(Adds source, background, Tong Yang share price moves)
By Joyce Lee
SEOUL, Feb 5 (Reuters) - China's Anbang Insurance Group Co has shown interest in buying a controlling stake in South Korea's Tong Yang Life Insurance, a source with knowledge of the matter said on Thursday.
The source, who declined to be idenfied as they were not authorised to speak to the media, gave no further details.
The Korea Economic Daily earlier reported that Anbang had signed a memorandum of understanding to buy South Korean private equity firm Vogo Investment's 57.5 percent stake in the country's eighth-largest life insurer for around 1.1 trillion won ($1.01 billion).
Vogo and Anbang declined to comment and the newspaper did not name its sources.
Late last year, Anbang was the lone bidder in a South Korean government effort to sell a 30 percent controlling stake in Woori Bank, worth about $2.7 billion. Because local rules required at least two bidders for a deal, the process collapsed.
Anbang has been on an investment spree in financial services and real estate around the world, and last year struck a $1.95 billion deal to buy the landmark Waldorf Astoria Hotel in New York.
Vogo first acquired a stake in Tong Yang Life in 2006, and first began a process to sell the insurer in 2011.
Tong Yang, which had 19.7 trillion won in assets as of the third quarter of 2014, had a 4.8 percent market share in terms of paid premiums, compared with 51.2 percent held by the country's biggest three life insurers - Samsung Life , Hanwha Life and Kyobo Life.
Tong Yang reported an operating profit of 135.7 billion won over the first three quarters of 2014, and had a return on equity of around 10-11 percent, higher than the roughly 7 percent average for the country's big three insurers.
Tong Yang Life shares were down 6.4 percent on Thursday after opening 5.6 percent higher. The stock had gained 11.1 percent over the previous two trading days.
Any acquisition agreement would need regulatory approval. South Korean regulators would begin looking into Anbang should it make an official request to acquire a financial company, two regulatory sources said.
$1 = 1,088.0000 won Additional reporting by Lee Chang-ho in SEOUL and Matthew Miller in BEIJING; Editing by Tony Munroe and Stephen Coates