Hartford Financial Services (HIG) attracted unusually heavy put volume on Wednesday, with 1.7 times the expected number of puts crossing the tape. About 10,000 put options were traded on the insurance issue during the course of yesterday's session, compared to fewer than 8,000 calls that changed hands.

Data from the International Securities Exchange (ISE) points to a strongly bearish bias. On Wednesday, options traders on the ISE bought to open 2,554 puts on HIG, while only 339 calls were purchased. The equity's single-day ISE put/call volume ratio of 7.53 underscores a distinct preference for pessimistically oriented options.

Catastrophe bond capacity is maturing, and not much of it is coming back. In the first quarter, $1.8 billion in cat bond risk capital matured, and only $508 million returned in the form of new issuances, according to Thomson Reuters. This quarter, $2.77 billion is maturing, and the absence of first-time issuers makes it unlikely that the market will replace it all. More than a billion of it was from State Farm's Merna Re transaction. The successor to it has already been issued, cleverly named Merna Re II, at only a fraction of the previous bond.

Merna Re, the largest catastrophe bond of all time, is set to mature in June, and State Farm is already putting together its replacement, the creatively named Merna Re II. The successor, planned for issuance in April, is said to be for $400 million in risk capital, though investor demand could push it as high as $700 million. This still pales in comparison to the $1.2 billion that the original brought in the door.

If State Farm is able to stimulate demand for Merna Re II, which would protect the company from non-California earthquake risk in the U.S., it will be third cat bond to come to market in 2010, which is expected to be a strong year for this form of risk transfer. The cat bond market fell silent after the near-collapse of American International Group (AIG) in September 2008 but was still the third busiest in terms of capital issued in the history of the cat bond market. Heading into 2009, prospects for the cat bond space seemed uncertain, but a robust fourth quarter eventually resulted in a year-over-year increase, driven mostly by repeat issuers.

The shares of Hartford Financial Services (NYSE: HIG) are joining in a sector-wide rally today, with insurance stocks catching a halo lift from their cousins in the financial sector. Today's jump probably comes as a relief for HIG investors, who haven't had much to cheer about lately.

During the past 52 weeks, HIG has given up 93.8% of its value, falling under consistent pressure from its 10-week and 20-week moving averages. Last Friday, the stock tumbled to an all-time low of $3.33. Although the security's price action shouldn't inspire much in the way of bullish sentiment, option players apparently think that Hartford shares have nowhere to go but up.

Positive thinking can be very powerful with respect to companies operating in this environment. Many stocks are priced for the worst possible outcome, thus any sort of positive news will be received with enormous relief.

That relief can translate into huge gains for investors.

In the positive spotlight Friday, insurance company giant Hartford Financial Services Group (NYSE: HIG) has been in the cross hairs of short sellers since the AIG (NYSE: AIG) debacle, falling from a 52-week high of nearly $100 to a low of $4.

Given huge losses in the stock market and with questions about its balance sheet, investors priced HIG for failure.

Not so fast. The company stated Friday that all was not as bad as it appeared as it raised its 2008 forecast and said that it had enough capital to withstand further deterioration in the equity market.

That last tidbit was the best news of all, especially for beaten down common shareholders. Shares of HIG are trading for more than a 100% gain today as a result. That's right, shares doubled in value in one day.

Is this move sustainable? I think the answer is "yes."

Even AIG, with all of its capital problems, ends with shareholders being diluted by 80%. It may even be something far less. If AIG can sell businesses and pay off government loans, shareholders may end up doing much better than expected.

The same is true with HIG, and it is far from the government trough.

Jamie Dlugosch is a contributor to InvestorPlace.com.

The Treasury has decided that just bailing out American International Group (NYSE: AIG) to the tune of $122.8 billion and counting is not going far enough. Now it's time to use our money to bail out more insurance companies. As it turns out, the insurers that are likely to get the money are the same ones that took a blood bath earlier this month. The companies seeking a bailout include Met Life (NYSE: MET), Hartford Financial Services (NYSE: HIG), and Prudential Financial (NYSE: PRU).

You may be wondering, what crime did I commit that makes it socially acceptable for my money to be used to bailout the insurance industry? Aren't my home, auto, and life insurance premiums up to date? If so, what gives the insurance industry the right to use my taxes to pay for their investment mistakes? Because that is exactly what the insurance companies are doing.

How so? Their books are loaded down with asset-backed securities such as mortgage-backed securities (MBSs) and collateralized debt obligations (CDOs) that vastly exceed their shareholder's equity. These securities are not worth much -- in fact, a recent report suggested that CDOs were worth 10 cents on the dollar at best. If the insurers have these stated on their books at 60 cents on the dollar, the mark to market process could wipe out a significant portion of their capital.

Analyst upgrades:

• Jefferies upgraded shares of Air Products & Chemicals, Inc. (NYSE: APD) to Buy from Hold and raised its target to $79 from $63 on valuation as they believe the stock is oversold at current levels and that the company is well positioned to outperform in a slowing demand environment.
  
• Goldman upgraded the U.S. Insurance Brokers sector to Attractive from Cautious and upgraded AON Corporation (NYSE: AOC) and Marsh & McLennan Companies, Inc. (NYSE: MMC) to Buy from Neutral.
  
• Covanta Holding Corporation (NYSE: CVA) was upgraded to Outperform from Perform at Oppenheimer. The firm recommends buying shares because they believe that its business model is defensive and its long-term contracts provide stability.
• First Solar, Inc. (NASDAQ: FSLR) was raised to Market Perform from Underperform at Friedman Billings.
  
• Baird upgraded IMS Health, Inc. (NYSE: RX) to Outperform from Neutral.
  
• The Progressive Corporation (NYSE: PGR) was lifted to Neutral from Sell at UBS.

With rumors of bankruptcy swirling, the shares of Hartford Financial Services Group Inc (NYSE: HIG) have plunged over the past few weeks. Hey, if AIG (NYSE: AIG) can implode, why not the others?

Well, the death of Hartford has been greatly exaggerated. Today, the company announced that it received a $2.5 billion capital infusion from Allianz, a mega German financial firm. Despite today's huge drops in the markets, Hartford's shares spiked 16% to $31.88.

The deal is certainly beneficial to Allianz, which gets preferred stock (that converts to common shares at $31 a piece) as well as junior subordinated debentures (there are also warrants to buy $1.75 billion of Hartford at $25.32). Yet, it's still a nice boost for Hartford.

Essentially, Hartford has an extensive portfolio of investments, which have suffered declines (it looks like the recent carnage in hedge funds was a big contributor). In fact, the company believes that there will be a Q3 loss of $8.50 to $8.80 per share.

But, with the capital infusion, Hartford should weather the storm – as well as be positioned to deal with possible credit downgrades (there will be $3.5 billion in excess capital). What's more, there may be opportunities to capitalize on the wreckage. After all, AIG is preparing to sell a large number of assets.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He is also the founder of BizEquity, a valuation website