AIG , the insurer that received a huge government bail out, said on Friday it is paying $12.1 million in retention awards to some top executives after U.S. pay czar Kenneth Feinberg gave it the green light.

In a regulatory filing, AIG said Chief Financial Officer David Herzog was paid $1 million, and Kristian Moor, chief executive of AIG's property-casualty division, Chartis, received $1.6 million.

Jay Wintrob, CEO of AIG's domestic life and retirement services, was another executive to receive a payment.

American International Group did not disclose the identities of any other recipients. It had voluntarily delayed making the executive payments, promised in 2008, to give Feinberg more time to comb over employee contracts.

The Obama administration appointed Feinberg in June to scrutinize the pay practices of the seven companies that received the biggest federal aid.

In a letter to AIG, the U.S. Treasury said it decided the three named executives should be paid the retention awards to keep them. However, it would consider the awards when determining an appropriate reduction in proposed 2009 cash salaries for these employees, the letter also stated.

The payments were promised in 2008 to get key employees to stay with AIG, even as it teetered on the brink of financial ruin from losses on subprime mortgage bets.

AIG CEO Robert Benmosche, who took over the insurer's leadership on August 10, is receiving a salary of $7 million in cash and stock.

On Wednesday, Benmosche sent a memo to assure employees that Feinberg's jurisdiction was confined to the company's top executives, and that the majority of the company's 116,000 worldwide employees would not be affected.

But in the filing with the U.S. Securities and Exchange Commission late on Friday, AIG warned that pay restrictions may hurt its ability to retain and motivate its best-performing employees.

AIG, once the world's largest insurer, received a $180 billion federal bailout in September 2008.

(Reporting by Lilla Zuill; Editing Bernard Orr)

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