Health insurers are enjoying another positive quarterly checkup.

Like industry giants

Aetna

(AET)

and

Anthem

(ATH) - Get Report

, which reported solid results last week,

Humana

(HUM) - Get Report

on Monday posted strong third-quarter profits and offered a healthy outlook.

Sierra

( SIE) also issued an upbeat earnings report. However,

First Health

( FHCC) -- an underperformer in the group -- continues to suffer.

Humana reported third-quarter profits of 52 cents a share that beat the consensus estimate by 8 cents. The company also issued new 2004 and 2005 earnings guidance that topped Wall Street estimates. It expects profit growth from all of its business segments.

Humana is a major player in the Medicare market.

"We've exceeded our previous expectations for this quarter as a result of higher contributions from our government segment, while our commercial segment continues to show great improvement over the prior year," said Humana CEO Michael McCallister. "Humana's diversification strategy is playing out very well, as evidenced by this quarter's results."

But Goldman Sachs analyst Matthew Borsch labeled Humana "a government earnings story." He noted that Humana's government profits of $89 million topped his $72 million estimate, while the company's commercial earnings of $39 million fell $4 million shy of his expectations. He also pointed out that Humana's commercial enrollment declined in the third quarter and is expected to do the same in the fourth.

Investors focused on Humana's overall performance, however, pushing the company's stock up 9% to $20.88 late Wednesday morning. Pacificare -- another major Medicare player -- jumped 1.5% to $36.15.

"Strong Humana Medicare HMO results bode well for Pacificare, our favorite mid/small-cap stock that reports third-quarter earnings on Wednesday," Borsch explained.

Meanwhile, Sierra also beat Wall Street estimates, posting third-quarter profits of 90 cents a share instead of the 80 cents analysts had been anticipating. And Sierra, too, issued 2004 guidance that topped consensuses estimates.

The company caters to the fast-growing population of Las Vegas.

"Our disciplined pricing, attractive product line and broad provider networks continue their popularity with individuals and companies of all sizes in Las Vegas," said Sierra CEO Anthony Marlon. "With the area's unprecedented growth continuing unabated, we are optimistic that we will expand on this success as we head into 2005."

Prudential analyst David Shove applauded Sierra's results. He called the company's core earnings "robust" and its outlook "bright." He also portrayed the company's cost trends as more favorable than most.

Still, Shove did acknowledge that Sierra has weathered a "significant" military contract loss. The company issued 2005 guidance of $3.15 to $3.25 a share -- below the $3.27 consensus estimate -- to reflect that reduction in business.

Sierra's stock slipped 41 cents to $47.31 on the quarterly update.

First Health also weakened, falling 6 cents to $15.86, on news of an earnings miss. Excluding special items, First Health posted third-quarter profits of 31 cents that fell a penny shy of Wall Street estimates. The company saw both revenue and earnings decline from a year ago. Looking ahead, the company -- which is in the process of merging with

Coventry

( CVH) -- expects to post full-year profits of $1.25 to $1.28 a share, excluding merger expenses. Analysts were counting on profits to come in at the high end of that range.

Still, many analysts remain upbeat about the sector overall. Kathy Shanley of Gimme Credit on Monday expressed confidence in three of the biggest players -- Aetna, Anthem and Wellpoint -- despite new scrutiny of the industry by New York Attorney General Eliot Spitzer. The health insurers recently fell on fears that they would be hurt by a bid-rigging investigation focused on giant insurance broker Marsh & McLennan.

Shanley downplayed that risk, however.

"So far, no evidence of bid-rigging or other illegal practices has been made public," she wrote. And "the dollars involved are not large."

Meanwhile, Shove continues to offer a bright outlook for the sector as well. He pointed to recent employment data -- showing a decline in health insurance costs -- as fresh evidence for his positive view. He believes the decline indicates that medical cost trends will continue to moderate and boost insurance profits going forward.

"We recommend investors look at managed care companies, who are disciplined underwriters and have a differentiated advantage," Shove wrote. "They should post good earnings growth in the coming quarters."