Health insurer WellPoint Inc posted an 11 percent decline in third-quarter profit on Wednesday as layoffs among customers led to lower membership, but results crushed estimates on improvements in its business serving elderly and low-income Americans.

Shares of the largest health insurer by membership rose nearly 3 percent even though it warned that it expected higher medical cost trends for the full year, owing in part to expenses tied to the flu and Cobra coverage for workers who lost their jobs.

It's a good, solid bottom-line number in the quarter, Collins Stewart analyst Brian Wright said. Commentary for the rest of the year and pricing and cost trends seems a bit cautious from management.

WellPoint follows UnitedHealth Group Inc in reporting better-than-expected third-quarter results. Shares of health insurers are trading at historic lows over concerns that the healthcare overhaul under debate in Congress will dramatically undercut their business.

WellPoint's net income fell to $730.2 million, or $1.53 per share, from $820.7 million, or $1.60 per share, a year earlier.

The latest results included a charge of 28 cents per share for impairment of intangible assets.

Excluding the charge and investment gains, earnings of $1.78 per share were well ahead of the analysts' average estimate of $1.37, according to Thomson Reuters I/B/E/S.

Revenue slipped 0.7 percent to $15.21 billion, but was higher than the $15.15 billion expected by analysts.

WellPoint reported enrollment of 33.9 million as of September 30, down 4.2 percent from a year earlier.

Operating profit in the consumer business more than doubled to $520 million. Results were bolstered by product changes in the company's Medicare business serving the elderly and withdrawal from unprofitable contracts in its Medicaid business serving low-income Americans.

Profit fell 31 percent to $628 million in its commercial unit serving employers, hurt by lower enrollment. Higher administrative costs, caused by an increase in compensation and spending for technology and customer service initiatives, weighed on results.

Overall, WellPoint spent 81.1 percent of its premium revenue on medical costs, less than 82.5 percent a year earlier and lower than several analysts expected.

But it projected medical costs would rise around 9 percent for 2009, plus or minus 0.5 percent, which is slightly higher than its prior view.

If this trend is expected to continue into 2010 and wasn't captured in its pricing, then margins could contract next year, Wells Fargo analyst Matt Perry said in a research note.

The company backed its previous forecast for 2009 net income of $5.06 to $5.12 per share. Excluding investment losses and the impairment charge, WellPoint's forecast rose to $5.86 to $5.92 per share, compared with $5.60 to $5.66 previously. Analysts looked for $5.67.

WellPoint shares were up 2.8 percent at $48 in premarket trading. Through Tuesday, the stock had risen about 11 percent this year, compared with a 6.6 percent rise for the S&P Managed Health Care index <.GSPHMO>.

(Reporting by Lewis Krauskopf; Editing by Lisa Von Ahn and Derek Caney)