The Treasury Department said life insurers are eligible for capital infusions under the federal rescue program, and applications are under review.
As a result, Hartford Financial Services Group Inc.'s shares rose 13.49% Wednesday, to $9.59. During the session the stock had been trading as much as 35% above Tuesday's closing price.
Lincoln National Corp. of Philadelphia soared 32.8%, to $9.15.
"There are a number of life insurers who met the requirements for the Capital Purchase Program," said Andrew Williams, a Treasury spokesman. "These are among the hundreds of financial institutions in the CPP pipeline that will be reviewed and funded as appropriate on a rolling basis."
He noted that an insurer must own a federally insured institution to be eligible.
Andrew Kligerman, an analyst with UBS AG in New York, wrote in a research note issued Wednesday that the $700 billion Troubled Asset Relief Program, which includes the CPP, "could be a source of relatively cheap capital" for insurers. "It likely will temporarily boost investor confidence, but Tarp funds alone cannot eliminate the capital and liquidity pressures caused by weak credit, equity market and economic conditions."
North American insurers have reported more than $190 billion of losses and writedowns tied to the collapse of the mortgage market. Eric Berg, a Barclays PLC analyst, wrote in a research report that corporate debt defaults are poised for a "significant" increase this year and may end up costing life insurers more than losses on securities linked to subprime, alternative-A and commercial mortgages.
The American Council of Life Insurers has said U.S. life insurers, which hold about $1 trillion of corporate debt, need Treasury aid to buy more bank bonds and help inject liquidity into the nation's credit markets. Frank Keating, the trade group's president, said last month that 12 life insurers await approval for Tarp applications.
More than $100 billion of Tarp funds remain, according to projections by the Government Accountability Office.
"Tarp is more of a last resort for life insurers, rather than a preferred option," Suneet Kamath, an analyst at AllianceBernstein Holding LP's Sanford C. Bernstein & Co., wrote in a research note.
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