Newark, N.J.-based Horizon had its ratings outlook downgraded from “stable” to “negative,” the result of three straight years of earnings declines, according to Standard & Poor’s.

Horizon Healthcare Services Inc., which operates as Horizon Blue Cross Blue Shield of New Jersey, and its wholly owned HMO subsidiary, Horizon Healthcare of New Jersey, have “good, but diminished, earnings; strong core market presence and capitalization; and geographic concentration in a very competitive marketplace,” the ratings services said.

“The negative outlook reflects our concerns regarding Horizon BCBSNJ’s continuing earnings deterioration caused by aggressive pricing in certain market segments, higher-than-expected claims trends, technology expenditures and a weak economy,” said Standard & Poor’s credit analyst Neal Freedman in a statement.

The ratings services said the company’s 2008 consolidated GAAP pretax operating income (which excludes realized gains and losses, conversion costs, and various other one-time items) totaled $169.4 million, down from $173.6 million in 2007 (excluding a $33 million prior-period reserve release) and $199.2 million in 2006.

Last year marked the third consecutive year of earnings decline. The corresponding return on revenue last year was 2.1%, compared with 2.3% in 2007 and 2.9% in 2006. During the four years prior to 2006, the company’s ROR remained in a tight range of 3.9% to 4.3%.

The service also affirmed its “A-“ counterparty credit and financial strength ratings on the companies.