US insurance firm American International Group (AIG) has replaced its chief executive officer, Martin Sullivan, after reporting billions in losses caused by turbulent credit market conditions.
AIG chairman Robert Willumstad will assume the additional position of chief executive officer, replacing Sullivan, who had been in the role since March 2005. Willumstad has been chairman of the board of AIG since November 2006.
Sullivan's departure comes after the insurance firm revealed a net loss of $7.81 billion for the first quarter of this year, which came on the back of a $5.29 billion loss for the fourth quarter of 2007. In the first three months of 2008, AIG’s capital markets division recorded an operating loss of $8.85 billion, primarily due to $9.11 billion of writedowns on AIG Financial Products’ (a wholly owned subsidiary of AIG) super-senior credit default swap (CDS) portfolio.
AIG attributes its losses to continuing weakness in the US housing market, disruption in the credit markets, as well as equity market volatility.
“In the coming months, we will conduct a thorough strategic and operational review of AIG's businesses and their performance. The board and I recognise that results over the past two quarters have been unacceptable, but we are confident in AIG's future. We are determined to get the organisation back on track as quickly as possible,” said Willumstad.
The insurer’s recent woes are reflected in its CDS spreads. The cost of five-year protection for the insurer, which was 83.5 basis points as recently as May 2, had risen to 197bp by close of play on June 13.
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