"This scenario," said Mr. Zaharuk, "results in intense pricing pressure in order to maintain market share. In addition, new commercial and Medicare Advantage products have added more operational complexity and financial risk for the insurers."

"Although more conservatively invested than other sectors, the health care insurance sector will feel the impact of credit impairments and lower investment returns should economic conditions continue to deteriorate," he explained.

"Additionally, the vulnerability of an employer-based system for health care coverage is exposed in a recessionary environment. Layoffs and coverage elimination by employers have an immediate negative impact on the sector's revenues and earnings," the analyst noted.

Lastly, he said, "the current uncertainty surrounding political solutions with respect to health care at both the state and federal levels hinders insurers' ability to develop focused strategic plans."

Mr. Zaharuk added, "More urgently, reimbursement cuts to insurers for Medicare Advantage programs and pressure on state budgets for Medicaid spending are threatening the growth and profitability of these segments."

But, not all companies will face the same degree of ratings pressure.

Mr. Zaharuk said the rating impact on any particular insurer will be determined by several external and internal factors:

o A company's size and product diversity.

o Financial profile, including profitability, capital adequacy and financial flexibility.

o Quality and adaptability of management.

o Severity of the current economic downturn.

o The degree and swiftness of health care reform.

The report is titled "US Healthcare Insurers: Industry Pressures Prompt Negative Outlook."