Aetna ( AET) posted a solid third quarter bolstered by membership gains and underwriting strength.

The Hartford, Conn., healthcare insurer earned $378 million, or $1.26 a share, up 25% from the year-ago continuing operations profit of $302 million, or 88 cents a share. Operating earnings rose 35% from a year ago to $1.24 a share. Excluding certain items including reserve development, latest-quarter operating earnings were $1.19 a share, 2 cents ahead of the Thomson First Call analyst consensus estimate.

Revenue rose to $5.7 billion from $5 billion a year ago.

Aetna said it expects to make $1.23 a share for the fourth quarter, in line with the Wall Street estimate, and $5.45 to $5.50 for 2006, which is better than the $5.41 estimate.

"Our exceptional year-over-year earnings growth of 35% can be attributed largely to two factors," said CEO John W. Rowe. "First, we have added nearly 1 million medical members since January. Secondly, our continued diligence around medical cost management has allowed us to have among the lowest medical cost ratios in the industry."

Aetna said its commercial risk medical cost ratio was 78.6% in the third quarter of 2005, level with 78.6% in the third quarter of 2004. Excluding favorable reserve development, the Commercial Risk MCR was 79.0% in the third quarter of 2005, compared to 79.2% in the third quarter of 2004. A Medicare MCR of 85.5% in the third quarter of 2005 compared with 86.2% in the third quarter of 2004. Excluding favorable reserve development, the Medicare MCR was 89.1% in the third quarter of 2005, compared with 87.0% in the third quarter of 2004. Medicare currently represents less than 1% of medical membership.

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