Financial stocks declined on Thursday as difficulties in the credit market continued to weigh on the minds of investors.

The Amex Securites Broker-Dealer Index, which measures a broad array of financial stocks fell 2.57 points, or 1.1 percent to 225.61. The S&P Insurance Index was down 4.22 points, or 1.1 percent to 376.50 and the KBW Bank Sector Index declined 0.32 points, or 0.3 percent to 100.86.

American International Group shares fell $2.05, or 3.2 percent, to $61.79 amid rumors that the world's biggest insurer will report big write-downs related to subprime mortgages and collateralized-debt-obligations.

The concerns came a day after the largest U.S. brokerage, Merrill Lynch reported an $8.2 billion write down on the same financial products. After falling nearly 6 percent on Wednesday, Merrill shares dropped another 3.7 percent, or $2.32 to $60.90.

The biggest mortgage lender by loan volume, Countrywide, slid 76 cents, or 5.5 percent to $13.07. The stock has lost nearly 70 percent of this value this year on subprime-mortgage lending troubles.

Bond insurer MBIA dropped $8.20, or 15 percent, to $46.99 after posting a loss and reporting a writedown. The largest U.S. mortgage insurer MGIC Investment fell $1.84, or 9.32 percent to $17.90 after it cut its quarterly dividend by 90 percent