Bank of Montreal is buying the Canadian life insurance business of financially troubled American International Group Inc. for $375 million in cash, the bank said Tuesday.

BMO said the deal will give its clients access to a broader range of investment, insurance and financial planning products.

The deal, which is expected to be completed by June 1, is projected to boost BMO’s earnings within a year. The impact on BMO’s Tier 1 Capital is under 15 basis points, the bank said.

AIG Life of Canada has about 300 employees and 400,000 customers.

“This acquisition is a perfect extension of our existing wealth management offering and our goal to become the one-stop location for all our clients’ financial and investment needs,” stated Bill Downe, president and CEO, BMO Financial Group.

“Combined with our industry-leading advisors at BMO Nesbitt Burns, we will now be able to provide clients with the investment and tax-efficient insurance solutions they need to help them secure their lifestyle and retirement needs. Such insurance products and advice are offered through BMO Nesbitt Burns Financial Services Inc. by more than 800 licensed life insurance agents, and, in Quebec, financial security advisors,” Downe added.

The operations of AIG Life of Canada will be integrated with BMO’s existing insurance operations over the next 6-12 months, the bank said.

The company will be known as BMO Life Insurance Co. and operate under the BMO Insurance brand.

Battered by the credit crisis, AIG received a lifeline from the U.S. government in the form of a US$60 billion loan. The company, which is one of the world’s biggest insurance firms, has now moved to unload some of its assets in order to repay the loan.