Medical costs ate into premium revenue more than a year earlier, but less than some analysts expected. Aetna's report follows disappointing medical cost trends posted by rivals UnitedHealth
"Better-than-expected (medical cost ratio) reported by Aetna should lend support to the managed care group," J.P. Morgan analyst William Georges said in a research note.
Net income rose to $434.6 million, or 81 cents a share, from $401.7 million, or 68 cents a share, a year earlier. The results beat the analysts' average forecast by 4 cents a share, according to Reuters Estimates.
Revenue rose 7.5% to $6.7 billion.
At the end of March, Aetna had 15.7 million members in its health plans, up 1.8% from a year earlier.
Aetna's total medical benefit ratio -- which measures medical costs as a percentage of premium dollars -- worsened to 80.7% from 80.1%.
The ratio for the company's commercial business that serves employers edged up to 79.6% from 79.4%. But that commercial gauge was better than expected, according to Goldman Sachs analyst Matthew Borsch.
Operating expenses as a percentage of revenue improved to 18% from 19.1%.
Aetna raised its 2007 operating earnings-per-share outlook to $3.35 from $3.30. Analysts were expecting $3.29.
For the second quarter, the company forecast profit of 79 cents a share. The analysts' average estimate is 78 cents.
Aetna is the third major U.S. health insurer to report first-quarter earnings. UnitedHealth and WellPoint posted higher net income, but medical cost trends have spooked investors.
Aetna shares are up about 4% this year, outpacing WellPoint and UnitedHealth.