American International Group Inc named director Robert Steve Miller as its new chairman, replacing Harvey Golub who resigned after clashing with Chief Executive Robert Benmosche over the botched sale of the insurer's Asian life unit.

AIG is set to move forward with an initial public offering for the Asian unit, AIA Group Ltd, a source familiar with the situation said.

Bob Benmosche has informed the board that he believes our working relationship as Chairman and CEO to be ineffective and unsustainable, Golub, 71, wrote in a July 14 letter to George Miles, an AIG director.

At this point, I view asking the board to choose between us would be an abdication of my responsibility to lead, Golub said. Consequently, I'm resigning for the simple reason I believe it is easier to replace a chairman than a CEO.

Golub, a former American Express CEO, and Miller were nominated to AIG's board last year by the government, which owns nearly 80 percent of the insurer.

A turnaround specialist, Miller, 68, has come out of retirement several times to work with troubled companies in many industries. His expertise would be useful for AIG, which is trying to restructure operations after receiving a $182.3 billion rescue from the U.S. government.

Miller served in a number of corporate restructuring situations, heading Delphi Corp, Bethlehem Steel, Federal-Mogul, Waste Management and Morrison Knudsen. He was also a director at UAL Corp during its reorganization.

He retired as executive chairman of Delphi in 2009 and is chairman of MidOcean Partners, a New York private equity that specializes in middle market investments. He is also a director of Symantec Corp and UAL.

AIG has established strong momentum over the last year, Miller said in a statement. We remain fully committed to delivering on AIG's core priorities: repaying taxpayers, meeting all of the company's obligations to its various stakeholders, and restructuring the company so that it emerges as a smaller, more focused enterprise worthy of investor confidence.

TENSIONS IN BOARDROOM

Golub was named AIG's nonexecutive chairman in August 2009 to replace Edward Liddy. At the time Benmosche said Golub would help AIG realize the true value of its businesses for the benefit of all of our stakeholders, including clients, employees and the U.S. government.

Tensions between the two, however, built up over the future of AIA.

AIG was well on its way to doing an IPO of the unit when Britain's Prudential Plc stepped in with an offer to buy it for $35.5 billion, but the deal soon ran into trouble.

Benmosche was in the favor of selling the business to Prudential on revised terms, which included a cut in the price, but was overruled by the board, which lost confidence in the British insurer's ability to close the deal.

That led to tensions within the boardroom, with media reports saying that Benmosche told the board at a meeting last month he wanted Golub to leave the company and would himself resign if that did not happen.

A source told Reuters on July 1 that the mood subsequently took a conciliatory direction, but that was not to be.

Golub said in the letter that it was easier for the company to find a new chairman at a time when it was in the midst of a major corporate restructuring and developing an exit plan from government control, both of which involve executing a long list of difficult tasks.

I appreciate the support I've received from my fellow directors and their desire to have me remain as chairman, Golub said, who also resigned as AIG director.

AIG's board was scheduled to meet on Wednesday and a public float for AIA was seen as the most likely outcome, sources told Reuters previously.

AIA, seen as AIG's Asian crown jewel, is a key cog in the bailed-out insurer's plans to repay U.S. taxpayers, who are owed more than $100 billion.

Chances of an AIA IPO were bolstered after strong institutional demand for Agricultural Bank of China's roughly $20 billion IPO.

Banking sources have previously told Reuters AIG could sell up to a 50 percent stake in AIA to raise up to $15 billion through a Hong Kong listing.

(Reporting by Paritosh Bansal, editing by Bernard Orr, Leslie Gevirtz)

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