The deal would represent one of the biggest divestments of such insurance books in recent times. Insurance companies have been offloading such blocks, consisting of policies in areas where no new business is being underwritten, to free up cash to invest in more profitable parts of their operations.

The sources asked not to be identified because the matter is confidential. A spokesperson for Great-West said "as a matter of policy, we don't comment on speculation or rumors".

Goldman Sachs Group Inc is arranging the sale process, the sources said. A spokesperson for Goldman declined to comment.

The portfolio of run-off insurance business being marketed by Great-West includes structured settlements, pay-out annuities, and corporate or bank-owned life insurance (COLI/BOLI), the sources said. Some group benefits policies are also part of the sale, one of them said.

Management at the Winnipeg-based insurer held meetings in mid-August with prospective bidders which had made it through an initial round of bidding, according to the one source.

Among the parties to have shown interest in the policies include other insurance firms and financial companies, a second source said.

Private equity firms and specialist investment firms such as Athene Holding and Wilton Re have been significant buyers of run-off insurance blocks, believing they can juice the profits from administering such policies by cutting costs.

Among the largest such transactions in recent times are the $2.05 billion sale of Hartford Financial Services Group's life insurance and annuity run-off businesses to a group of investors, and Wilton Re's $14 billion deal involving Aegon pay-out annuity and COLI/BOLI businesses in the United States.

As well as Canada, Great-West Lifeco and its subsidiaries have operations in the United States and Europe and have more than $1.4 trillion of consolidated assets under administration as of June 30, according to public filings from majority shareholder Power Financial Corp.

(The story is refiled to correct "contracts," not "contacts" in 1st paragraph.)

(Reporting by David French in New York and John Tilak in Toronto; editing by Susan Thomas)

By David French and John Tilak