Citing earnings deterioration, Fitch Ratings has revised the outlook of Health Insurance Plan of Greater New York to “negative” from “stable,” while also affirming a pair or ratings.

Fitch affirmed the “BB+” issuer default rating and “BBB-”insurer financial rating of the New York, N.Y., company.

Regarding the insurer’s outlook, Fitch noted that in 2007 and 2008, profitability for HIP-NY was materially weakened, primarily by the company’s Medicaid business. Also, net income has been negatively affected by significant “other than temporary impairments taken on the company’s asset portfolio,” Fitch said.

The ratings service estimates that the insurer’s consolidated statutory net income dropped from a $267 million profit in 2006 to a $102 million loss in 2008.

“If HIP-NY’s earnings do not generate a profitable operating margin in the near term, the ratings may be downgraded,” Fitch warned.

The affirmed ratings continue to consider the company’s business profile, which contains heavy concentration risk, particularly to the economic conditions of the New York metropolitan area and a very large single-client exposure with the city of New York’s group health plan, Fitch noted.

While the ratings service said it believes the company is well entrenched in this account, the sheer size of this plan creates exposure to a significant risk if this account were to leave.

Fitch also noted that following a series of mergers and acquisitions in recent years, it views HIP-NY in the context of its parent company, EmblemHealth Inc., and affiliated corporations. These operations are all considered core operations, as all provide a significant share of total revenue, according to Fitch.

Fitch said it believes that overall membership trends will remain level and the New York City account will remain a long-term client.

EmblemHealth is seeking conversion to a for-profit corporation and if this occurred, Fitch said it will evaluate any potential changes to the corporate and financial profile.