The Bank of Montreal has agreed to pay $308 million in cash for AIG Life Insurance Company of Canada.

The Bank of Montreal, Montreal, which does business as BMO Financial Group, hopes to complete the deal by June 1, according to BM and American International Group Inc., New York.

AIG has been trying to sell assets to cope with severe problems at its credit default swaps operations and other derivatives operations.

AIG Life of Canada, Toronto, sells whole life insurance, universal life insurance, term life insurance, critical illness insurance and immediate annuities.

AIG Life of Canada has about 300 employees, 400,000 customers and relationships with about 5,000 brokers.

BMO’s BM Nesbitt Burns Financial Services Inc. unit has 74 branches and about 1,400 financial advisors.

BMO is making the deal because of its “goal to become the one-stop location for all our clients’ financial and investment needs,” BMO President William Downe says in a statement.

A unit of J.P. Morgan Chase & Company, New York, acted as financial advisor to AIG on the transaction.

BMO says it plans to combine the operations of AIG Life of Canada with its own operations over the next 6 to 12 months.

“The company will be known as BMO Life Insurance Company and operate under the BMO Insurance brand,” BMO says.

BMO notes that it is assuming that the Canadian and U.S. economies will contract in the first half of 2009, that interest rates and inflation will remain low, that the Canadian housing market will weaken this year, and that the U.S. market will start to recover in the second half.