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By Lilla Zuill
NEW YORK, June 15 (Reuters) - Martin Sullivan may have ushered AIG through regulatory assaults from former New York Attorny General Eliot Spitzer, but he wasn’t strong enough to survive losses from the subprime crisis that have badly hurt the world’s biggest insurer.
The Englishman, known for being quick with a joke and for his shock of white hair, came into office three years ago after an accounting scandal that brought down his one-time mentor, AIG’s legendary former CEO Hank Greenberg.
He left the post on Sunday partly as a result of separate accounting questions.
Sullivan’s departure after only three years on the job comes after AIG posted two consecutive quarters of record losses, stemming from about $20 billion in write-downs on assets linked to risky subprime mortgages. In recent weeks, several large AIG shareholders have been pushing for his ouster.
AIG installed Robert Willumstad, a former Citigroup Inc executive, to replace him. (To read the full story on Sullivan’s resignation and management changes, click on [ID:nSP178665])
Sullivan joins a growing list of Wall Street executives, including Citigroup’s (C.N) Charles Prince, and Merrill Lynch & Co’s MER.N Stan O‘Neil, who have lost their jobs as risky U.S. subprime investments took a toll on each corporation’s bottom line.
The U.S. Securities and Exchange Commission has launched an investigation into whether AIG may have overvalued the derivative contracts that led to the costly write downs.
The departure of Sullivan, 53, was in sharp contrast to his first year as AIG’s CEO, when he won widespread investor support by bringing AIG through a rough regulatory probe.
He continued to build on that, with AIG, posting record adjusted net income for 2006 and early 2007. But he fell out of favor with investors in recent months, as unrealized losses from the mortgage investments mounted.
The large losses, and a precipitous drop in AIG’s share price, led several large shareholders to push for Sullivan’s ouster.
AIG’s shares have fallen by more than half over the past year, closing at $34.18 on Friday. The shares were trading at $72.91 a year ago.
Among the unhappy investors was former CEO Greenberg, who remains a large AIG shareholder and has also been critical of management.
Greenberg had once been a mentor to Sullivan, but their relationship grew frosty after Greenberg’s departure, and has deteriorated since, with a nasty string of lawsuits outstanding between the two sides.
Greenberg, through a spokesman, declined to comment on his successor’s departure on Sunday.
Sullivan departs AIG after a 36-year career dating back to when he took up a clerk’s post in the insurer’s London offices at the age of 17.
He moved to New York in 1996 and over the years rose into AIG’s executive suite through long hours and hard work. In 2002, he was named co-chief operating officer of the company, along with Edmund Tse. That put him in line as a possible successor to Greenberg.
Around the same time, Sullivan married Antoinette, his second wife. He has two grown daughters, Lindsey and Katie, from his first marriage.
In Sullivan’s first year in the CEO office, he ushered AIG through a painful, costly regulatory probe, paying $1.64 billion to settle state and federal investigations that alleged accounting improprieties, and oversaw a five-year restatement to fix overstated income discovered as part of AIG’s own inquiry.
Greenberg is still fighting civil charges stemming from that probe, by then-New York state Attorney General Eliot Spitzer and the U.S. Securities and Exchange Commission.
Sullivan is due a severance payment of $35 million as long as his departure is not “for cause,” $20 million more than the severance benefit he was initially promised when he was named CEO in 2005. (Editing by Jonathan Oatis & Kim Coghill)