UPDATE 1-Sun Life, Khazanah to buy Aviva's Malaysian insurance JV

* Cos to pay C$586 million

* To buy 98 pct in the venture from Aviva, CIMB Group

* CIMB to retain 2 pct stake

Jan 17 (Reuters) - Canada's Sun Life Financial Inc and Malaysian state investor Khazanah will buy the Malaysian insurance joint venture of Britain's No.2 insurer Aviva Plc and lender CIMB Group.

The deal helps Sun Life, Canada's No. 3 insurer, expand in Southeast Asia, a region that insurers are increasingly interested in because of its rapid growth, high savings rates, and young population.

Aviva is exiting markets across the world to boost its underperforming share price.

Sun Life and Khazanah Nasional Bhd will buy 49 percent each in CIMB Aviva Assurance Berhad and Islamic insurer CIMB Aviva Takaful Berhad for C$586 million ($594 million). CIMB Group Holdings Berhad will retain a 2 percent stake.

"We see huge opportunity there (in Southeast Asia). There are 600 million people, the economies are growing, there is a growing middle class," Kevin Strain, president of Sun Life Financial Asia, told Reuters.

Sun Life is now present in seven Asian markets, including four in Southeast Asia.

"This is an important investment for Khazanah. It marks not just an opportunity to invest into an asset in a growth sector, but also brings together a unique commercial partnership among three strong parties in their respective areas," said Khazanah's managing director Azman Mokhtar.

The Canadian company and Khazanah, which owns a 29.9 percent stake in CIMB, will each pay C$293 million.

Sources told Reuters on Sunday that Sun Life and Khazanah had agreed to buy Aviva's Malaysian insurance joint venture.

The deal includes a new 20-year exclusive bancassurance agreement with CIMB Bank.