By TOM MURPHY,  AP Business Writer

INDIANAPOLIS (AP) _ Aetna Inc.’s third-quarter net income slipped 1 percent on a charge for an early retirement program, but the performance trumped expectations and the health insurer raised its 2011 earnings forecast.

The Hartford, Conn., company said Thursday that lower-than-expected use of health care continued to help its performance, along with disciplined pricing and medical cost management.

Company shares jumped 4 percent, or $1.61, to $40.51 in pre-market trading.

Aetna saw a $177-million gain in the third quarter because claims leftover from previous quarters _ mostly the second quarter– came in lower than expected, and its health care costs fell 5 percent to $5.36 billion mainly due to the use trend.

For the past several quarters, health care utilization has grown at a slower clip than insurers expected when they set premiums.  That has helped Aetna and its competitors turn in strong performances. Analysts say consumers tend to scale back their use of care after a recession by putting off elective procedures or skipping doctor visits.

Health care use tends to pick up toward the end of the year, when consumers pay off their nsurance deductibles and seek care before those deductibles renew in the new year. But Citi analyst Carl McDonald said in a Thursday morning note he has not seen evidence that use is rising “by any meaningful amount.”

UnitedHealth Group Inc. and WellPoint Inc. have already reported better-than-expected third-quarter earnings and raised their 2011 net income forecasts as well.

Aetna is the third-largest commercial health insurer based on both enrollment and revenue, trailing WellPoint and UnitedHealth.  Health insurance is Aetna’s main product, but the company also sells dental, group life and disability coverage.

For the third quarter, Aetna earned $490.4 million, or $1.30 per share. That’s down from $497.6 million in the same period last year. Earnings per share rose from $1.19 per share last year because the company had fewer shares  outstanding in this year’s quarter.

Revenue excluding capital gains fell 1 percent to $8.4 billion. Adjusted earnings, which exclude one-time items, were $1.40 per share.

Analysts surveyed by FactSet expected, on average, earnings of $1.15 per share on $8.28 billion in revenue.

Goldman Sachs analyst Matthew Borsch said in a research note investors already expected a strong third quarter from Aetna, and the performance was not surprising.

Aetna said results included a one-time charge of 24 cents a share from a voluntary early retirement program it announced in July.

Aetna’s medical enrollment fell nearly 2 percent to 18.2 million compared with last year’s quarter, and that contributed to the revenue decrease. Membership fell by only 11,000 people compared with the second quarter.

The insurer now expects 2011 adjusted earnings of $5 per share, up from its previous forecast of $4.60 to $4.70 per share.

Analysts expect, on average, earnings of $4.80 per share.

Aetna said Thursday it expects 2012 adjusted earnings of at least $4.80 per share. A company spokeswoman said that figure does not include projections for any benefits from leftover claims coming in lower than expected. In contrast, the $5 per share forecast for 2011 includes benefits totaling 37 cents per share that the insurer has already seen this year.

For 2012, analysts forecast earnings of $4.87 per share.

WellPoint said Wednesday it expects earnings growth next year off of its projection for 2011, but the Indianapolis insurer did not give a specific figure.

     (Copyright 2011 by The Associated Press.  All Rights Reserved.)


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