American International Group is to replace Martin Sullivan, its embattled chief executive, with Bob Willumstad, the veteran banker who is the insurer’s chairman, in an effort to end one of the worst crises in the company’s 89-year history.
People familiar with the situation said that an emergency board meeting had decided to end Mr Sullivan’s three-year tenure at the helm of AIG, which has been rocked by credit-related losses and regulatory probes.
They added that Mr Willumstad, who missed out on the top job at Citigroup in 2003, would take over the chief executive job on a permanent basis. Stephen Bollenbach, a former chief executive of Hilton Hotels, will become lead director.
Last night Mr Willumstad, who will retain the title of chairman, told the Financial Times: “The current challenge for the company is to get through this credit crisis and to make sure that the balance sheet is strong.”
Mr Sullivan, 53, who joined AIG as an insurance clerk aged 17, is likely to leave with a severance package of more than $35m, according to his contract.
AIG declined to comment.
Mr Sullivan becomes the latest high-profile casualty of the credit crisis, which has already claimed the jobs of Chuck Prince, Citigroup’s chairman and chief executive, and Stan O’Neal, his opposite number at Merrill Lynch.
People familiar with the board’s thinking said that Mr Sullivan’s position at the company had become untenable amid huge mortgage-related losses and growing shareholder discontent. The board of AIG, which has recorded more than $30bn in credit-related writedowns and losses, backed Mr Sullivan throughout the company’s mortgage-related turbulence. Last month, Mr Willumstad said Mr Sullivan was the “right guy” to dig AIG out of its crisis.
But talks between AIG’s directors intensified late last week after three other large shareholders again criticised top management and called for change.
The shareholders – former AIG director Eli Broad, Legg Mason fund manager Bill Miller and fund manager Shelby Davis – called last week for the formation of a search committee to identify a fresh management team and hire a chief executive.
Together, the three shareholders control about 4 per cent of its outstanding shares.
Mr Sullivan’s departure is a victory for Hank Greenberg, the former AIG chairman and chief executive who has waged a bitter battle against the company since leaving in 2005.
Mr Greenberg, AIG’s single largest shareholder, has repeatedly attacked Mr Sullivan, his one-time protegé, and other members of management, saying that AIG is in a serious financial crisis and lacks a clear strategy.
Mr Willumstad is widely respected on Wall Street but his area of expertise has been banking rather than insurance. He will have to stem a decline in AIG shares, which have lost more than 50 per cent in a year.