Wall Street investment analysts continue to look for signs of stability and instability at American International Group Inc.[@@]

AIG, New York, impressed observers Wednesday by reporting a 50% increase in net income despite the investigations that led to the ouster of Maurice Greenberg, the company’s longtime chairman.

Peter Streit, an analyst at Williams Capital Advisors L.P., New York, is optimistic about AIG’s prospects.

“Indications are that the company is about to reach an agreement with [New York Attorney General Eliot] Spitzer for a dollar figure in the area of $850 million,” Streit says.

Such a figure would be in line with recent settlements at the big insurance brokers and would not put much of a dent in a company with AIG’s level of capitalization, Streit says.

Many AIG segments performed surprisingly well during the second quarter, Streit adds.

But Paul Newsome, an analyst at A.G. Edwards & Sons Inc., St. Louis, is expressing concern about press reports that Greenberg may have tried to cover up records sought by Spitzer. “It has become clear to us that the regulatory issues will be long lasting for AIG,” Newsome writes in a note to investors.

In addition, “there is considerable investor uncertainty about Martin Sullivan, the new CEO, and whether he might have been involved in any wrongdoing,” Newsome writes.

Before taking over as AIG’s chief executive officer, Sullivan ran the company’s property-casualty insurance business.

Ron Frank, an analyst at the Smith Barney unit at Citigroup Inc., New York, says he thinks AIG’s stock has reached a natural limit since rising 25% from a recent low point in April.

Frank says he also wants to hear the results of a top-down review of the company’s insurance reserve structure. Milliman Inc., Seattle, is supposed to complete the review sometime this year.