American International Group
said it has reached a tentative settlement with securities regulators and federal prosecutors looking into two financing transactions arranged by one of the insurer's subsidiaries.
The world's biggest insurer announced the tentative pact in a press release issued before the beginning of trading Tuesday. The release did not disclose any details of the settlement and made no mention of any potential fine.
The deals must still be approved by government officials.
The settlement would cover an investigation by the
Securities and Exchange Commission
and the Department of Justice into structured finance deals AIG Financial Products crafted for
, a wireless devices company. Regulators and prosecutors were looking into AIG's role in engineering transactions used by PNC and Brightpoint to either smooth earnings or enhance a corporate balance sheet.
The SEC and Justice Department had previously reached a settlement with PNC, which resulted in the Pittsburgh-based bank paying $120 million. The investigation centered around three AIG-sponsored deals that enabled PNC to transfer more than $700 million in bad loans to an off-balance-sheet venture, a move that allowed the bank to report higher earnings.
Last year, AIG paid a $10 million to the SEC over its sale of an "income smoothing" insurance product to Brightpoint, which permitted the Indiana-based company to conceal $11.9 million of losses in 1998. In recent weeks, federal prosecutors had asked a grand jury to begin looking to the matter.
The tentative agreements with the SEC and federal prosecutors, however, may not be the end of AIG's troubles when it comes to helping companies engage in financial engineering. New York Attorney General Eliot Spitzer and the SEC have begun a broad-based inquiry into such deals, serving subpoenas on more than a dozen insurers that have sold similar insurance products, commonly referred to as finite insurance policies.
In early trading, shares of AIG rose $1.25, or 2%, to $64.10