Investor panic over the state of the US financials spread to AIG on Friday, as the stock dropped 31 per cent during active trading. The shares fell 2 per cent further in extended trading after Standard & Poor's, the credit rating agency, said it may cut the insurance company's credit rating.

More than other insurance companies, AIG has significant exposure in real estate and the credit default swap market, two segments that have been crushed in the past year by the decline in asset prices.

Although it boasted revenues of $110bn in 2007, AIG has taken $18.5bn in losses over the past three quarters.

An AIG spokesman would not comment on Friday's trading activity, but noted that Robert Willumstad, chief executive, is expected to unveil the results of a 90-day strategic review on September 25.

Mr Willumstad, who took over after the ousting of Martin Sullivan in June, has said that nothing was sacred at the commercial insurance giant - indicating he was willing to sell any part of the franchise.

This year, AIG has raised $20bn in new capital. Mr Willumstad has not indicated whether he believes the company will need to raise more.

But with total derivative exposures of $441bn, according to RBS, the company's third-quarter earnings could disappoint.

AIG's stock has slumped this week in part because of the federal government's takeover of mortgage giants Fannie Mae (NYSE: FNM - News) and Freddie Mac.

As part of that takeover, the government promised to make good on all debt issued by the two government-sponsored entities, leaving holders of common and preferred stock to suffer.

According to CreditSights, AIG holds about $616m of preferred stock in the two entities.

With $78bn in shareholders' equity at the end of the second quarter, AIG appeared to be insulated from the problems that have bedevilled other financial institutions.

But the mounting losses and steady erosion of the company's share price have threatened its position.