American International Group Inc., the largest property/casualty insurer in the U.S. and Canada, joined private-equity firm Oak Hill Capital Management to help start a lender serving medium-sized companies.

AIG has committed $1.5 billion to Varagon Capital Partners, the companies said in a statement today. The venture will be led by Chief Executive Officer Walter Owens, who previously worked at GE Capital and CIT Group Inc.

Institutional investors have been seeking to diversify holdings beyond bonds with interest rates near record lows. Many have added loans to so-called middle-market companies to boost yields.

In addition to insurers, “pension funds, family offices and endowments that have become investors in middle-market credit are looking to take the next step,” Owens said in a phone interview. They’re “really perfect candidates to be talking with us.”

Competition has intensified as more investors pour capital into commercial lenders. That prompted the Federal Reserve to report in April that underwriting standards are deteriorating. Commercial and industrial loans rose at a seasonally adjusted annual rate of more than 12 percent, the fastest of any loan category in a tally by the central bank published last week.

Varagon will focus on borrowers with $10 million to $75 million of earnings before interest, tax, depreciation and amortization. Loans will be for as much as $350 million, according to the statement.

Credit Discipline

AIG paid back its government rescue in 2012 and has been reshaping its investment portfolio by adding residential mortgage debt and scaling back holdings of municipal bonds. The insurer plans to hold $20 million to $100 million of a typical Varagon transaction and syndicate the rest to other investors, Jon Diat, a spokesman, said in an e-mail.

“As a buy-and-hold investor with a core focus on credit discipline, we are excited to partner with Varagon,” Brian Schreiber, deputy chief investment officer for AIG, said in an e-mail. “We believe that by applying strong credit discipline, middle-market loans offer compelling risk-adjusted returns.”

The lender’s offerings will include first-lien, second-lien and unitranche loans, as well as mezzanine financing.

Varagon’s chairman is Denis Nayden, a managing partner of Oak Hill and former chairman and CEO of GE Capital. The board includes Schreiber; Michael Gaudino, former CEO of GE Corporate Financial Services; and Morris Offit, chairman of Offit Capital and a former AIG director.

Oak Hill manages funds with more than $8 billion of initial capital commitments. Partners and affiliates of the firm joined AIG in backing Varagon, according to the statement.