Aetna Inc. (NYSE:AET) reported better than expected first quarter earnings that beat Wall Street forecasts. Earnings were helped by lower-than-expected medical claims, and an increase in Medicaid and Medicare premiums. Though profits declined 4.1 percent due to costs of its pending acquisition of Coventry Health Care, Inc. (NYSE:CVH), the company issued optimistic guidance for the full-year.

Aetna Coventry health care buyout

The Hartford, Connecticut-based company announced a net income of $490.1 million, compared to $511 million in the same period a year ago. However, earnings per share increased from $1.43 to $1.48 because of fewer outstanding shares. The company repurchased 3.7 million shares for $184 million during the quarter. Excluding the transaction and integration costs, earnings jumped from $1.34 to $1.50. Revenues surged 7% to $9.54 billion. Analysts were expecting $1.39 in EPS and $9.64 billion in revenues.

For the full year, the company now estimates to earn $5.50-$5.60 per share, up from the earlier estimate of $5.40 a share. Last year, Aetna Inc. (NYSE:AET) announced to purchase Coventry Health Care, Inc. (NYSE:CVH) for $5.6 billion in a cash-and-stock deal to increase its Medicaid and Medicare offerings. The acquisition is expected to close in June 2013. Aetna Inc. (NYSE:AET) CEO Mark Bertolini said today that the company has received all the regulatory approvals and various states, and only the approval of Justice Department is awaited.

The amount paid in medical claims jumped 9 percent to $6.38 billion, which is the largest expense of Aetna Inc. (NYSE:AET). The health insurer recorded a gain of $325 million in the first quarter as claims left over from the previous quarters were lower than expected. Aetna Inc. (NYSE:AET) had recorded a gain of $169 million in Q1 2012.

The company’s enrollment in medical plans rose 2.1 percent to 18.3 million primarily due to gains in the private version of Medicare business which covers elderly, and Medicaid. The U.S. health insurers have benefited in the past few years from slower increase in medical costs as people cut back their expenses due to economic concerns.

Aetna Inc. (NYSE:AET) shares were up 2.46 percent to $57.54 at 10:52 AM EDT.