The settlement is another important step in separating AIG from its troubled past. The Federal Reserve, using its extraordinary powers, agreed to acquire 79.9% of the company on Sept. 16, 2008 in return for $85 billion in cash needed to answer a margin call from owners of troubled mortgage-backed securities that an AIG unit had insured through so-called credit default swaps (CDS). The CDS protected purchasers of MBS of various grades whose value was declining as a housing boom in the U.S. turned into a housing bust.

It turned out that the unit, AIG Financial Products, had sold $2.77 trillion of these CDS. It had also used the prime grade securities serving as reserves of its 13 life insurance subsidiaries to purchase an estimated $70 billion of MBS of various grades.

Most of AIG's liabilities were held off-balance sheet. The Fed provided more than $300 billion, either in cash or through the creation of two facilities used to provide funds needed to wind down the CDS liabilities.

A study by an outside auditing group, released in October 2010 by the Pennsylvania Insurance Department, showed that AIG had cross-collateralized all of its life and property and casualty insurance companies in order to secure the AAA credit rating used to sell the CDS.

The government, through the Treasury Department, had divested its interest in AIG through IPOs by October 2012.

By contrast, AIG disclosed in its securities filings Monday that its net liabilities for CDS as of June 30, 2014 and December 31, 2013, were $26 million and $32 million, respectively.

The settlement covers eight securities lawsuits that sought class-action status on behalf of numerous investors. AIG and law firms representing the investors agreed to the settlement amount proposed by a court mediator July 15.