July 28 (Bloomberg) -- American International Group Inc., the insurer bailed out by the U.S., sold a business that makes loans to wealthy life insurance buyers for about $679.5 million.

AIG sold a majority of the so-called premium finance business held by AIG Credit Corp. and A.I. Credit Consumer Discount Co. to Wintrust Financial Corp., the New York-based insurer said today in a statement. Wintrust, based in Lake Forest, Illinois, may buy additional assets for $61.2 million, the statement said.

Chief Executive Officer Edward Liddy is dismantling AIG after the insurer got a $182.5 billion government bailout to prop up the insurer following losses on bets tied to home loans. The company has struck more than 20 deals, including the sale of an auto insurer, an equipment guarantor and a Japanese office tower, for more than $7.3 billion.

The deal “is a significant step in fulfilling Wintrust’s planned expansion in the life insurance premium finance business,” said Edward Wehmer, the lender’s CEO, in a separate statement.

The business involves making loans to “high net worth” policyholders who use the financing for estate planning, Wintrust said. The loans may be repaid from insurance proceeds.

Wintrust’s acquisition includes a portfolio of U.S. premium finance loans with an unpaid principal balance of about $941.3 million, consisting of about 530 loans with an average remaining expected life of 5 to 7 years, according to a regulatory filing today. The transaction includes software and trademarks, the bank said.

The company also hired most of A.I. Credit’s employees involved in financing life insurance premiums and leased office space in Jersey City, New Jersey, so they can continue to service the portfolio, Wintrust said.

Blackstone Group LP advised AIG on the deal.

To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net

Last Updated: July 28, 2009 11:48 EDT