Bailed-out insurer American International Group will pay $100 million in fines in a settlement with all 50 states over reporting errors for premiums on workers' compensation insurance.

The Pennsylvania Department of Insurance announced the settlement on Wednesday on behalf of the other jurisdictions.

In addition to the fines, AIG will pay $46.5 million in taxes and assessments and has agreed to a potential $150 million in extra fines if it does not follow a compliance plan.

Pennsylvania authorities said the primary violation was the misreporting of more than $2 billion in workers' comp premiums as general or commercial auto liability premiums.

The examination focused on actions between 1975 and 1996, the same period that was the subject of the 2006 regulatory settlement between AIG and New York state, AIG spokesman Mark Herr said in a statement.

We are pleased that if this settlement becomes final, we will have resolved all remaining regulatory issues related to AIG's workers compensation premium reporting for our stakeholders, Herr said.

In early 2006, AIG entered into a settlement with federal prosecutors and securities regulators and New York prosecutors and insurance officials over a range of issues, including the underpayment of taxes on workers' comp premiums. AIG took more than $1 billion in charges at the time to cover the settlement.

Besides Pennsylvania, seven other states took part in the most recent probe. For the new settlement to become final, 35 of the remaining 43 states must ratify it by March 1, 2011.

The deal, if approved, will remove another overhang for AIG as it progresses on its restructuring plan. By March 15 the company is due to close a recapitalization deal that will pay back the Federal Reserve Bank of New York and leave the U.S. Treasury with a 92.1 percent stake in the company.

AIG's bailout at one point topped $182 billion, though the government now stands to make a profit in the tens of billions of dollars on the last-minute rescue of what had been the world's largest insurer.

AIG shares closed Wednesday at $55.76, up 1 percent.

(Reporting by Ben Berkowitz; Editing by Gary Hill and Carol Bishopric)

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