AIG chairman says board stands by CEO Sullivan

By Lilla Zuill

NEW YORK (Reuters) - American International Group Inc's (AIG.N) chairman said on Wednesday the global insurer's board is backing Chief Executive Martin Sullivan despite some anger from investors over two quarters of record losses.

Robert Willumstad told investors packing a staff cafeteria and satellite rooms at the insurer's New York headquarters for AIG's annual shareholder meeting that comments in a Wall Street Journal article expressing concern about Sullivan's leadership had not come from directors.

"No one is pleased with the financial results and we would certainly expect them to improve," Willumstad said.

The quarterly losses had prompted former CEO Maurice "Hank" Greenberg to call on management to explain why it was raising some $17 billion through the sale of common stock, convertibles and hybrid securities -- diluting existing shareholdings -- rather than shedding assets.

Greenberg did not let up after the shareholder meeting, telling Reuters it was the board's job to make sure management was fulfilling its responsibility.

Asked in an interview at his Park Avenue office if AIG management should be replaced, Greenberg, who voted against AIG's board, said the results spoke for themselves.

"I think a lot of change has to be made," he added.

Last week, AIG posted a $7.8 billion net loss, its largest ever, surpassing the $5.3 billion then-record loss the insurer recorded a quarter earlier.

The losses stemmed largely from write-downs of the value of assets linked to subprime investments and Sullivan stressed on Wednesday that many companies were grappling with problems from a meltdown in credit markets, and stressed AIG's write-downs were recorded as unrealized losses, not actual losses.

The Wall Street Journal article had quoted a source it identified as "a person familiar with the board" as saying: "No one -- neither the shareholders nor the board -- is happy with the results."

AIG went ahead with the annual meeting, although Greenberg days earlier had requested a delay to allow shareholders to absorb information about the company's record loss and decide how to react to it.

Greenberg, who ran AIG for almost 40 years, controls about 12 percent of the company's outstanding shares through companies he controls and through a personal stake.

Greenberg was not present at the annual meeting.

Sullivan told investors AIG's capital raising, announced last week to bolster the balance sheet and set to close on Friday, was going "better than expected."

But he also repeatedly acknowledged the frustration of investors, speaking in a subdued, somber tone for much of the meeting -- in contrast to his normally more upbeat public speaking manner.