NEW YORK (Bloomberg) — American International Group Inc. led decliners on the Standard & Poor's 500 Index, extending its plunge since government trustees approved a 1-for-20 reverse stock split last week.

AIG dropped $2.44, or 15 percent, to $13.75 in New York Stock Exchange composite trading yesterday. The New York-based insurer executed the reverse split, in which investors turned in 20 shares for a new one with a higher price, after the measure was approved at the June 30 annual shareholders meeting."The reverse split has always been thought of as the kiss of death — companies doing it have not been treated well historically," said Robert Bolton, managing director for trading at Mendon Capital Advisors Corp. "It turns into an 'avoid' situation all around."

AIG split the stock after the company plunged more than 90 percent in the past year, saying that a higher price may attract institutional investors who don't typically buy shares trading for less than $5.

Investors are concerned there will be little left for private holders after the insurer, which was rescued by the US in September for a bailout that eventually swelled to $182.5 billion, repays its federal loans.

The trustees overseeing the government's majority stake in the insurer control most shareholder votes. AIG closed at a split-adjusted $26.60 on June 29, the day before the share swap was approved.

The insurer's lower share price before the reverse split meant that "small moves" turned into "disproportionately large swings in the price on a percentage basis" of the stock, AIG said in a June 5 proxy statement. The reverse split also may prevent the stock — which had dipped below $1 a share — from being delisted by the New York Stock Exchange, the insurer said.

AIG was the subject of an erroneous notice of suspension and delisting by the NYSE the day after the reverse stock split. The NYSE posted the mistake on July 1 on its website. The exchange said it regretted the error, and AIG said the mistake may have been triggered by a technical issue.

The company disclosed on June 29 a new risk on derivatives sold to European banks, saying that valuation declines on the contracts could have a "material adverse effect" on results. The risk of losses on $192.6 billion in credit-default swaps may last "longer than anticipated", the insurer said in a regulatory filing updating the "risk factors" in its 2008 annual report.