AIG names Peter Eastwood president and chief executive of its unit Lexington Insurance

NEW YORK (AP) – Embattled insurer American International Group Inc. said Tuesday it named Peter Eastwood president and chief executive of a subsidiary, Lexington Insurance Co. Lexington Insurance is a unit of AIG’s commercial insurance business.

Eastwood replaced Kevin Kelley, who left the company. Eastwood has worked at AIG since 1991, most recently serving as executive vice president of Lexington Insurance.

Last month, the government said it would provide a $150 billion financial-rescue package to AIG to help it remain in business amid the worsening credit crisis. That rescue package came just two months after AIG was extended an initial $85 billion loan from the Federal Reserve. The original loan was replaced by the $150 billion package as it became apparent the insurer needed more funds.

Problems at AIG did not come from its traditional insurance subsidiaries, but instead from its financial services operations, and primarily its insurance of mortgage-backed securities and other risky debt against default. If AIG couldn’t make good on its promise to pay back soured debt, investors feared the consequences would pose a threat to the U.S. financial system, which led to the government bailout.

AIG’s traditional insurance subsidiaries have widely been viewed as safe.

Shares of AIG rose 1 cent to $1.94 in late morning trading.