UPDATE 3-Aetna profit, membership up, backs 2008 forecast

(Adds analyst, CFO comments, share movement, byline)

By Lewis Krauskopf

NEW YORK, July 31 (Reuters) - Health insurer Aetna Inc (AET.N) posted a slightly better-than-expected profit on Thursday, helped by an increase in membership, and stood by its 2008 earnings forecast.

The No. 3 U.S. health insurer, whose shares rose more than 4 percent, also said it expects "solid" profit growth for 2009 and remains committed to its long-term goal of operating earnings per share growth of 15 percent, amid doubts about the sector's outlook.

After a brutal first half of 2008, health-insurer shares rallied on Thursday, continuing somewhat of a rebound that began with last week's quarterly reports from the industry's two biggest companies, UnitedHealth Group Inc (UNH.N) and WellPoint Inc (WLP.N), whose profit beat expectations.

"It was a really good quarter for Aetna in the face of everything going on in the industry and the overall economic environment," Edward Jones analyst Aaron Vaughn said.

Aetna, which has been diversifying into government programs such as Medicare and Medicaid, showed membership growth across its various businesses, at a time rivals are struggling for such gains.

The industry's membership has been pressured by the weakening U.S. economy as employers cut jobs.

"Our customer segmentation strategy is allowing us to grow membership in a very difficult environment," Chief Financial Officer Joseph Zubretsky said in an interview.

Aetna's second-quarter net income rose to $480.5 million, or 97 cents per share, compared with $451.3 million, or 85 cents per share, a year earlier.

Excluding items, Aetna said operating earnings rose 6 percent to $466.3 million, or 94 cents per share. That was 1 cent ahead of the average estimate of analysts, according to Reuters Estimates.

Revenue rose 15 percent to $7.83 billion and enrollment rose 11 percent to 17.5 million members.

About half of Aetna's membership growth stemmed from acquisitions, particularly of a company providing Medicaid plans for low-income Americans. Membership growth has also come in its Medicare plans for seniors.

The Hartford, Connecticut-based company also has been gaining business among commercial plans for employers for which it assumes full insurance risk -- a particularly lucrative area.

Aetna's medical benefit ratio -- a closely watched gauge of the percent of premiums spent on medical costs -- worsened slightly to 81.9 percent from 81.5 percent, although the measure was stable for its commercial plans.

Aetna forecast full-year earnings, excluding special items, of $4 per share. Analysts expect $4.01.

Aetna has stood by its 2008 profit forecast, while most rivals have reduced their expectations for the year.

Aetna shares were up $1.68, or 4.2 percent, at $42 in morning trading on the New York Stock Exchange.

Through Wednesday, Aetna shares had fallen some 30 percent this year, less than a 34 percent drop for the Morgan Stanley Healthcare Payor index .HMO. (Reporting by Lewis Krauskopf; Editing by Derek Caney, Gerald E. McCormick, Dave Zimmerman)