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Aetna Beats, Guides Higher

Membership swells.
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first-quarter earnings rose from a year ago, beating estimates, and the insurer lifted full-year guidance.

Aetna earned $401.7 million, or 68 cents a share, in the quarter, compared with $389.3 million, or 64 cents a share, a year ago. Adjusted for investment gains and other items, Aetna earned 64 cents a share in the quarter, beating the Thomson First Call consensus by a penny.

Total revenue rose 15% from a year ago to $6.23 billion, also beating estimates, which stood at $6.01 billion.

In Aetna's biggest unit, health care, operating earnings rose to $360.6 million, from $286.5 million, excluding items, a year ago. The increase primarily reflected "higher membership levels across all products and premium and fee rate increases, as well as solid underwriting results and continued general and administrative expense efficiencies," Aetna said.

"Our operating earnings per share increased by 31% over the prior-year quarter. Our medical membership increased by approximately 663,000, well above our prior guidance of 575,000. In fact, we experienced strong growth across all of our health care product lines: medical, dental, pharmacy and behavioral. And our administrative cost ratio declined by 150 basis points," Aetna said.

For 2006, Aetna raised adjusted earnings guidance to $2.74 to $2.76 a share, from $2.71 to $2.74 a share. Analysts were forecasting $2.76 a share, according to Thomson First Call. The stock closed at $46.42 Wednesday, 16.8 times the high end of the new 2006 guidance.