Aetnareported an 8% rise in first-quarter profit on Thursday, helped by an increase in enrollment and improved operating cost controls, and the health insurer raised its 2007 forecast.
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 UnitedHealthand WellPoint earlier in the month.
"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.