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Big life insurance stocks finished the day higher Friday, with MetLife and Hartford Financial Services leading the way after suffering steep losses Thursday.

But the stocks pulled back from their highs along with the rest of the stock market after the House approved the bank bailout bill Friday afternoon.

Shares of Hartford (HIG, Fortune 500) rose 6%, recovering a bit from its 32% plunge on Thursday. MetLife (MET, Fortune 500) gained 2% Friday after dropping 15% Thursday.

Donald Light, senior analyst for the financial research firm Celent, said the passage of the bank bailout bill should help restore some confidence in the health of insurers going forward.

"The major hoped-for impact is that some of the knee-jerk responses that are not really based on any kind of financial reality will...become much more rare," said Light shortly after the bill passed.

Insurance stocks were hit hard Thursday, partly because of investor nervousness about finance stocks in general ahead of the House's vote but also because comments from Senate Majority Leader Harry Reid, D-Nev. about a potential bankruptcy in the industry.

On Wednesday, Reid said he had heard from someone that an unnamed "major insurance company" was "on the verge of going bankrupt."

But a spokesman for Reid backtracked Thursday and said the senator "is not personally aware of any particular company being on the verge of bankruptcy." Spokespersons for MetLife and Hartford both told CNNMoney.com that their businesses were solid and they were not in danger of going bankrupt.

In addition, an analyst upgraded MetLife Friday morning.

Jeffrey Schuman, analyst for Keefe, Bruyette & Woods, raised MetLife to "outperform" from "market perform" and said in a report that the stock, which has plummeted 32% over the past two weeks, is now attractively valued.

Schuman said MetLife has enough money to absorb impending losses. He said the company has about $3 billion in excess capital and another $1.5 billion to $2 billion at the operating level and that the company generates an additional $1 billion in excess capital annually.

"This is more than enough to absorb what we conservatively estimate at $3.9 billion of after-tax credit losses over the next two years," wrote Schuman.

The upgrade also appeared to help boost sentiment for the insurance group.

Light, the analyst for Celent, said that, on average, life insurance companies' holdings in some of the riskier mortgage-related investments may be less than investors thought.

"The amount of subprime real estate is pretty limited on the balance sheet of the industry as a whole," said Light.

Shares of Principal Financial Group (PFG, Fortune 500) and Paris-based AXA (AXA) rose 3% and 4.5% respectively Friday. Prudential Financial (PRU, Fortune 500) and Manulife Financial (MFC), which both fell sharply Thursday, each gave up gains from earlier in the day and finished Friday lower.

Also on Friday, shares of the beleaguered insurance giant AIG (AIG, Fortune 500) fell 3.5% after the company said it would sell part of its business to help pay off an $85 billion loan from the Federal Reserve. The stock was trading higher for most of the day but fell after the House passed the bailout bill.

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