AIG board names Willumstad as new CEO

Willumstad, 62, will take over from Martin Sullivan, 53, effective immediately, the company said. Stephen Bollenbach, the former CEO of Hilton Hotels Corp., will be named AIG's lead director.

AIG named Willumstad chairman of the board in fall 2006, about a year after Willumstad left his post as president and chief operating officer at Citigroup. Citigroup had passed him over for the CEO job--which went instead to the now-dethroned Charles Prince.

Sullivan, a native of England who had worked with AIG for 37 years, now joins the long list of CEOs who have been pushed out since the credit crisis started slamming the financial services industry last year. That list includes Citigroup's Charles Prince, Merrill Lynch & Co.'s Stanley O'Neal and Wachovia Corp.'s Ken Thompson.

New York-based AIG--the world's biggest insurer with $1.05 trillion in assets--lost $7.8 billion during the first quarter of the year due to investments and contracts tied to bad loans. The insurer's first-quarter deficit was even more massive than its fourth-quarter loss of more than $5 billion. After its two straight quarterly losses, AIG revealed plans to raise $20 billion in fresh capital--but investors reacted skeptically, unsure that extra cash would solve the insurer's problems.

Shares of AIG have fallen by more than 50 percent over the past 12 months, closing at $34.18 on Friday.

"In the coming months, we will conduct a thorough strategic and operational review of AIG's businesses and their performance," Willumstad said in a statement Sunday. "The Board and I recognize that results over the past two quarters have been unacceptable, but we are confident in AIG's future."

George L. Miles, Jr., chairman of the AIG board's nominating and corporate governance committee, said Willumstad's "broad managerial and financial services experience makes him the right person to lead AIG through today's turbulent markets, drive further organizational change and rebuild shareholder value in the years ahead."

The company said it will hold a conference call at Monday morning with investors to discuss the management changes.

Besides big losses, AIG is reportedly facing a regulatory probe. The Securities and Exchange Commission reportedly began looking into whether AIG had overstated the value of contracts called credit default swaps.