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AIG is having another terrible day. Markets certainly aren’t being patient with the New York-based American International Group (NYSE:AIG). Despite the company's announcement of new strategic plans set to be introduced Sept. 25, the insurer’s shares continue to sink aggressively lower. The company's stock has fallen 25% in less than a week while the cost of insuring against default has risen beyond that of Lehman Brothers (LEH).

According to Phoenix Partners Group, AIG’s credit-default swaps have exploded. Today it costs $1.2 million, along with $500,000 annually, to protect $10 million in bonds against default, compared with $680,000 on Thursday.

AIG’s meltdown started earlier this year as the firm warned investors about unrealized losses on credit default swaps linked to subprime mortgages. The write-downs on these investments are more than $23 billion, leaving the co. negative by a cumulative $18 billion over the past three quarters.

If the management, notes WSJ, fails to act by not dismantling the firm, which would include selling its 59% stake in Transatlantic Holdings or divesting itself of asset manager AIG Investments AIG Direct, its stock value will further deteriorate as the insurer could face a ratings downgrade, forcing it to post at least $10 billion more collateral with counterparties and prompting a further capital call.

Citigroup lowered their AIG target today to $25.50 from $40, citing marketplace fears over the insurer’s financial condition.

UpdateBloomberg is now reporting AIG may announce a turnaround plan before the previous deadline of Sept. 25. The plan may include selling assets, raising capital and restructuring the company. AIG today closed down 5.41, or 30.83%, to 12.83.

Disclosure: None