The company said while it did not admit or deny wrongdoing it would pay $46 million in fees and interest on fees to the Securities and Exchange Commission to resolve claims that grew out transactions that AIGFP structured with PNC Bank in Pittsburgh.

In addition, the company has agreed to take on a U.S. Justice Department and SEC-approved independent consultant who will serve as an outside monitor and examine company transactions between 2000 and 2004 to ensure that AIG did not violate accounting rules.

A portion of the settlement, which includes the Department of Justice Fraud Section and U.S. Attorney for the Southern District of Indiana in Indianapolis, will involve paying an $80 million penalty to the Justice Department to settle prosecutions related to AIGFP PAGIC Equity Holding Corp. that will end prosecutions in connection with PNC and Brightpoint, a Plainfield, Ind., mobile phone distributor.

The Brightpoint transaction involved insurance designed to spread a large loss over a number of years that the SEC once likened to disguised loans. The PNC dealings involved transactions known as C-Gaits product designed to take $762 million in bad loans and lagging venture capital assets from the bank's balance sheet.

Mr. Greenberg said that the company has been forming a Complex Structured Finance Transaction Committee comprised of senior executives, including AIG Chief Risk Officer Bob Lewis, to assure the company sells no products to help an insured or other party "misrepresent either its income statement or balance sheet.

At AIGFP, Mr. Greenberg said the company has put John M. Foster, on the board. Mr. Foster is a former member of the Financial Accounting Standards Board. Frank Zarb, AIG Executive Committee chairman has been added as well.

Mr. Greenberg said that since April AIGFP has had a Transaction Review Committee that makes sure deals follow accounting rules and regulations and they are assessed for "reputational risk."

He said Mari Maloney, the AIG associate general counsel in charge of AIG's corporate legal compliance group that oversees member companies' compliance with laws and regulations, has been given the title chief compliance officer.

Ms. Maloney is a former New York narcotics prosecutor and enforcement attorney with the National Association of Securities Dealers who joined AIG in 1999.

Mr. Greenberg noted that the company has an anonymous hotline so employees can ask compliance questions or report violations.Concerning the placement of an outside monitor, Mr. Greenberg said, "We welcome this enhancement to our overall risk management and control mechanisms."

Stephen M. Cutler, SEC enforcement division director said "AIG was reckless" in not knowing that the product it developed did not satisfy accounting standards.

Mr. Cutler said SEC action in the case was "a message to insurance companies and others that sell structured finance or other products to public companies that are designed for no purpose other than to improve those companies accounting results."

He warned that "in appropriate circumstances, marketers of such products will be held liable for the resulting misstatements in their customers' financial disclosures."

SEC said the settlement must be approved by the U.S. District Court in Washington, D.C.