(MONEY Magazine) – Last month we recommended insurer American International Group (AIG), arguing that the Florida hurricanes would likely boost insurance prices. Then a very different kind of storm hit. In mid-October, New York State attorney general Eliot Spitzer announced an investigation into how insurance companies and brokers set prices. Spitzer alleges that brokers steered business to some insurers, even rigging bids. The regulator already has forced one brokerage executive, Marsh & McLennan (MMC) CEO Jeffrey Greenberg, to resign. He's also subpoenaed AIG, and two of its employees pleaded guilty to charges connected to the Marsh case. Investors are nervous. By the end of October, AIG was at $61, down 11% since MONEY recommended it.

There are too many uncertainties now to make AIG a buy for most investors. But for those with a taste for contrarian bets, there's still a value case for this stock. Here are the three big risks hanging over AIG and how each might be resolved:

THE INVESTIGATION LINGERS As long as the market is guessing about how far the New York probe might reach, AIG shares may languish. But history suggests that whatever Spitzer does, he'll do it quickly. His mutual fund investigation started in September 2003, and the bulk of the cases were settled by June 2004. So all this could be over by spring.

REFORMS STUNT PROFITS One open question is how much AIG benefited—if at all—from too-cozy relationships with brokers. But it seems logical that a more transparent insurance market could help push prices of corporate policies down. AIG gets about 20% of its business from such policies. Rob Haines, an analyst at CreditSights, says that profits from that business could fall 10%. That means AIG might earn $5.10 a share, 10¢ less than expected, in 2005. That would give it a price/earnings ratio of 12—still cheap.

HANK HITS THE ROAD AIG boss Hank Greenberg—who is also the father of Marsh's ousted CEO—is looking vulnerable. The company was facing investigations by other regulators before Spitzer came along. What happens if the board ousts the man who led this company's strong growth? It might actually be good news. Wall Street has long worried about the lack of a succession plan for Greenberg, 79. If he goes, a cloud that's been hanging over the stock could finally clear. "This is one of the world's greatest companies, trading at a way-below-market multiple," says portfolio manager Robert Torray, whose funds hold 2.2 million AIG shares. "We have been buying more." —STEPHEN GANDEL