NEW YORK – A few years from now, the world’s largest insurer might not be so large.

Embattled American International Group Inc., in an effort to become profitable again, appears to be leaning toward shrinking – a similar strategy to that taken by Citigroup Inc., one of the world’s biggest banks.

“A less complex AIG will be a better competitor,” AIG’s new chief executive, Robert Willumstad, said during a conference call Thursday with investors.

But Willumstad, a Citi veteran, has yet to reveal any definitive plans. And with the mortgage crisis still far from resolution, investors remain wary about stock in a company that has lost money for three straight quarters and that may have to raise more capital.

After revealing a nearly $5.4 billion second-quarter loss late Wednesday, AIG saw its shares plummet 16 percent Thursday.

“AIG could not have reported more horrific results,” wrote Bijan Moazami, an analyst with Friedman Billings Ramsey, in a note early Thursday. He downgraded AIG’s stock to a “hold” rating from “buy.”

AIG operates a wide variety of businesses in about 130 countries, ranging from life, auto, property and mortgage insurance to retirement services, lending, investment services and airline leasing.

Wall Street’s calls for a breakup of AIG are not as loud as they were for Citigroup, which couldn’t boost profits even before spiking mortgage defaults triggered the credit crisis last summer.

Willumstad’s review is still incomplete, but he said it will result in “significant changes.”

The CEO reiterated, though, that the company intends to keep International Lease Finance Corp., AIG’s airline leasing business, which posted record results in the second quarter.

Over the past three quarters, AIG has lost about $25 billion in the value of default protection for bondholders and about $15 billion in other investments. .

But the problem is that AIG – which called its subprime exposure “minimal” a year ago – not only is joining the likes of Citi and Merrill Lynch & Co. in its mortgage-related assets write-downs, but also is showing other weak sectors.

“Some of the underlying trends in the company’s core lines of business suggest that a return to more normal earnings power may be further off than we had previously thought,” Goldman Sachs analyst Thomas Cholnoky wrote to clients late Wednesday.