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AIG Removed From Dow; Kraft Added

The insurance company, bailed out this week by the Fed, lasted only four years in the Dow Jones Industrial Average. The change will take effect Monday.

Kraft Foods

(KFT)

will replace

AIG

(AIG) - Get American International Group, Inc. Report

as a component in the

Dow Jones Industrial Average

on Monday, leaving the index underweighted in financials following the recent turmoil in the stock market.

AIG's

removal comes after a tumultuous week for the

insurer

, which was aided by the

Federal Reserve

through an $85 billion bailout that potentially kept the company from seeking bankruptcy protection. AIG has been a component of the Dow since April 1, 2004.

Cramer on AIG Rescue

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Kraft was once part of former Dow component

Altria

(MO) - Get Altria Group Inc Report

before being spun off.

"We are refraining at this point from adding another stock in the financial industry because of the extremely unsettled conditions," said Robert Thomson, managing editor of

TheStreet Recommends

The Wall Street Journal

. The

WSJ's

top news editor is responsible for the makeup of the 112-year-old stock index. "We realize this decision leaves the Dow Jones Industrial Average underweighted in financials, and we will address this situation in due course," he added.

Dow Jones, part of

News Corp.

(NWS) - Get News Corporation Class B Report

, said the changes won't cause any disruption in the level of the index. The divisor used to calculate the Dow from its components' prices on their respective home exchanges will be changed prior to the market's open on Sept. 22.

AIG's replacement by Kraft is the second change to the Dow this year. On Feb. 19,

Bank of America

(BAC) - Get Bank of America Corp Report

and

Chevron

(BAC) - Get Bank of America Corp Report

took spots vacated by

Honeywell

(HON) - Get Honeywell International Inc. (HON) Report

and Altria. By comparison, only two changes were made to the component makeup of the Dow in the 10 years previous.

For the sake of continuity, composition changes are intentionally rare, said John Prestbo, editor of

Dow Jones Indexes

, "although this time change was forced by the effective nationalization of AIG and its very low stock price. There are no predetermined criteria for a stock to be added or deleted, though we intend that all components be established U.S. companies that are leaders in their industries."