AIG's Sullivan Is Latest Credit Casualty

Updated from 10:43 a.m. EDT

The fallout from the subprime meltdown and related credit crisis has claimed another corporate chieftain.

Martin Sullivan has resigned as CEO of American International Group (AIG Quote) and will be replaced by AIG Chairman Robert Willumstad. Stephen Bollenbach, an AIG director and a former CEO of Hilton Hotels, was named lead director.

The insurance giant's board held a special meeting this weekend to consider Sullivan's fate. Sullivan had come under fire over the past month, after AIG raised $20 billion to cover $7.81 billion in first-quarter losses tied to writedowns on its portfolio of credit derivatives and mortgage-related products. Sullivan, who spent 37 years at AIG, had started out as a clerk in London.

But last Thursday, three shareholders that own 4% of the company fired off a letter to the board demanding changes. According to Bloomberg, former director Eli Broad and fund managers Shelby Davis of Davis Selected Advisers and Bill Miller of Legg Mason(LM Quote), sent a joint letter calling for "significant and immediate changes at both the management and board level." The criticism came on top of earlier concerns raised by from ex-CEO Maurice "Hank" Greenberg.

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"The board and I recognize that results over the past two quarters have been unacceptable, but we are confident in AIG's future," Willumstad said in a company statement. "We are determined to get the organization back on track as quickly as possible and ensure it is well positioned for future success."

During a conference call Monday morning, Willumstad noted that the company would begin a 60- to 90-day review of its businesses and performance. "The investment community expects we should be able to come up with a game plan," he said.