American International Group named Robert Willumstad to replace Martin Sullivan as CEO, effective immediatly, following a three-hour board meeting, according to various news reports. Willumstad is expected to maintain his current role as chairman of the AIG board. Willumstad most recently served as president and CEO of Citigroup.
In addition, Stephen Bollenback, an AIG director who is supported by billionaire investor Eli Broad, has been named lead director.
His addition is expected to help AIG gain some ground after four decades under Maurice R. “Hank” Greenberg’s leadership. Since Greenberg left AIG in 2005, there have been tumultuous internal battles regarding the company’s direction. Willumstad’s appointment is an attempt to lesson tensions as Greenberg and affiliated shareholders control 12.5 percent of AIG’s shares, according to The Wall Street Journal.
In a statement, Broad said the appointments of Bollenbach and Willumstad are “a positive step forward” and that he hoped for “more harmonious” relations.
Willumstad plans to focus on what businesses AIG will continue to participate in and which segments should be given more capital to expand. Three years after separating CEO and chairman positions, AIG has combined them once again to prevent an additional change. Bollenbach’s position as lead director is common in companies where the CEO and chairman position are combined. He will be the main representative for outside shareholders on the board.
Meanwhile, the financial products division of AIG is being investigated by the Securities and Exchange Commission for its alleged intentional understatement of the value of subprime mortgage-linked contracts, according to Financial Week. The SEC is focusing on an investor presentation made December 5. Both Sullivan and AIG’s former financial-products chief Joseph Cassano said at the time that risks from the roiling subprime crisis were unlikely to cause the insurer major damage, according to a story Friday in the WSJ.
In May, AIG raised $20 billion of capital that Citigroup said was intended to shore up the division, which earlier had admitted to violating accounting rules. That action resulted in AIG paying $126 million to settle SEC allegations that it sold products that helped PNC Financial Group and cell phone distributor Brightpoint inflate earnings.