Oct. 22 (Bloomberg) -- Coventry Health Care Inc. fell the most in its 17 years of trading after the provider of health benefits said rising medical costs and bad investments pushed third-quarter profit down 49 percent.

Coventry fell $14.56, or 51 percent, to $13.93 at 4:04 p.m. in New York Stock Exchange composite trading. The Bethesda, Maryland-based company, which has fallen 77 percent this year, was downgraded today by Merrill Lynch, J.P. Morgan and Standard & Poor's.

The insurer said yesterday that it took a $36.2 million charge for bad investments, including an $11.4 million loss on its position in Lehman Brothers Holdings Inc. More troubling was the company's report of increasing medical costs because it came too late in the year to affect price-setting for next year's policies, said Carl McDonald, an analyst with Oppenheimer & Co. in New York.

``As a result, 2009 becomes essentially a throwaway year, with the first hope of a meaningful recovery not occurring until January 2010, when the commercial and Medicare business is re- priced,'' McDonald said in a note today to investors.

Net income for the third quarter decreased to $85.5 million, or 58 cents a share, from $168.7 million, or $1.08, a year earlier, Coventry said. Profit missed analysts' average estimate of $1.06 a share. Revenue rose 18 percent to $2.98 billion.

The company said it would delay until January its usual October forecast of earnings for the following year.

Standard & Poor's lowered its counterparty credit rating on Coventry to BBB- from BBB. The ratings service gave Coventry a negative outlook that reflects the potential for another downgrade within 18 months.

Douglas Simpson of Merrill Lynch in New York changed his rating to underperform from buy, and John Rex of J.P. Morgan in New York dropped Coventry to underweight from neutral.

To contact the reporters on this story: Avram Goldstein in Washington at agoldstein1@bloomberg.net; Larry Liebert in Washington at lliebert@bloomberg.net;

Last Updated: October 22, 2008 16:13 EDT