NEW YORK (AP) - The board of directors of insurer American International Group Inc., which has lost billions on bad bets on the mortgage market, was meeting Sunday to consider the possible resignation of the company's chief executive, The Wall Street Journal reported.
Citing an unnamed source, the Journal said the resignation of AIG's CEO Martin Sullivan was not a certainty but 'highly likely.' It said the board would discuss who would take Sullivan's place.
The Financial Times reported that it was unclear whether Sullivan had offered his resignation or if the board would call for it at the meeting.
A spokesman for AIG was not immediately available Sunday.
New York-based AIG lost $7.8 billion during the first quarter of the year due to investments and contracts tied to bad loans. The insurer's first-quarter deficit was even more massive than its fourth-quarter loss of more than $5 billion. After its two straight quarterly losses, AIG revealed plans to raise $20 billion in fresh capital -- but investors reacted skeptically, unsure that extra cash would solve the insurer's problems.
Shares of AIG have fallen by more than 50 percent over the past 12 months, closing at $34.18 on Friday.
In addition to big losses, AIG is reportedly facing a regulatory probe. The Securities and Exchange Commission reportedly began looking into whether AIG had overstated the value of contracts called credit default swaps.
Credit default swaps, or CDS, are essentially insurance policies that investors buy to protect against loan defaults, including subprime mortgage defaults. A surprisingly large $9.1 billion loss in AIG's CDS portfolio dealt the insurer its most significant blow during the first quarter.
Many angry shareholders blame poor management for AIG's financial troubles.
Last August, shortly after mortgage-related losses began roiling the financial services industry, Sullivan told investors that AIG was 'well-positioned, even in the event of further deterioration in this market.' But by May, Sullivan acknowledged that 'the severity of the unrealized valuation losses and decline in value of our investments were beyond our expectations.'
Sullivan -- who received compensation last year of $13.9 million -- replaced Maurice R. 'Hank' Greenberg as chief executive in March 2005. Greenberg, forced out amid accusations from then-New York State Attorney General Eliot Spitzer of fraudulent accounting, still controls the largest block of stock in AIG.
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