American International Group reported third-quarter earnings of $1.35 per share, sharply missing Wall Street estimates of $1.62.
Shares of the world's largest insurer -- along with other major financial firms -- tumbled as investors grew nervous about exposure to subprime mortgage losses.
AIG shares slid about 3 percent in after-hours trade, adding to a loss of 6.7 percent during regular market hours.
The Dow Jones Industrial Average plunged 360.92 points, or 2.6 percent, to 13,300.02, with all 30 components declining; the S&P 500 index dropped 2.9 percent, its worst day since August; and the Nasdaq lost 76.42 at 2748.76.
Analysts surveyed by Thomson Financial had predicted AIG's earnings per share would be $1.62, up from $1.53 in the same quarter a year ago, and revenue of $29.91 billion, up from $29.19 billion in the year-ago period.
Investors were also concerned about AIG units that are directly involved in lending, such as its United Guaranty mortgage division and its consumer finance arm.
In addition, investor optimism that former AIG Chief Executive Maurice "Hank" Greenberg would force the company to adopt a "strategic alternative," such as selling pieces of the company, has declined, an analyst said.
"The Greenberg premium has evaporated," said Donald Light, an analyst with Celent.
Sources said Tuesday that Greenberg, who in a filing with the Securities and Exchange Commission last week announced he was talking to other investors, had declined to answer questions about himself when he was deposed by the SEC in September.
The SEC is investigating allegations that Greenberg, who ran AIG for more than 30 years, manipulated earnings at the insurer. Through a spokesman Greenberg declined to comment.
UBS analyst Andrew Kligerman said in a report Wednesday that he thought the market was "overly pessimistic" about subprime losses at AIG, and the stock's recent decline represented a good buying opportunity.
Reuters contributed to this story.