AIG's New Chief Willumstad Positive About Future

New York, NY (AHN) - Shares rose after American International Group Inc., the world's biggest insurer by assets, replaced Chief Executive Officer Martin Sullivan with Bob Willumstad on Monday.

The 53-year-old Sullivan was ousted after the New York-based insurer record losses and stocks battered due to the losses releated to the subprime mortgage market.

Early this month, the U.S. Securities and Exchange Commission reportedly began investigating the beleaguered insurance giant whether it has overstated the value of contracts tied to subprime mortgages.

The insurer had reported as much as $7.81 billion losses in its first-quarter, while posted a total of an $11.5 billion writedown to its swap portfolio in 2007.

In 2006, the company settled an accounting fraud case for $1.6 billion.

As of April 30, the firm has reported $9.7 billion in collateral related to its swaps, which is more than $5.3 billion posted around two months ago.

"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 statement released on Monday.

"We are determined to get the organization back on track as quickly as possible and ensure it is well positioned for future success."

In the month of May, Standard & Poor's, Fitch Ratings and Moody's Investors Service downgraded AIG's debt after it reported the huge writedowns to its swap portfolio.

But the company may raise up to $10 billion in capital to avoid any further credit ratings cut, after which the market analysts speculated that the insurer may have to raise as much as $20.3 billion.

The insurer's stock, which a component of the Dow industrials, gained by as much as 1.2 percent to $34.60 during the pre-market trading on Monday.

Shares of the company had closed on Friday at $34.18; stocks have dropped almost 26 percent from May 1 and around 41 percent from the start of this year.

At 01:45 p.m. EST, the company was trading down by 0.6 percent or $0.22 at $33.96.