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US insurer AIG has replaced its chief executive with the group's chairman after two quarters of "unacceptable" results.

American International Group (AIG) named chairman Robert Willumstad in a dual role as its new chief executive, and said current head Martin Sullivan would be leaving the firm.

The board also appointed Stephen Bollenbach as its lead independent director.

The group, which is the biggest insurance firm in the world by assets, has reported heavy losses as a result of the recent market turbulence.

In recent months, the company has reported more than $30 billion (£15 billion) in writedowns and losses as the subprime crisis hit.

In May, the company was forced to raise $20 billion (£10 billion) in capital through the sale of common stock, equity units and fixed income securities.

AIG made the announcement last night after an emergency board meeting.

George Miles, Jr, chairman of the nominating and corporate governance committee of the board of directors, said: "Martin successfully led AIG through the crisis it faced when he became chief executive in 2005, and he has made significant contributions over the past three years in executing AIG's strategy and building on its global franchise.

"The board has determined that Bob's broad managerial and financial services experience makes him the right person to lead AIG through today's turbulent markets, drive further organisational change and rebuild shareholder value in the years ahead."

Mr Willumstad, 62, added: "Although conditions in the credit markets continue to create significant challenges in several areas of the business, AIG has great people throughout the organisation and an unrivaled global franchise with tremendous long-term growth potential.

"The board and I recognise that results over the past two quarters have been unacceptable, but we are confident in AIG's future. We are determined to get the organisation back on track as quickly as possible and ensure it is well positioned for future success."

Mr Willumstad has been chairman of AIG since November 2006 and was previously the president and chief operating officer at Citigroup.

Last week, the credit crunch also claimed two top executives at Lehman Brothers, which has also reported huge subprime-related losses.