American International Group Inc is preparing to pay its departing general counsel several million dollars in severance after she resigned over federal pay curbs, the Wall Street Journal reported on Monday.

The insurer determined that Anastasia Kelly 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 Journal reported, citing people familiar with the matter.

AIG officials could not be immediately reached by Reuters outside regular office hours. AIG is about 80 percent owned by U.S. taxpayers.

The Journal said Kelly was among five executives who notified the insurer that they were prepared to resign and collect severance benefits if their pay was cut sharply by the U.S. pay czar. The four others rescinded their threats.

AIG is expected to name a new general counsel soon, the newspaper reported.

(Reporting by Deepa Seetharaman; Editing by Anshuman Daga)

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