NEW YORK (Bloomberg) — American International Group Inc. fell by 6.7 percent in New York trading, heading for its seventh straight drop, the longest streak of declines in 15 months.

The bailed-out insurer slipped $2.52 to $34.81 in New York Stock Exchange composite trading yesterday on concerns that Europe's debt crisis could hinder the $35.5 billion sale of an AIG unit to London-based Prudential Plc.

"The liquidity of capital markets is very important for resuscitating confidence in AIG, in part because the sale of subsidiaries is dependent on that," said Bill Bergman, an analyst at Morningstar Inc. in Chicago. "If there are more problems on that score, it will be important for AIG shareholders as well as the taxpayer, who's still at risk."

AIG chief executive officer Robert Benmosche announced deals in March to sell two life divisions for about $51 billion. The larger of the transactions was to divest AIA Group Ltd., which operates in markets spanning China to Australia, to Prudential, which must convince 75 percent of its shareholders to agree to the acquisition.

The insurer has dropped 14 percent in the seven trading days, narrowing this year's gain to about 20 percent. The New York-based company declined 4.5 percent in 2009 and plunged 97 percent in 2008, the year it was rescued by the US government in a bailout that swelled to $182.3 billion.

Benmosche, 66, told investors this month in an audio statement that he expects the two division sales to close by year-end. "Our transactions are on track," he said. Mark Herr, a spokesman for the insurer, didn't immediately return a message seeking comment.

Meanwhile, other participants in the Bermuda insurance market saw their shares plunges yesterday too.

Ace and XL Capital both fell by more than five percent. White Mountains Group dipped 4.9 percent and Argo Group 4.3 percent.

Most of the US-listed Bermuda insurance companies suffered falls of more than three percent as stock markets fell sharply.

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