European stocks fall, led by banks, insurers

(Corrects spelling of "Daimler" in third paragraph)

PARIS, May 9 (Reuters) - European stocks dropped in early trade on Friday, falling for a second day in a row, led by financials after U.S. insurer AIG (AIG.N: Quote, Profile, Research) posted a $7.8 billion quarterly loss, hit by bad credit-related investments.

European car makers were also on the downside after Toyota Motor Corp (7203.T: Quote, Profile, Research), the world's biggest automaker, forecast its first decline in annual net profit in seven years.

BMW (BMWG.DE: Quote, Profile, Research) was down 4 percent, Peugeot (PEUP.PA: Quote, Profile, Research) was down 0.9 percent and Daimler (DAIGn.DE: Quote, Profile, Research) down 0.8 percent.

At 0713 GMT, the FTSEurofirst 300 index of top European shares was down 0.7 percent at 1,351.62 points.

AXA (AXAF.PA: Quote, Profile, Research) was down 1.2 percent, Allianz (ALVG.DE: Quote, Profile, Research) down 1.4 percent and Banco Santander (SAN.MC: Quote, Profile, Research) down 0.8 percent.

Adding to the gloom for the financial sector, Citigroup (C.N: Quote, Profile, Research) could announce as much as $400 billion of "non-core" assets are up for sale when it meets with investors and analysts later in the day, a person familiar with the situation said. (Reporting by Blaise Robinson)