NEW YORK (Bloomberg) ? American International Group Inc.'s Maurice "Hank" Greenberg will relinquish ties to the world's largest insurer after more than 40 years, resigning as chairman amid expanding probes of potential accounting irregularities.

Greenberg, 79, is giving up the post two weeks after stepping down as chief executive officer. Frank Zarb will take on the chairman duties as lead director of AIG's board, the New York- based company said in a statement yesterday.

Greenberg's chairmanship was cut short as New York Attorney General Eliot Spitzer and the US Securities and Exchange Commission broadened an investigation of reinsurance contracts that may have manipulated earnings. The probes felled a leader who boosted AIG's assets more than 1,000-fold since 1967, reaching 50 million customers in 130 countries.

"The board has made difficult decisions, including major personnel changes," Spitzer said in a statement after AIG's announcement. "The wise actions of the AIG board will help set this investigation on a path toward resolution."

Greenberg will leave AIG on March 30 or March 31, as new CEO Martin Sullivan, formerly co-chief operating officer, works to resolve the probes and restore investor confidence in one of the 10 most profitable companies in the US Shares of AIG have fallen 22 percent, wiping out about $41 billion in market value, since the company announced on February 14 that it received subpoenas on reinsurance accounting.

AIG earlier this month delayed filing its annual financial report, and company lawyers yesterday told regulators that accounting on more than 50 reinsurance contracts may need to be corrected, a person familiar with the probe said. AIG spokesman Chris Winans declined to comment.

The SEC and Spitzer have been investigating Greenberg's role in a four-year-old transaction with Warren Buffett's Berkshire Hathaway Inc., and the SEC on March 25 sent AIG a new subpoena demanding information on reinsurance with offshore entities, according to the person, who declined to be identified.

"Mr. Greenberg recognises the need to promptly and cooperatively resolve all inquiries," Greenberg's attorney, David Boies, wrote in a letter to the board that was distributed by the company. "He believes that it is in the interest of the company and its shareholders that, with the transition to new management now in place, a new chairman be selected who will guide AIG's growth and success over the next decades."

Earlier today, the Wall Street Journal reported that Buffett was called by regulators about the AIG transaction. Buffett, 74, will be interviewed on April 11, the Journal said, citing unidentified people familiar with the situation. The SEC and Spitzer plan to question him about documents and witnesses that they believe suggest his early involvement in talks between General Re and AIG, the newspaper said.

Greenberg recommended AIG search for a new chairman with "the extensive international, financial and insurance experience required," the letter said.

Zarb, 70, is a managing director at buyout firm Hellman & Friedman LLC in New York and used to be chairman of the Nasdaq. He is a former director of Bermuda-based XL Capital. When Greenberg resigned as CEO, Zarb called the move "in the best interest of AIG's shareholders, customers and employees." He didn't return phone calls seeking comment.

Shares of AIG rose $1.41, or 2.5 percent, to $57.02 in New York Stock Exchange composite trading yesterday. The extra yield, or spread, for the company's 5.4 percent notes maturing in 2013 widened by 2 basis points to 75 basis points more than Treasuries with comparable maturity, according to Trace, NASD's bond reporting system.

Spitzer's investigations have taken a toll on the Greenberg family after rocking the banking and mutual-fund industries. The attorney general's accusations of bid-rigging forced Greenberg's son Jeffrey to resign as CEO of Marsh & McLennan Cos., the world's largest broker of insurance, five months ago. Ace Ltd., run by his son Evan, has received subpoenas too.

Greenberg, the son of a candy storeowner on Manhattan's Lower East Side, joined AIG in 1960 after serving in the US Army. He stormed Omaha Beach during the D-Day invasion and earned a Bronze Star in Korea.

By 1962, AIG's founder Cornelius Starr had chosen him to fix American Home Assurance Co., an earlier acquisition with an unwieldy agency structure. Five years later, he was named CEO.

In the 1970s, Greenberg added units specialising in products including kidnap and ransom insurance and corporate board liability coverage, earning AIG a reputation as an insurer that would cover almost anything at the right price.

Greenberg, paid $7.59 million in 2003, made more than $50 billion in acquisitions during his 38 years at the helm. He expanded the company in Japan, Eastern Europe, and Africa. He led its return to China, where Starr founded the company in 1919.

Greenberg's tenure came to abrupt end as the SEC and Spitzer began investigating whether companies were misusing reinsurance accounting to mask losses or make their reserves for claims appear bigger.

Lawyers conducting an internal review for AIG spent three hours yesterday explaining more than $1.5 billion of transactions to investigators for Spitzer, the SEC, the Department of Justice, and the New York Insurance Department, a person familiar with the probes said.

Union Excess

At least 50 of the transactions that may need correcting were with Union Excess Reinsurance Co., a company registered in Barbados, the person said. AIG may have control over Union Excess and similar offshore reinsurers, effectively doing business with itself while taking advantage of the accounting that comes with transferring risk to other companies, said the person.

AIG used private, offshore companies for at least six times more reinsurance than any of its nine biggest US competitors, 2003 state regulatory filings show. Insurers buy reinsurance to limit their risks from claims.

AIG's lawyers told investigators Howard Smith, who was fired last week as AIG's chief financial officer, was involved in some of the reinsurance deals under investigation, the person said. AIG said it ousted Smith for failing to cooperate with the probe. Smith's lawyer Andrew Lawler didn't return a phone call seeking comment.

It isn't clear how corrections to the accounting, which would bring assets and liabilities back onto AIG's books, will affect AIG's earnings and net worth, the person said.