Feb. 8 (Bloomberg) -- American International Group Inc., the world's largest insurer, settled a lawsuit against two former executives it accused of using the firm's confidential information to launch rival funds.

AIG last week sued Peter Yu, the ex-president of AIG Capital Partners Inc., an emerging markets fund owned by the company, and William Jarosz, the former general counsel, saying they used "confidential and proprietary information" to start new funds in violation of non-competition agreements.

Lawyers in the case told U.S. District Judge Lewis Kaplan in New York today that they had reached a settlement. The terms were confidential. Attorneys declined to say whether Yu and Jarosz would go forward with their funds.

"The case is going to be dismissed," David Golub, a lawyer for Yu and Jarosz, said in court.

Yu and Jarosz, whom Kaplan has said were allies of ousted Chief Executive Officer Maurice Greenberg, were fired last year after they failed to reach an agreement with the insurer to buy AIG Capital Partners, which manages $2.5 billion. The private equity firm is one of a handful that compete in emerging market investments.

The case is American International Group v. Cartesian Capital Group, 06-CV-752, Southern District of New York.