NEW YORK (Reuters) - American International Group (AIG) chairman Robert Willumstad said yesterday the giant global insurer's directors stand behind management, including chief executive Martin Sullivan, fending off concerns raised by investors frustrated by two quarters of record losses.

Investors packed a staff cafeteria and satellite rooms at the insurer's New York headquarters for AIG's annual shareholder meeting and heard Willumstad say that comments expressing concerns about management — namely Sullivan's leadership — in a Wall Street Journal story did not come from directors.

The quarterly losses had prompted former CEO Maurice (Hank) Greenberg to call on management to explain why it was raising in the region of $17 billion through the sale of common stock, convertibles and hybrid securities — deals that dilute existing shareholdings — rather than shedding assets.

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

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

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

The Wall Street Journal story 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 decide to absorb information around the company's record loss, and how to react.

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 that 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, sombre tone for much of the meeting — in contrast to his normally more upbeat public speaking manner.

At one point in the meeting, Sullivan stopped to take a drink of water, and made the remark that the "spotlights are very hot today". A shareholder in the audience quipped: "Should be."

A Briton, Sullivan joined AIG as a teenager and worked his way up through the ranks to be tapped in 2005 as the successor to Greenberg, who quit AIG amid an accounting scandal.