NEW YORK (Bloomberg) ? American International Group Inc., the world?s largest insurer, agreed to settle with federal regulators investigating transactions that may have let clients such as PNC Financial Services Group Inc. inflate profit.

The agreements with the US Securities and Exchange Commission and Justice Department stem from products New York-based American International designed to help PNC remove bad loans from its books and insurance it sold to Brightpoint Inc., the company said in a statement yesterday. It didn?t disclose terms of the accords, which still need final approval.

Chairman Maurice ?Hank? Greenberg, 79, may be clearing the inquiries to focus on New York Attorney General Eliot Spitzer, who is probing collusion with insurance brokers. Two of the insurer?s executives last month pleaded guilty to charges that they fabricated bids, agreeing to testify in future cases.

?The next question is what happens with Spitzer,? said Quint, who helps manage about $75 billion at Gartmore in West Conshohocken, Pennsylvania. ?It?s one step in a series of many.?

Gartmore sold almost 60 percent of its American International shares in the second quarter, leaving it with 294,390 shares at the end of June. The shares rose $1.35, or 2.2 percent, to $64.20 in New York Stock Exchange composite trading. The stock is down 3.1 percent this year.

The settlements still need final approval from both agencies, American International said. Joe Norton, a spokesman for American International, declined to comment beyond the statement. The Justice Department and the SEC also declined to comment.

The agreements will probably cost the insurer less than $450 million, before taxes, said UBS AG analyst Andrew Kligerman.

The estimate assumes a maximum $250 million settlement with the Justice Department and $200 million with the SEC, and is based on previous accords with companies such as Computer Associates International Inc., Kligerman said in an interview. He recommends investors buy the company?s shares.

American International said in September that the SEC and Justice Department were investigating special-purpose entities designed by AIG Financial Products Corp.

PNC, a Pittsburgh-based PNC, a Pittsburgh-based bank, settled SEC and Justice Department accusations that it used the products to help hide $762 million in bad loans and inflate 2001 earnings by 27 percent.

The accord with the Justice Department, reached last year, cost PNC $115 million.

The Justice Department said the special purpose entities should have been included in the bank?s financial statements because American International didn?t own enough of them to qualify for non-consolidated accounting treatment.

The SEC also threatened to sue American International for failing to disclose that the regulator?s probe also involved five transactions with two unidentified insurers. American International said last month that it had stopped marketing the type of transaction sold to the insurers before 2003.

Today?s settlement also covers a federal grand jury investigation into insurance policies American International designed to allegedly help clients smooth client earnings.

The review stemmed from SEC allegations that a policy American International sold to Brightpoint, a Plainfield, Indiana-based distributor of cellular phones, helped the company hide losses, the insurer said last month. American International agreed to pay $10 million to resolve the SEC?s claims.

Brightpoint sought the policy six years ago to avoid telling investors that a one-time cost would be about $11 million higher than originally anticipated, the SEC said. Essentially a loan, the policy allowed Brightpoint to spread the loss over several years when the company should have recognised it immediately, the agency said.

In settling the SEC case on Brightpoint last year, American International said ?mistakes were made? in the underwriting of the policy, which it had ?taken steps to correct?. It neither admitted nor denied wrongdoing.

The type of policy, known as finite insurance, has come under increased scrutiny from the SEC and Spitzer, who jointly sent subpoenas this month to at least five insurers, including Bermuda-based Ace Ltd., St. Paul Travelers Cos. and Zurich Financial Services Group AG. The policies can help smooth earnings and hide losses by providing financing like a loan, while being accounted for as insurance.

Negative Outlook

American International was mentioned as a participant in alleged bid-rigging when Spitzer sued Marsh & McLennan Cos., the world?s largest insurance broker, on October 14.

Karen Radke and Jean-Baptist Tateossian, who worked at American International?s American Home Assurance unit, the same day pleaded guilty to charges they colluded with Marsh to fake bids when the winner of business had already been determined. American International has not been sued.

Standard & Poor?s lowered its outlook on American International?s AAA credit rating to negative from stable on October 29, citing uncertainty around the potential fallout from Spitzer?s investigation. Eleven days after Spitzer?s suit, AIG said it was seeking a ?prompt? settlement of the federal inquiries.

?AIG is looking to do whatever it takes to get this behind it because the company wants to help Spitzer,? said Gerald Bollman, portfolio manager at Great Companies LLC, which manages $1.4 billion, including 500,000 shares of American International.