Aetna posted a better-than-expected third-quarter profit Thursday as membership increased, and the health insurer projected next year's earnings would grow faster than Wall Street expected.
Shares rose more than 3 percent after the No. 3 U.S. health insurer also lifted its enrollment forecast for this year and continued to reassure investors about its medical cost trends.
Aetna shares have risen 27 percent this year, outperforming most large rivals.
"Aetna needed solid (third-quarter) results to ... prove that its momentum in the first half was sustainable, and it looks like it got them," Bank of America analyst Joseph France said in a research note.
The company is enrolling more members in its Medicare health plans, where it has a smaller presence than other insurers, as well as adding enrollees among students, and through contracts with governments and unions.
Third-quarter net income rose to $496.7 million, or 95 cents per share, from $476.4 million, or 85 cents per share, a year earlier.
Ahead of Forecast
Excluding net realized capital losses, operating earnings were 97 cents per share, 6 cents ahead of the analysts' average forecast, according to Reuters Estimates.
Revenue rose 11 percent to $6.96 billion.
Aetna's results came after quarterly reports from larger rivals UnitedHealth Group and WellPoint received a mixed response from investors.
Aetna reported medical membership of 16.6 million at Sept. 30, about 1.2 million more than a year ago. Enrollment benefited from the company's August acquisition of Schaller Anderson, which is focused on Medicaid plans for low-income Americans.
The Hartford, Connecticut-based company has added 562,000 members through the first three quarters, excluding acquisitions.
It raised its full-year enrollment-growth target to 600,000 to 650,000 members, up from the previous range of 575,000 to 600,000. It also projected adding in excess of 650,000 members next year.
Aetna's medical benefit ratio, the percentage of premiums spent on medical costs, worsened to 79.4 percent from 78.8 percent a year ago. The ratio for the company's commercial business serving employers was 78.6 percent, better than the estimates of some analysts.
Goldman Sachs analyst Matthew Borsch said the better-than-expected commercial medical-cost ratio "should bode well for the remainder of managed care earnings season."
Aetna raised its full-year forecast for operating earnings per share to $3.48, against its previous outlook of $3.40 to $3.42. It projected 2008 operating earnings of $4 per share, an increase of 15 percent.
Analysts expect $3.43 for 2007 and $3.89 for next year.