Aegon is working with JPMorgan on the process and has held preliminary discussions with industry players to sell the unit, which is primarily focused on Hungary but is also active in Poland, Romania and Turkey, the sources said, speaking on condition of anonymity.
The business could be valued at about 650 million euros (589.52 million pounds) and is being sold as part of an auction process, they said.
Dutch insurer NN Group and Belgium's KBC are both studying possible bids for the assets while German rival Allianz has also expressed interest, the sources said.
Aegon, Allianz and NN Group declined to comment while KBC was not immediately available.
Aegon provides both life and general insurance in Hungary, where it first built a footprint in 1992 with the acquisition of former state-owned insurer Állami Biztosító and subsequently used the unit as a springboard for further acquisitions across Central and Eastern Europe.
Aegon's Chief Executive Lard Friese, who took the helm in May and was previously CEO of NN Group, said in August he would review the company's operations in some of the 20 markets where it operates as part of its efforts to preserve capital.
The Dutch firm previously sold its operations in the Czech Republic and Slovakia to NN Group for 155 million euros in 2018.
Aegon mainly focuses on life insurance, pensions and asset management and ranks as Hungary's fifth largest provider of life insurance.
It suffered a 30% drop in underlying pretax earnings in the first half of 2020 due to higher mortality and lower interest rates in the United States, where it owns the Transamerica brand and does two thirds of its business.
(Reporting by Arno Schuetze in Frankfurt and Pamela Barbaglia in London, additional reporting by Toby Sterling, Alexander Huebner and Carolyn Cohn; Editing by Susan Fenton)
By Arno Schuetze and Pamela Barbaglia