for potential sale is a joint venture between Allianz and Banque Saudi Fransi and was established in 2007.
Allianz controls a 51% stake in the JV, which caters to both individual and corporate customers with services marine, travel, motor and health insurance.
Through the merger, the firms hope to increase penetration of life and general insurance in high-growth African markets and develop new products to further financial inclusion.