In the wake of the Treasury Department’s delaying for seven months a decision to provide bailout funds for eligible life insurance companies, some of those insurers who initially indicated interest in the program have changed their mind, while others are apparently still looking forward to receiving those funds.

The Treasury confirmed on April 7 that it has decided to provide aid for insurers if they met the criteria for eligibility of having a federally regulated affiliate.

“There’s no reason to disqualify them,” said a Treasury official, “because they meet the criteria.”

But, according to a Treasury spokesman on April 15, “nothing is imminent” in providing aid for any particular insurance company.

Jason Weyeneth, CFA, an analyst in New York for Sterne Age, which is based in Birmingham, Ala., said that for the insurers that remain eligible and are pursuing the funds, “investors also are looking favorably on insurers getting aid.

“Life insurance stocks have performed better since the April 7 Treasury announcement,” he said.

The program for which they remain eligible is the Capital Purchase Program of the Troubled Asset Relief Program launched by the government last October.

But the original list of 12 applicants who applied for aid has shrunk by at least three, and several other large insurers–seeing participation as a mixed bag–are also expected to decline to participate, according to Weyeneth.

Three life insurers announced recently that they won’t be getting the aid. They are Genworth Financial, which said it has been ruled ineligible for the program because its application to purchase a federally regulated thrift was not processed by the deadline established by Treasury for eligibility; Protective Life Corp., which dropped out because its contract to buy a Florida bank holding company required it to buy the company with TARP capital before April 1; and MetLife, which announced that it is no longer considering accepting the aid.

In an announcement after the market closed on April 13, MetLife disclosed that it is one of the 19 potentially systemically-risking institutions undergoing a “stress test” of its financial viability by the Federal Reserve Board, which regulates its holding company.

But MetLife said in a statement by CEO C. Robert Henrikson that the company has decided it does not need to participate in the CPP.

Henrikson said MetLife has about $5 billion in excess capital, a strong balance sheet and leading market positions in both the group and individual insurance businesses.

He added that MetLife repositioned its investment portfolio more than a year ago in anticipation of the current recession, completing a $2.3 billion common stock offering in October 2008. The company also remarketed more than $1 billion in debt earlier this year.

“We have therefore decided not to participate in the [CPP],” Henrikson said. “We are confident that we have the financial strength to continue to succeed now and over the long-term.”

Weyeneth said the unspoken reason that MetLife dropped out–and he expects Prudential Financial and Ameriprise Financial to also drop out–is the unanticipated baggage that participation in the program has yielded for the banks and thrifts that are in it.

Reasons for dropping out include concerns about opening themselves up for criticism of their policies by Congress and the public at large, and limits on hiring of foreign personnel and on bonuses and other compensation for top executives imposed by the Treasury, Federal Reserve Board and White House under public pressure.

Lincoln National also recently announced that it was withdrawing from consideration for another, separate program, the Temporary Liquidity Guarantee Program. Lincoln has not commented on the CPP since it announced in November 2008 that it had applied to participate in the program.

The Phoenix Companies also has announced that it has applied for CPP aid.

Weyeneth said he expects the remaining institutions that have applied, such as Hartford, Principal and Lincoln National, to accept the aid if provided.

“Hartford Financial, in our view, certainly needs it,” Weyeneth said. “Everyone would agree that HIG has more capital constraints than the other three. It is a prime candidate and would take it if offered.”

Weyeneth said MetLife is different since it is the only insurer with a holding company that is a bank holding company. MetLife has been a federally chartered bank holding company since it set up MetLife Bank N.A. in 2001, around the time it converted from a mutual insurer to a stock insurer.

“None of the other insurers are set up that way,” Weyeneth said. “This is an important difference between insurers and banks.”

He said that, unlike banks, “if you would look at the actual capital structure of insurers, all are in pretty good shape.”

The difference is between their holding companies and their operating subs, Weyeneth said.

“All operating subs are in strong shape, but most holding companies have problems because the predominant source of their cash flow is dividends from operating companies, which are likely to be stressed because of the economy,” he said.