By The Associated Press

NEW YORK - American International Group Inc. said Tuesday that it would go ahead with a previously announced pay package for its new CEO Robert Benmosche of US$7 million in cash and stock.

Benmosche, who took over as CEO of the embattled insurer three months ago, will receive an annual salary of $3 million in cash and $4 million in AIG common stock under the pay agreement.

AIG is under close government scrutiny after receiving a bailout package worth up to $182.5 billion from the U.S. government in exchange for an 80 per cent stake in the company. That bailout package also includes restrictions on compensation for the insurer's 100 highest-paid employees.

Earlier this month, a Wall Street Journal report said Benmosche had threatened to leave his post as he struggled to deal with the heavy government oversight and restrictions on what the bailed-out company could pay employees. Benmosche acknowledged frustrations with the oversight in a recent letter to employees but said he plans to stay on the job.

The Wall Street Journal reported online Tuesday that Benmosche signed a non-compete agreement, and reiterated at a board meeting his commitment to stay CEO. AIG didn't immediately return calls for comment.

Benmosche, former CEO of MetLife Inc., took over as CEO in August, replacing Edward Liddy, who was appointed CEO after the government bailed out the insurer in September 2008. The CEO's compensation deal was approved by Treasury Department pay czar Kenneth Feinberg.

In August, AIG said it was aware of potential conflicts of interest related to the hiring of Benmosche as its new CEO, and would deal with any conflicts as necessary.

AIG, which is selling off its business units to help repay the massive government loan, had been reportedly in talks with MetLife about a possible deal for all or part of one of AIG's largest foreign life-insurance units. MetLife is the nation's biggest life insurer by assets.

Benmosche, because of his former executive roles at MetLife from 1998 until 2006, remains a MetLife shareholder.

Under the pay agreement with AIG, Benmosche will also be eligible for a yearly performance-based bonus of up to $3.5 million in stock.