Aetna Thursday posted a 16% rise in second-quarter earnings as enrollment increased, and the No. 3 U.S. health insurer raised its full-year forecast.
The results, which beat Wall Street estimates, follow reports from rivals UnitedHealthGroup and WellPoint, which posted higher profits but failed to excite the market.
Net income rose to $451.3 million, or 85 cents per share, from $389.5 million, or 67 cents a share, a year earlier.
Revenue rose 9% to $6.8 billion.
Aetna reported operating earnings of 83 cents per share, excluding an 8-cent per share gain from a discontinued product and 6 cents in net realized capital losses. Analysts on average had expected 80 cents per share, according to Reuters Estimates.
"Earnings were better than expected, and clean, driven principally by higher enrollment," Bank of America analyst Joseph France said in a research note.
Aetna also affirmed its target of increasing full-year membership by 575,000 to 600,000 members, a day after WellPoint lowered its membership forecast.
"We have significant enrollment opportunity for growth throughout the year based on our highly diversified focus on different customer segments," Aetna CEO Ron Williams said in an interview.
Citing the results, Aetna lifted its full-year operating earnings per-share forecast to a range of $3.40 to $3.42 from its prior view of $3.35. Analysts have expected $3.37.
Aetna's enrollment in its health plans rose 2.3% from a year earlier to 15.8 million members. So far this year, Aetna has added 334,000 members.
Williams said many customers have made their coverage decisions for September -- a seasonally higher month for enrollment decisions -- giving the company confidence in its full-year forecast.
The company's medical benefit ratio, a key measure of the percent of premiums it spends on medical costs, improved to 81.5% from 81.9% a year earlier. Its ratio for its commercial business serving employers also improved, to 80.5% from 81.1%.
Investors have been closely watching insurers' medical-cost ratios, which are considered a crucial measure of profitability.
Aetna shares were off 1 cent at $50.64 in afternoon trade on the New York Stock Exchange. They have risen about 18% in 2007, outperforming a roughly 3% increase for the S&P Managed Health Care index, a barometer of large health insurers.
Aetna shares have outpaced those of most other health insurers this year.
"For a long time, Aetna sold at a discount" to other health insurers, said Woody Small, chief investment officer with Boston Private Value Investors, who said the firm has held Aetna stock since 2001.
"That discount is beginning to get paired back a little bit... They're executing well," Small said.