(Bloomberg) ? American International Group Inc., the world?s largest insurer, agreed to pay $126 million to settle allegations it helped clients such as PNC Financial Services Group Inc. inflate profit.

The accords with the US Securities and Exchange Commission and Department of Justice require American International to pay an $80 million penalty and return $46 million in fees it made helping PNC remove bad loans from its books, the New York-based company said yesterday in a statement.

American International Chairman Maurice ?Hank? Greenberg, 79, resolved the federal inquiries as New York Attorney General Eliot Spitzer separately probes whether the insurer colluded with brokers to get business. The sanctions equal 5 percent of the company?s third-quarter net income.

?I am very pleased that this is it,? said Wayne Wilbanks, who manages $1 billion for Wilbanks, Smith & Thomas Asset Management in Norfolk, Virginia, including about 136,000 American International shares as of September. The cost is so small it could be lost as a ?rounding error,? he said.

Shares of American International rose 3 cents to $64.23 in New York Stock Exchange composite trading. The stock has dropped 3 percent this year, compared with a 2.3 percent gain in the Standard & Poor?s 500 Insurance Index.

In a separate matter, the Federal Bureau of Investigation is investigating whether Greenberg improperly influenced the company?s stock price in 2001 to save money on the acquisition of American General Corp., a person familiar with the situation said.

The Wall Street Journal reported earlier yesterday that the US Attorney?s office in Manhattan is probing the matter, citing people familiar.

American International spokesman Joe Norton said Greenberg hasn?t been contacted or interviewed by the FBI or the US attorney?s office and declined to comment further on the settlements. Justice Department spokesman Bryan Sierra and SEC spokesman John Nester declined to comment. The insurer first announced it had reached settlements with the SEC and Justice Department yesterday, without disclosing how much it would pay. Both agencies must still give the agreements final approval.

The settlements total more than 12 times the $10 million American International paid last year to settle SEC allegations that it sold a fraudulent insurance policy to Brightpoint Inc., a cellular phone distributor.

It also tops the $80 million Prudential Financial Inc. paid to state and federal regulators in the 1990s as part of more than $2.6 billion it set aside to resolve claims of improper life insurance sales.

?Appeasement is a reasonably good strategy for AIG right now,? said Thomas Russo, a partner at Gardner, Russo & Gardner in Lancaster, Pennsylvania, which manages $2 billion, including about 1.4 million American International shares. ?Now AIG needs to address all its remaining issues, including with Spitzer?s office. AIG?s need to restore its public trust is critical.?

Spitzer?s Oct. 14 lawsuit against Marsh & McLennan Cos., the world?s largest insurance broker, said American International colluded with Marsh to fabricate bids on business.

Two of the insurer?s executives, Karen Radke and Jean- Baptist Tateossian, pleaded guilty to related charges, saying they faked bids when the winner of business had already been determined.

Radke became a manager of American Home Assurance, a unit of American International, in July 2001, according to plea agreements. Tateossian, 33, was the head of the American Home unit that dealt with Marsh in 2002 and 2003. Both have agreed to testify in future cases.

American International?s $46 million payment is part of its agreement with the SEC, which is requiring that an independent consultant review certain transactions from the past four years to determine whether clients may have used them to violate generally accepted accounting principles, the company said.

The insurer, which hasn?t admitted or denied wrongdoing, also agreed to establish a transaction review committee.

Both settlements cover products American International?s AIG Financial Products Corp. unit designed for PNC, a Pittsburgh- based bank. The Justice Department accord, which imposes the $80 million fine, also resolves its investigation into the insurance sold to Plainfield, Indiana-based Brightpoint.

Both regulators previously settled with PNC, having accused it of using American International products to help hide $762 million in bad loans and inflate 2001 earnings by 27 percent.

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 settlement also resolves allegations American International failed to disclose that the probes involved five transactions with two unidentified insurers in addition to the PNC products, American International said.

The Justice Department accord ends a probe into insurance policies American International designed to allegedly help clients smooth earnings.

A grand jury in Indiana began investigating after American International settled the SEC allegations about Brightpoint in September 2003.

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.