AIG agreed Monday to sell its American Life Insurance Co. unit to MetLife Inc. for $15.5 billion in cash and stock, in beleaguered AIG’s second sale of an international unit in a week.

AIG said it will sell the unit, known as Alico, for $6.8 billion in cash and the remainder in MetLife equity. The deal leaves AIG as the second-largest shareholder of MetLife, with a stake of more than 20% in the company.

Selling Alico, one of its largest international life insurance businesses, will allow government-controlled AIG to take yet another step in repaying the nearly $132 billion it borrowed from the federal government beginning in 2008 to avoid collapse.

Expected to close by the end of the year, the companies said the acquisition will also help MetLife, the largest seller of life insurance in the United States, grow internationally and especially target Japan.

The deal came a week after AIG announced an agreement to sell its Asian life insurance business, American Insurance Assurance Ltd (AIA), to Britain’s Prudential PLC in a deal valued at $35.5 billion, including $25 billion in cash.

AIG said it expects to generate about $50.7 billion from these two transactions, including approximately $31.5 billion in cash to repay the New York Federal Reserve Bank and another $19.2 billion in securities that it will sell over time to repay the government.

“This sale is an important step toward repaying the government,” Harvey Golub, chairman of AIG, said in a statement. “Both sales give AIG greater flexibility to move forward with our restructuring and rebuilding efforts, and focus on enhancing the value of our key insurance businesses.”

At the end of February, AIG announced a loss of $8.9 billion in the fourth quarter of 2009, which it said was largely due to the costs associated with selling off large stakes in its insurance businesses to reduce the debt it owes to taxpayers.

In December, AIG sold stakes in AIA and Alico to the U.S. government. In exchange for those transactions, the Fed reduced the amount AIG has to repay taxpayers by $25 billion. AIG said it took a $5.2 billion charge for that agreement last quarter.

The deal for Alico has been approved by the boards of both AIG and MetLife, and is subject to regulatory approvals in the United States and overseas. To top of page

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Maurice “Hank” Greenberg, former chief executive of American International Group, has agreed to pay $15 million to settle charges related to an accounting scandal, the Securities and Exchange Commission said Thursday.

A complaint filed by the SEC said Greenberg and former chief financial officer Howard Smith were involved in “numerous improper accounting transactions” that inflated AIG’s reported financial results between 2000 and 2005.

Smith agreed to pay $1.5 million to settle the charges, the SEC said.

“Corporate leaders cannot avoid the truth and consequences of their companies’ performance by using improper accounting gimmicks and signing off on distorted financial reports,” said Robert Khuzami, director of the SEC’s Division of Enforcement, in a statement.

Among the improper accounting transactions listed in the complaint were sham reinsurance transactions as well as dealings with a shell company to conceal multi-million dollar underwriting losses.

The company was also charged with “economically senseless” transactions aimed at inflating investment gains and the sale of tax exempt municipal bonds to improperly report capital gains.

Greenberg, 83, relinquished his post as AIG’s chief executive in 2005 amid a probe by then-New York Attorney General Eliot Spitzer for accounting fraud. The following year, the SEC charged AIG with securities fraud and improper accounting. The company settled the charges by repaying $700 million plus a fine of $100 million.

Greenberg is currently chairman and chief executive of privately-held insurance and investment firm C.V. Starr, which released a statement on his behalf.

“Mr. Greenberg is pleased that after a four-and-a-half year investigation involving the review of millions of pages of documents and numerous depositions, the SEC has now concluded not to charge Mr. Greenberg with any fraud,” said C.V. Starr. “With these issues behind him, Mr. Greenberg looks forward to being able to concentrate on building for the future.”

For his part, Smith had planned to challenge the allegations in court, according to a statement issued by his attorney, Vincent Sama of Winston & Strawn LLP in New York.

“Although Mr. Smith was originally inclined to litigate this matter, resolving the SEC matter allows him to move forward with his life without the added legal costs and distraction of this lawsuit,” Sama said.

AIG was brought to the brink of collapse last year amid towering losses related to insurance products the company sold to investors with souring mortgage-backed investments.

The company has received $82 billion in taxpayer-funded bailouts and is now essentially owned by the government.

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Insurer American International Group Inc. took another step Monday toward spinning off its property casualty and general insurance business and renamed the operation Chartis.

AIG placed Chartis, formerly known as AIU Holdings, into a separate unit known as a special-purpose vehicle, or SPV.

SPVs are entities sometimes set up ahead of the split or sale of a unit to separate its operations from the parent company.

In April, New York-based AIG said it would spin off AIU Holdings, which includes commercial insurance, foreign general insurance and private client group businesses, into a separate firm as part of its restructuring plan to help repay a $182.5 billion government bailout.

The business serves more than 40 million clients in 160 locations.

Kristian Moor was named president and CEO of Chartis on Monday.

The government provided AIG with an $85 billion rescue package amid the growing credit crisis in September.

In return, the government took about an 80 percent stake in AIG.

Since then, the government has provided additional rounds of support that now total $182.5 billion.

AIG has been selling assets, cutting costs and planning to spin off multiple operations to repay the government.

Aside from AIU Holdings, AIG has also said it would place two life-insurance subsidiaries – American International Assurance Co. and American Life Insurance Co. – into special-purpose vehicles ahead of planned spinoffs.

After setting up a special-purpose vehicle, AIG could still have the option of selling the operations to another investor or launching initial public offerings for shares in the businesses.

Although AIG could retain majority stakes in each of the spinoffs, separating the units allows them to create different management teams to operate the firms.

The spinoffs also allow AIG to separate the still-performing businesses from a parent company whose brand is likely hindering business.

Being able to rename some of the operations while cashing in a portion of their market value could help further stabilize business while paying off the government loan.

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