Although, in theory, a House/Senate conference committee could insert a rigorous public option in the reconciliation process, if the current trend in Washington prevails, the health care reform bill that emerges from the committee will not have a national public option; nor will the Obama administration require one, the AP reported.

It could, however, offer states the opportunity to "opt-in" to a public option, or contain a "trigger" -- some level at which a national, public insurance program would take effect, if, for example, a certain percentage of a state's residents remains without health insurance after a specified year, say 2012 or 2014. The former would both enable states with existing, successful universal health care programs to continue them. It would also allow states -- provided they are meeting federally-set goals for universal coverage -- to participate in the federal program on an as-desired basis.

I'm reiterating my Buy rating for The Travelers Companies (NYSE: TRV), first recommended on April 24, 2009 at a price of $39.50. If you purchased TRV at that time, you're up a decent 20%.

Simply, look for The Travelers to continue to improve underwriting results and to capitalize on the flight-to-quality in property-casualty insurance market. Further, TRV's P/E of 9 gives those who didn't purchase shares in April an opportunity to do so now at an attractive price.

Regardless of how you feel about a public health insurance option offered by the government, interest at the policy level seems to be waning recently. If Democrats drop the idea of a public option as a component of health care reform, health insurance companies could benefit.

The way I see it, if the government starts offering health insurance as a public provider then new supply will have entered the market. According to my college Econ 101 text book, that new supply would have shifted the supply and demand curves towards lower prices and maybe lower profits.

Share of insurance company Progressive (NYSE: PGR) are moving higher this morning following better-than-expected numbers for its second quarter.

Going into this mornings earnings announcement analysts had been looking to see the nation's fourth largest insurer post earnings of 36 cents per share, but the company surprised to the upside with an actual 37 cents a share for its most recent quarter.

The market's flight-to-safety in late 2008/early 2009 spared few sectors, and it did not exempt the insurance sector, the upside of which is an insurance value or two for investors, and Aflac is one.

Aflac Incorporated (NYSE: AFL) is another one of those insurers that was rudely treated by Wall Street during the panic and paranoia that gripped markets with the onset of the global financial crisis. And it was rude: the Street took AFL's shares from a high of $68 to about $11, basically on the fear that Alfac would incur major losses from European bank hybrid bonds, including the threat of bank nationalization. To be sure, given the opaqueness surrounding much of the financial crisis, an AFL hair-cut was in order, but an 80% price drop? Please.

Just when you thought it might be safe to peek your head back into the world of economic reports, it has hit the wire that American families will be shelling out an average of $16,771 this year for healthcare costs. That's a new record, up $1,162 per family.

It's a vicious cycle -- hospitals, doctors, drug companies and others are hiking their rates to fight the recession. In turn, many companies, in an attempt to cut costs, have cut back on the amount they'll pay as benefits, putting the burden on the employees.

The insurance sector has had its share of woes, due to some companies dabbling in securities that perhaps they shouldn't have. But that does not mean there aren't bargains out there for moderate-risk investors, and with the aforementioned in mind, The Travelers Companies (NYSE: TRV) is worth a review.

Although both the underwriting and investment climates will remain a tough road up ahead, Wall Street has once again inordinately taken down a company's shares. The Travelers' actions to improve underwriting results and to capitalize on the flight-to-quality in property-casualty insurance market are not fully-reflected in TRV's shares -- not with a p/e of 9.

Another day of interesting news to watch. Not sure if you have read Simon Johnson's article in the Atlantic "The Quiet Coup" about how financial oligarchs in the U.S. are delaying the Big Reckoning, but its thoughtful and sobering reading.

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.

As the U.S. market wraps up a wild day in which central banks cut rates in unison, one sector has no doubt at all about where it wants to go -- down. Three leading insurance companies have lost as much as a 28% of their stock market value in today's trading alone. How so? As I posted, insurers are the next part of the financial foundation to crumble due to mortgage-backed securities (MBS) gone sour.

Here's the latest insurance industry carnage:

• XL Capital (NYSE: XL) -28%. The property-casualty insurer holds $29 billion in asset-backed securities such as MBSs and collateralized debt obligations (CDOs), 330% of its shareholders' equity.
• Met Life (NYSE: MET) -27%. This life insurer announced plans to sell 75 million shares and to fire an unspecified number of employees. It also expects to earn between 83 cents and 93 cents per share -- way below analysts' $1.44 forecast.
• The Allstate Corp. (NYSE: ALL) -21%. This property-casualty insurer holds $83 billion in fixed income securities such as MBSs, 421% of its shareholders' equity -- and the $22 billion in Level 3 -- difficult to value -- fixed income securities exceed its $19.7 billion in capital.

I expect this problem to affect every insurance company to some extent. Will the $810 billion rescue plan relieve these institutions of their bad investment decisions? We might know in a year. Until then, look out below.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.

It was July 1, 2008 when I first posted Serious Money: Five stable stocks for troubled times. The title speaks for itself. This update, after nine weeks and horrible market conditions, is through Friday October 3, 2008.

The index for comparison is the Standard & Poor's 500 Index, which closed on June 30, 2008 at 1,280.00. The S&P closed Friday at 1,099.23 , down 14.12%.

Each of my five picks is beating the market and three of the five are actually up despite crushing news in the financial sector, unemployment and housing. Congress did pass a Wall Street backstop/bailout bill that President Bush has signed, but only after adding another 450 pages and $130 billion to the amount. Although the five stocks have averaged a 0.75% loss, as intended, they easily beat the S&P by 13.37%.

Here are the five stocks that I still think are worth considering. For my original rationale see the linked story above.

1) Johnson and Johnson (NYSE: JNJ) -- when recommended, the stock closed at $64.34 and paid a 2.89% dividend yield. It closed Friday at $66.16 -- up 2.75%. JNJ was featured in Barron's this month as the most respected from the top 100 companies in the world.

2) Teva Pharmaceuticals ADR (NASDAQ: TEVA) -- when recommended, the stock closed at $45.80 and paid a 1% dividend yield. It closed October 3 at $46.08 -- up 0.06% 0.62% Teva (of Isreal) is the largest generic drug company in the world and just got bigger through the acquisition of Barr Pharmaceuticals last month.

TheStreet.com's Jim Cramer says this insurance company is a sign of lower costs, and it's not done yet.

How many ways can I explain that what's going on is massively deflationary? How about by pointing out one of the most sensitive stocks to deflation: Prudential (NYSE: PRU) (Cramer's Take). Take a look at the move this stock has had from its lows. It's almost a 50% move! That's remarkable. It is a sign that everything is worth less than it was a couple of months ago!

I have long used the price of conservative insurance companies -- and PRU is a conservative one -- as a gauge of inflation. Now, I know that Barron's had a positive article about PRU this weekend, but all you really got was a rehash of what an analyst has been saying. That's not behind the gain.

This company is a bulwark of deflation. Why anyone thinks that inflation is still a problem after looking at that chart is just nuts.

The losses from Gustav are significant, but not nearly as bad as they could have been.

That's the early read regarding onshore / offshore property and infrastructure damaged caused by Hurricane Gustav, with losses pegged at $4 billion to $10 billion, according to estimates by Risk Management Solutions. In contrast, Hurricane Katrina in 2005 caused about $50 billion in damages.

Risk Management said losses from Gustav were lessened by the fact that the storm weakened, and hit the coastline as a Category 2 hurricane, and the fact that it came ashore about 70 miles southwest of New Orleans. Those factors, combined with better preparation by companies with vulnerable property in the area, will result in lower damages totals, Risk Management said.

However, RMS was quick to point out that the $4-10 billion damage total does not include loses from flooding in New Orleans that could occur in the days ahead.

Gustav: Little U.S. GDP impact

Economist David H. Wang, who runs U.S. GDP models each quarter, said Tuesday he expects "only a minimal U.S. GDP impact from Gustav."

"Of course human safety is the primary concern. But regarding regional GDP, the Southeast U.S. will incur a 0.1-0.3% GDP reduction in the third quarter from the hurricane, but the overall impact on U.S. GDP will be minimal," Wang said.

AIG (NYSE: AIG) may have a new CEO, but his track record is no better than that of the man he replaced. The firm said its second-quarter net loss was $5.36 billion, or $2.06 a share. AIG blamed the housing and credit markets, but, of course, the real trouble rests with its risk management. According to Reuters, "AIG said it recorded $5.56 billion in second quarter unrealized market valuation losses on credit default swaps, the same area that led to losses in the prior two quarters."

While the company's insurance and investing units are still profitable, AIG may have to post similar losses in the next two quarters if the US credit and housing markets get worse. It has already moved ahead with its plan to raise $20 billion. It may have to add substantially to that to offset big deficits .

With AIG's stock at about $25 and a market cap of $72 billion, another capital injection cold drive shares down to $20.

In other words, AIG's shares may be down over 50% this year, but that does not make them a good investment. The stock could actually still be one of the most risky among large-cap firms. AIG joins many other financial companies in finding that replacing CEOs does them no good.

Douglas A. McIntyre is an editor at 247wallst.com.

In the expectations game, Citigroup (NYSE: C) $2.5 billion loss is great news for Wall Street. Bloomberg News reports that the analysts it surveyed expected a $3.67 billion loss, or 54 cents a share -- so Citi's results were $1.2 billion better than expected. But there were wide variations on what analysts expected Citi to lose -- from 51 cents to 67 cents.

This reminds me of the story of the boy who comes home from school to tell his mother about a grade he got on a test. Rather than bow his head in shame, he walks into the kitchen with head held high and a big smile on his face. And he announces: "Great news mom! I got a 70!"

The key reason for Citi's loss is the $7 billion in credit-related write-downs it took. These included reductions in the stated value of its subprime mortgage exposure and its investments in monoline insurance companies including Ambac Financial Group Inc. (NYSE: ABK) after they lost their AAA credit ratings. Analysts expected write-downs as high as $12 billion.