For the second time in three years, the board at American International Group, the giant insurance company, has responded to its falling stock price and to regulatory concerns about its accounting by replacing its chief executive.

Martin Sullivan, who was named chief executive in 2005 after an accounting scandal claimed his predecessor, was removed by the board at a closed-door meeting on Sunday, according to a person briefed on the board's deliberations.
Robert Willumstad, chairman of the company's board and a former top executive at Citigroup, was named as Sullivan's successor, this person said.
The board also named Stephen Bollenbach, a member of the AIG board and a former chief executive of Hilton Hotels, as the board's lead director, this person said.
The change at the top comes as pressure has mounted on the company to respond to a steady stream of bad news, including record losses, that has pounded down the stock price more than 40 percent since December. AIG's shares closed at $34.18 on Friday, down from $57.05 in December.
In 2005, Sullivan's predecessor, Maurice R. Greenberg, was asked to resign by board members unnerved by news that regulators had sent the company subpoenas. Sullivan's departure comes just weeks after AIG confirmed that it was the subject of new investigations by regulators and the Justice Department.
Investors had every reason to hope that Sullivan's tenure would be free of such turmoil. Months after he took office, AIG restated financial results covering a five-year period and went on to negotiate settlements with regulators. There were supposed to be no more surprises.
Instead, the mortgage crisis ensnared the company. It has had to revise its accounting for complex transactions involving securities backed by home loans, generating huge paper losses and leading investors to worry that other companies that made similar investments might also adjust their accounting methods. The removal of Sullivan is an attempt to calm fears of new surprises from the company.
Three years ago, when the board asked for the resignation of Greenberg, it was amid a widening accounting scandal. Regulators had identified a financial transaction that Greenberg had struck in 2000 and 2001 that made AIG's financial position look better.
The company ultimately acknowledged that its accounting for several transactions was faulty. In February of this year, five former insurance industry executives, including one from AIG, were convicted in federal court in Connecticut of conspiring to manipulate the company's financial statements; AIG had already paid $1.6 billion in 2006 to settle federal and state investigations of the matter.
The company's board turned to Sullivan, who had risen to co-chief operating officer at AIG and who had already been chosen by both the board and by Greenberg to take over leadership of the company ? if not quite at the time that he did.
Sullivan succeeded in steadying the ship, and did so with a personal style that was kinder and less combative than his predecessor's. Investigations were resolved and settlements negotiated. And for the past several months, the board has stood behind Sullivan.
But pressure to make changes in personnel has increased steadily. The losses reported by AIG this spring ? and perhaps more important, how the reporting of those losses was handled ? raised damaging questions about Sullivan's stewardship.
In December, Sullivan said that the turmoil in credit markets was ""manageable"" for AIG Then in February, the company disclosed that its auditor, PricewaterhouseCoopers, had identified ""material weakness"" in the accounting for AIG's swaps portfolio. A few months later, the company announced that it had lost $5.3 billion in the last three months of the year. And in May, it reported a loss of $7.8 billion.
Never before had AIG reported back-to-back quarterly losses. The company has had to mark down the value of complex investments called credit default swaps, which essentially guarantee the performance of other securities ? in this case, securities backed by home loans, whose value has plummeted in the ongoing credit crisis.
Then earlier this month, AIG confirmed that both the Securities and Exchange Commission and the Justice Department were examining how the company had come up with its valuations for the swaps. In May, the company announced a plan to raise $12.5 billion ? it ultimately raised $20 billion ? in an effort to ""fortify"" its balance sheet, as Sullivan put it in a conference call with analysts. But at the same time, in a puzzling move, the company increased the size of its dividend.
Sullivan is not the first casualty of AIG's latest crisis. In February, the company announced the retirement of Joseph Cassano, who headed AIG Financial Products, the unit that focuses on sophisticated financial instruments like credit default swaps. Cassano had estimated in December that AIG would lose $1.1 billion in its swap portfolio, not $11.1 billion ? $7.2 billion after taxes ? as the company later reported.
(Source: IHT)