Analyst: Health insurers' finances still strong

Companies like UnitedHealth Group Inc. and WellPoint Inc. remain "relatively well capitalized" and have available back-up financing from credit facilities or bank lines, analyst Charles Boorady wrote.

The Dow Jones industrials and other major indexes have fallen steeply recently, and the Federal Reserve and other leading central banks have cut interest rates to try to stem fears that a frozen credit market will trigger a global recession.

Last week, the federal government approved a $700 billion bailout to help stabilize markets.

Credit market fears caused a rate spike around mid-September for commercial paper, which is a short-term debt used by companies to finance day-to-day cash-flow needs. But insurers shouldn't see a material impact from this in their third-quarter results due to the timing of the spike and the fact that the debt comes due in stages, not all at once, Boorady wrote.

However, fourth-quarter earnings per share may be reduced by a couple of cents.

Boorady also said in the note that he doesn't envision a material earnings impact from long-term debt. He noted that only WellPoint and UnitedHealth have long-term debt maturing next year.

The third quarter ended Sept. 30, and managed-care companies will start reporting their results with UnitedHealth on Oct. 21. The sector also includes Aetna Inc., Cigna Corp. and Humana Inc.

These insurers started the third quarter strong, after most reported second-quarter earnings that beat expectations. But the financial market woes washed away much of that gain by the quarter's end.

The sector experienced mixed trading Wednesday afternoon, with WellPoint and Humana shares rising slightly. UnitedHealth stock fell nearly 4 percent to $19.84, and Aetna shares dropped 15 cents to $30.91.