(Bloomberg) American International Group Inc.?s Maurice ?Hank? Greenberg, who has run the world?s largest insurer for almost four decades, retired as chief executive amid probes of potential earnings manipulation and bid-rigging, the Wall Street Journal reported, without citing its source.

Greenberg, 79, will be replaced by Co-Chief Operating Officer Martin Sullivan, 50, and stay on as chairman, the Journal reported. Sullivan didn?t return phone calls and an assistant for Greenberg said he wasn?t available.

AIG spokesman Chris Winans declined to comment. Sullivan didn?t return phone calls and an assistant for Greenberg said he wasn?t available.

AIG?s headquarters is in New York but it has a presence worldwide ? including Bermuda.

AIG shares fell $1.13 to $63.58 on the New York Stock Exchange. Its 1.8 percent drop was the second-steepest in all of the Dow Industrial Index.

The Wall Street Journal said the AIG board meet all day Sunday to hammer out the terms of Greenberg?s retirement as chief executive. It said under one scenario, Greenberg would stay on as chairman. The New York Times, in its Monday edition, said the board was looking at the ?potential impact? of regulatory investigations on Greenberg?s future and on AIG.

?With all the regulatory issues it?s facing, anyone?s tenure would be under threat,? said Simon Clinch, who oversees about $1.3 billion of US stock investments at Aberdeen Asset Management Plc. in London.

Aberdeen owns about 300,000 AIG shares. The stock fell 86 cents, or 1.3 percent to $63.85 in New York Stock Exchange composite trading.

A resignation from Greenberg would mark the biggest executive fallout since New York Attorney General Eliot Spitzer touched off an industrywide investigation of fraud last October.

Since taking over in 1967, Greenberg has boosted AIG?s assets more than a thousandfold, making $50 billion in acquisitions to reach 50 million customers in 130 countries.

Spitzer is probing a four-year-old reinsurance transaction between AIG and Berkshire Hathaway Inc.?s General Reinsurance unit that Greenberg may have initiated to smooth to the company?s own earnings, said a person familiar with the matter.

The attorney general obtained information in the last ten days to two weeks that Greenberg himself was involved, the person said.

Spitzer and the Securities and Exchange Commission subpoenaed AIG last month as a probe of collusion with insurance brokers widened to the investigation of insurance and reinsurance that may be used to hide losses.

AIG said Greenberg personally received one of the Spitzer subpoenas, which sought information on the ?non-traditional? policies and AIG?s accounting for reinsurance it sold. Shares have fallen 13 percent since AIG disclosed the requests on February 14.

Spitzer?s investigation has already forced out Greenberg?s son, former CEO of Marsh & McLennan Cos., the world?s largest insurance broker.

In an October 14 lawsuit against New York-based Marsh, Spitzer alleged the broker colluded with insurers including AIG. Since then four AIG employees have pleaded guilty to rigging bids with Marsh, agreeing to testify in future cases. AIG hasn?t been sued.

Greenberg?s resignation would bring the company closer to settling regulatory issues, said Prudential Equity Group analyst John Hall in New York, who has an ?overweight? rating on the stock.

?We will probably see the regulatory issues start to be resolved not so long after his resignation,? said Al Copersino, an analyst at Columbia Management Advisors in New York.

Columbia, a unit of Bank of America Corp., holds about 18.7 million shares of AIG.

Investors had been asking Greenberg for years to share his succession plans. His choice for successor had been unclear since his son Evan Greenberg left the company in 2000 without explanation. ?We have been waiting to find out for some time because of Greenberg?s age,? said Roman Cizdyn, an analyst at Oriel Securities Ltd. in London.

AIG shares fell two percent March 11 after AIG cancelled two Greenberg meetings with clients of Goldman Sachs Group Inc. and JPMorgan Chase & Co late the day before, spurring speculation about the status of the regulatory probes.

Of AIG?s non-executive board members, Frank Zarb, Stephen Hammerman, Ellen Futter, Carla Hills, Marshall Cohen, Martin Feldstein and Frank Hoenemeyer didn?t return phone calls seeking comment.

Richard Holbrooke said in an interview yesterday that any discussions held by the board are a ?confidential matter,? and declined to comment further. Bernard Aidinoff and William Cohen declined to comment. Chia Pei-Yuan couldn?t be reached.

Analysts at UBS Investment Research, which rates the stock ?Buy 1,? said in a research report that ?the optimal scenario? would be if Greenberg relinquished the CEO post but remained chairman.

It added that ?the caliber of AIG?s executive bench is strong across all of its businesses,? suggesting that management could weather the shakeup.

Sullivan will start in his new role today, CNBC reported. He has been chief operating officer since May 2002 and shares his title with Donald Kanak, who had been the other favourite to succeed Greenberg. A London native, Sullivan started at AIG as a teenager.

His first job was in the UK finance department of American International Underwriters, AIG?s property and casualty subsidiary outside the US. He rose through the ranks of AIU, and moved to New York in the 1990s to become president of the unit.

Greenberg has run the company as if he founded it and few companies are so strongly identified with a single man.

The successor to founder Cornelius Starr, Greenberg took the company public in 1969 and has driven its market value to $168.5 billion. Greenberg, who was paid $7.59 million in 2003, increased AIG?s net income by at least 15 percent in eight of the past ten years, according to data compiled by Bloomberg.

In 2003, the company spent 93 percent of every premium dollar on claims and expenses the third-best ratio among the 12 property and casualty insurers on the S&P 500 Insurance Index, Bloomberg data show.

When prices on property and casualty insurance as much as doubled following the September 2001 terrorist attacks in the U.S., he used the company?s AAA credit rating to justify charging more than competitors.

As price increases started slowing in 2003, he bought General Electric Co?s Japanese life insurance business to further diversify. ?I?m thinking about the business all the time, it?s not something I can start and stop,? Greenberg said in an interview in September 2004.

?You have to have passion for what you do. If it?s a chore, if you want to shut yourself off from what you do, then you?re doing the wrong thing.?

Greenberg joined AIG in 1960 after working at Continental Casualty Co. By 1962, Starr, who died six years later, had chosen him to fix American Home Assurance Co, an earlier acquisition with an unwieldy agency structure, according to AIG?s corporate history. In the 1970s, Greenberg added units to specialise in products such as kidnap and ransom insurance and corporate board liability coverage, establishing AIG as an insurer willing to cover almost anything at the right price. By the mid-1980s, AIG was the largest commercial insurer in the U.S.

Greenberg, who expanded the company in Japan, Eastern Europe and Africa, also returned AIG to China a country he has said may become one of the company?s biggest markets. Starr, a First World War veteran whose wanderlust took him to Asia, founded the company in Shanghai in 1919. AIG left when the Communist takeover advanced in 1950.

In 1992, Greenberg won the company the first foreign insurance license there in 40 years, according to AIG?s corporate history. Greenberg, whose father owned a candy store, was born in New York City and nicknamed after Major League Baseball Hall of Famer Hank Greenberg.

He fought in the Second World War and Korea before becoming an insurance executive. At the age of 19, he stormed Omaha Beach during the D-Day invasion. In Korea, Greenberg earned a Bronze Star and rose to the level of captain.

Between the wars, Greenberg earned a pre-law certificate from the University of Miami and an LL.B. from New York Law School. Greenberg built the company?s property and casualty business with acquisitions such as National Union Fire Insurance Co, United Guaranty Corp. and HSB Group Inc., and expanded into non-insurance businesses such airplane leasing with the purchase of International Lease Finance Corp. in 1990.

More recently, he focused on life insurance and annuities, buying SunAmerica Inc. in 1999 for $19.7 billion and then American General Corp. for $23 billion in 2001. ?He only works about 16 hours a day,? said Warren Buffett, chairman of rival Berkshire Hathaway Inc., in 2001. ?For as big as AIG is, he knows when a sparrow falls, even when a sparrow is thinking of falling.?

Greenberg also used his clout in Washington, helping to get a bill to limit class-action lawsuits approved and lobbying to cap insurers? costs from cancer-causing asbestos. At a Boston College event in February 2004, he called the plaintiffs? bar ?terrorists?.

The shift in power comes as AIG?s share price heads into its fourth year at about 2.5 times book value. The stock was as high as 5.5 times book value in 2000 more than double the average for peers on the Standard & Poor?s 500 Insurance Index.

In 2001, profit fell because of losses from the September terrorist attacks in New York and Washington. In 2002, net income rose just 2.9 percent as AIG increased reserves to pay claims on policies sold too cheaply in the 1990s.