Troubled insurer American International Group is preparing to pay its outgoing general counsel Anastasia Kelly several million dollars in severance after she resigned over federal pay curbs, a media report said.

Attributing to people familiar with the matter, The Wall Street Journal said AIG is preparing to pay Kelly several million dollars in severance after she resigned over federal pay curbs.

AIG is determined that its top in-house lawyer was entitled to the money under the company's severance plan, whose terms say certain executives can resign and collect severance if their pay is reduced significantly, the report citing people aware of the development said.

The move comes amid recent scrutiny of Kelly's actions in a December pay dispute involving her and four other senior executives.

AIG's board engaged an outside law firm, Orrick, Herrington & Sutcliffe LLP, this month to review Kelly's actions after she advised other executives on what they could do to protect their rights to collect severance benefits.

According to the publication, the executives notified the insurer on December 1 that they were prepared to resign and collect severance benefits if their pay was cut significantly by the US pay czar, who was reviewing pay packages for a group of 75 AIG executives at the time.

The four others, who work at AIG's insurance and financial-services units, later withdrew their notices, leaving only Kelly's outstanding.

She subsequently told the company she would resign, the daily said citing a person familiar with the matter.

The daily said the law firm's investigation looked whether Kelly performed her duties properly as the firm's general counsel and as an executive who would be affected by the pay czar's determinations.

The attorneys gave the AIG board's compensation committee a verbal report earlier this month. The report said citing one person familiar with the report that the law firm's findings 'can be interpreted in a number of ways.'

The committee concluded Kelly's conduct should not prevent her from receiving severance.