Oct. 29 (Bloomberg) -- Aetna Inc., the third-largest U.S. health insurer, said higher premiums and enrollment helped profit beat analysts’ estimates even as medical costs rose to treat swine flu and jobless workers.

Third-quarter net income climbed 18 percent to $326.2 million, or 73 cents a share, the Hartford, Connecticut-based company said today in a statement. At the same time, Aetna narrowed its prediction for full-year earnings to $2.75 a share, at the low end of its prior forecast, citing increased costs.

In contrast to declines for larger rivals UnitedHealth Group Inc. and WellPoint Inc., Aetna said membership in its medical plans jumped 7.6 percent to 19 million from a year earlier. Chief Executive Officer Ronald Williams said in July that Aetna’s rates, still lower relative to competitors, made it harder to cover costs and would be adjusted for 2010.

Aetna reported a “solid third quarter,” with medical costs, reserves and other measures “better than we have see in over a year” from the company, said Josh Raskin, an analyst with Barclays Capital Inc. in New York, in a note. “It appears that Aetna is again taking a conservative approach to its outlook.”

Aetna jumped 5.3 percent, or $1.33, to $26.65 in New York Stock Exchange composite trading at 4 p.m. Before today, the company had dropped 11 percent for the year, making it the worst performer on the six-member Standard & Poor’s 500 managed-care index. UnitedHealth, of Minnetonka, Minnesota, and WellPoint, of Indianapolis, are the top U.S. insurers by sales.

Investment Rebound

Adjusted profit of 69 cents a share topped the 66 cent average estimate of 17 analysts in a Bloomberg survey. Revenue increased 14 percent to $8.72 billion, boosted by the enrollment gains and investment income that rebounded from last year’s collapse of financial markets.

The company expects to benefit from its higher prices starting in 2010’s first quarter, Chief Financial Officer Joseph Zubretsky said on a conference call with analysts today. It may take more than a year to adjust premiums to where Aetna needs to be, he said.

Aetna won’t forecast 2010 earnings until its fourth-quarter earnings call on Feb. 5, because of the economy, flu costs and health-care legislation in Washington, Zubretsky said. Aetna also postponed an investor conference scheduled for December.

“We view 2010 as a repositioning year a year that does not fully reflect the earnings potential of our business,” he said.

Medical Costs

The company spent 85.6 percent of the premiums it collected in the third quarter to cover claims, up from 80.9 percent a year earlier. Aetna cited the swine flu epidemic and the number of patients in Cobra, the government-subsidized program that extends benefits to the newly unemployed. Those tend to be workers with higher medical costs.

Aetna “priced lower than others for 2008 and gained a lot of market share as a result,” said Ana Gupte, a Sanford C. Bernstein & Co. analyst in New York, in an e-mail. “Next year, we expect they will not provide such favorable rates to customers.”

Aetna cut its 2009 earnings forecast twice this year before today’s report. In July, Williams said the company was taking measures, such as audits at high-cost hospitals, to try to tighten control over expenses.

Williams said in today’s statement that the outlook for 2010 was clouded by “ongoing uncertainty” over the economy.

UnitedHealth and WellPoint exceeded analysts’ expectations for third-quarter earnings.

To contact the reporter on this story: Alex Nussbaum in New York anussbaum1@bloomberg.net.

Last Updated: October 29, 2009 16:13 EDT