Shares of AIG fell 12 percent on Monday after an analyst raised concerns about a possible deficiency in the company's non-life insurance reserves.

According to CNBC, Bernstein Research estimated AIG's property-casualty operations could face an $11 billion reserve deficiency in the next year.

Bernstein cut its target price for AIG shares to $12 from $20 to reflect the possible reserve deficiency, the business television channel reported.

AIG shares fell $4.14 to $29.16 in early-afternoon trading on the New York Stock Exchange, and bearish options traders bet that the stock would continue to fall in coming weeks.

An AIG spokeswoman said the company does not comment on analysts' reports.

Bernstein said the majority of the possible deficiency is in three lines of coverage -- workers' compensation, general liability, and professional liability -- underwritten by AIG's non-life insurance businesses, CNBC reported.

Robert Schimek, chief financial officer for these businesses, recently said the company had been trimming its sales where prices for coverage were too low to be profitable, including for workers' compensation.

Insurers set aside reserves to cover claims on coverage that has already been sold. The reserves may have to be maintained for many years, depending on the type of coverage.

AIG's global non-life insurance business adopted the name Chartis in July to distance itself from its troubled parent. The unit has not been one of the AIG businesses needing taxpayer support, and has remained profitable.

A flurry of put option trading on Monday was dominated by bearish investors. Defensive options activity indicates that investors are expecting AIG shares to extend its declines within the next three weeks, said Andrew Wilkinson, senior market analyst at Interactive Brokers Group.

The most popular trade for bearish options traders was the $25 December put strike that expires in three weeks, he added.

That put strike, which gives investors the right the sell the stock at $25 a piece, had volume of 24,498 contracts, far exceeding its existing contracts outstanding, Reuters data show. The cost of those premiums rose to $1.02 per contract, up 81 cents by early afternoon trade.

Highlighting the uncertainty surrounding the stock was a 50 percent increase in the options implied volatility to 83 percent. That reading magnifies the potential for share price movement, Wilkinson said.

American International Group Inc was saved from collapse last year by a U.S. bailout that has since swelled to as much as $180 billion, including more than $80 billion in loans that must be repaid. The company is now about 80 percent owned by U.S. taxpayers.

(Reporting by Lilla Zuill; Additional reporting by Doris Frankel in Chicago; editing by John Wallace)