AIG CEO Martin Sullivan resigns amid subprime woes

ABS-CBN News

Posted at Jun 16 2008 06:50 AM | Updated as of Jun 16 2008 02:50 PM

Reuters

NEW YORK - Martin Sullivan, chief executive officer of insurer American International Group Inc, has stepped down after three years on the job, according to a person familiar with the matter.

Robert Willumstad, chairman of the world's largest insurer, will take the position of CEO effective immediately, and retain the chairman title, according to the person familiar with the matter, who asked not to be identified by name.

In stepping down, Sullivan becomes the latest in a string of Wall Street chiefs who have left their jobs amid large losses from risky mortgage bets.

In recent weeks, several large shareholders have been pushing for Sullivan's ouster after AIG posted back-to-back quarters of record losses, stemming from about $20 billion in write-downs in the market value of assets linked to subprime mortgages.

Willumstad, 62, joined AIG's board two years ago, a year after leaving Citigroup Inc where he had been chief operating officer. When he left Citi, he expressed a desire to lead a public company.

Stephen Bollenbach, who was named to AIG's board earlier this year, will become lead director, according to a report in The Wall Street Journal. Bollenbach is favored by some of AIG's most critical shareholders, including billionaire Eli Broad.

Broad, a former director who founded SunAmerica, a life insurer that AIG bought several years ago, and fund managers Shelby Davis of Davis Selected Advisers LP and Bill Miller of Legg Mason Inc wrote in a letter obtained by Reuters last week that "significant and immediate changes at both the management and board level are clearly called for."

The same group sent another letter to the board last month, also expressing concern over Sullivan's management.

Separately, former Chief Executive Officer Maurice "Hank" Greenberg, who remains a large shareholder, has also been critical of management and AIG's board.

Sullivan, 53, replaced Greenberg as chief executive in 2005, after then-New York Attorney General Eliot Spitzer and the U.S. Securities and Exchange Commission accused Greenberg and the company of financial misconduct.

Greenberg, an octogenarian, is still fighting civil charges. Sullivan, an affable Englishman who is a 36-year company veteran, ushered AIG through the difficult process of reaching a settlement with regulators, paying $1.64 billion to settle charges of fraud, bid rigging and improper accounting, one of the largest regulatory settlements in U.S. history.

Sullivan initially won investor favor by seeing AIG through the regulatory probe, but more recently saw his reputation become tarnished as losses mounted and AIG's stock fell precipitously.

The stock's price has been than halved over the last year, closing on Friday at $34.18. A year ago, shares were trading at $72.91.