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The surprise forecast from the No 3. U.S. health insurer, supported by operating cost cuts and share buybacks, comes after rivals such as UnitedHealth Group Inc (UNH.N) and Humana Inc (HUM.N) have braced the market for at least the possibility of declining earnings per share in 2011.

"They're the first managed care company to guide up" for 2011, said David Heupel, a portfolio manager with Thrivent Investment Management, which holds Aetna shares. "It's a very surprising turn of events."

Aetna, which also posted a slightly higher-than-expected quarterly profit, forecast 2011 operating earnings, excluding items, of $3.70 per share to $3.80 per share. Analysts were looking for $3.27.

Aetna's forecast equates to slightly higher operating earnings per share in 2011 than the $3.68 per share it reported for 2010.

Aetna said moves to lower operating costs, changes to its pension plan and a lower share count from share buybacks are helping 2011 per-share results. Those positive factors are countering projected drops in membership and investment income, among other negative pressures.

The industry faces new spending rules this year from the healthcare overhaul law that may cut into profits and is factoring in a rebound in use of medical services after Americans avoided procedures in 2010 to save money.

"We're very pleased with our outlook," Chief Financial Officer Joseph Zubretsky said in an interview.

"The caution is that it's still a very difficult economy; employers have a lot of cost pressure; you're never exactly sure about a resurgence in utilization," the CFO said.

Even as other insurers have projected lower 2011 profit, many analysts have deemed those forecasts to be conservative.

"The overall take is that reform is not as bad as everybody has been fearing and there are ways to mitigate the headwinds from reform and enjoy nice year-over-year EPS growth," Sanford Bernstein analyst Ana Gupte said. "They're guiding obviously conservatively ... so there must be upside to the number."

With regard to the new U.S. rules, Zubretsky said: "We think we have our arms around them and know how they'll emerge financially, but there's risk to that as well."

Aetna shares were up $3.13, or 9.4 percent, to $36.40 in late morning trading on the New York Stock Exchange, after climbing as high as $38.08 earlier in the session -- their highest level in more than two years.

Shares of rival insurers, which have outperformed the broader market substantially in 2011, were mixed after Aetna's report. UnitedHealth shares were off 1.2 percent, while shares of WellPoint Inc (WLP.N) were up 1.4 percent.

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