NEW YORK (Bloomberg) — American International Group Inc., the bailed-out insurer, was permitted by US paymaster Kenneth Feinberg to increase 2010 compensation for most top executives in a group that had their pay slashed last year.

Six of eight managers who had their 2009 awards set by Feinberg, the Obama administration's special master on executive pay, had their overall packages increased this year, according to a Treasury Department report released today. Chief executive officer Robert Benmosche has said that AIG must offer competitive pay to keep employees needed to repay its rescue.

Feinberg, who controls pay for AIG's 25 highest-paid employees, last year slashed overall compensation for that group by about 58 percent and instituted a $500,000 base salary cap for most workers. The majority of the employees who were among the top 25 when the insurer was bailed out in 2008 have left the company, and those new to the group had their 2010 awards lowered, on average.

"AIG, under the strong leadership of Mr. Benmosche, the new CEO, has worked closely with our office," Feinberg said yesterday at a press conference. "He deserves specific mention and praise."

Exceptions to the $500,000 cap were made for those deemed critical to AIG's success, including Benmosche, whose compensation was unchanged from last year's $7 million salary and $3.5 million in long-term incentives. Five other AIG executives had base cash salaries of $500,000 or more in 2010, according to the Treasury document. AIG is majority-owned by the US after a rescue that has swelled to $182.3 billion.

Among the employees who were awarded larger packages was an executive, labelled only by an identification number, who will collect $3.6 million this year, mostly in stock salary, compared with total pay of $125,000 for 2009. For a group of 12 corporate and operating-unit executives new to the top-paid list, overall compensation decreased by 25 percent from 2009.

AIG chairman Harvey Golub wrote last month in a letter to shareholders that some of Feinberg's rulings hurt the company. AIG's board is focused on working with the Federal Reserve Bank of New York and Treasury Department and "dealing with" pay guidelines, Golub wrote.

"While we can pay the vast majority of people competitively, on occasion, these restrictions and his decisions have yielded outcomes that make little business sense," Golub, 70, said of Feinberg. "In some cases we are prevented from providing market-competitive compensation to retain some of our most experienced and best executives. This hurts the business and makes it harder to repay the taxpayers."

More than 60 managers have left AIG since its 2008 rescue. Under Feinberg's orders, cash salary was reduced by 91 percent last year for 12 of AIG's top executives. Benmosche, 65, said in a November 11 memo to employees that he was committed to leading AIG after reports that he'd threatened to resign because pay limits hurt the insurer's ability to retain staff.

General counsel Anastasia Kelly stepped down in December after a dispute with Feinberg over pay. Her $900,000 base salary would have been slashed to $500,000 and she may have jeopardised a severance payment if she stayed.