Shareholders in insurance giant AIG today welcomed the ousting of Dagenham-born chief executive Martin Sullivan after the company suffered two quarters of record losses from risky mortgage bets.

AIG, the world's biggest insurer and joint owner of London City Airport through its subsidiary AIG Financial Products, has seen its share price fall by more than a half following the credit crisis, prompting several big investors, including former AIG director Eli Broad to call for change.

Sullivan, who was awarded an OBE in the Queen's birthday honours last year and could get a $35 million (£18 million) pay-off, has been under pressure to quit after AIG last month posted the worst results in its 89-year history, resulting in some of its ratings being cut and forcing it to strengthen its balance sheet with a $20 billion capital-raising.

AIG's chairman, former Citigroup banker Robert Willumstad, was appointed chief executive with immediate effect. Stephen Bollenbach, 65, the former chief executive of Hilton Hotels, will be the lead independent director.

Broad welcomed the change as a " positive step forward", and described Willumstad and Bollenbach as "proven, experienced and successful financial executives".

He added: "I expect they will attract badly needed first-rate financial and investment executives to AIG." Company records show that Sullivan is entitled to $35 million in pay and benefits if he can prove he was fired without cause.

The 53-year-old, who started with the company in London as a 17-year-old clerk, was appointed chief executive in 2005 to succeed Maurice "Hank" Greenberg, who left the company under the cloud of an accounting scandal. Greenberg, 83, remains a shareholder in AIG.

Sullivan initially gained plaudits for ushering AIG through the difficult process of reaching a deal with regulators, paying $1.64 billion to settle charges of fraud, bid-rigging and improper accounting. It was one of the largest regulatory settlements in US history.

Sullivan is the latest in a string of Wall Street chiefs to have left their jobs amid large losses stemming from the collapse of the US subprime mortgage market, which triggered the global credit crunch. Others include former Citigroup chief executive Charles Prince and Merrill Lynch's Stan O'Neal.

One of the first tasks facing Willumstad, who was a contender to take over from Prince until Citigroup appointed Vikram Pandit this year, is to find a new chief financial officer after Steven Bensinger stepped down during the first quarter. Willumstad also said he will have a turnaround plan in place for AIG by September.

While investors welcomed the appointment of Willumstad, who describes himself as a very young 62-year-old, analysts said they would have preferred an outside candidate with a track record in insurance.