AIG appoints new CEO after record losses on sub-prime

Sullivan has been replaced as CEO.

The world's biggest insurer, American International Group, replaced CEO Martin Sullivan after it suffered two quarters of record losses from risky mortgage bets and its share price more than halved over the past year.

Sullivan is the latest Wall Street chief – including former Citigroup Chief Executive Charles Prince and Merrill Lynch's Stan O'Neill – who have left their jobs amid large losses stemming from the collapse of the US sub-prime mortgage market, which triggered a global credit crunch.

AIG named veteran former Citigroup banker Robert Willumstad, who was already AIG chairman, as its new CEO, effective immediately.

Willumstad told Reuters that he plans to craft a turnaround plan for AIG by early September.

Several large AIG shareholders had pushed in recent weeks for Sullivan's ouster after it posted back-to-back quarters of record losses, stemming from more than $20 billion (Dh73.4bn) in write-downs on the market value of assets linked to sub-prime mortgages. Willumstad told Reuters that his first priority will be to meet AIG's regulators, credit rating agencies and top managers around the globe over the next three months.

He is also working to quickly hire a new CFO, after Steven Bensinger stepped aside last quarter.

The company is poring over external candidates with financial services experience, he said.

"I have mixed feelings. It seems like he [Sullivan] was made a scapegoat for issues before he took over the helm," said analyst Donn Vickrey at research firm Gradient Analytics, noting some derivatives contracts that contributed to AIG's losses were entered into under former CEO Maurice "Hank" Greenberg.

"It would have been preferable to bring someone in from outside that had a core insurance pedigree," Vickrey said.

 

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