<PAGE> 1

                SECURITIES AND EXCHANGE COMMISSION

                       Washington, D.C.  20549

                             Form 10-Q

          Quarterly Report Pursuant to Section 13 or 15(d)
               of the Securities Exchange Act of 1934


For the quarterly period ended  September 30, 1996 
                               ____________________


Commission file number  1-11913 
                       _________


                                  Aetna Inc.                               
___________________________________________________________________________
            (Exact name of registrant as specified in its charter)


          Connecticut                             02-0488491               
___________________________________________________________________________
(State or other jurisdiction of                (I.R.S. Employer
 incorporation or organization)                 Identification No.)


151 Farmington Avenue, Hartford, Connecticut           06156               
___________________________________________________________________________
(Address of principal executive offices)             (ZIP Code)


Registrant's telephone number, including area code     (860) 273-0123      
                                                     ______________________


                              Not Applicable*                              
___________________________________________________________________________
            (Former name, former address and former fiscal year,
                       if changed since last report)


   * Aetna Inc. became the parent corporation of each of 
     Aetna Services, Inc. (formerly Aetna Life and Casualty
     Company - Commission File No. 1-5704; I.R.S. Employer 
     Identification No. 06-0843808) and U.S. Healthcare, Inc.
     (Commission File No. 0-11531; I.R.S. Employer Identification
     No. 23-2229683) as a result of a merger transaction 
     on July 19, 1996. Aetna Services, Inc. and U.S. Healthcare,
     Inc. no longer file separate reports under the Securities
     Exchange Act of 1934.

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.

     Yes    X        No  _____
          _____               


Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.


                                            Shares Outstanding
   Title of Class                           at September 30, 1996 
  ________________                          ______________________

Common Capital Stock
 $.01 par value                                 150,920,893

<PAGE> 2

                             TABLE OF CONTENTS
                             _________________


                                                           Page
                                                           ____

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements.

         Consolidated Statements of Income                   3
         Consolidated Balance Sheets                         4
         Consolidated Statements of Shareholders'
           Equity                                            6
         Consolidated Statements of Cash Flows               7
         Condensed Notes to Financial Statements             8
         Independent Auditors' Review Report                26

Item 2.  Management's Discussion and Analysis of
           Financial Condition and Results of
           Operations.                                      27


PART II. OTHER INFORMATION

Item 1.  Legal Proceedings.                                 57

Item 4.  Submission of Matters to a Vote of 
           Security Holders.                                57

Item 5.  Other Information.                                 59

Item 6.  Exhibits and Reports on Form 8-K.                  59


Signatures                                                  65

<PAGE> 3

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements.

                          AETNA INC. AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>

                                                      Three Months Ended            Nine Months Ended
                                                         September 30,                 September 30,     
                                                 __________________________    __________________________
(Millions, except share and per share data)      1996          1995            1996          1995
                                                 ____          ____            ____          ____

<S>                                              <C>           <C>             <C>           <C>

Revenue:
  Premiums.....................................  $    2,688.4  $    1,830.4    $    6,243.1  $    5,535.0
  Net investment income........................         897.9         884.0         2,678.0       2,673.5
  Fees and other income........................         558.5         473.3         1,624.8       1,413.0
  Net realized capital gains...................           7.5           3.3            73.9           6.0
                                                 ____________  ____________    ____________  ____________
      Total revenue............................       4,152.3       3,191.0        10,619.8       9,627.5
                                                 ____________  ____________    ____________  ____________

Benefits and expenses:
  Current and future benefits..................       2,860.7       2,203.6         7,157.0       6,735.5
  Operating expenses...........................         913.7         774.1         2,499.2       2,271.7
  Amortization of goodwill and other 
   intangible assets...........................          75.1           3.8            80.8          16.7
  Amortization of deferred policy acquisition 
   costs.......................................          48.4          33.5           123.5         102.6
  Reduction of loss on discontinued products...             -             -          (170.0)            -
  Severance and facilities charges.............          49.0             -           441.7             -
                                                 ____________  ____________    ____________  ____________
      Total benefits and expenses..............       3,946.9       3,015.0        10,132.2       9,126.5
                                                 ____________  ____________    ____________  ____________
  
Income from continuing operations before income
  taxes........................................         205.4         176.0           487.6         501.0
Income taxes (benefits):
  Current......................................          76.7          79.0           201.5         172.0
  Deferred.....................................           6.3         (15.6)          (26.1)          2.9 
                                                 ____________  ____________    ____________  ____________ 
      Total income taxes.......................          83.0          63.4           175.4         174.9
                                                 ____________  ____________    ____________  ____________

Income from continuing operations..............         122.4         112.6           312.2         326.1
Discontinued operations, net of tax:
  Income (Loss) from operations................             -          99.5           182.2        (250.1)
  Gain on sale.................................             -             -           263.7             -
                                                 ____________  ____________    ____________  ____________

      Net income ..............................  $      122.4  $      212.1    $      758.1  $       76.0
                                                 ____________  ____________    ____________  ____________
                                                 ____________  ____________    ____________  ____________
      Net income applicable to
        common ownership.......................  $      111.2  $      212.1    $      746.9  $       76.0
                                                 ____________  ____________    ____________  ____________
                                                 ____________  ____________    ____________  ____________

Results per common share:
Income from continuing operations..............  $        .77  $        .98    $       2.39  $       2.87
Discontinued operations, net of tax:
  Income (Loss) from operations................             -           .88            1.44         (2.20)
  Gain on sale.................................             -             -            2.09             -
                                                 ____________  ____________    ____________  ____________
 
  Net income ..................................  $        .77  $       1.86    $       5.92  $        .67 
                                                 ____________  ____________    ____________  _____________
                                                 ____________  ____________    ____________  _____________
  Dividends declared...........................  $        .40  $        .69    $       1.09  $       2.07
                                                 ____________  ____________    ____________  ____________
                                                 ____________  ____________    ____________  ____________

  Weighted average common shares and common
    share equivalents..........................   145,149,973   114,370,702     126,138,464   113,522,029 
                                                 ____________  ____________    ____________  ____________ 
                                                 ____________  ____________    ____________  ____________ 

<FN>

See Condensed Notes to Financial Statements.

</TABLE>


<PAGE> 4

                    AETNA INC. AND SUBSIDIARIES

                    CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                            September 30,     December 31,
(Millions)                                      1996              1995    
                                            _____________     ____________
<S>                                         <C>               <C>

Assets:
Investments:
  Debt securities available for sale, 
     at fair value (amortized cost 
     $30,504.9 and $29,962.5).........      $  30,955.5       $  31,860.3
  Equity securities, at fair value
   (cost $995.5 and $597.8)...........          1,234.8             659.7
Short-term investments................            642.2             607.8
Mortgage loans........................          7,171.6           8,327.2
Real estate...........................          1,101.1           1,277.3
Policy loans..........................            670.0             629.4
Other.................................            660.2             688.6
                                            ___________       ___________
      Total investments...............         42,435.4          44,050.3
Cash and cash equivalents.............          2,159.3           1,712.7
Accrued investment income.............            584.5             618.3
Premiums due and other receivables....          1,361.3           1,080.9
Deferred income taxes.................                -             271.5
Deferred policy acquisition costs.....          2,141.1           1,953.1
Goodwill and other intangible assets..          8,517.4             147.3
Other assets..........................          1,097.2             857.1
Separate Accounts assets..............         33,243.8          29,699.7
                                                                         
Net assets of Discontinued 
 Operations...........................                -           3,932.8
                                            ___________       ___________
      Total assets....................      $  91,540.0       $  84,323.7
                                            ___________       ___________
                                            ___________       ___________

<FN>

See Condensed Notes to Financial Statements.

</TABLE>


<PAGE> 5

                  AETNA INC. AND SUBSIDIARIES

                   CONSOLIDATED BALANCE SHEETS
                           (Continued)

<TABLE>
<CAPTION>

                                                       September 30,     December 31,
(Millions, except share and per share data)                1996              1995    
                                                       _____________     ____________
<S>                                                    <C>               <C>

Liabilities:
  Future policy benefits........................       $ 18,339.5        $  18,372.9
  Unpaid claims and claim expenses..............          1,946.6            1,563.1
  Unearned premiums.............................            217.0              142.4
  Policyholders' funds left with the company....         20,482.9           22,898.7
                                                       __________        ___________
      Total insurance liabilities...............         40,986.0           42,977.1
  Dividends payable to shareholders.............             37.1               79.2
  Short-term debt...............................            366.5              389.6
  Long-term debt................................          2,382.3              989.1
  Current income taxes..........................            127.8              154.0
  Deferred taxes................................             29.6                  -
  Other liabilities.............................          3,051.8            2,344.2
  Participating policyholders' interests........            192.2              204.8
  Separate Accounts liabilities.................         33,180.1           29,637.9
                                                       __________        ___________
      Total liabilities.........................         80,353.4           76,775.9
                                                       __________        ___________

 Aetna-obligated mandatorily redeemable 
   preferred securities of subsidiary
   limited liability company holding 
   primarily debentures guaranteed by Aetna.....            275.0              275.0
                                                       __________        ___________

Shareholders' Equity:
  Class C Voting Mandatorily Convertible 
   Preferred Stock ($.01 par value; 15,000,000
   shares authorized in 1996; 11,655,546 issued
   and outstanding).............................            865.4                  -
  Common Stock ($.01 par value and no par value;
   500,000,000 and 250,000,000 shares authorized;
   150,920,893 and 115,013,675 issued, and
   150,920,893 and 114,727,093 outstanding).....          4,104.0            1,448.2
  Net unrealized capital gains..................            139.7              641.1
  Retained earnings.............................          5,802.5            5,195.6
  Treasury stock, at cost (286,582 shares in 1995)              -              (12.1)
                                                       __________        ___________ 

      Total shareholders' equity................         10,911.6            7,272.8
                                                       __________        ___________

      Total liabilities, minority interest and
       shareholders' equity.....................       $ 91,540.0        $  84,323.7
                                                       __________        ___________
                                                       __________        ___________

  Shareholders' equity per common share.........       $    66.57        $     63.39
                                                       __________        ___________
                                                       __________        ___________

<FN>

See Condensed Notes to Financial Statements.

</TABLE>


<PAGE> 6

                        AETNA INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>

(Millions, except share data)
                                                   Class C Voting
                                                   Mandatorily             Net
                                                   Convertible             Unrealized
                                                   Preferred    Common     Capital        Retained  Treasury
Nine Months Ended September 30, 1996     Total     Stock        Stock      Gains (Losses) Earnings  Stock  
___________________________________________________________________________________________________________

<S>                                      <C>       <C>          <C>        <C>            <C>       <C>

Balances at December 31, 1995            $ 7,272.8 $        -   $ 1,448.2  $   641.1      $ 5,195.6 $ (12.1)
___________________________________________________________________________________________________________ 

Net income............................       758.1                                            758.1
Change in net unrealized capital gains
   and losses.........................      (501.4)                           (501.4)
Class C Voting Mandatorily Convertible
   Preferred stock issued for U.S.
   Healthcare merger (11,655,546 shares)     865.4      865.4
Common shares issued for U.S.
   Healthcare merger (34,988,615 shares)   2,580.1                2,580.1 
Stock options issued for U.S. Healthcare
   merger.............................        24.8                   24.8
Common stock issued for benefit plans
  (1,205,185 shares)..................        63.0                   63.0
Common stock dividends................      (140.0)                                          (140.0)
Preferred stock dividends.............       (11.2)                                           (11.2)
Treasury stock retired................           -                  (12.1)                             12.1
                                         __________________________________________________________________


Balances at September 30, 1996           $10,911.6 $    865.4   $ 4,104.0  $   139.7      $ 5,802.5 $     -
___________________________________________________________________________________________________________
                                         __________________________________________________________________




Nine Months Ended September 30, 1995                                                                       
___________________________________________________________________________________________________________

<S>                                      <C>       <C>          <C>        <C>            <C>       <C>

Balances at December 31, 1994            $ 5,503.0 $        -   $ 1,419.2  $(1,071.5)     $ 5,259.6 $(104.3)
___________________________________________________________________________________________________________ 

Net Income............................        76.0                                             76.0
Change in net unrealized capital gains
  and losses..........................     1,472.9                           1,472.9
Common stock issued for benefit plans
  (1,657,048 shares)..................        78.9                                                     78.9
Gain on issuance of treasury stock....         6.4                    6.4
Common stock dividends................      (236.2)                                          (236.2)       
                                         __________________________________________________________________


Balances at September 30, 1995           $ 6,901.0  $        -  $ 1,425.6  $   401.4      $ 5,099.4 $ (25.4)
___________________________________________________________________________________________________________ 
                                         __________________________________________________________________ 

<FN>

See Condensed Notes to Financial Statements.

</TABLE>


<PAGE> 7

                        AETNA INC. AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                          Nine Months Ended
                                                                            September 30,       
                                                                        ________________________
(Millions)                                                              1996           1995
                                                                        ____           ____
<S>                                                                     <C>            <C>

Cash Flows from Operating Activities:
   Net income........................................................   $   758.1      $    76.0
   Adjustments to reconcile net income to net
    cash provided by (used for) operating activities:
      (Income) loss from Discontinued Operations.....................      (182.2)         250.1
      Decrease (Increase) in accrued investment income...............        39.3           (2.0)
      Increase in premiums due and other receivables.................      (151.6)         (39.3)
      Increase in deferred policy acquisition costs..................      (186.7)        (163.7)
      Depreciation and amortization..................................       206.9          133.5
      (Decrease) Increase in income taxes............................      (177.1)           2.7
      Net increase (decrease) in other assets and other liabilities..       131.0         (251.4)
      Decrease in insurance reserve liabilities......................    (1,208.1)        (198.4)
      Net realized capital gains.....................................       (73.8)          (6.0)
      Net realized capital gains on sale of Discontinued Operations..      (263.7)             - 
      Amortization of net investment discounts.......................       (95.9)         (98.5)
      Other, net.....................................................        15.8          (23.1)
                                                                        _________      _________ 
        Net cash used for operating activities.......................    (1,188.0)        (320.1)
                                                                        _________      _________ 
Cash Flows from Investing Activities:
   Proceeds from sales of:
      Debt securities available for sale.............................    10,373.6        9,978.4
      Equity securities..............................................       405.0          600.1
      Mortgage loans.................................................       104.7           99.1
      Real estate....................................................       387.7          178.8
      Short-term investments.........................................    27,947.7       35,152.7
      Sale of Discontinued Operations................................     4,134.1              -
   Investment maturities and repayments of:
      Debt securities available for sale.............................     2,579.1        1,515.3
      Debt securities held for investment............................           -          196.7
      Mortgage loans.................................................     1,123.3          881.6
   Cost of investments in:
      Debt securities available for sale.............................   (11,899.8)     (11,768.0)
      Debt securities held for investment............................           -          (43.7)
      Equity securities..............................................      (777.1)        (421.0)
      Mortgage loans.................................................      (282.6)        (148.2)
      Real estate....................................................       (50.7)        (104.5)
      Short-term investments.........................................   (27,905.1)     (35,603.0)
      U.S. Healthcare................................................    (5,243.9)             -
   Increase in property and equipment................................       (67.4)        (118.5)
   Net (decrease) increase in Separate Accounts......................        (2.0)          58.7
   Other, net........................................................         2.9           18.4
                                                                        _________      _________
        Net cash provided by investing activities....................       829.5          472.9
                                                                        _________      _________
Cash Flows from Financing Activities:
   Deposits and interest credited for investment contracts...........     1,456.4        2,357.8
   Withdrawals of investment contracts...............................    (2,647.2)      (2,829.9)
   Issuance of long-term debt........................................     1,389.3            6.8
   Stock issued under benefit plans..................................        56.5           85.3 
   Repayment of long-term debt.......................................           -           (1.6)
   Net (decrease) increase in short-term debt........................       (23.4)          54.7
   Dividends paid to shareholders....................................      (193.2)        (236.2)
                                                                        _________      _________ 
        Net cash provided by (used for) financing activities.........        38.4         (563.1)
                                                                        _________      _________ 
Effect of exchange rate changes on cash and cash
   equivalents.......................................................          .1            2.7
                                                                        _________      _________
Net decrease in cash and cash equivalents............................      (320.0)        (407.6)
Cash acquired from U.S. Healthcare...................................       766.6              -
Cash and cash equivalents, beginning of period.......................     1,712.7        2,277.2
                                                                        _________      _________
Cash and cash equivalents, end of period.............................   $ 2,159.3      $ 1,869.6
                                                                        _________      _________
                                                                        _________      _________

Supplemental Cash Flow Information:
   Interest paid.....................................................   $   113.8      $   101.7
                                                                        _________      _________
                                                                        _________      _________
   Income taxes paid ................................................   $   206.4      $    81.7
                                                                        _________      _________
                                                                        _________      _________
<FN>
See Condensed Notes to Financial Statements.
</TABLE>

<PAGE> 8

                AETNA INC. AND SUBSIDIARIES

           CONDENSED NOTES TO FINANCIAL STATEMENTS

(1)  Summary of Significant Accounting Policies

Basis of Presentation
The consolidated financial statements include Aetna Inc. and its 
majority-owned subsidiaries (collectively, the "company"), 
including Aetna Services, Inc. ("Aetna Services") (formerly Aetna 
Life and Casualty Company), and, from July 19, 1996, U.S. 
Healthcare, Inc. ("U.S. Healthcare"). Less than majority-owned 
entities in which the company has at least a 20% interest are 
reported on the equity basis.  These consolidated financial 
statements have been prepared in accordance with generally 
accepted accounting principles and are unaudited.  Certain 
reclassifications have been made to 1995 financial information to 
conform to the 1996 presentation.  These interim statements 
necessarily rely heavily on estimates, including assumptions as to 
annualized tax rates.  In the opinion of management, all 
adjustments necessary for a fair statement of results for the 
interim periods have been made.  All such adjustments are of a 
normal, recurring nature.  The accompanying condensed consolidated 
financial statements should be read in conjunction with the 
consolidated financial statements and related notes as presented 
in Aetna Services' 1995 Annual Report.  Certain financial 
information that is normally included in annual financial 
statements prepared in accordance with generally accepted 
accounting principles, but that is not required for interim 
reporting purposes, has been condensed or omitted.

Goodwill and Other Intangible Assets
Goodwill, which represents the excess of cost over the fair value 
of net assets of acquired subsidiaries and affiliates, is 
amortized on a straight-line basis over periods not exceeding 40 
years.  Other intangible assets, which are primarily customer 
lists, provider networks and computer systems are amortized on a 
straight-line basis over various periods not exceeding 25 years.

The company regularly evaluates the recoverability of goodwill and 
other intangible assets.  The carrying value of goodwill and other 
intangible assets would be reduced through a direct write-off if, 
in management's judgment, it was probable that projected future 
operating income (before amortization of goodwill and other 
intangible assets) would not be sufficient on an undiscounted 
basis to recover the carrying value of the goodwill and other 
intangible assets.  Operating earnings considered in such an 
analysis are those of the entity acquired, if separately 
identifiable, or the business segment that acquired the entity if 
the entity's earnings are not separately identifiable.

<PAGE> 9

                AETNA INC. AND SUBSIDIARIES

           CONDENSED NOTES TO FINANCIAL STATEMENTS

Prepaid Health Care Services
Medical costs related to the company's prepaid health care 
services (primarily health maintenance organizations) consist 
principally of medical claims and capitation costs, and are 
included in current and future benefits in the company's 
Consolidated Statements of Income.  Medical claims include 
estimates of payments to be made on claims reported and estimates 
of health care services rendered but not reported to the company 
as of the balance sheet date.  Such estimates include the cost of 
services which will continue to be rendered after the balance 
sheet date if the company is obligated to pay for such services in 
accordance with contract provisions or regulatory requirements.  
Medical claims payable are included in unpaid claims and claim 
expenses on the company's Consolidated Balance Sheets.  Capitation 
costs represent monthly fees to participating primary care 
physicians and other medical providers for providing health care 
services.

(2)  Merger with U.S. Healthcare

The merger with U.S. Healthcare was consummated on July 19, 1996.  
As a result of the merger, Aetna Services and U.S. Healthcare are 
each direct, wholly-owned subsidiaries of Aetna Inc.  Pursuant to 
the merger, each outstanding share of Aetna Services common stock 
(115,721,039 shares) became a share of common stock of Aetna Inc.  
Each outstanding share of U.S. Healthcare common stock and Class B 
Stock became a right to receive $34.20 in cash, 0.2246 shares of 
Aetna Inc. common stock and 0.0749 shares of Aetna Inc. 6.25% 
Class C Voting Preferred Stock ("Class C Stock") resulting in the 
issuance of 34,951,077 shares of Aetna Inc. common stock and 
11,655,546 shares of Class C Stock.

The merger has been accounted for as a purchase with total 
consideration of approximately $8.9 billion which has been 
allocated to the assets acquired and liabilities assumed based on 
estimates of their fair values.  Assets acquired totaled $1.8 
billion and liabilities assumed were $.8 billion.  A total of $7.9 
billion, net of related deferred taxes, representing the excess of 
the purchase price over the fair values of the net assets 
acquired, has been allocated to goodwill and identifiable 
intangible assets and is being amortized over a range of estimated 
useful lives for goodwill at 40 years and for identifiable 
intangible assets of 5 to 25 years.

The company's consolidated results of operations include U.S. 
Healthcare's results from the date of the merger.  The unaudited 
pro forma information below presents combined results of 
operations as if the merger (as well as the sale of Aetna's 
property-casualty operations - see note 4) had occurred at the 
beginning of 1995 and reflects adjustments which include interest 
expense related to the assumed financing of a portion of the cash 
consideration paid, interest income foregone related to the 
balance of the cash consideration paid, amortization of goodwill 
and identifiable intangible assets, and adjustments to conform 
U.S. Healthcare's accounting policies with Aetna, and to remove 
the effect of merger-related costs incurred by U.S. Healthcare 
prior to the acquisition.  No adjustment has been made to give 
effect to any synergies which may be realized as a result of the 
merger.

<PAGE> 10

                AETNA INC. AND SUBSIDIARIES

           CONDENSED NOTES TO FINANCIAL STATEMENTS


(2)  Merger with U.S. Healthcare (Continued)

The unaudited pro forma information is not necessarily indicative 
of the results of operations of the combined company had the 
merger occurred at the beginning of 1995, nor is it necessarily 
indicative of future results.

<TABLE>
<CAPTION>
                                        Three Months Ended         Nine Months Ended
                                          September 30,              September 30,
(in millions, except per share data)    1996          1995         1996         1995
___________________________________     _____         ____         ____         ____
<S>                                     <C>           <C>          <C>          <C>

Revenue                                 $4,356.0      $4,117.4     $12,985.1    $12,248.4
                                        ________      ________     _________    _________
                                        ________      ________     _________    _________

Realized investment gains 
  (losses) included in
  revenue                               $    (.8)     $    3.3     $    68.4    $    12.6
                                        ________      ________     _________    _________
                                        ________      ________     _________    _________

Income before income taxes              $  183.7      $  206.1     $   503.5    $   597.5
                                        ________      ________     _________    _________

Income taxes                            $   78.6      $   96.8     $   222.5    $   277.6
                                        ________      ________     _________    _________

Net income                              $  105.1      $  109.3     $   281.0    $   319.9
                                        ________      ________     _________    _________
                                        ________      ________     _________    _________

Net income per common share             $    .60      $    .64     $    1.58    $    1.87
                                        ________      ________     _________    _________
                                        ________      ________     _________    _________

</TABLE>


<PAGE> 11

                AETNA INC. AND SUBSIDIARIES

           CONDENSED NOTES TO FINANCIAL STATEMENTS
                       (Continued)

(3) Future Application of Accounting Standards

Financial Accounting Standard ("FAS") No. 123, Accounting for 
Stock-Based Compensation, is effective for 1996 reporting.  This 
statement addresses the accounting for the cost of stock-based 
compensation, such as stock options.  FAS No. 123 permits either 
expensing the cost of stock-based compensation over the vesting 
period or disclosing in the financial statement footnotes what 
this expense would have been.  This cost would be measured at the 
grant date based upon estimated fair values, using option pricing 
models.  The company has selected the disclosure alternative which 
requires that such disclosures be included in full year financial 
statements only.

FAS No. 125, Accounting for Transfers and Servicing of Financial 
Assets and Extinguishments of Liabilities was issued in June 1996.  
This statement provides accounting and reporting standards for 
transfers of financial assets and extinguishments of liabilities.  
Transactions covered by this statement would include 
securitizations, sales of partial interests in assets, repurchase 
agreements and securities lending.  This statement requires that 
after a transfer of financial assets, an entity would recognize on 
the balance sheet any assets it controls and liabilities it has 
incurred.  Similarly, an entity would remove assets or liabilities 
from its balance sheet when control of the assets has been 
surrendered or the liabilities satisfied.

This statement is effective for 1997 financial statements and 
early adoption or retroactive application of this statement is not 
permitted.  The company does not expect the adoption of this 
statement will have a material effect on its financial position or 
results of operations.

(4)  Sales of Subsidiaries

On April 2, 1996, the company completed the sale of its property-
casualty operations to an affiliate of the Travelers Insurance 
Group Inc. ("Travelers") for approximately $4.1 billion in cash.  
The sale resulted in a gain of $263.7 million ($218.3 million 
pretax).

The operating results of the property-casualty operations were 
presented as discontinued operations through the sale date.  
Operating results for the period from January 1 to April 2 were:

<TABLE>
<CAPTION>
(Millions)                                          1996     
_____________________________________________________________
<S>                                                 <C>

Total revenue                                       $1,539.3
____________________________________________________________
                                                    ________
Income before taxes                                 $  262.7
Income taxes                                            80.5
                                                    ________
Income from Discontinued Operations                 $  182.2
____________________________________________________________
                                                    ________

</TABLE>

<PAGE> 12

               AETNA INC. AND SUBSIDIARIES

           CONDENSED NOTES TO FINANCIAL STATEMENTS
                       (Continued)

(4)  Sales of Subsidiaries (Continued)

As a result of the sale, the company retained no property-casualty 
liabilities other than those associated with indemnifying 
Travelers for a portion of certain potential liability exposures.  
While there can be no assurances, management currently does not 
believe that the aggregate ultimate loss arising from these 
indemnifications, if any, will be material to the annual net 
income, liquidity or financial condition of the company, although 
it is reasonably possible.

(5) Severance and Facilities Charges

In the third quarter of 1996, the company recorded a $31.8 million 
after tax ($49.0 million pretax) severance and facilities charge 
for Aetna Retirement Services, primarily related to actions taken 
or expected to be taken to improve its cost structure relative to 
its competitors.  The severance portion of the charge is based on 
a plan to eliminate 723 positions (primarily customer service, 
sales and information technology support staff).  The facilities 
portion of the charge is based on a plan to consolidate 
sales/service field offices.

In the second quarter of 1996, in conjunction with the sale of the 
company's property-casualty operations, Travelers subleased the 
space that had been occupied by the company in the CityPlace 
office facility in Hartford for eight years at current market 
rates.  The company recorded a charge of $190.0 million (after 
tax) during the second quarter of 1996 representing the present 
value of the difference between rent required to be paid by the 
company under the lease and future rentals expected to be received 
by the company.  The company also recorded additional severance 
and facilities charges of $45.5 million (after tax) during the 
second quarter of 1996 due to actions taken or expected to be 
taken to reduce the level of corporate expenses and other costs 
previously absorbed by the property-casualty operations.  The 
severance portion of this charge includes the planned elimination 
of 475 positions.

In the second quarter of 1996, a severance and facilities charge 
of $19.5 million after tax ($30.0 million pretax) was taken by 
Aetna U.S. Healthcare primarily related to actions taken or 
expected to be taken to reduce information technology costs in the 
health business and are not related to the U.S. Healthcare merger.  
The severance portion of this charge is based on a plan to 
eliminate 675 positions.

<PAGE> 13

                AETNA INC. AND SUBSIDIARIES

           CONDENSED NOTES TO FINANCIAL STATEMENTS
                       (Continued)

(5) Severance and Facilities Charges (Continued)

Severance and facilities charges for the nine months ended 
September 30, 1996 included the following (pretax):

<TABLE>
<CAPTION>
                                                            Vacated
                                              Asset         Leased
                                                                  
(Millions)                   Severance      Write-Off     Property      Other     Total
________________________________________________________________________________________
<S>                            <C>            <C>           <C>         <C>       <C>

Aetna U.S. Healthcare          $ 20.8         $   .9        $  3.5      $  4.8    $ 30.0
Aetna Retirement Services        42.8            1.5           1.9         2.8      49.0
Corporate:  Other                28.5           18.0         313.2 (1)     3.0     362.7
                               _________________________________________________________

  Total Company                $ 92.1         $ 20.4        $318.6      $ 10.6    $441.7
________________________________________________________________________________________
                               _________________________________________________________
<FN>
(1)  Includes $292.2 million related to the CityPlace lease.
</TABLE>

The activity for the nine months ended September 30, 1996 within 
the severance and facilities reserve (pretax, in millions) and the 
number of positions eliminated related to such actions were as 
follows:

<TABLE>
<CAPTION>
                                                  Reserve             Positions
_______________________________________________________________________________
<S>                                               <C>                 <C>

Beginning of period                               $   -                       -
Severance and facilities charges                   441.7                  1,873
Actions taken                                      (55.0) (1)              (905)
                                                  ______                  _____ 

   End of period                                  $386.7                    968
_______________________________________________________________________________
                                                  _____________________________
<FN>
(1)  Includes $42.6 million of severance related actions.
</TABLE>

The 905 positions eliminated during the nine months ended 
September 30, 1996 related to the following segments:  53% - Aetna 
U.S. Healthcare, 15% - Aetna Retirement Services and 32% -
corporate.  Termination of the remaining employees, under the 
announced actions, and the vacating of the leased office space 
(excluding the CityPlace lease) are expected to be substantially 
completed within 15 to 18 months. The remaining lease payments 
(net of expected subrentals) on such vacated facilities are 
payable over approximately the next 3 years.

Aetna U.S. Healthcare will record a severance and facilities 
charge of approximately $275.0 million after tax in the fourth 
quarter of 1996 principally related to costs associated with the 
integration of the health businesses of Aetna and U.S. Healthcare.  
The severance and facilities charge is expected to consist of $167 
million of severance costs, $40 million of facilities-related 
costs and $68 million of asset write-offs and other related items.  
The severance portion of this charge is based on a plan to 
eliminate approximately 7,500 positions (primarily service center, 
medical management, administrative and data center personnel).  
Such actions are expected to be substantially completed by 
December 31, 1998.

<PAGE> 14

                AETNA INC. AND SUBSIDIARIES

           CONDENSED NOTES TO FINANCIAL STATEMENTS
                       (Continued)

(6)  Discontinued Products

Under the company's accounting for its discontinued fully 
guaranteed large case pension products (guaranteed investment 
contracts ("GICs") and single-premium annuities ("SPAs")), the 
respective reserves for anticipated future losses are reviewed by 
management quarterly.  Accordingly, as long as the reserves 
represent management's then best estimates of expected future 
losses, results of operations of the discontinued products, 
including net realized capital gains and losses, are 
credited/charged to the respective reserve and do not affect the 
company's results of operations.  As a result of management's 
review in the second quarter, $170 million (pretax) of the reserve 
related to GICs was released.  The reserves at September 30, 1996 
reflect management's best estimate of the anticipated future net 
losses for GICs and SPAs.  To the extent that actual future losses 
are greater than anticipated future net losses, the company's 
results of operations would be adversely affected.  Conversely, if 
actual future losses are less than anticipated future losses, the 
company's results of operations would be favorably affected.  
(Refer to Aetna Services' 1995 Annual Report for a more complete 
discussion of the reserve for anticipated future losses on 
discontinued products.)


<PAGE> 15

                AETNA INC. AND SUBSIDIARIES

           CONDENSED NOTES TO FINANCIAL STATEMENTS
                       (Continued)


(6)  Discontinued Products (Continued)

Results of discontinued products were as follows (pretax, in 
millions):

<TABLE>
<CAPTION>
                                                                                 Charged
                                                                                 (Credited) to
                                        Guaranteed    Single-                    Reserve for
                                        Investment    Premium                    Future
Three months ended September 30, 1996   Contracts     Annuities    Total         Losses       Net*   
_____________________________________________________________________________________________________
<S>                                     <C>           <C>          <C>           <C>          <C>

Net investment income                   $  81.9       $ 106.7      $ 188.6       $      -     $ 188.6
Net realized capital gains                 10.5           1.6         12.1          (12.1)          -
Interest earned on receivable    
  from continuing business                  4.0           7.8         11.8              -        11.8
Other income                                3.1          13.6         16.7              -        16.7
                                        _____________________________________________________________
     Total revenue                         99.5         129.7        229.2          (12.1)      217.1
                                        _____________________________________________________________

Current and future benefits                83.2         106.2        189.4           24.7       214.1
Operating expenses                           .7           2.3          3.0              -         3.0
                                        _____________________________________________________________
     Total benefits and expenses           83.9         108.5        192.4           24.7       217.1
                                        _____________________________________________________________

Results of discontinued products        $  15.6       $  21.2      $  36.8       $  (36.8)    $     -
_____________________________________________________________________________________________________
                                        _____________________________________________________________


                                                                                 Charged
                                                                                 (Credited) to
                                        Guaranteed    Single-                    Reserve for
                                        Investment    Premium                    Future
Three months ended September 30, 1995   Contracts     Annuities    Total         Losses       Net*   
_____________________________________________________________________________________________________
<S>                                     <C>           <C>          <C>           <C>          <C>

Net investment income                   $ 121.2       $ 111.6      $ 232.8       $     -      $ 232.8
Net realized capital gains                (12.4)         16.2          3.8          (3.8)           -
Interest earned on receivable                  
  from continuing business                  5.0           7.7         12.7             -         12.7
Other income                                2.1           3.0          5.1             -          5.1
                                        _____________________________________________________________
     Total revenue                        115.9         138.5        254.4          (3.8)       250.6
                                        _____________________________________________________________

Current and future benefits               138.1         108.9        247.0           1.7        248.7
Operating expenses                          (.4)          2.3          1.9             -          1.9
                                        _____________________________________________________________
     Total benefits and expenses          137.7         111.2        248.9           1.7        250.6
                                        _____________________________________________________________

Results of discontinued products        $ (21.8)      $  27.3      $   5.5       $  (5.5)     $     -
_____________________________________________________________________________________________________
                                        _____________________________________________________________
<FN>

* Amounts are reflected in the 1996 and 1995 Consolidated Statements of Income, except for interest of
  $11.8 million and $12.7 million for the three months ended September 30, 1996 and 1995, respectively,
  earned on the receivable from continuing business which is eliminated in consolidation.
</TABLE>


<PAGE> 16

                AETNA INC. AND SUBSIDIARIES

           CONDENSED NOTES TO FINANCIAL STATEMENTS
                       (Continued)

(6)  Discontinued Products (Continued)

<TABLE>
<CAPTION>
                                                                                 Charged
                                                                                 (Credited)
                                        Guaranteed    Single-                    to Reserve
                                        Investment    Premium                    for Future
Nine months ended September 30, 1996    Contracts     Annuities    Total         Losses       Net*   
_____________________________________________________________________________________________________
<S>                                     <C>           <C>          <C>           <C>          <C>

Net investment income                   $ 280.8       $ 331.6      $  612.4      $      -     $ 612.4
Net realized capital gains (losses)        36.2           (.1)         36.1         (36.1)          -
Interest earned on receivable    
  from continuing business                 14.6          23.4          38.0             -        38.0
Change in Accounting 
  Policy - FAS No. 121 (1)                  5.4           2.9           8.3             -         8.3
Other income                                8.0          20.5          28.5             -        28.5
                                        _____________________________________________________________
     Total revenue                        345.0         378.3         723.3         (36.1)      687.2
                                        _____________________________________________________________

Current and future benefits               285.8         312.2         598.0          74.8       672.8
Operating expenses                          6.9           7.5          14.4             -        14.4
                                        _____________________________________________________________
     Total benefits and expenses          292.7         319.7         612.4          74.8       687.2
                                        _____________________________________________________________

Results of discontinued products        $  52.3       $  58.6      $  110.9      $ (110.9)    $     -
_____________________________________________________________________________________________________
                                        _____________________________________________________________
(1) See note 7 for a discussion of FAS No. 121.


                                                                                 Charged
                                                                                 (Credited)
                                        Guaranteed    Single-                    to Reserve
                                        Investment    Premium                    for Future
Nine months ended September 30, 1995    Contracts     Annuities    Total         Losses       Net*   
_____________________________________________________________________________________________________
<S>                                     <C>           <C>          <C>           <C>          <C>

Net investment income                   $ 391.8       $ 333.9      $  725.7      $      -     $ 725.7
Net realized capital gains (losses)       (43.5)         38.6          (4.9)          4.9           -
Interest earned on receivable                  
  from continuing business                 15.2          22.9          38.1             -        38.1
Other income                                7.0           9.0          16.0             -        16.0
                                        _____________________________________________________________
     Total revenue                        370.5         404.4         774.9           4.9       779.8
                                        _____________________________________________________________

Current and future benefits               438.4         336.5         774.9          (4.1)      770.8
Operating expenses                          1.2           7.8           9.0             -         9.0
                                        _____________________________________________________________
     Total benefits and expenses          439.6         344.3         783.9          (4.1)      779.8
                                        _____________________________________________________________

Results of discontinued products        $ (69.1)      $  60.1      $   (9.0)     $    9.0     $     -
_____________________________________________________________________________________________________
                                        _____________________________________________________________
<FN>

* Amounts are reflected in the 1996 and 1995 Consolidated Statements of Income, except for interest of
  $38.0 million and $38.1 million for the nine months ended September 30, 1996 and 1995, respectively,
  earned on the receivable from continuing business which is eliminated in consolidation.
</TABLE>


<PAGE> 17

                AETNA INC. AND SUBSIDIARIES

           CONDENSED NOTES TO FINANCIAL STATEMENTS
                       (Continued)

(6)  Discontinued Products (Continued)

Assets and liabilities of discontinued products were as follows 
(in millions):

<TABLE>
<CAPTION>
                                                   September 30, 1996         
                                       _______________________________________

                                       Guaranteed      Single-
                                       Investment      Premium
                                       Contracts       Annuities     Total    
                                       _______________________________________
<S>                                    <C>             <C>           <C>

Debt securities available for sale     $ 1,689.5       $ 3,345.4     $ 5,034.9
Mortgage loans                           1,590.5         1,385.4       2,975.9
Real estate                                418.4           180.9         599.3
Short-term and other investments           112.0           195.9         307.9
                                       _______________________________________
   Total investments                     3,810.4         5,107.6       8,918.0
Current and deferred income taxes           89.5           119.3         208.8
Receivable from continuing business            -           517.0         517.0
                                       _______________________________________
   Total assets                        $ 3,899.9       $ 5,743.9     $ 9,643.8
______________________________________________________________________________
                                       _______________________________________
Future policy benefits                 $       -       $ 4,822.3     $ 4,822.3
Policyholders' funds left with
  the company                            3,679.5               -       3,679.5
Reserve for future losses on
  discontinued products                    103.7           796.0         899.7
Other                                      116.7           125.6         242.3
                                       _______________________________________
   Total liabilities                   $ 3,899.9       $ 5,743.9     $ 9,643.8
______________________________________________________________________________
                                       _______________________________________
</TABLE>

Net unrealized capital gains as of September 30, 1996 on available 
for sale debt securities are included above in other liabilities 
and are not reflected in consolidated shareholders' equity.  The 
reserve for anticipated future losses on GICs is included in 
policyholders' funds left with the company and the reserve for 
anticipated future losses on SPAs is included in future policy 
benefits on the Consolidated Balance Sheets.

The activity in the reserve for anticipated future losses on 
discontinued products was as follows (pretax, in millions):

<TABLE>
<CAPTION>
                                         Nine Months Ended September 30, 1996 
                                      ________________________________________
                                      Guaranteed       Single-
                                      Investment       Premium
                                      Contracts        Annuities   Total      
______________________________________________________________________________
<S>                                   <C>              <C>         <C>

Reserve at beginning of period        $    221.4       $   737.4   $     958.8
Results of discontinued products            52.3            58.6         110.9
Release of reserve                        (170.0)              -        (170.0)
                                      ________________________________________ 
Reserve at end of period              $    103.7       $   796.0   $     899.7
______________________________________________________________________________
                                      ________________________________________
</TABLE>


<PAGE> 18

                AETNA INC. AND SUBSIDIARIES

           CONDENSED NOTES TO FINANCIAL STATEMENTS
                       (Continued)

(6)  Discontinued Products (Continued)

At the time of discontinuance, a receivable from Large Case 
Pensions' continuing business was established for each 
discontinued product equivalent to the net present value of the 
anticipated cash flow shortfalls.  Interest is accrued on the 
receivables at the discount rate used to calculate the loss on 
discontinuance. The offsetting payable, on which interest is 
similarly accrued, is reflected in the continuing business.  The 
interest on such payable generally offsets the investment income 
on the assets available to fund the shortfall.  At September 30, 
1996, the GIC receivable of $314.8 million, net of the related 
deferred taxes payable on the accrued interest income of 
$19.0 million, was funded from continuing operations to meet 
liquidity needs from maturing GICs.  At September 30, 1996, for 
SPAs, the receivable from continuing business, net of the related 
deferred taxes payable of $28.7 million on the accrued interest 
income, was $488.3 million.  As of September 30, 1996, no funding 
of the SPA receivable had taken place.  This amount is eliminated 
in consolidation and is therefore not reflected on the 
Consolidated Balance Sheets.

(7)  Investments

Net investment income includes amounts allocable to experience 
rated contractholders of $344.8 million and $363.4 million for the 
three months ended September 30, 1996 and 1995, respectively, and 
$1,041.5 million and $1,092.1 million for the nine months ended 
September 30, 1996 and 1995, respectively.  Interest credited to 
contractholders is included in current and future benefits.

Net realized capital gains allocable to experience rated 
contractholders of $30.0 million and $62.9 million for the three 
months ended September 30, 1996 and 1995, respectively, and 
$113.7 million and $74.2 million for the nine months ended 
September 30, 1996 and 1995, respectively, were deducted from net 
realized capital gains as reflected on the Consolidated Statements 
of Income, and an offsetting amount is reflected on the 
Consolidated Balance Sheets in policyholders' funds left with the 
company.


<PAGE> 19

                AETNA INC. AND SUBSIDIARIES

           CONDENSED NOTES TO FINANCIAL STATEMENTS
                       (Continued)

(7) Investments (Continued)

The company applies the provisions of FAS No. 114, Accounting by 
Creditors for Impairment of a Loan and FAS No. 118, Accounting by 
Creditors for Impairment of a Loan - Income Recognition and 
Disclosures, individually to all loans in the portfolio and does 
not aggregate smaller balance, homogeneous loans for separate 
evaluation nor does it aggregate loans by major risk 
classifications for the purpose of applying such provisions.  In 
accordance with these standards, a loan is considered impaired 
when it is probable that the company will be unable to collect 
amounts due according to the contractual terms of the loan 
agreement (minimum delays (i.e., up to 60 days) will not result in 
a loan being considered impaired).  For impaired loans, the 
measurement method used is to establish a specific impairment 
reserve for the difference between the recorded investment in the 
mortgage loan and the fair value of the collateral.  The company 
records full or partial charge-offs of loans at the time an event 
occurs with the borrower affecting the legal status of the loan.  
This typically occurs at the time of foreclosure (actual or in-
substance) or upon a loan modification giving rise to forgiveness 
of debt.

General reserves are established for losses management believes 
are likely to arise from loans in the portfolio other than those 
which have been specifically reserved for, but cannot be 
attributed to specific loans.

At September 30, 1996, the total recorded investment in loans that 
are considered to be impaired (which include problem loans, 
restructured loans and potential problem loans) under FAS No. 114 
and related specific reserves are presented in the table below.  
Included in the total recorded investment are impaired loans of 
$417 million for which no specific reserves are considered 
necessary.  This includes $191 million related to one mortgage 
loan where the borrower has declared bankruptcy.  No specific 
reserve has been established for this loan because the loan is 
well secured, and the company does not anticipate any losses.

<TABLE>
<CAPTION>
                                              Total
                                              Recorded          Specific
(Millions)                                    Investment        Reserves
________________________________________________________________________
<S>                                           <C>               <C>

Supporting discontinued products              $   746.5         $   105.7
Supporting experience rated products              504.1              91.7
Supporting remaining products                     237.4              24.8
                                              ___________________________
 Total Impaired Loans                         $ 1,488.0         $   222.2
_________________________________________________________________________
                                              ___________________________
</TABLE>


<PAGE> 20

               AETNA INC. AND SUBSIDIARIES

           CONDENSED NOTES TO FINANCIAL STATEMENTS
                       (Continued)

(7) Investments (Continued)

The activity in the specific and general reserves for the nine 
months ended September 30, 1996 is summarized below:

<TABLE>
<CAPTION>
                                             Charged                                  Balance
                              Balance at     to net       Charged                     at
                              December 31,   realized     to other      Principal     September 30,
(Millions)                    1995           loss (gain)  accounts(1)   Write-offs    1996        
__________________________________________________________________________________________________
<S>                           <C>            <C>          <C>           <C>           <C>

Supporting discontinued
 products                     $   287.5      $       -    $      -      $ (127.5)     $  160.0

Supporting experience 
 rated products                   228.3              -       (39.4)        (33.6)        155.3

Supporting remaining 
 products                          89.1          (10.6)          -         (25.3)         53.2
                              ________________________________________________________________

  Total -    
  continuing operations       $   604.9       $  (10.6)   $  (39.4)     $ (186.4)     $  368.5
______________________________________________________________________________________________
                              ________________________________________________________________
<FN>

(1)  Reflects adjustments of reserves related to assets supporting experience rated products
     and discontinued products.
</TABLE>

The company accrues interest income on impaired loans to the 
extent it is deemed collectible and the loan continues to perform 
under its original or restructured contractual terms.  Interest 
income on problem loans is generally recognized on a cash basis.  
Cash payments on loans in the process of foreclosure are generally 
treated as a return of principal.

Income earned (pretax) and received on the average recorded 
investment in impaired loans for the three and nine months ended 
September 30, 1996 was as follows:

<TABLE>
<CAPTION>
                                         Three Months Ended             Nine Months Ended
                                         September 30, 1996             September 30, 1996    
                                      __________________________ _____________________________
                                      Average                     Average
                                      Impaired  Income  Income    Impaired  Income    Income
(Millions)                            Loans     Earned  Received  Loans     Earned    Received
________________________________________________________________  ____________________________
<S>                                   <C>       <C>     <C>       <C>       <C>       <C>

Supporting discontinued products      $  744.9  $  17.5  $ 16.8   $  711.1  $  47.5   $   48.4
Supporting experience rated products     509.4      8.5     8.4      505.7     28.3       28.0
Supporting remaining products            219.6      4.5     4.4      222.1     14.2       14.1
                                      _________________________   ____________________________
  Total continuing operations         $1,473.9  $  30.5  $ 29.6   $1,438.9  $  90.0   $   90.5
_______________________________________________________________   ____________________________
                                      _________________________   ____________________________
</TABLE>


<PAGE> 21

               AETNA INC. AND SUBSIDIARIES

           CONDENSED NOTES TO FINANCIAL STATEMENTS
                       (Continued)

(7) Investments (Continued)

As of January 1, 1996, the company adopted FAS No. 121, Accounting 
for the Impairment of Long-Lived Assets and Long-Lived Assets to 
Be Disposed Of.  This statement requires long-lived assets to be 
held and used to be written down to fair value when they are 
considered impaired.  Long-lived assets to be disposed of (e.g., 
real estate held for sale) are to be carried at the lower of cost 
or fair value less estimated selling costs.  In addition, this 
statement does not allow long-lived assets to be disposed of to be 
depreciated.  As a result of the adoption of FAS No. 121,  
valuation reserves at January 1, 1996 were increased by $52.9 
million in connection with the reversal of previously recorded 
accumulated depreciation related to properties held for sale.  The 
adoption of FAS No. 121 resulted in an immaterial impact on 
results of operations.

(8)  Debt and Guarantee of Debt Securities

Aetna Services has a revolving credit facility aggregating $2.5 
billion with a worldwide group of banks that terminates in June 
2001 (subsequent to September 30, 1996 the facility was reduced by 
Aetna Services to approximately $1.5 billion).  Various interest 
rate options are available under the facility and any borrowings 
mature on the expiration date of the applicable credit commitment.  
Aetna Services pays facility fees ranging from .065% to .20% per 
annum, depending upon the company's long-term senior unsecured 
debt rating.  Aetna Services is currently paying a facility fee of 
 .08%.  The commitments require Aetna Inc. as a guarantor to the 
credit facility to maintain shareholders' equity, excluding net 
unrealized capital gains and losses, of at least $7.5 billion.  
The facility also supports Aetna Services' commercial paper 
borrowing program.

Aetna Inc. has fully and unconditionally guaranteed the payment of 
all principal, premium, if any, and interest on all outstanding 
debt securities of Aetna Services, including the $348,000,000     
9 1/2% Subordinated Debentures due 2024 (the "Subordinated 
Debentures") issued to Aetna Capital L.L.C., a wholly-owned 
subsidiary of Aetna Services (collectively the "Aetna Services 
debt").  Aetna Capital L.L.C. has issued $275,000,000 of 
redeemable preferred stock and the Subordinated Debentures 
represent primarily all of the assets of Aetna Capital L.L.C.

<PAGE> 22

               AETNA INC. AND SUBSIDIARIES

           CONDENSED NOTES TO FINANCIAL STATEMENTS
                       (Continued)

(8) Debt and Guarantee of Debt Securities (Continued)

Aetna Services issued the following debt on August 19, 1996 which 
is fully and unconditionally guaranteed by Aetna Inc.:  
$300,000,000 6.75% Notes due 2001; $350,000,000 7.125% Notes due 
2006; $450,000,000 7.625% Debentures due 2026; and $300,000,000 
6.97% Debentures due 2036 (putable at par in 2004).  Pursuant to 
shelf registration statements declared effective by the Securities 
and Exchange Commission ("SEC"), Aetna Services may offer and sell 
up to an additional $.6 billion of debt securities guaranteed by 
Aetna Inc., and Aetna Capital L.L.C. may offer and sell up to an 
additional $225 million of preferred securities guaranteed by 
Aetna Inc.

Separate financial statements of Aetna Services have not been presented 
herein or in any separate reports filed with the SEC because management 
has determined that such financial statements would not be material to 
holders of the Aetna Services debt.  Summarized consolidated financial 
information for Aetna Services was as follows (in millions):

Balance Sheet Information:

<TABLE>
<CAPTION>
                                         September 30,             December 31,
                                             1996                       1995   
                                         _____________             _________
<S>                                      <C>                       <C>

Total investments (excluding
  Separate Accounts)                     $41,758.5                 $44,050.3
                                         _________                 _________
                                         _________                 _________

Total assets                             $81,668.2                 $84,323.7
                                         _________                 _________
                                         _________                 _________

Total insurance liabilities              $40,335.3                 $42,977.1
                                         _________                 _________
                                         _________                 _________

Total liabilities                        $78,835.7                 $76,775.9
                                         _________                 _________
                                         _________                 _________

Total redeemable preferred stock         $   275.0                 $   275.0
                                         _________                 _________
                                         _________                 _________

Total shareholder's equity               $ 2,557.6                 $ 7,272.8
                                         _________                 _________
                                         _________                 _________
</TABLE>


<PAGE> 23

               AETNA INC. AND SUBSIDIARIES

           CONDENSED NOTES TO FINANCIAL STATEMENTS
                       (Continued)

(8) Debt and Guarantee of Debt Securities (Continued)

Statement of Income Information:

<TABLE>
<CAPTION>
                                        Three Months Ended         Nine Months Ended
                                          September 30,              September 30,
                                        1996          1995         1996         1995
                                        _____         ____         ____         ____
<S>                                     <C>           <C>          <C>          <C>

Total revenue                           $3,216.9      $3,191.0     $9,684.4     $9,627.5
                                        ________      ________     ________     ________
                                        ________      ________     ________     ________

Total benefits and expenses             $3,025.5      $3,015.0     $9,210.8     $9,126.5
                                        ________      ________     ________     ________
                                        ________      ________     ________     ________

Income from
  continuing operations
  before income taxes                   $  191.4      $  176.0     $  473.6     $  501.0
                                        ________      ________     ________     ________
                                        ________      ________     ________     ________


Income from
  continuing operations                 $  127.9      $  112.6     $  317.7     $  326.1
                                        ________      ________     ________     ________
                                        ________      ________     ________     ________

Net income                              $  127.9      $  212.1     $  763.6     $   76.0
                                        ________      ________     ________     ________
                                        ________      ________     ________     ________

</TABLE>

The amount of dividends that may be paid to Aetna Services by its 
domestic insurance subsidiaries from September 30, 1996 through 
December 31, 1996 without prior approval by the Insurance 
Commissioner of the State of Connecticut are limited to 
approximately $226.1 million in the aggregate.  There are no such 
restrictions on distributions from Aetna Services to Aetna Inc.

(9)  Capital Stock

In addition to the capital stock disclosed on the Consolidated 
Balance Sheets, Aetna Inc. has the following authorized capital 
stock:  15,000,000 shares of Class A Voting Preferred Stock, $.01 
par value per share; 15,000,000 shares of Class B Voting Preferred 
Stock, $.01 par value per share; and 15,000,000 shares of Class D 
Non-Voting Preferred Stock, par value $.01 per share.  Of these 
additional shares authorized, no shares were issued or outstanding 
at September 30, 1996.

Each share of Class C Stock is mandatorily convertible into one 
share of common stock on July 19, 2000.  Dividends accrue on a 
daily basis at an annual rate of $4.7578 per share and are payable 
upon declaration by the Board of Directors.  The company may, at 
its option, redeem the Class C Stock on or after July 19, 1999 but 
prior to July 19, 2000 for shares of Aetna Inc. common stock based 
on specified formulas.  The number of shares of common stock to be 
issued for each share of Class C Stock pursuant to this optional 
redemption will be based on a ratio, calculated as the greater of: 
(a) $76.125 (plus any accrued but unpaid dividends) divided by the 
then current market price of the common stock determined two 
trading days prior to the notice date of the intent to redeem; or 
(b) .8197.  Each share of Class C Stock is also convertible, in 
whole or part, at the option of the holder, into .8197 shares of 
common stock.

<PAGE> 24

                AETNA INC. AND SUBSIDIARIES

           CONDENSED NOTES TO FINANCIAL STATEMENTS
                       (Continued)

(10)  Off-Balance-Sheet and Other Financial Instruments

The company engages in hedging activities to manage interest rate, 
price and currency risks.  Such hedging activities have 
principally consisted of using foreign exchange forward contracts, 
futures and forward contracts and interest rate swap agreements.  
(See General Account Investments - Use of Derivatives and Other 
Investments on page 53 of the Management's Discussion and Analysis 
of Financial Condition and Results of Operations and 
Note 16 of the company's 1995 Annual Report for a description of 
the company's hedging activities).  The notional amounts, carrying 
values and estimated fair values of the company's off-balance-
sheet and other financial instruments are as follows (in 
millions):

<TABLE>
<CAPTION>
                                                         Carrying
                                                         Value
                                             Notional    Asset        Fair
September 30, 1996                           Amount      (Liability)  Value   
______________________________________________________________________________
<S>                                          <C>         <C>          <C>

Foreign exchange forward contracts - sell:
  Related to net investments in foreign
    affiliates                               $ 135.3     $    (.9)    $   (.9) 
  Related to investments in nondollar
    denominated assets                          55.4            -           -
Interest rate swaps                             43.0            -         5.7
Futures contracts to purchase debt securities  225.3          2.4         2.4
Stock index futures                            139.2         (9.1)       (9.1)
Warrants to purchase debt securities            19.0          3.2         3.2 

</TABLE>

At September 30, 1996, the company had commitments to purchase 
investments for $2.3 million, the fair market value of which is 
$2.5 million.

(11)  Supplemental Cash Flow Information

Significant noncash investing and financing activities of 
continuing operations include acquisition of real estate through 
foreclosures (including in-substance foreclosures) of mortgage 
loans amounting to $75.0 million and $184.5 million for the nine 
months ended September 30, 1996 and 1995, respectively.

<PAGE> 25

            AETNA, INC. AND SUBSIDIARIES

           CONDENSED NOTES TO FINANCIAL STATEMENTS
                       (Continued)

(12)  Earnings Per Share

Earnings per share are computed using net income less preferred 
dividends divided by the weighted average number of common shares 
outstanding (including common share equivalents). In determining 
earnings per share, the Class C Stock is not considered a common 
stock equivalent for primary earnings purposes.  It is considered 
an equivalent for the company's fully diluted earnings per share 
calculation and the weighted average number of Class C Stock 
shares outstanding were 9.2 million and 3.1 million for the three 
and nine months ended September 30, 1996, respectively.  There is 
no material difference between primary and fully diluted earnings 
per share for the periods presented.

(13)  Litigation

The company is involved in numerous lawsuits arising, for the most 
part, in the ordinary course of its business operations, including 
litigation in its health business concerning benefit plan coverage 
and other decisions made by the company, and alleged medical 
malpractice by participating providers.  While the ultimate 
outcome of litigation against the company cannot be determined at 
this time, after consideration of the defenses available to the 
company and any related reserves established, it is not expected 
to result in liability for amounts material to the financial 
condition of the company, although it may adversely affect results 
of operations in future periods.

<PAGE> 26

           Independent Auditors' Review Report

The Board of Directors
Aetna Inc.:

We have reviewed the accompanying condensed consolidated balance 
sheet of Aetna Inc. and Subsidiaries as of September 30, 1996, and 
the related condensed consolidated statements of income for the 
three-month and nine-month periods ended September 30, 1996 and 
1995, and the related condensed consolidated statements of 
shareholders' equity and cash flows for the nine-month periods 
ended September 30, 1996 and 1995.  These condensed consolidated 
financial statements are the responsibility of the company's 
management.

We conducted our review in accordance with standards established 
by the American Institute of Certified Public Accountants.  A 
review of interim financial information consists principally of 
applying analytical procedures to financial data and making 
inquiries of persons responsible for financial and accounting 
matters.  It is substantially less in scope than an audit 
conducted in accordance with generally accepted auditing 
standards, the objective of which is the expression of an opinion 
regarding the financial statements taken as a whole.  Accordingly, 
we do not express such an opinion.

Based on our review, we are not aware of any material 
modifications that should be made to the accompanying condensed 
consolidated financial statements for them to be in conformity 
with generally accepted accounting principles.

We have previously audited, in accordance with generally accepted 
auditing standards, the consolidated balance sheet of Aetna 
Services, Inc. (formerly Aetna Life and Casualty Company) and 
Subsidiaries as of December 31, 1995, and the related consolidated 
statements of income, shareholders' equity, and cash flows for the 
year then ended (not presented herein); and in our report dated 
February 6, 1996, we expressed an unqualified opinion on those 
consolidated financial statements.  In our opinion, the 
information set forth in the accompanying condensed consolidated 
balance sheet as of December 31, 1995, is fairly presented, in all 
material respects, in relation to the consolidated balance sheet 
from which it has been derived.




/s/ KPMG PEAT MARWICK LLP
Hartford, Connecticut
October 23, 1996


<PAGE> 27

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations

Consolidated Results of Operations
__________________________________

<TABLE>
<CAPTION>
Operating Summary
(Millions, except per share data)       Three Months Ended September 30,      Nine Months Ended September 30, 
                                      ___________________________________   __________________________________
                                      1996         1995          % Change   1996         1995         % Change
                                      ____         ____          ________   ____         ____         ________
<S>                                   <C>          <C>           <C>        <C>          <C>          <C>

Premiums............................  $ 2,688.4    $  1,830.4     46.9%     $ 6,243.1    $  5,535.0     12.8%
Net investment income...............      897.9         884.0      1.6        2,678.0       2,673.5       .2
Fees and other income...............      558.5         473.3     18.0        1,624.8       1,413.0     15.0
Net realized capital gains..........        7.5           3.3    127.3           73.9           6.0        -
                                      _________    __________               _________    __________         
    Total revenue...................    4,152.3       3,191.0     30.1       10,619.8       9,627.5     10.3

Current and future benefits.........    2,860.7       2,203.6     29.8        7,157.0       6,735.5      6.3
Operating expenses..................      913.7         774.1     18.0        2,499.2       2,271.7     10.0
Amortization of goodwill and
 other intangible assets............       75.1           3.8        -           80.8          16.7        -
Amortization of deferred policy
 acquisition costs..................       48.4          33.5     44.5          123.5         102.6     20.4
Reduction of loss on discontinued 
 products...........................          -             -        -         (170.0)            -        -
Severance and facilities charges....       49.0             -        -          441.7             -        -
                                      _________    __________               _________    __________         
    Total benefits and expenses.....    3,946.9       3,015.0     30.9       10,132.2       9,126.5     11.0
                                      _________    __________               _________    __________         

Income from continuing operations
 before income taxes................      205.4         176.0     16.7          487.6         501.0     (2.7)
Income taxes........................       83.0          63.4     30.9          175.4         174.9       .3
                                      _________    __________               _________    __________         

Income from continuing operations...      122.4         112.6      8.7          312.2         326.1     (4.3)

Discontinued operations, net of tax:
 Income (loss) from operations......          -          99.5   (100.0)         182.2        (250.1)       -
 Gain on sale.......................          -             -        -          263.7             -        -
                                      _________    __________               _________    __________         

    Net income......................  $   122.4    $    212.1    (42.3)     $   758.1    $     76.0        -
                                      _________    __________               _________    __________         
                                      _________    __________               _________    __________         

    Net income applicable
      to common ownership...........  $   111.2    $    212.1    (47.6)     $   746.9    $     76.0        -
                                      _________    __________               _________    __________         
                                      _________    __________               _________    __________         

Net realized capital gains 
 from continuing operations, net of 
 tax (included above)...............  $     5.2    $      1.5        -      $    49.2    $       .3        -
                                      _________    __________               _________    __________         
                                      _________    __________               _________    __________         


Results per common share:

Income from continuing operations...  $     .77    $      .98    (21.4)     $    2.39    $     2.87    (16.7)

Discontinued operations, net of tax:
 Income (loss) from operations......          -           .88   (100.0)          1.44         (2.20)       -
 Gain on sale.......................          -             -        -           2.09             -        -
                                      _________    __________               _________    __________         

    Net income......................  $     .77    $     1.86    (58.6)     $    5.92    $      .67        -
                                      _________    __________               _________    __________         
                                      _________    __________               _________    __________         
</TABLE>

Overview
________

Aetna Inc. (the "company") became the parent corporation of each of 
Aetna Services, Inc. ("Aetna Services") (formerly Aetna Life and 
Casualty Company) and U.S. Healthcare, Inc. ("U.S. Healthcare") as a 
result of the merger transaction effected on July 19, 1996.  The 
merger has been accounted for as a purchase of U.S. Healthcare, and 
the company's consolidated results of operations include the results 
of Aetna Services and, from the date of the merger, the results of 
U.S. Healthcare.  (See Note 2 of Condensed Notes to Financial 
Statements for additional information about the merger.)


<PAGE> 28

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations

Overview (Continued)
____________________

Income from Continuing Operations

The company reported income from continuing operations of 
$122 million and $312 million for the three and nine months ended 
September 30, 1996, respectively, compared with $113 million and 
$326 million for the same periods a year ago.  Income from 
continuing operations, excluding net realized capital gains, for 
the three and nine months ended September 30, 1996 increased $6 
million and decreased $63 million, respectively, from the same 
periods a year ago.  The comparison of results of continuing 
operations is affected by the merger with U.S. Healthcare and 
other significant factors discussed below:

Factors Primarily Related to the Merger

         Income from continuing operations reflects the inclusion 
         of U.S. Healthcare from July 19, 1996.

         Approximately $7.9 billion of goodwill and other 
         intangible assets were created as a result of the merger.  
         Results of continuing operations for the three and nine 
         months ended September 30, 1996 reflected increases in 
         amortization of goodwill and other intangible assets of 
         $58 million and $51 million (after tax), respectively, 
         primarily related to the amortization of these intangible 
         assets for the period July 19, 1996 through September 30, 
         1996.

         A portion of the consideration paid in connection with 
         the merger consisted of cash from the net proceeds 
         received from the sale of the company's property-casualty 
         operations.  (See "Sale of Property-Casualty Operations" 
         on page 31.)  Results of continuing operations for the 
         three and nine months ended September 30, 1996 included 
         $7 million and $37 million (after tax), respectively, of 
         interest income earned on such net proceeds from April 2, 
         1996, the date of the property-casualty sale, through 
         July 19, 1996, the closing date of the merger.

         Results of continuing operations for the three and nine 
         months ended September 30, 1996 included an increase in 
         interest expense of $13 million related to borrowings 
         incurred in connection with the merger.

         As a result of the merger, the company issued 
         approximately 35.0 million shares of common stock and 
         11.7 million shares of mandatorily convertible preferred 
         stock.  The increase in the number of common shares 
         outstanding and the dividends on the mandatorily 
         convertible preferred stock affect the comparability of 
         per share amounts.  See Note 12 of Condensed Notes to 
         Financial Statements for further discussion.


<PAGE> 29

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations

Overview (Continued)
____________________

Other Significant Factors

         Results of continuing operations for the three and nine 
         months ended September 30, 1996 included severance and 
         facilities charges of $32 million (after tax) and $287 
         million (after tax), respectively.  The third quarter 1996 
         severance and facilities charge principally related to 
         actions taken or expected to be taken by Aetna Retirement 
         Services to improve its cost structure relative to its 
         competitors.  The remaining severance and facilities charges 
         of $255 million (after tax), recorded in the second quarter 
         of 1996, related to the CityPlace office facility lease, 
         actions taken or expected to be taken to reduce the level of 
         corporate expenses and other costs previously absorbed by 
         the property-casualty operations, and actions taken or 
         expected to be taken by Aetna U.S. Healthcare, primarily to 
         reduce information technology costs.  (See "Severance and 
         Facilities Charges" on page 30 regarding these charges and 
         other severance and facilities charges to be recorded by the 
         company in the fourth quarter.)

         Results of continuing operations for the nine months ended 
         September 30, 1996 included an $111 million benefit (after 
         tax) related to a reduction of the reserve for anticipated 
         future losses on discontinued products, primarily as a 
         result of continuing and recent favorable developments in 
         real estate markets.  (See "Discontinued Products" on page 
         41.)

Net Realized Capital Gains and Losses

Net realized after-tax capital gains and losses from continuing 
operations included in net income, allocable to experience rated 
pension contractholders, and supporting discontinued products were 
as follows (in millions):

<TABLE>
<CAPTION>
                                           Three Months Ended September 30,   Nine Months Ended September 30,
                                           ________________________________   _______________________________
                                                 1996         1995                 1996         1995
                                                 ____         ____                 ____         ____
<S>                                              <C>          <C>                  <C>          <C>    

Net realized capital gains from sales            $   5.2      $   1.5              $  54.7      $   4.4

Net realized capital losses from changes
  in reserves for mortgage loans and
  real estate                                          -            -                 (5.5)        (4.1)
                                                 _______      _______              _______      _______ 

Net realized capital gains from
  continuing operations                          $   5.2      $   1.5              $  49.2      $    .3
                                                 _______      _______              _______      _______
                                                 _______      _______              _______      _______

Net realized capital gains allocable
  to experience rated pension contractholders
  (excluded above)                               $  19.5      $  40.9              $  73.9      $  48.2
                                                 _______      _______              _______      _______
                                                 _______      _______              _______      _______

Net realized capital gains (losses) on 
  assets supporting discontinued products
  (excluded above)                               $   7.8      $   2.3              $  23.4      $  (3.3)
                                                 _______      _______              _______      _______ 
                                                 _______      _______              _______      _______ 
</TABLE>

Net realized capital gains from sales for the nine months ended 
September 30, 1996 include a $25 million gain related to the sale 
of Aetna Realty Investors ("ARI") to TA Associates and a $15 
million gain from the sale of an HMO subsidiary.

<PAGE> 30

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Overview (Continued)
____________________

Severance and Facilities Charges

During 1996, the company has recorded the following severance and 
facilities charges in connection with its strategic initiatives in 
order to make its continuing businesses more competitive.

          Aetna Retirement Services - In the third quarter, Aetna 
          Retirement Services recorded a $32 million (after tax) 
          severance and facilities charge principally related to 
          actions taken or expected to be taken to improve its 
          cost structure relative to its competitors.  The 
          severance portion of this charge is based on a plan to 
          eliminate 723 positions (primarily customer service, 
          sales and information technology support staff).

          Corporate - In conjunction with the sale of the 
          company's property-casualty operations (see "Sale of 
          Property-Casualty Operations" on page 31) an affiliate 
          of The Travelers Insurance Group Inc. ("Travelers") 
          subleased the space that had been occupied by the 
          company in the CityPlace office facility in Hartford for 
          eight years at current market rates.  The company 
          recorded a charge of $190 million (after tax) during the 
          second quarter representing the present value of the 
          difference between rent required to be paid by the 
          company under the lease and future rentals expected to 
          be received by the company.  The company also recorded 
          additional severance and facilities charges of 
          $45 million (after tax) during the second quarter due to 
          actions taken or expected to be taken to reduce the 
          level of corporate expenses and other costs previously 
          absorbed by the property-casualty operations.  The 
          severance portion of this charge includes the planned 
          elimination of 475 positions.

          Aetna U.S. Healthcare - Severance and facilities charges 
          of $20 million (after tax) were recorded by Aetna U.S. 
          Healthcare in the second quarter primarily related to 
          actions taken or expected to be taken to reduce 
          information technology costs and are not related to the 
          U.S. Healthcare merger.  The severance portion of this 
          charge is based on a plan that includes the planned 
          elimination of 675 positions.

These severance and facilities charges for the nine months ended 
September 30, 1996, included the following (pretax):

<TABLE>
<CAPTION>
                                                                    Vacated
                                                  Asset Write-       Leased
(Millions)                          Severance         Off          Property      Other        Total   
______________________________________________________________________________________________________
<S>                                 <C>           <C>              <C>           <C>          <C>

Aetna U.S. Healthcare               $   20.8      $     .9         $    3.5      $    4.8     $   30.0
Aetna Retirement Services               42.8           1.5              1.9           2.8         49.0
Corporate:  Other                       28.5          18.0            313.2 (1)       3.0        362.7
                                    ________      ________         ________      ________     ________

     Total Company                  $   92.1      $   20.4         $  318.6      $   10.6     $  441.7
                                    ________      ________         ________      ________     ________
                                    ________      ________         ________      ________     ________
<FN>
(1)  Includes $292.2 million related to the CityPlace lease.
</TABLE>

<PAGE> 31

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Overview (Continued)
____________________

The Aetna Retirement Services severance actions are expected to be 
completed by the end of the first quarter of 1998.  The Aetna U.S. 
Healthcare and Corporate severance actions and the vacating of the 
leased office space (excluding the CityPlace office space) are 
expected to be substantially completed by December 31, 1997.  The 
remaining lease payments (net of expected subrentals) on such 
vacated facilities are payable over approximately the next three 
years.

Aetna U.S. Healthcare will record a severance and facilities charge 
of approximately $275 million (after tax) in the fourth quarter of 
1996 principally related to costs associated with the integration of 
the health businesses of Aetna Services and U.S. Healthcare.  The 
severance and facilities charge is expected to consist of 
approximately $167 million of severance costs, $40 million of 
facilities-related costs and $68 million of asset write-offs and 
other related items.  The severance portion of this charge is based 
on a plan to eliminate approximately 7,500 positions (primarily 
service center, medical management, administrative and data center 
personnel).  Such actions are expected to be substantially completed 
by December 31, 1998.

Sale of Property-Casualty Operations

On April 2, 1996, the company completed the sale of its property-
casualty operations to Travelers for approximately $4.1 billion in 
cash.  The sale resulted in a gain of approximately $264 million 
(after tax).  (See Note 4 of Condensed Notes to Financial Statements 
for a discussion of certain indemifications related to the sale.)

See "Severance and Facilities Charges" on page 30 for a discussion of 
certain charges related to the sale.

Strategic Outlook

The company's merger with U.S. Healthcare represents a major step in 
the company's previously announced strategic decision to focus its 
resources on pursuing growth opportunities in its health care 
business, as well as evaluating opportunities for growth and 
development of its financial services and international operations.

<PAGE> 32

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Aetna U.S. Healthcare
_____________________

<TABLE>
<CAPTION>
Operating Summary
(Millions)                            Three Months Ended September 30,   Nine Months Ended September 30, 
                                      _________________________________  ________________________________
                                      1996         1995        % Change  1996        1995        % Change
                                      ____         ____        ________  ____        ____        ________
<S>                                   <C>          <C>         <C>       <C>         <C>         <C>     

Premiums............................  $ 2,315.4    $ 1,501.3    54.2%    $ 5,223.2   $ 4,457.8    17.2%
Net investment income...............      116.1         95.5    21.6         307.1       276.7    11.0
Fees and other income...............      387.8        318.0    21.9       1,125.0       961.6    17.0
Net realized capital gains (losses).       (1.3)        (5.0)   74.0          24.0       (15.1)      -
                                        _______    _________             _________   _________        
   Total revenue....................    2,818.0      1,909.8    47.6       6,679.3     5,681.0    17.6

Current and future benefits.........    1,951.2      1,271.6    53.4       4,474.0     3,818.0    17.2
Operating expenses..................      627.0        522.7    20.0       1,682.3     1,496.2    12.4
Amortization of goodwill and other
 intangible assets..................       74.1          2.4       -          78.3        12.8       -
Amortization of deferred policy 
 acquisition costs..................        3.7          5.4   (31.5)          8.8        18.6   (52.7)
Severance and facilities charge.....          -            -       -          30.0           -       -
                                      _________    _________             _________   _________        
   Total benefits and expenses......    2,656.0      1,802.1    47.4       6,273.4     5,345.6    17.4
                                      _________    _________             _________   _________        

Income before income taxes..........      162.0        107.7    50.4         405.9       335.4    21.0
Income taxes........................       69.3         39.1    77.2         154.2       123.7    24.7
                                      _________    _________             _________   _________        

Net income..........................  $    92.7    $    68.6    35.1     $   251.7   $   211.7    18.9
                                      _________    _________             _________   _________        
                                      _________    _________             _________   _________        
Net realized capital gains (losses),
 net of tax (included above)........  $     (.8)   $    (3.3)   75.8     $    16.8   $    (9.6)      -
                                      _________    _________             _________   _________        
                                      _________    _________             _________   _________        

</TABLE>

Aetna U.S. Healthcare provides a full spectrum of managed care, 
indemnity and group insurance products.  Aetna U.S. Healthcare 
consists of the Health Risk business and the Group Insurance and 
Other Health business.  Health products include health maintenance 
organization (HMO), point-of-service (POS), preferred provider 
organization (PPO) and indemnity.  The Health Risk business 
includes such health products where the company assumes all or a 
significant level of health care cost and utilization risk.  The 
Group Insurance and Other Health business includes group life and 
disability insurance, long-term care and all health products where 
the customer, and not the company, assumes all or a significant 
level of health care cost and utilization risk.

Actual Results

Aetna U.S. Healthcare's net income for the three and nine months 
ended September 30, 1996 increased by $24 million and $40 million, 
respectively, compared with the same periods a year ago.  Included 
in these results are severance and facilities charges (see 
"Severance and Facilities Charges" on page 30), amortization of 
goodwill and other intangibles ($61 million and $65 million after 
tax, for the three and nine months ended September 30, 1996, 
respectively, and $2 million and $13 million after tax, for the 
three and nine months ended September 30, 1995, respectively) and 
net realized capital gains and losses.  Excluding these items, 
results for the three and nine months ended September 30, 1996 
increased $80 million and $86 million, respectively, from the same 
periods a year ago, primarily reflecting the inclusion of U.S. 
Healthcare from July 19, 1996.  See Note 2 of Condensed Notes to 
Financial Statements for a discussion of the U.S. Healthcare 
merger.

Net realized capital gains for the nine months ended September 30, 
1996 were primarily attributable to the sale of an HMO subsidiary.  
The earnings of this subsidiary were not material to results.

<PAGE> 33

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Aetna U.S. Healthcare (Continued)
_________________________________

Pro Forma Results

The remainder of the discussion related to Aetna U.S. Healthcare 
is on a pro forma basis assuming that the merger had occurred at 
the beginning of 1995.

<TABLE>
<CAPTION>
Pro Forma Operating Summary (1)
(Millions)                            Three Months Ended September 30,   Nine Months Ended September 30, 
                                      _________________________________  ________________________________
                                      1996         1995        % Change  1996        1995        % Change
                                      ____         ____        ________  ____        ____        ________
<S>                                   <C>          <C>         <C>       <C>         <C>         <C>     

Premiums............................  $ 2,529.5    $ 2,403.6     5.2%    $ 7,554.6   $ 6,998.6     7.9%
Net investment income...............      119.7        105.8    13.1         333.8       310.1     7.6
Fees and other income...............      392.6        331.8    18.3       1,178.3     1,001.7    17.6
Net realized capital gains (losses).       (9.6)        (5.0)  (92.0)         18.5        (8.5)      -
                                        _______    _________             _________   _________        
   Total revenue....................    3,032.2      2,836.2     6.9       9,085.2     8,301.9     9.4

Current and future benefits.........    2,110.1      1,933.2     9.2       6,238.6     5,666.6    10.1
Operating expenses..................      670.8        644.4     4.1       2,014.1     1,833.2     9.9
Amortization of goodwill and other
 intangible assets..................       91.3         91.4     (.1)        273.5       279.8    (2.3)
Amortization of deferred policy
 acquisition costs..................        3.7          5.4   (31.5)          8.8        18.6   (52.7)
Severance and facilities charges....          -            -       -          30.0           -       -
                                      _________    _________             _________   _________        
   Total benefits and expenses......    2,875.9      2,674.4     7.5       8,565.0     7,798.2     9.8
                                      _________    _________             _________   _________        

Income before income taxes..........      156.3        161.8    (3.4)        520.2       503.7     3.3
Income taxes........................       70.5         80.9   (12.9)        234.1       251.5    (6.9)
                                      _________    _________             _________   _________         

Net income..........................  $    85.8    $    80.9     6.1     $   286.1   $   252.2    13.4
                                      _________    _________             _________   _________        
                                      _________    _________             _________   _________        
Net realized capital gains (losses),
 net of tax (included above)........  $    (6.0)   $    (3.3)  (81.8)    $    13.3   $    (5.6)      -
                                      _________    _________             _________   _________        
                                      _________    _________             _________   _________        
<FN>

(1)  Represents financial information as though U.S. Healthcare had been acquired on 
     January 1, 1995, reflecting adjustments which include:  (a) amortization of 
     goodwill and other intangible assets, (b) interest income foregone related to a $500 
     million dividend paid by U.S. Healthcare to the company and (c) adjustments to 
     conform U.S. Healthcare's accounting policies with Aetna's and to remove the effect 
     of merger-related costs incurred by U.S. Healthcare prior to the acquisition.
     The pro forma operating summary and information derived from such summary is 
     not necessarily indicative of the results of operations of Aetna U.S. Healthcare had 
     the merger occurred at the beginning of 1995, nor is it necessarily indicative of 
     future results.  The pro forma operating summary does not give effect to any 
     synergies which may be realized in future periods as a result of the merger nor does 
     it give effect to the costs of financing the merger (see "Corporate" on page 44 for 
     further discussion).
</TABLE>

Although Aetna U.S. Healthcare's pro forma net income for the three 
and nine months ended September 30, 1996 increased by $5 million and 
$34 million, respectively, excluding the 1996 severance and 
facilities charge, amortization of goodwill and other intangibles and 
net realized capital gains and losses, the segment's earnings reflect 
a decrease in Health Risk earnings of $17 million and $12 million for 
the three and nine months ended September 30, 1996, respectively, 
compared with the same periods a year ago.

The table below sets forth earnings for the Health Risk and Group 
Insurance and Other Health businesses, excluding the 1996 severance 
and facilities charge, amortization of goodwill and other intangibles
and net realized capital gains and losses.


<PAGE> 34

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Aetna U.S. Healthcare (Continued)
_________________________________

<TABLE>
<CAPTION>
                                     Three Months Ended September 30,   Nine Months Ended September 30,
                                     ________________________________   _______________________________
                                           1996           1995               1996           1995
                                     ________________________________   _______________________________
<S>                                        <C>            <C>                <C>            <C>        

Health Risk                                $ 106.3        $ 123.2            $  362.2       $ 373.8 
Group Insurance and Other Health              60.8           36.5               155.8         116.1 
                                           _______        _______            ________       _______ 
   Total Aetna U.S. Healthcare             $ 167.1        $ 159.7            $  518.0       $ 489.9 
                                           _______        _______            ________       ________
                                           _______        _______            ________       ________

Health Risk Medical Loss Ratios               82.0%          78.4%               80.9%         78.7%
                                           _______        _______            ________       _______ 
                                           _______        _______            ________       _______ 
Health Risk SG&A Ratios                       15.0%          14.8%               14.7%         14.4%
                                           _______        _______            ________       _______ 
                                           _______        _______            ________       _______ 
</TABLE>

The decrease in pro forma earnings for the three and nine months ended 
September 30, 1996 in the Health Risk business resulted from lower 
Commercial HMO premium per member per month and higher medical costs 
per member per month for Commercial and Medicare HMO products.  The 
decrease in Commercial HMO premium per member per month resulted from 
competitive pricing pressures and customers selecting lower premium 
plans.  The increase in Commercial medical costs on a per member per 
month basis resulted from higher specialist, outpatient and pharmacy 
costs.  The increase in Medicare medical costs on a per member per 
month basis resulted from higher utilization in certain markets and 
pharmacy costs.  See "Outlook" on page 35 for further discussions.

The increase in pro forma earnings for the three and nine months 
ended September 30, 1996 for the Group Insurance and Other Health 
business is primarily attributable to favorable group life mortality 
experience, as well as increased Group Insurance sales and enrollment 
in nonrisk health products.  Third quarter 1996 results for the Group 
Insurance and Other Health business also reflected lower operating 
expenses per member for nonrisk health products.

The number of members enrolled in/covered by Aetna U.S. Healthcare's 
products was as follows:

<TABLE>
<CAPTION>
                                   September 30, 1996                September 30, 1995*      
                              ______________________________    _____________________________ 
(Thousands)                   Risk      Nonrisk      Total      Risk      Nonrisk      Total
____________________________________________________________    _____________________________
<S>                           <C>       <C>          <C>        <C>       <C>         <C>  
HMO
  Commercial (1)               3,290       527         3,817     2,898       340        3,238
  Medicare                       286        19           305       186        18          204
  Medicaid                       134        27           161       108         -          108
                               _____     _____        ______     _____     _____       ______
    Total HMO                  3,710       573         4,283     3,192       358        3,550
POS                              308     2,312         2,620       213     1,845        2,058
PPO                              780     3,051         3,831       845     3,066        3,911
CHAMPUS                            -         -             -       721         -          721
Indemnity                        547     2,934         3,481       818     3,249        4,067
                               _____     _____        ______     _____     _____       ______
 Total Health Care Enrollment  5,345     8,870        14,215     5,789     8,518       14,307
                               _____     _____        ______     _____     _____       ______
                               _____     _____        ______     _____     _____       ______

Group Insurance (2):
  Group Life (3)                                       8,453                            7,981
                                                      ______                           ______
                                                      ______                           ______
  Disability                                           2,423                            2,101
                                                      ______                           ______
                                                      ______                           ______
  Long-Term Care                                          95                               92
                                                      ______                           ______
                                                      ______                           ______
<FN>
*   1995 membership is presented on a basis consistent with 1996.
(1) Includes 784 thousand and 443 thousand POS members who utilize the HMO network at 
    September 30, 1996 and 1995, respectively.
(2) Many Group Insurance members participate in more than one type of coverage and are 
    counted in each.
(3) Group Life includes members with accident coverages.
</TABLE>

<PAGE> 35

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Aetna U.S. Healthcare (Continued)
_________________________________

Total health care enrollment as of September 30, 1996, excluding the 
loss of .7 million members resulting from the termination of the 
CHAMPUS contract, increased by .6 million members, or 5% when 
compared to September 30, 1995.  Such increase is primarily 
attributable to new Commercial HMO enrollment, as well as new 
enrollment in and continued migration of indemnity members to the POS 
product.

Revenue for Aetna U.S. Healthcare, excluding net realized capital 
gains and losses, increased by $201 million or 7% and $756 million or 
9% for the three and nine month periods ended September 30, 1996, 
respectively, compared to the same periods a year ago, primarily due 
to increases in the number of members enrolled in HMO products and 
covered by Group Insurance, partially offset by the termination of 
the CHAMPUS contract.

Operating expenses for Aetna U.S. Healthcare increased during the 
nine months ended September 30, 1996 compared with the same period in 
1995 due primarily to the continued migration of members from the 
indemnity product to more resource-intensive POS products, as well as 
from expenses related to operating physician practices.

Outlook

Premiums - Premiums in the Health Risk business are generally fixed 
for one-year periods and, accordingly, cost levels in excess of those 
reflected in pricing, such as those being experienced during 1996, 
cannot be recovered in the year through higher premiums.  Accordingly, 
earnings in the Health Risk business for the remainder of 1996 are 
expected to continue to be similarly adversely affected, as they were 
this quarter.  The company attempts, however, to the extent possible, 
to address cost increases in its contracting with providers.

For 1997 and beyond, the company has targeted premium increases and 
recontracting with providers to improve Health Risk profitability.  
There can be no assurances, however, that premium increases and cost 
savings achieved through recontracting will be sufficient to offset 
increases in medical costs and other operating costs, as governmental 
action (including downward adjustments to Medicare and other premium 
rates), business conditions (including intensification of competition) 
and other factors may adversely affect the company's ability to realize 
such premium increases and cost savings.

Severance and Facilities Charge - On October 10, 1996, the company 
announced that Aetna U.S. Healthcare will record a severance and 
facilities charge of approximately $275 million (after tax) in the 
fourth quarter of 1996 principally related to costs associated with 
the integration of the health businesses of Aetna Services and U.S. 
Healthcare.  The charge is expected to consist of approximately $167 
million of severance costs, $40 million of facilities-related costs 
and $68 million of asset write-offs and other related items.  See 
"Severance and Facilities Charges" on page 31 for a further 
discussion of the fourth quarter severance and facilities charge.


<PAGE> 36

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Aetna U.S. Healthcare (Continued)
_________________________________

Health Legislation and Regulation - A variety of legislative and 
regulatory proposals have been made at both the federal and state 
government levels to address various aspects of the health care 
system (including benefit mandates, insurance reforms, provider 
contract limitations, restrictions on utilization management, 
taxes and assessments to pay for uncompensated care and graduate 
medical education, and reforms to Medicare and Medicaid programs).  
Aetna U.S. Healthcare supports proposals which it believes are 
consistent with the principles of managed care and expand access 
to health care coverage through private sector competition.

Recently enacted federal legislation, the Health Insurance 
Portability and Accountability Act of 1996 ("Kennedy-Kassebaum"), 
will (i) ensure portability of coverage to individuals changing jobs 
or moving to individual coverage by limiting preexisting condition 
exclusions, (ii)  guarantee availability of coverage to employees in 
the small group market, and (iii) prevent exclusion of individuals 
from coverage under group plans based on health status, effective 
July 1, 1997.  Other recently enacted federal legislation mandates 
minimum hospital stays after childbirth and parity in applying 
lifetime limits to mental health benefits.

New York and several other states have also enacted legislation or 
regulation related to the operation of managed care plans.  Such 
legislation or regulation varies, but typically includes, among other 
things, mandatory maternity length of stay, regulation of utilization 
review, consumer disclosure, payment of emergency room services, 
hearings on termination of physicians from health plan networks, and 
provisions similar to those in the Kennedy-Kassebaum legislation.

In New York, the Health Care Reform Act of 1996, effective January 1, 
1997, will allow all private health care payers to negotiate payment 
rates for inpatient hospital services.  The Act also provides for 
direct funding of hospital bad debt and charity care and graduate 
medical education by payments to State funding pools rather than 
through surcharges on payments for hospital services.   The Company 
plans to have competitive arrangements with hospitals  in its New 
York networks, and to adjust the payments it makes to network 
hospitals to reflect the changes required by the Act.  However, there 
can be no assurance that the Company will reach agreement on these 
adjustments with all such hospitals or that agreements will be 
reached by the effective date of the Act.

In California, two initiatives related to regulation of managed care 
practices are on the November 1996 ballot.  One or both of these 
initiatives include, among other things,  provisions to prohibit so-
called "gag clauses", restrict compensation arrangements with 
providers, restrict utilization review,  impose premium controls and 
create a private right of action for enforcement.

At this time, the Company is unable to predict the impact of the 
foregoing federal or state legislation or initiatives, or of any 
future legislation or regulatory changes that may be enacted.

See "Forward Looking Information" on page 56 for information 
regarding other important factors affecting certain of these matters.

<PAGE> 37

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Aetna Retirement Services (formerly named Aetna Life Insurance &   
_________________________                                          
  Annuity)

<TABLE>
<CAPTION>
Operating Summary
(Millions)                             Three Months Ended September 30,     Nine Months Ended September 30, 
                                     ___________________________________  __________________________________
                                     1996         1995          % Change    1996        1995        % Change
                                     ____         ____          ________    ____        ____        ________
<S>                                  <C>          <C>           <C>         <C>         <C>         <C>     
Premiums............................ $    25.3    $    37.7      (32.9)%    $    80.8   $   129.7    (37.7)%
Net investment income...............     272.5        259.5        5.0          804.4       763.1      5.4
Fees and other income...............     122.2         86.9       40.6          336.3       258.0     30.3
Net realized capital gains..........        .9          8.7      (89.7)          18.2        17.9      1.7
                                     _________    _________                 _________   _________         
   Total revenue....................     420.9        392.8        7.2        1,239.7     1,168.7      6.1

Current and future benefits.........     242.4        241.0         .6          716.3       710.0       .9
Operating expenses..................      86.4         73.4       17.7          254.0       225.3     12.7
Amortization of deferred policy
 acquisition costs..................      18.2          8.2      122.0           49.7        30.0     65.7
Severance and facilities charge.....      49.0            -          -           49.0           -        -
                                     _________    _________                 _________   _________         
   Total benefits and expenses......     396.0        322.6       22.8        1,069.0       965.3     10.7
                                     _________    _________                 _________   _________         

Income before income taxes..........      24.9         70.2      (64.5)         170.7       203.4    (16.1)
Income taxes........................       6.8         23.9      (71.5)          48.3        67.1    (28.0)
                                     _________    _________                 _________   _________          

Net income.......................... $    18.1    $    46.3      (60.9)     $   122.4   $   136.3    (10.2)
                                     _________    _________                 _________   _________          
                                     _________    _________                 _________   _________          
Net realized capital gains, net
 of tax (included above)............ $      .6    $     5.6      (89.3)     $    11.9   $    11.6      2.6
                                     _________    _________                 _________   _________         
                                     _________    _________                 _________   _________         

Deposits not included in premiums
 above.............................. $ 1,098.3    $   828.3       32.6      $ 3,370.9   $ 2,397.0     40.6
                                     _________    _________                 _________   _________         
                                     _________    _________                 _________   _________         

Assets under management (1)(2)......                                        $29,935.7   $23,824.4     25.7
                                                                            _________   _________         
                                                                            _________   _________         
<FN>
(1) Excludes net unrealized capital gains of approximately $206 million and $459 million 
    at September 30, 1996 and 1995, respectively.
(2) Includes $4.3 billion and $1.9 billion at September 30, 1996 and 1995, respectively, of
    assets held and managed by unaffiliated mutual funds.
</TABLE>

Aetna Retirement Services' net income for the three and nine months 
ended September 30, 1996 decreased $28 million and $14 million, 
respectively, from the same periods a year ago.  Excluding net 
realized capital gains, results for the three and nine months ended 
September 30, 1996 decreased $23 million and $14 million, 
respectively, from the same periods a year ago.  Such decreases 
reflected an after-tax severance and facilities charge of $32 million 
in the third quarter of 1996 primarily related to actions taken or 
expected to be taken to improve Aetna Retirement Services' cost 
structure relative to its competitors.  (See "Severance and 
Facilities Charges" on page 30.)  Excluding net realized capital 
gains and the third quarter 1996 severance and facilities charge, 
earnings for the three and nine months ended September 30, 1996 
increased $9 million and $18 million, respectively, from the same 
periods a year ago.

<PAGE> 38

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Aetna Retirement Services (Continued)
_____________________________________

Third quarter and year-to-date results in 1996 benefited from 
increased fee income primarily due to the growth in assets under 
management resulting from continued business growth and, for the 
nine months ended September 30, 1996, from appreciation in the 
stock market, as well as overall increased interest margins 
primarily related to experience rated contracts.  Partially 
offsetting such favorable increases in fee income were increased 
operating expenses associated with business growth and investments 
in nontraditional distribution channels (e.g., broker/dealers and 
banks).

The average annualized earned rate on investments supporting fully 
guaranteed contracts was 7.8% and 8.0% and the average annualized 
earned rate on investments supporting experience rated contracts was 
8.1% and 8.2% for the nine months ended September 30, 1996 and 1995, 
respectively.  The average annualized credited rate on fully 
guaranteed contracts was 5.9% and 6.0% and the average annualized 
credited rate on experience rated contracts was 6.1% and 6.3% for the 
nine months ended September 30, 1996 and 1995, respectively.  The 
resulting annualized interest margins on fully guaranteed contracts 
were 1.9% and 2.0% and on experience rated contracts were 2.0% and 
1.9% for the nine months ended September 30, 1996 and 1995, 
respectively.

The duration of the investment portfolios supporting Aetna Retirement 
Services' liabilities is regularly monitored and adjusted in order to 
maintain an aggregate duration that is within 0.5 years of the 
estimated duration of the underlying liabilities.  For a complete 
discussion of the company's asset/liability management practices, see 
Aetna Services' 1995 Annual Report.

Premiums decreased 33% and 38% during the three and nine months 
ended September 30, 1996, respectively, compared to the same 
periods in 1995 primarily because Aetna Retirement Services ceased 
writing structured settlement annuities in the fourth quarter of 
1995.  The cessation of writing this product did not and is not 
expected to have a material effect on results of the segment.


<PAGE> 39

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

International
_____________

<TABLE>
<CAPTION>
Operating Summary
(Millions)                             Three Months Ended September 30,      Nine Months Ended September 30, 
                                     ___________________________________   __________________________________
                                     1996         1995          % Change   1996          1995        % Change
                                     ____         ____          ________   ____          ____        ________
<S>                                  <C>          <C>           <C>         <C>          <C>         <C>

Premiums............................ $   316.9    $   275.0      15.2%      $  834.5     $  747.9      11.6%
Net investment income...............      81.7         76.1       7.4          247.5        231.5       6.9
Fees and other income...............      30.1         35.2     (14.5)          92.0         90.9       1.2
Net realized capital gains (losses).       1.7         (1.8)        -            3.0         (3.5)        -
                                     _________    _________                _________     ________          
   Total revenue....................     430.4        384.5      11.9        1,177.0      1,066.8      10.3

Current and future benefits.........     265.7        241.3      10.1          715.9        657.5       8.9
Operating expenses..................      94.4         87.6       7.8          269.8        265.6       1.6
Amortization of goodwill and
 other intangible assets............       1.0          1.4     (28.6)           2.4          3.8     (36.8)
Amortization of deferred policy
 acquisition costs..................      26.5         19.9      33.2           65.0         54.0      20.4
                                     _________    _________                _________     ________          
   Total benefits and expenses......     387.6        350.2      10.7        1,053.1        980.9       7.4
                                     _________    _________                _________     ________          

Income before income taxes..........      42.8         34.3      24.8          123.9         85.9      44.2
Income taxes .......................      14.2         11.8      20.3           43.3         25.7      68.5
                                     _________    _________                _________     ________          

Net income.......................... $    28.6    $    22.5      27.1      $    80.6     $   60.2      33.9
                                     _________    _________                _________     ________          
                                     _________    _________                _________     ________          
Net realized capital gains (losses),
 net of tax (included above)........ $     1.4    $    (1.5)        -      $     2.2     $   (4.0)        -
                                     _________    _________                _________     ________          
                                     _________    _________                _________     ________          

</TABLE>

International's net income for the three and nine months ended 
September 30, 1996 increased by $6 million and $20 million, 
respectively, compared with the same periods a year ago.  
Excluding net realized capital gains and losses, results for the 
three and nine months ended September 30, 1996 increased 
$3 million and $14 million, respectively, from the same periods a 
year ago.  Results for the nine months ended September 30, 1996 
reflected continued revenue growth in the Asia Pacific operations.  
The improvement in year-to-date results also reflected increased 
earnings in Chile primarily resulting from lower operating 
expenses due to tighter controls over such costs and lower 
interest expense.

The company continues to explore opportunities for additional 
investments in emerging growth markets.  In October, the company 
entered into a definitive agreement with its Mexican partner to 
acquire a 49.0% stake in a joint venture that will offer insurance 
products through the partner's bank subsidiary.  The company 
agreed to invest $115 million in the joint venture initially and 
up to an additional $63 million based on the performance of the 
new company over the first five years of operations.  The company 
also agreed to increase its ownership in its current Mexican 
insurance joint venture from 44.5% to 49.0% for an additional $20 
million.  Interest will be payable on certain of these amounts.  
The company also agreed with its Mexican partner to acquire a 
49.0% interest in a joint venture to manage pension monies 
privatized under recent Mexican legislation for approximately $47 
million.  Completion of these transactions is subject, among other 
matters, to regulatory approvals and the transactions are expected 
to be completed by the end of 1996.

<PAGE> 40

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Large Case Pensions
___________________

<TABLE>
<CAPTION>
Operating Summary
(Millions)                             Three Months Ended September 30,      Nine Months Ended September 30, 
                                     ___________________________________   __________________________________
                                     1996         1995          % Change   1996          1995        % Change
                                     ____         ____          ________   ____          ____        ________
<S>                                  <C>          <C>           <C>        <C>           <C>         <C>

Premiums............................ $    30.8    $    16.4      87.8%     $    104.6    $    199.6   (47.6)%
Net investment income...............     411.0        450.6      (8.8)        1,249.4       1,396.1   (10.5)
Fees and other income...............      15.5         32.7     (52.6)           68.0         100.8   (32.5)
Net realized capital gains (losses).       (.2)         1.4         -            12.5           7.3    71.2
                                     _________    _________                __________    __________        
   Total revenue....................     457.1        501.1      (8.8)        1,434.5       1,703.8   (15.8)

Current and future benefits.........     401.4        449.7     (10.7)        1,250.8       1,550.0   (19.3)
Operating expenses..................       8.7         18.7     (53.5)           51.9          61.8   (16.0)
Reduction of loss on discontinued
 products...........................         -            -         -          (170.0)            -       -
                                     _________    _________                __________    __________         
   Total benefits and expenses......     410.1        468.4     (12.4)        1,132.7       1,611.8   (29.7)
                                     _________    _________                __________    __________         

Income before income taxes..........      47.0         32.7      43.7           301.8          92.0       -
Income taxes........................      17.3         10.9      58.7           107.4          30.2       -
                                     _________    _________                __________    __________        

Net income.......................... $    29.7    $    21.8      36.2      $    194.4    $     61.8       -
                                     _________    _________                __________    __________        
                                     _________    _________                __________    __________        

Net realized capital gains (losses),
  net of tax (included above)....... $     (.2)   $      .8         -      $      8.1    $      4.6    76.1
                                     _________    _________                __________    __________        
                                     _________    _________                __________    __________        

Deposits not included in premiums
  above............................. $   418.5    $   358.3      16.8      $  1,340.9    $  1,252.6     7.0
                                     _________    _________                __________    __________        
                                     _________    _________                __________    __________        

Assets under management (1)(2)......                                       $ 35,797.1    $ 46,557.1   (23.1)
                                                                           __________    __________         
                                                                           __________    __________         

<FN>
(1) Excludes net unrealized capital gains of approximately $166 million and $397 million at 
    September 30, 1996 and 1995, respectively.
(2) Includes assets related to discontinued products.
</TABLE>

Large Case Pensions' net income for the three and nine months 
ended September 30, 1996 increased by $8 million and $133 million, 
respectively, compared with the same periods a year ago.  
Excluding net realized capital gains and losses and a benefit of 
$111 million (after tax) for the nine months ended September 30, 
1996 attributable to a reduction of the reserve for anticipated 
future losses on discontinued products, results for the three and 
nine months ended September 30, 1996 increased $9 million and $19 
million, respectively, from the same periods a year ago, 
reflecting an increase in net investment income from the assets 
supporting the capital in Large Case Pensions.  Results for the 
nine months ended September 30, 1996 also reflected an increase in 
net interest margins.  (Please see "Discontinued Products" on page 
41 for a discussion of the reserve reduction.)

After-tax net realized capital gains for the nine months ended 
September 30, 1996 include a gain of $25 million related to the 
sale of ARI to TA Associates, which was partially offset by net 
realized capital losses related to bond sales.

The decreases in fees and other income and operating expenses for 
the three and nine months ended September 30, 1996 when compared 
to the same periods a year ago primarily resulted from the sale of 
ARI.  However, the earnings of ARI were not material to Large Case 
Pensions' net income.

Year-to-date 1995 premiums reflect additional premiums from 
existing contractholders and did not have a material effect on 
earnings.

<PAGE> 41

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Large Case Pensions (Continued)
_______________________________

Assets under management at September 30, 1996 were 23% lower than 
a year earlier, primarily as a result of the sale of Insurance 
Company Investment Management ("ICIM"), a specialized asset 
manager which had been conducting business through the company's 
Aeltus Investment Management subsidiary ("Aeltus"), in the first 
quarter of 1996.  ICIM was not a significant contributor to Large 
Case Pensions' earnings in 1995 or in the first quarter of 1996.

Experience rated contractholder and participant withdrawals and 
transfers were as follows (excluding contractholder transfers to 
other company products) (in millions):

<TABLE>
<CAPTION>
                                       Three Months Ended September 30,    Nine Months Ended September 30,
                                       ________________________________    _______________________________
                                         1996             1995               1996            1995
                                         ____             ____               ____            ____
<S>                                      <C>              <C>                <C>             <C>
Scheduled contract maturities
 and benefit payments (1)                $  259.8         $  228.6           $  867.7        $  734.6 
                                         ________         ________           ________        ________ 
                                         ________         ________           ________        ________ 

Contractholder withdrawals other
 than scheduled contract maturities
 and benefit payments                    $   67.3         $   55.8           $  429.6 (2)    $  244.4 
                                         ________         ________           ________        ________ 
                                         ________         ________           ________        ________ 

Participant withdrawals                  $   34.6         $   36.1           $  135.7        $  133.7 
                                         ________         ________           ________        ________ 
                                         ________         ________           ________        ________ 
<FN>

(1) Includes payments made upon contract maturity and other amounts distributed in accordance
    with contract schedules.
(2) Increase primarily relates to an unscheduled withdrawal by one contractholder in the first
    quarter of 1996.
</TABLE>

Discontinued Products

Under the company's accounting for its discontinued fully guaranteed 
large case pension products (guaranteed investment contracts ("GICs") 
and single-premium annuities ("SPAs")), the respective reserves for 
anticipated future losses are reviewed by management quarterly.  
Accordingly, as long as the reserves represent management's then best 
estimates of expected future losses, results of operations of the 
discontinued products, including net realized capital gains and 
losses, are credited/charged to the respective reserve and do not 
affect the company's results of operations.  As a result of 
management's review in the second quarter, $170 million (pretax) of 
the reserve related to GICs was released.  The reserves at September 
30, 1996 reflect management's best estimate of the anticipated future 
net losses for GICs and SPAs.  To the extent that actual future 
losses are greater than anticipated future net losses, the company's 
results of operations would be adversely affected.  Conversely, if 
actual future losses are less than anticipated future losses, the 
company's results of operations would be favorably affected.  (Refer 
to Aetna Services' 1995 Annual Report for a more complete discussion 
of the reserve for anticipated future losses on discontinued 
products.)


<PAGE> 42

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Large Case Pensions (Continued)
_______________________________

At the time of discontinuance, a receivable from Large Case 
Pensions' continuing business was established for each 
discontinued product equivalent to the net present value of the 
anticipated cash flow shortfalls.  Interest is accrued on the 
receivables at the discount rate used to calculate the loss on 
discontinuance.  The offsetting payable, on which interest is 
similarly accrued, is reflected in the continuing business.  The 
interest on such payable generally offsets the investment income 
on the assets available to fund the shortfall.  At September 30, 
1996, the GIC receivable of $315 million, net of the related 
deferred taxes payable on the accrued interest income of $19 
million, was funded from continuing operations to meet liquidity 
needs from maturing GICs.  At September 30, 1996, for SPAs, the 
receivable from continuing business, net of the related deferred 
taxes payable of $29 million on the accrued interest income, was 
$488 million.  As of September 30, 1996, no funding of the SPA 
receivable had taken place.  This amount is eliminated in 
consolidation and is therefore not reflected on the Consolidated 
Balance Sheets.

Results of discontinued products were as follows (in millions):

<TABLE>
<CAPTION>
                                      Three Months Ended September 30,    Nine Months Ended September 30, 
                                      ________________________________    _______________________________ 
                                                    1996                                1996              
                                      ________________________________    _______________________________ 
                                      GICs        SPAs        Total       GICs       SPAs        Total 
                                      ____        ____        _____       ____       ____        _____ 
<S>                                   <C>         <C>         <C>         <C>        <C>         <C>
Interest margin (a)                   $    (.8)   $     .3    $    (.5)   $   (3.3)  $   12.6    $   9.3
Net realized capital gains (losses)        6.8         1.0         7.8        23.5        (.1)      23.4
Interest earned on receivable from
  continuing business                      2.6         5.1         7.7         9.5       15.2       24.7
Other, net                                  .6         7.7         8.3         1.5       11.9       13.4
                                      ________    ________    ________    ________   ________    _______

Results of discontinued products,
  after tax                           $    9.2    $   14.1    $   23.3    $   31.2   $   39.6    $  70.8
                                      ________    ________    ________    ________   ________    _______
                                      ________    ________    ________    ________   ________    _______

Results of discontinued products,
  pretax                              $   15.6    $   21.2    $   36.8    $   52.3   $   58.6    $ 110.9
                                      ________    ________    ________    ________   ________    _______
                                      ________    ________    ________    ________   ________    _______

Net realized capital gains (losses)
  from sales of bonds, after tax, 
  included above                      $     .7    $   (1.9)   $   (1.2)   $    2.1   $   (5.9)   $  (3.8)
                                      ________    ________    ________    ________   ________    _______ 
                                      ________    ________    ________    ________   ________    _______ 


                                      Three Months Ended September 30,    Nine Months Ended September 30, 
                                      ________________________________    _______________________________ 
                                                    1995                               1995               
                                      ________________________________    _______________________________ 
                                      GICs        SPAs        Total       GICs       SPAs        Total 
                                      ____        ____        _____       ____       ____        ______
<S>                                   <C>         <C>         <C>         <C>        <C>         <C>
Interest margin (a)                   $  (11.0)   $    1.8    $   (9.2)   $ (30.3)   $  (1.6)    $ (31.9)
Net realized capital gains (losses)       (8.2)       10.5         2.3      (28.4)      25.1        (3.3)
Interest earned on receivable from
  continuing business                      3.3         5.0         8.3        9.9       14.9        24.8
Other, net                                  .8          .9         1.7        1.5        2.6         4.1
                                      ________    ________    ________    _______    _______     _______

Results of discontinued products,
  after tax                           $  (15.1)   $   18.2    $    3.1    $ (47.3)   $  41.0     $  (6.3)
                                      ________    ________    ________    _______    _______     _______ 
                                      ________    ________    ________    _______    _______     _______ 

Results of discontinued products,
  pretax                              $  (21.8)   $   27.3    $    5.5    $ (69.1)   $  60.1     $  (9.0)
                                      ________    ________    ________    _______    _______     _______ 
                                      ________    ________    ________    _______    _______     _______ 

Net realized capital gains (losses)
  from sales of bonds, after tax,
  included above                      $    4.8    $   10.2    $   15.0    $  (4.2)   $  33.3     $  29.1
                                      ________    ________    ________    _______    _______     _______
                                      ________    ________    ________    _______    _______     _______
<FN>
(a) Represents the amount by which interest credited to holders of fully guaranteed large case
    pension contracts (exceeds) or is less than interest earned on invested assets supporting such contracts.
</TABLE>

<PAGE> 43

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Large Case Pensions (Continued)
_______________________________

The results of the discontinued products in the first nine months 
of 1996 were favorably affected by and the respective reserves for 
anticipated future losses were credited for nonrecurring items 
including rental income received on a foreclosed property of $6 
million (after tax) related to GICs and $3 million (after tax) 
related to SPAs.  Such rental income had previously not been 
recognized due to uncertainties associated with its ultimate 
collection.  Additionally, the adoption of FAS No. 121 (see Note 7 
of Condensed Notes to Financial Statements), favorably impacted 
the results of GICs by $4 million (after tax) and SPAs by $2 
million (after tax).
                    

The activity in the reserve for anticipated future losses on 
discontinued products was as follows (pretax, in millions):

<TABLE>
<CAPTION>
                                   Nine Months Ended September 30, 1996 
                                   ____________________________________ 
                                   GICs        SPAs       Total
                                   ____        ____       _____
<S>                                <C>         <C>        <C>
Reserve at December 31, 1995       $  221.4    $  737.4   $  958.8
Results of discontinued products       52.3        58.6      110.9
Release of reserve                   (170.0)          -     (170.0)
                                   ________    ________   ________ 
Reserve at September 30, 1996      $  103.7    $  796.0   $  899.7
                                   ________    ________   ________
                                   ________    ________   ________
</TABLE>

Distributions on GICs and SPAs were as follows (in millions):

<TABLE>
<CAPTION>
                                     Three Months Ended September 30,   Nine Months Ended September 30,
                                     ________________________________   _______________________________
                                                   1996                              1996               
                                     ________________________________   _______________________________ 
                                     GICs        SPAs        Total      GICs       SPAs        Total
                                     ____        ____        _____      ____       ____        _____
<S>                                  <C>         <C>         <C>        <C>        <C>         <C>
Scheduled contract maturities,
 GIC settlements and benefit
 payments (1)                        $  529.0    $  123.7    $  652.7   $1,627.1   $  392.5    $2,019.6
                                     ________    ________    ________   ________   ________    ________
                                     ________    ________    ________   ________   ________    ________

Participant directed withdrawals     $   12.8    $      -    $   12.8   $   43.2   $      -    $   43.2
                                     ________    ________    ________   ________   ________    ________
                                     ________    ________    ________   ________   ________    ________



                                     Three Months Ended September 30,   Nine Months Ended September 30,
                                     ________________________________   _______________________________
                                                   1995                              1995               
                                     ________________________________   _______________________________ 
                                     GICs        SPAs        Total      GICs       SPAs        Total
                                     ____        ____        _____      ____       ____        _____
<S>                                  <C>         <C>         <C>        <C>        <C>         <C>
Scheduled contract maturities,
 GIC settlements and benefit 
 payments (1)                        $  411.2    $  135.7    $  546.9   $1,670.5   $  397.9    $2,068.4
                                     ________    ________    ________   ________   ________    ________
                                     ________    ________    ________   ________   ________    ________

Participant directed withdrawals     $   24.6    $      -    $   24.6   $   73.9   $      -    $   73.9
                                     ________    ________    ________   ________   ________    ________
                                     ________    ________    ________   ________   ________    ________
<FN>

(1) Includes early contractual settlements of GIC liabilities of approximately $2 million and
    $183 million for the three and nine months ended September 30, 1996, respectively, and 
    approximately $23 million and $111 million for the same periods a year ago.

</TABLE>

Cash required to meet the above payments was provided by earnings 
on, sales of, and scheduled payments on, invested assets and, for 
GICs, also from the funding of the receivable from continuing 
business which was established at the time of discontinuance.

(See "General Account Investments" on page 45 for a discussion of 
investments supporting discontinued products.)


<PAGE> 44

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Corporate
_________

<TABLE>
<CAPTION>
Operating Summary
(Millions, after tax)                  Three Months Ended September 30,     Nine Months Ended September 30, 
                                       _________________________________    ________________________________
                                       1996         1995        % Change    1996        1995        % Change
                                       ____         ____        ________    ____        ____        ________
<S>                                    <C>          <C>           <C>        <C>         <C>         <C>

Interest expense....................   $  31.4      $  18.0        74.4%     $  68.3     $  53.9       26.7%
Other expense, net (1)..............      15.3         28.6       (46.5)       268.6        90.0      198.4
<FN>

(1) Includes after-tax net realized capital gains of $4.2 million and $10.2 million for the
    three and nine months ended September 30, 1996, respectively, and net realized capital 
    losses of $.1 million and $2.3 million for the three and nine months ended 
    September 30, 1995, respectively.
</TABLE>

The increase in interest expense of $13 million and $14 million 
for the three and nine months ended September 30, 1996 compared to 
the same periods a year ago principally resulted from borrowings 
incurred in connection with the U.S. Healthcare merger.  Excluding 
net realized capital gains and losses, other expense decreased $9 
million and increased $191 million for the three and nine months 
ended September 30, 1996, respectively, compared with the same 
periods a year ago.  The increase for the nine months ended 
September 30, 1996 resulted from the $235 million (after tax) 
severance and facilities charge discussed below.  A portion of the 
consideration paid in connection with the merger consisted of cash 
from the net proceeds received from the sale of the company's 
property-casualty operations.  Other expense for the three and 
nine months ended September 30, 1996 included $7 million and $37 
million (after tax), respectively, of interest income earned on 
such net proceeds from April 2, 1996, the date of the property-
casualty sale, through July 19, 1996, the closing date of the 
merger with U.S. Healthcare.

In conjunction with the sale of the company's property-casualty 
operations, Travelers subleased the space that had been occupied 
by the company in the CityPlace office facility in Hartford for 
eight years at current market rates.  The company recorded a 
charge of $190 million (after tax) during the second quarter of 
1996 representing the present value of the difference between rent 
required to be paid by the company under the lease and future 
rentals expected to be received by the company.  The company also 
recorded additional severance and facilities charges of $45 
million (after tax) during the second quarter of 1996 due to 
actions taken or expected to be taken to reduce the level of 
corporate expenses and other costs previously absorbed by the 
property-casualty operations.


<PAGE> 45

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

General Account Investments
___________________________

Overview

The company's invested assets were comprised of the following, net 
of impairment reserves:

<TABLE>
<CAPTION>
                                                  September 30,      December 31,
(Millions)                                            1996               1995    
_________________________________________________________________________________
<S>                                               <C>                <C>

Debt securities:
  Available for sale, at fair value
    (amortized cost $30,504.9 and $29,962.5)      $ 30,955.5         $ 31,860.3
Equity securities, at fair value
    (cost $995.5 and $597.8)                         1,234.8              659.7
Short-term investments                                 642.2              607.8
Mortgage loans                                       7,171.6            8,327.2
Real estate                                          1,101.1            1,277.3
Policy loans                                           670.0              629.4
Other                                                  660.2              688.6
_______________________________________________________________________________
    Total invested assets                         $ 42,435.4         $ 44,050.3
_______________________________________________________________________________
                                                  _____________________________
</TABLE>

Refer to Aetna Services' 1995 Annual Report for a description of the 
company's investment objectives and policies.

The change in the invested assets portfolio from December 31, 1995 to 
September 30, 1996 primarily reflected depreciation of debt 
securities due to an increase in interest rates and a decrease in the 
aggregate mortgage loan and real estate portfolios.  Such decreases 
were partially offset by the addition of approximately $655 million 
of debt securities resulting from the U.S. Healthcare merger.  Debt 
securities reflected net unrealized capital gains of $451 million at 
September 30, 1996, compared with $1.9 billion at December 31, 1995.  
Of such net unrealized capital gains at September 30, 1996, $136 
million and $202 million related to assets supporting discontinued 
products and experience rated pension contractholders, respectively.  
The decrease in the aggregate mortgage loan and real estate 
portfolios of $1.3 billion principally reflected prepayments and 
payments at maturity on mortgage loans and sales of foreclosed 
properties.

The risks associated with investments supporting experience rated 
pension and annuity products are assumed by those customers subject 
to, among other things, certain minimum guarantees.  The anticipated 
future losses associated with investments supporting discontinued 
fully guaranteed large case pension products are provided for in the 
reserve for anticipated future losses.  (See "Discontinued Products" 
on page 41.)


<PAGE> 46

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

General Account Investments (Continued)
_______________________________________

Debt Securities

As of September 30, 1996 and December 31, 1995, the company's 
investments in debt securities represented 73% and 72%, 
respectively, of total general account invested assets and were as 
follows:

<TABLE>
<CAPTION>
                                           September 30,         December 31,
(Millions)                                     1996                  1995     
_____________________________________________________________________________ 
<S>                                        <C>                   <C>

Supporting discontinued products           $   5,034.9           $    5,765.2
Supporting experience rated products          14,419.5               14,243.4
Supporting remaining products                 11,501.1               11,851.7
                                           __________________________________
   Total debt securities                   $  30,955.5           $   31,860.3
                                           __________________________________
                                           __________________________________
</TABLE>

Below Investment Grade, Problem and Potential Problem Debt Securities

Included in the company's debt security balances were the following 
categories of debt securities:

<TABLE>
<CAPTION>
(Millions)                                                   September 30, 1996                        
_______________________________________________________________________________________________________
                                       "Below Investment        "Problem" Debt      "Potential Problem"
                                       Grade" Securities        Securities          Debt Securities    
                                       _________________        ______________      ___________________
<S>                                    <C>                      <C>                 <C>

Total                                  $1,623.7                 $   62.6            $   83.3
                                       ________                 ________            ________
                                       ________                 ________            ________
Percentage of total:
  Supporting discontinued products         28.8%                    20.1%               41.2%
  Supporting experience rated products     45.6                      9.6                28.3
  Supporting remaining products            25.6                     70.3                30.5
                                       ________                 ________            ________
                                          100.0%                   100.0%              100.0%
                                       ________                 ________            ________ 
                                       ________                 ________            ________ 

                                                             December 31, 1995                         
                                       ________________________________________________________________
                                       "Below Investment        "Problem" Debt      "Potential Problem"
                                       Grade" Securities        Securities          Debt Securities    
                                       _________________        ______________      ___________________
<S>                                    <C>                      <C>                 <C>

Total                                  $1,623.8                 $   81.0            $   90.4
                                       ________                 ________            ________
                                       ________                 ________            ________
Percentage of total:
  Supporting discontinued products         32.7%                    36.9%               57.5%
  Supporting experience rated products     42.6                     12.5                24.1
  Supporting remaining products            24.7                     50.6                18.4
                                       ________                 ________            ________
                                          100.0%                   100.0%              100.0%
                                       ________                 ________            ________ 
                                       ________                 ________            ________ 
</TABLE>

"Below investment grade" securities (which include "problem" debt 
securities and "potential problem" debt securities described 
below) are defined to be securities that carry a rating below BBB-
/Baa3.  Such debt securities have been written down for other than 
temporary declines in value.

Management defines "problem" debt securities to be securities for 
which payment is in default, securities of issuers which are 
currently in bankruptcy or in out-of-court reorganizations, or 
securities of issuers for which bankruptcy or reorganization 
within six months is considered likely.


<PAGE> 47

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

General Account Investments (Continued)
_______________________________________

"Potential problem" debt securities are currently performing debt 
securities for which neither payment default nor debt 
restructuring is anticipated within six months, but whose issuers 
are experiencing significant financial difficulties.  Identifying 
such potential problem debt securities requires significant 
judgment as to likely future market conditions and developments 
specific to individual debt securities.

The company does not accrue interest on problem debt securities 
when management believes the likelihood of collection of interest 
is doubtful.

Collateralized Mortgage Obligations

Included in the company's total collateralized mortgage 
obligations ("CMOs") balances were the following categories of 
residential CMOs:

<TABLE>
<CAPTION>
(Millions)                                  September 30, 1996              December 31, 1995   
___________________________________________________________________      _______________________
                                         Fair             Amortized      Fair         Amortized
                                         Value              Cost         Value          Cost   
                                         _________        _________      _________    _________
<S>                                      <C>              <C>            <C>          <C>      

Total CMOs (1)                           $ 2,691.5        $ 2,640.8      $ 3,073.9    $ 2,866.5
                                         _________        _________      _________    _________
                                         _________        _________      _________    _________
Percentage of total CMOs: 
  Sequential and planned
    amortization class bonds                  68.5%                           75.9%
  Z-tranches                                  17.5                            15.8
  Subordinated tranches                        8.3                             3.3
  Interest-only strips and
    principal-only strips                      3.9                             3.3
  Other                                        1.8                             1.7
                                         _________                       _________
                                             100.0%                          100.0%
                                         _________                       _________ 
                                         _________                       _________ 
<FN>
(1)  At September 30, 1996 and December 31, 1995, approximately 71% and 70%, respectively, 
     of the company's CMO holdings were collateralized by residential mortgage loans, 
     on which the timely payment of principal and interest is backed by specified 
     government agencies (e.g., GNMA, FNMA, FHLMC).
</TABLE>

The principal risks inherent in holding CMOs are prepayment and 
extension risks related to dramatic decreases and increases in 
interest rates whereby the value of the CMOs would be subject to 
variability based on the repayment of principal from the 
underlying mortgages earlier or later than originally anticipated.  
The various categories of CMOs are subject to different degrees of 
risk from changes in interest rates and defaults (for non-agency-
backed bonds).  Sequential and planned amortization class bonds 
are subject to less prepayment and extension risk than other CMO 
instruments. Interest-only strips ("IOs") receive payments of 
interest and principal-only strips ("POs") receive payments of 
principal on the underlying pool of residential mortgages.  The 
company has mitigated the risks associated with holding IOs and 
POs by holding positions in both types of instruments such that 
exposure from significant changes in interest rates is reduced.  
Z-tranches receive principal payments from the underlying mortgage 
pool only after all other priority classes have been fully or 
substantially paid.  Subordinated tranches are subject to more 
credit risk, but less prepayment and extension risk than other CMO 
tranches.

<PAGE> 48

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

General Account Investments (Continued)
_______________________________________

Mortgage Loans

During the first nine months of 1996, the mortgage loan portfolio 
was reduced 14% to $7.2 billion, net of impairment reserves.  The 
company's total mortgage loan investments, net of impairment 
reserves, supported the following types of business:

<TABLE>
<CAPTION>
                                      September 30,            December 31,
(Millions)                                 1996                    1995    
___________________________________________________________________________
<S>                                   <C>                      <C>

Supporting discontinued products      $ 2,975.9                $ 3,388.6
Supporting experience rated products    2,547.1                  3,013.4
Supporting remaining products           1,648.6                  1,925.2
                                      __________________________________
   Total mortgage loan investments    $ 7,171.6                $ 8,327.2
                                      __________________________________
                                      __________________________________
</TABLE>

During the first nine months of 1996, the company continued to manage 
its mortgage loan portfolio to reduce the balance in absolute terms 
and relative to invested assets, and to reduce its overall risk.  The 
principal balance of mortgage loans decreased $1.4 billion since 
December 31, 1995 primarily reflecting the effect of repayments of 
maturing loans, loan prepayments and foreclosures.

Loans with a principal balance of $182 million and collateral with a 
fair market value of $71 million were foreclosed upon in the first 
nine months of 1996.  Additional loans with a principal balance of 
$125 million were in the process of foreclosure at September 30, 
1996.


<PAGE> 49

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

General Account Investments (Continued)
_______________________________________

Problem, Restructured and Potential Problem Loans

Included in the company's total mortgage loan balances were the 
following categories of mortgage loans:

<TABLE>
<CAPTION>
(Millions)                                                     September 30, 1996                        
_________________________________________________________________________________________________________
                                                           Restructured      Potential
                                       Problem Loans       Loans             Problem Loans      Total
                                       _____________       ____________      _____________      _____
<S>                                    <C>                 <C>               <C>                <C>

Total                                  $  466.7 (1)        $  422.2          $  584.6           $1,473.5
                                       ________            ________          ________           ________
                                       ________            ________          ________           ________
Percentage of total:
  Supporting discontinued products         42.3%               59.4%             51.0%
  Supporting experience rated products     40.0                23.3              35.8
  Supporting remaining products            17.7                17.3              13.2
                                       ________            ________          ________
                                          100.0%              100.0%            100.0%
                                       ________            ________          ________ 
                                       ________            ________          ________ 
Specific impairment reserves on 
 loans (2)                                                                                      $  222.2
                                                                                                ________
                                                                                                ________

Specific impairment reserves as a
 percentage of total                                                                                15.1%
                                                                                                ________ 
                                                                                                ________ 

                                                               December 31, 1995                         
_________________________________________________________________________________________________________
                                                           Restructured      Potential
                                       Problem Loans       Loans             Problem Loans      Total
                                       _____________       ____________      _____________      _____
<S>                                    <C>                 <C>               <C>                <C>

Total                                  $  160.3            $  514.1          $  839.1           $1,513.5
                                       ________            ________          ________           ________
                                       ________            ________          ________           ________
Percentage of total:
  Supporting discontinued products         22.6%               50.9%             54.3%
  Supporting experience rated products     51.8                35.5              29.1
  Supporting remaining products            25.6                13.6              16.6
                                       ________            ________          ________
                                          100.0%              100.0%            100.0%
                                       ________            ________          ________ 
                                       ________            ________          ________ 
Specific impairment reserves on 
 loans (2)                                                                                      $  361.2
                                                                                                ________
                                                                                                ________

Specific impairment reserves as a
 percentage of total                                                                                23.9%
                                                                                                ________ 
                                                                                                ________ 
<FN>

(1) The increase in problem loans from December 31, 1995 to September 30, 1996 includes 
    $191 million related to one mortgage loan where the borrower has declared bankruptcy.
    No specific reserve has been established for this loan because the loan is well secured, 
    and the company does not anticipate any future losses.

(2) See Note 7 of Condensed Notes to Financial Statements for further disclosures related 
    to mortgage loan impairment reserves.
</TABLE>

"Problem loans" are defined to be loans with payments over 60 days 
past due, loans on properties in the process of foreclosure, loans 
on properties involved in bankruptcy proceedings and loans on 
properties subject to redemption.


<PAGE> 50

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

General Account Investments (Continued)
_______________________________________

"Restructured loans" are loans whose original contract terms have 
been modified to grant concessions to the borrower and are 
currently performing pursuant to such modified terms.  
Restructured loans that have a market rate of interest at the time 
of the restructure (which represents the interest rate the company 
would charge for a new loan with comparable risk) and demonstrate 
sustainable performance (as generally evidenced by six months of 
pre- or post-restructuring payment performance in accordance with 
the restructured terms) may be returned to performing status.  
(See Aetna Services' 1995 Annual Report for a description of the 
company's restructuring program.)

"Potential problem loans" include all loans which are performing 
pursuant to existing terms and are considered likely to become 
classified as problem or restructured loans.  Such loans are 
identified through the portfolio review process on the basis of 
known information about the ability of borrowers to comply with 
present loan terms.  Identifying such potential problem loans 
requires significant judgment as to likely future market 
conditions and developments specific to individual properties and 
borrowers.  Provision for losses that management believes are 
likely to arise from such potential problem loans is included in 
the specific impairment reserves.  (See Note 7 of Condensed Notes 
to Financial Statements for a discussion of mortgage loan 
impairment reserves.)

The company does not accrue interest on problem loans or 
restructured loans when management believes the collection of 
interest is unlikely.  The amount of pretax investment income 
required by the original terms of such problem and restructured 
loans outstanding at September 30 and the portion thereof actually 
recorded as income were as follows:

<TABLE>
<CAPTION>
                                       Three Months Ended     Nine Months Ended
                                          September 30,          September 30,  
                                       __________________     __________________
(Millions)                             1996       1995        1996       1995   
_________________________________________________________     __________________
<S>                                    <C>        <C>         <C>        <C>

Income which would have been
 recorded under original terms
 of loans                              $  23.4    $  21.7     $  70.4    $  66.0

Income recorded                           15.0       12.6        49.8       38.6
                                       _______    _______     _______    _______

Lost investment income                 $   8.4    $   9.1     $  20.6    $  27.4
                                       _______    _______     _______    _______
                                       _______    _______     _______    _______

Lost investment income allocated to
 investments supporting discontinued
 products (included above)             $   2.8    $   3.8     $   9.6    $  10.3
                                       _______    _______     _______    _______
                                       _______    _______     _______    _______

Lost investment income allocated to
 investments supporting experience
 rated pension products
 (included above)                      $   4.1    $   3.5     $   8.0    $  11.5
                                       _______    _______     _______    _______
                                       _______    _______     _______    _______

Lost investment income allocated to
 investments supporting remaining
 products (included above)             $   1.5    $   1.8     $   3.0    $   5.6
                                       _______    _______     _______    _______
                                       _______    _______     _______    _______
</TABLE>

<PAGE> 51

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

General Account Investments (Continued)
_______________________________________

Real Estate 

The company's equity real estate balances, net of write-downs and 
reserves, were as follows:

<TABLE>
<CAPTION>
(Millions)                                                   September 30, 1996                 
________________________________________________________________________________________________
                                       Investment               Properties          Total Equity
                                       Real Estate              Held for Sale       Real Estate 
                                       ___________              _____________       ____________
<S>                                    <C>                      <C>                 <C>

Total equity real estate               $  162.5                 $  938.6 (1)        $ 1,101.1
                                       ________                 ________            _________
                                       ________                 ________            _________
Percentage of total equity real 
  estate:
  Supporting discontinued products         22.9%                    59.9%
  Supporting experience rated products      8.3                     23.2
  Supporting remaining products            68.8                     16.9
                                       ________                 ________
                                          100.0%                   100.0%
                                       ________                 ________ 
                                       ________                 ________ 

                                                             December 31, 1995                  
                                       _________________________________________________________
                                       Investment               Properties          Total Equity
                                       Real Estate              Held for Sale       Real Estate 
                                       ___________              _____________       ____________
<S>                                    <C>                      <C>                 <C>

Total equity real estate               $  153.0                 $1,124.3 (1)        $ 1,277.3
                                       ________                 ________            _________
                                       ________                 ________            _________
Percentage of total equity real
  estate:
  Supporting discontinued products          7.5%                    55.5%
  Supporting experience rated products      7.8                     29.2
  Supporting remaining products            84.7                     15.3
                                       ________                 ________
                                          100.0%                   100.0%
                                       ________                 ________ 
                                       ________                 ________ 
<FN>

(1) Includes $133.4 million and $190.4 million of in-substance foreclosures
    at September 30, 1996 and December 31, 1995, respectively.  (See Aetna 
    Services' 1995 Annual Report for further discussion of in-substance 
    foreclosures.)
</TABLE>

Real estate which the company has the intent to hold for the 
production of income is classified as investment real estate.  
Investment real estate is carried at depreciated cost plus capital 
additions, net of impairment write downs.

All real estate acquired through foreclosure, including in-
substance foreclosures, is classified as properties held for sale.  
The fair value at foreclosure is established as the new cost basis 
for these assets, which are carried at the lower of cost or fair 
value less estimated selling costs.  As a result of adopting FAS 
No. 121 on January 1, 1996, the company no longer depreciates 
properties held for sale.  Adjustments to the carrying value of 
properties held for sale are recorded in a valuation reserve when 
the fair value less estimated selling costs is below cost.  Fair 
value is generally determined using a discounted future cash flow 
analysis in conjunction with comparable sales information.  
Property valuations are reviewed regularly by investment 
management.  The company intends to sell a significant amount of 
the properties held for sale over the next one to two years, real 
estate and capital market conditions permitting.


<PAGE> 52

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

General Account Investments (Continued)
_______________________________________

Foreclosed real estate classified as properties held for sale was 
carried at 63% and 61% of the company's cash investment (unpaid 
mortgage balance plus capital additions) at September 30, 1996 and 
December 31, 1995, respectively.  Net investment income included 
$33 million and $104 million (pretax) from the net operations of 
properties held for sale for the three and nine months ended 
September 30, 1996, respectively.

Real Estate Write-Downs and Valuation Reserves

Total real estate write-downs and valuation reserves on properties 
included in the company's equity real estate balances were as 
follows:

<TABLE>
<CAPTION>
                                            September 30,      December 31,
(Millions)                                      1996               1995    
___________________________________________________________________________
<S>                                         <C>                <C>

Allocable to discontinued products          $  341.3           $  381.0
Allocable to experience rated products         124.5              208.2
                                                                       
Allocable to remaining products                111.5               96.8
                                            ________           ________
   Total real estate write-downs and 
     valuation reserves                     $  577.3 (*)       $  686.0
                                            ________           ________
                                            ________           ________
<FN>
(*) As a result of the adoption of FAS No. 121, valuation reserves at January 1, 1996 
    were increased by $52.9 million in connection with the reversal of previously recorded
    accumulated depreciation related to properties held for sale.  The adoption of 
    FAS No. 121 resulted in an immaterial impact on results of operations.
</TABLE>

For the periods shown below, total after-tax net realized capital 
(gains) losses from real estate write-downs and changes in the 
valuation reserves were as follows:

<TABLE>
<CAPTION>
                                              Three Months Ended         Nine Months Ended
                                                 September 30,              September 30,   
                                              ___________________        ___________________
(Millions)                                    1996        1995           1996        1995   
____________________________________________________________________________________________
<S>                                           <C>         <C>            <C>         <C>

Allocable to discontinued products (1)        $     -     $  13.0        $  (3.0)    $  13.0
Allocable to experience rated products (2)          -           -             .1           -
                                                                                            
Allocable to remaining products                     -           -           16.2           -
<FN>

(1)  Write-downs and impairment expense allocable to discontinued products are charged
     against the reserve for future losses and do not affect the company's results of 
     operations.

(2)  Write-downs and impairment expense allocable to experience rated products do not 
     affect the company's results of operations.
</TABLE>

<PAGE> 53

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

General Account Investments (Continued)
_______________________________________

Use of Derivatives and Other Investments

The company's use of derivatives is limited to hedging activity and 
has principally consisted of using foreign exchange forward 
contracts, futures and forward contracts and interest rate swap 
agreements to hedge interest rate, price and currency risks.  These 
instruments, viewed separately, subject the company to varying 
degrees of market and credit risk.  However, when used for hedging, 
the expectation is that these instruments would reduce overall market 
risk.  Market risk is the possibility that future changes in market 
prices may decrease the market value of one or all of these financial 
instruments.  Credit risk arises from the potential inability of 
counterparties to perform under the terms of the contracts.  
Management does not believe that its current hedging activity will 
have a material effect on the company's liquidity or results of 
operations.  (See Note 10 of Condensed Notes to Financial Statements 
for a discussion of the company's hedging activities.)

The company also had investments in certain debt instruments with 
derivative characteristics, including those where market value is 
at least partially determined by, among other things, levels of or 
changes in domestic and/or foreign interest rates (short term or 
long term), exchange rates, prepayment rates, equity markets or 
credit ratings/spreads.  The amortized cost and fair value of 
these securities included in the debt securities portfolio as of 
September 30, 1996 was as follows:

<TABLE>
<CAPTION>
                                                     Amortized      Fair      
(Millions)                                           Cost           Value     
_____________________________________________________________________________ 
<S>                                                  <C>            <C>       

Collateralized mortgage obligations:                 $ 2,640.8      $ 2,691.5 
  Interest-only strips (included above)                   37.2           50.4 
  Principal-only strips (included above)                  46.1           54.7 
Structured notes (1)                                     114.5          117.5 
<FN>

(1) Represents nonleveraged instruments whose fair values and credit risk are
    based on underlying securities, including fixed-income securities and
    interest rate swap agreements.
</TABLE>



<PAGE> 54

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Liquidity and Capital Resources
_______________________________

Financings and Financing Capacity

Cash and cash equivalents at September 30, 1996 and December 31, 1995 
were $2.2 billion and $1.7 billion, respectively.

The company's short-term and long-term borrowings and financings are 
conducted through Aetna Services or other subsidiaries and are fully 
and unconditionally guaranteed by Aetna Inc.  See Note 8 of Condensed 
Notes to Financial Statements.

Short-term borrowings are used from time to time to provide for 
timing differences between receipts and disbursements.  The maximum 
amount of domestic short-term borrowings outstanding during the first 
nine months of 1996 was $1.5 billion.  In the third quarter of 1996, 
the company utilized funds made available from the issuance of $1.4 
billion of commercial paper to fund a portion of the cash 
consideration paid in connection with the U.S. Healthcare merger.

On August 19, 1996, Aetna Services issued $300,000,000 of 6.75% Notes 
due 2001; $350,000,000 of 7.125% Notes due 2006; $450,000,000 of 
7.625% Debentures due 2026; and $300,000,000 of 6.97% Debentures due 
2036 (putable at par in 2004).  The company utilized the net proceeds 
from these securities to re-finance its outstanding short-term 
borrowings.

Subsequent to September 30, 1996, the company reduced from $2.5 
billion to $1.5 billion, the aggregate amount of its revolving credit 
facility with a worldwide group of banks.  The facility terminates in 
June 2001.  No amounts are outstanding under the facility.  (See Note 
8 of Condensed Notes to Financial Statements.)

Pursuant to shelf registration statements declared effective by the 
SEC, the company may offer and sell through Aetna Services up to an 
additional $600 million of debt securities and up to an additional 
$225 million of preferred securities of a subsidiary.

Restrictions on Certain Payments by the Company

The company's business operations are conducted through Aetna 
Services and U.S. Healthcare and their respective subsidiaries (which 
principally consist of HMO and insurance companies).  In addition to 
general state law restrictions on payment of dividends and other 
distributions to shareholders applicable to all corporations, HMO and 
insurance companies are subject to further state regulations that, 
among other things, may require such companies to maintain certain 
levels of equity, and restrict the amount of dividends and other 
distributions to their parent corporations.  These regulations are 
not directly applicable to Aetna Services, U.S. Healthcare, or the 
company, as none are an HMO or insurance company.  The additional 
regulations applicable to the company's indirect HMO and insurance 
company subsidiaries are not expected to affect the ability of the 
company to pay dividends, or the ability of any of the company's 
subsidiaries to service their outstanding debt or preferred stock 
obligations.


<PAGE> 55

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Liquidity and Capital Resources (Continued)
___________________________________________

Ratings

In July 1996, Standard & Poor's Corporation, Moody's Investors 
Service, Inc. and Duff & Phelps Credit Rating Company affirmed the 
senior debt and commercial paper ratings of the company and removed 
the company's ratings from credit watch.  Standard & Poor's 
Corporation announced on July 16, 1996 that it had lowered the claims 
paying rating of Aetna Life Insurance Company, a wholly-owned 
subsidiary of the company, from A+ to A and had lowered the claims 
paying rating of Aetna Life Insurance and Annuity Company, a wholly-
owned subsidiary of the company, from AA to AA-.

Dividends

On September 27, 1996, the Board of Directors of Aetna Inc. (the 
"Board") declared a quarterly dividend of $.20 per share of common 
stock and $1.18945 per share of 6.25% Class C Voting Preferred Stock 
to shareholders of record at the close of business on October 25, 
1996, payable November 15, 1996.

New Accounting Pronouncements
_____________________________

See Note 3 of Condensed Notes to Financial Statements for a 
discussion of recently issued accounting pronouncements.

Federal Employee Benefit Regulation
___________________________________

The company provides a variety of products and services to employee 
benefit plans that are covered by the Employee Retirement Income 
Security Act of 1974 ("ERISA").

In December 1993, in a case involving an employee benefit plan and an 
insurance company, the United States Supreme Court ruled that assets 
in the insurance company's general account that were attributable to 
the nonguaranteed portion of a group pension contract issued to the 
plan were "plan assets" for purposes of ERISA and that the insurance 
company was an ERISA fiduciary with respect to those assets.  In 
reaching its decision, the Court declined to follow a 1975 Department 
of Labor ("DOL") interpretive bulletin that had suggested that 
insurance company general account assets were not plan assets.

Congress recently enacted the Small Business Job Protection Act (the 
"Act"), which, among other matters, created a framework for resolving 
potential issues raised by the Supreme Court decision.  The Act 
provides that, absent criminal conduct, insurers generally will not 
have liability with respect to general account assets held under 
previously existing nonguaranteed contracts based on claims that 
those assets are plan assets.  The Act also requires the DOL to issue 
regulations addressing ERISA's application to the general account 
assets of insurers attributable to existing nonguaranteed contracts 
and such contracts issued through the end of 1998 (insurers will have 
eighteen months to comply with the regulations once they are issued).  
The Act does not address how ERISA may apply to assets attributable 
to the nonguaranteed portion of contracts issued after 1998, and the 
company and other insurers continue to seek clarification from the 
DOL of these matters.  As a result, the company is not currently able 
to predict how these matters may ultimately affect its businesses.


<PAGE> 56

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (Continued)

Forward-Looking Information
___________________________

The Private Securities Litigation Reform Act of 1995 (the "Act") 
provides a "safe harbor" for forward-looking statements to 
encourage companies to provide prospective information about their 
companies, so long as those statements are identified as forward-
looking and are accompanied by meaningful cautionary statements 
identifying important factors that could cause actual results to 
differ materially from those discussed in the statement.  The 
company desires to take advantage of the "safe harbor" provisions 
of the Act.  Certain information contained herein is forward 
looking, particularly the information that appears under the 
heading "Outlook" in the discussion of Aetna U.S. Healthcare 
results.  Those matters are subject to significant uncertainties 
and contingencies, many of which are beyond the control of the 
company and may be affected by, among other important factors: (i) 
governmental action (including downward adjustments to Medicare 
and other premium rates) or business conditions (including 
intensification of competition) and other factors resulting in 
premiums not increasing sufficiently to offset increases in 
medical costs and other operating costs; (ii) termination of 
provider contracts or renegotiation thereof at less cost-effective 
rates or terms of payment; (iii) price increases in 
pharmaceuticals, durable medical equipment and other covered 
items; (iv) governmental regulation of premium increases or 
prospective or retroactive reductions to premium rates for federal 
employees; (v) the selection by employers and individuals of 
higher copayment/deductable/coinsurance plans with relatively 
lower premiums; and (vi) the impact upon medical loss ratio of 
greater net enrollment in higher medical loss ratio lines of 
business such as Medicare and Medicaid.  For information regarding 
additional factors that may affect the company's health and other 
businesses see the company's Form S-4 registration statement 
related to the merger with U.S. Healthcare, and the prior SEC 
filings of Aetna Services and U.S. Healthcare, including their 
1995 Form 10-Ks and Annual Reports.


<PAGE> 57

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings.

The company is involved in numerous lawsuits arising, for the most 
part, in the ordinary course of its business operations including 
litigation in its health business concerning benefit plan coverage 
and other decisions made by the company, and alleged medical 
malpractice by participating providers.  While the ultimate 
outcome of litigation against the company cannot be determined at 
this time, after consideration of the defenses available to the 
company and any related reserves established, it is not expected 
to result in liability for amounts material to the financial 
condition of the company, although it may adversely affect results 
of operations in future periods.

Item 4.  Submission of Matters to a Vote of Security Holders.

Aetna Services, Inc. (formerly Aetna Life and Casualty Company):

(a)  A Special Meeting of Shareholders of Aetna Services, Inc.
     was held on Thursday, July 18, 1996.

(b)  Directors Elected at the Meeting:  None.

(c)  Other matters voted upon:

<TABLE>
<CAPTION>
                                          Votes          Votes                               Broker
                                          For            Against           Abstain           Non-Votes
                                          _____          _______           _______           _________
<S>                                       <C>            <C>               <C>               <C>

(1) Approval and adoption of an 
     Agreement and Plan of Merger,
     dated as of March 30, 1996, as 
     amended, by and among Aetna Life
     and Casualty Company, U.S.
     Healthcare, Inc., Aetna Inc., New
     Merger Corporation and Antelope
     Sub., Inc. and the transactions
     contemplated thereby.                 85,409,279     10,030,420          465,730         0

(2) Approval and adoption of the 
     Aetna Inc. 1996 Stock 
     Incentive Plan.                       77,896,570     15,838,003        2,170,856         0

(3) Approval and adoption of the 
     Aetna Inc. Annual Incentive Plan.     88,464,326      6,583,862          857,241         0

(4) Approval of the assumption by
     Aetna Inc. of Aetna Life and 
     Casualty Company's Non-Employee 
     Director Deferred Stock and 
     Deferred Compensation Plan.           87,534,754      7,406,119          964,556         0

(5) Approval and adoption of a new
     Aetna Life and Casualty
     Company Certificate of 
     Incorporation in connection 
     with its reincorporation as a
     general business corporation, 
     the surrender of its license as
     an insurance company in Connecticut
     and the related change of its name
     to Aetna Services Inc., as well 
     as a change of the par  value of 
     its Common Capital Stock to $.01.     91,734,302      3,509,139          661,988         0

</TABLE>

<PAGE> 58

Item 4.  Submission of Matters to a Vote of Security Holders.  
        (Continued)

U.S. Healthcare, Inc:

(a)  A Special Meeting of Shareholders of U.S. Healthcare, Inc. 
     was held on Thursday, July 18, 1996.

(b)  Directors Elected at the Meeting:

<TABLE>
<CAPTION>
                                          Votes          Votes             Broker
                                          For            Withheld          Non-Votes
                                          _____          ________          _________
<S>                                       <C>            <C>               <C>       

David B. Soll, M.D.                       818,854,900    415,371           0
Timothy T. Weglicki                        97,747,128    413,993           0
</TABLE>

Such persons and Leonard Abramson, Betsy Z. Cohen, Jerome S. Goodman, 
and Allen Misher, Ph.D. continued as directors following the meeting 
and until the merger on July 19, 1996 pursuant to which U.S. 
Healthcare, Inc. became a wholly owned subsidiary of the company.

(c)  Other Matters voted upon:

<TABLE>
<CAPTION>
                                          Votes          Votes                               Broker
                                          For            Against           Abstain           Non-Votes
                                          _____          _______           _______           _________
<S>                                       <C>            <C>               <C>               <C>

(1) Approval and adoption of an 
     Agreement and Plan of Merger, 
     dated as of March 30, 1996, as 
     amended, by and among Aetna Life
     and Casualty Company, U.S.
     Healthcare, Inc., Aetna Inc., New
     Merger Corporation and Antelope
     Sub., Inc. and the transactions
     contemplated thereby.                811,173,171     1,138,622          199,699         6,758,779

(2) Approval and adoption of 
     the Aetna Inc. 1996 Stock 
     Incentive Plan.                      797,980,654    12,338,662        2,299,371         6,651,584

(3) Approval and adoption of the
     Aetna Inc. Annual Incentive Plan.    808,896,321     1,411,716        2,310,549         6,651,585

(4) Approval of the assumption by
     Aetna Inc. of Aetna Life and 
     Casualty Company's Non-Employee
     Director Deferred Stock and 
     Deferred Compensation Plan.          808,425,919     1,624,736        2,568,031         6,651,585
</TABLE>

<PAGE> 59

Item 5.  Other Information.

(a)  Ratios of Earnings to Fixed Charges and Earnings to 
     Combined Fixed Charges and Preferred Stock Dividends

The following table sets forth the company's ratio of earnings to 
fixed charges and ratio of earnings to combined fixed charges and 
preferred stock dividends for the periods indicated.

<TABLE>
<CAPTION>
                                          Nine Months Ended              Years ended December 31,      
                                                                   ____________________________________
                                          September 30, 1996       1995    1994    1993    1992    1991
                                          ____________________     ____    ____    ____    ____    ____
<S>                                       <C>                      <C>     <C>     <C>     <C>     <C>

Ratio of Earnings to Fixed Charges         4.05                     4.97    4.74    (a)     1.90     .54(b)
Ratio of Earnings to Combined Fixed
 Charges and Preferred Stock Dividends     3.66                     4.97    4.74    (a)     1.90     .54(b)
<FN>
(a) The company reported a pretax loss from continuing operations in 1993 which
    was inadequate to cover fixed charges by $1.0 billion.
(b) Earnings were inadequate to cover fixed charges by $92.0 million in 1991.
</TABLE>

For purposes of computing both the ratio of earnings to fixed 
charges and the ratio of earnings to combined fixed charges and 
preferred stock dividends, "earnings" represent consolidated 
earnings from continuing operations before income taxes, 
cumulative effect adjustments and extraordinary items plus fixed 
charges and minority interest.  "Fixed charges" consist of 
interest (and the portion of rental expense deemed representative 
of the interest factor) and includes the dividends paid to 
preferred shareholders of a subsidiary.  (See Note 11 of Notes to 
Financial Statements in Aetna Services' 1995 Annual Report.)  For 
the years ended December 31, 1995, 1994, 1993, 1992 and 1991 there 
was no preferred stock outstanding.  As a result, the ratios of 
earnings to combined fixed charges and preferred stock dividends 
were the same as the ratios of earnings to fixed charges.

Item 6.  Exhibits and Reports on Form 8-K.

(a) Exhibits

    (3)     Articles of Incorporation and By-Laws.

    (3.1)   Aetna Inc. Amended and Restated Certificate of 
            Incorporation, incorporated herein by reference to the 
            company's Registration Statement on Form S-4 (File No. 
            333-5791) filed on June 12, 1996.

    (3.2)   Aetna Inc. Bylaws, incorporated herein by reference to 
            the company's Registration Statement on Form S-4 (File 
            No. 333-5791) filed on June 12, 1996.

    (4)     Instruments defining the rights of Security Holders, 
            including indentures.

    (4.1)   Senior Indenture, dated July 1, 1996, between the 
            Company, Aetna Services, Inc. (formerly Aetna Life and 
            Casualty Company), and State Street Bank and Trust 
            Company of Connecticut, National Association, as 
            Trustee.


<PAGE> 60

Item 6.  Exhibits and Reports on Form 8-K.  (Continued)

    (4.2)   Form of Subordinated Indenture between Aetna Services, 
            Inc., Aetna Inc. and State Street Bank and Trust 
            Company of Connecticut, National Association, as 
            Trustee (including the forms of Subordinated Debt 
            Securities and Subordinated Debt Guarantees), 
            incorporated herein by reference to the company's and 
            Aetna Services, Inc.'s Registration Statement on 
            Form S-3 (File No. 333-07167) filed on June 28, 1996.

    (4.3)   Designations, Rights and Preferences of 6.25% Class C 
            Voting Preferred Stock, incorporated herein by 
            reference to the company's 8-K filed on July 26, 1996.

    (4.4)   Aetna Inc. Rights Agreement, incorporated herein by 
            reference to the company's 8-K filed on July 26, 1996.

    (4.5)   Indenture, dated as of October 15, 1986, between Aetna 
            Services, Inc. and The First National Bank of Boston, 
            Trustee, incorporated herein by reference to Aetna 
            Services, Inc.'s 1992 Form 10-K.

    (4.6)   First Indenture Supplement, dated as of August 1, 
            1996, to Indenture, dated as of October 15, 1986, 
            between Aetna Services, Inc. and State Street Bank and 
            Trust Company, as Successor Trustee.

    (4.7)   Indenture, dated as of August 1, 1993, between Aetna 
            Services, Inc. and State Street Bank and Trust Company 
            of Connecticut, National Association, as Trustee, 
            incorporated herein by reference to Aetna Services, 
            Inc.'s Registration Statement on Form S-3 (File No. 33-
            50427).

    (4.8)   First Indenture Supplement, dated as of August 1, 
            1996, to the Indenture dated as of August 1, 1993 
            between Aetna Services, Inc. and State Street Bank and 
            Trust Company of Connecticut, National Association, as 
            Trustee.

    (4.9)   Written Action, dated as of November 15, 1994, 
            establishing the terms of Series A Preferred 
            Securities of Aetna Capital L.L.C., incorporated 
            herein by reference to Aetna Services, Inc.'s Form 
            8-K filed on November 22, 1994.

    (4.10)  Subordinated Indenture, dated as of November 1, 1994, 
            between Aetna Services, Inc. and The First National 
            Bank of Chicago, as Trustee, incorporated herein by 
            reference to Aetna Services, Inc.'s Form 8-K filed on 
            November 22, 1994.

    (4.11)  First Indenture Supplement, dated as of August 1, 
            1996, to the Indenture, dated as of November 1, 1994, 
            between Aetna Services, Inc. and The First National 
            Bank of Chicago, as Trustee.

    (4.12)  Payment and Guarantee Agreement, dated November 22, 
            1994, of Aetna Services, Inc. with respect to Aetna 
            Capital L.L.C., incorporated herein by reference to 
            Aetna Services, Inc.'s Form 8-K filed on November 22, 
            1994.


<PAGE> 61

Item 6.  Exhibits and Reports on Form 8-K.  (Continued)

    (4.13)  Payment and Guarantee Agreement, dated as of August 1, 
            1996, of Aetna Inc. with respect to Aetna Capital 
            L.L.C.

    (4.14)  Amendment No. 1, dated as of August 1, 1996, to the 
            Fiscal Agency Agreement, dated as of July 17, 1986, 
            between Aetna Services, Inc. and State Street Bank and 
            Trust Company, as successor Fiscal Agent.

    (10)    Material Contracts.

    (10.1)  Employment Agreement, dated as of March 30, 1996, by 
            and between U.S. Healthcare, Inc. and Joseph 
            Sebastianelli.**

    (10.2)  Employment Agreement, dated as of March 30, 1996, by 
            and between U.S. Healthcare, Inc. and Michael 
            Cardillo.**

    (10.3)  Stock Purchase Agreement, dated as of November 28, 
            1995, between The Travelers Insurance Group Inc. and 
            Aetna Services, Inc. relating to the purchase and sale 
            of 100% of the Common Stock of The Aetna Casualty and 
            Surety Company and The Standard Fire Insurance 
            Company, incorporated herein by reference to Aetna 
            Services, Inc.'s 1995 Form 10-K.

    (10.4)  Letter Agreement, dated as of January 19, 1995, 
            between Aetna Services, Inc. and Richard L. Huber, 
            incorporated herein by reference to Aetna Services, 
            Inc.'s 1995 Form 10-K.**

    (10.5)  Employment Agreement, dated as of January 29, 1996, 
            between Aetna Services, Inc. and Ronald E. Compton, 
            incorporated herein by reference to Aetna Services, 
            Inc.'s 1995 Form 10-K.**

    (10.6)  Employment Agreement, dated as of December 19, 1995, 
            between Aetna Services, Inc. and Daniel P. Kearney, 
            incorporated herein by reference to Aetna Services, 
            Inc.'s 1995 Form 10-K.**

    (10.7)  Letter Agreement, dated as of January 31, 1996, 
            between Aetna Services, Inc. and The Travelers 
            Insurance Company Group Inc., incorporated herein by 
            reference to Aetna Services, Inc.'s Form 10-Q filed on 
            April 26, 1996.

    (10.8)  Amendment, dated as of April 2, 1996, to Stock 
            Purchase Agreement, dated as of November 28, 1995, 
            between Aetna Services, Inc. and The Travelers 
            Insurance Group Inc., incorporated herein by reference 
            to Aetna Services, Inc.'s Form 10-Q filed on April 26, 
            1996.

    (10.9)  Registration Rights Agreement, dated as of March 30, 
            1996, between the company and Leonard Abramson, 
            incorporated herein by reference to Aetna Services, 
            Inc.'s Form 10-Q filed on April 26, 1996.


<PAGE> 62

Item 6.  Exhibits and Reports on Form 8-K.  (Continued)

    (10.10) Amendment No. 1, dated as of May 30, 1996, to the 
            Registration Rights Agreement, dated as of March 30, 
            1996, between the company and Leonard Abramson, 
            incorporated herein by reference to the company's 
            Registration Statement on Form S-4 (Registration No. 
            333-5791) filed on June 12, 1996.

    (10.11) Amended and Restated Agreement, dated as of May 30, 
            1996, between the company and Leonard Abramson, 
            incorporated herein by reference to the company's 
            Registration Statement on Form S-4 (Registration No. 
            333-5791) filed on June 12, 1996.

    (10.12) The Aetna Inc. 1996 Stock Incentive Plan, incorporated 
            herein by reference to the company's Registration 
            Statement on Form S-4 (Registration No. 333-5791) 
            filed on June 12, 1996.

    (10.13) The Aetna Inc. Annual Incentive Plan, incorporated 
            herein by reference to the company's Registration 
            Statement on Form S-4 (Registration No. 333-5791) 
            filed on June 12, 1996.

    (10.14) The Aetna Inc. Non-Employee Director Deferred Stock 
            and Deferred Compensation Plan, incorporated herein by 
            reference to the company's Registration Statement on 
            Form S-4 (Registration No. 333-5791) filed on June 12, 
            1996.

    (10.15) The Supplemental Incentive Savings Plan for Certain 
            Employees of Aetna Services, Inc.

    (10.16) The Supplemental Pension Benefit Plan for Certain 
            Employees of Aetna Services, Inc.

    (10.17) Amendment No. 1, dated March 1, 1996 to Letter 
            Agreement, dated January 19, 1995, between Aetna 
            Services, Inc. and Richard L. Huber, incorporated 
            herein by reference to the company's Registration 
            Statement on Form S-4 (Registration No. 333-5791) 
            filed on June 12, 1996.

    (10.18) Amended and Restated U.S. Healthcare, Inc. Savings 
            Plan, incorporated herein by reference to U.S. 
            Healthcare, Inc.'s 1995 Form 10-K filed on March 25, 
            1996.

    (10.19) Amended and Restated Pension Plan for Employees of 
            U.S. Healthcare, Inc., incorporated herein by 
            reference to U.S. Healthcare, Inc.'s 1995 Form 10-K 
            filed on March 25, 1996.

    (10.20) Split Dollar Insurance Agreement, dated as of February 
            1, 1990, among Madlyn K. Abramson, Marcy A. Shoemaker 
            (formerly Marcy Abramson), Nancy Wolfson, Judith 
            Abramson and David B. Soll, and U.S. Healthcare, Inc., 
            and the related Collateral Assignment Agreement, dated 
            as of February 1, 1990, among Madlyn K. Abramson, 
            Marcy A. Shoemaker (formerly Marcy Abramson), Nancy 
            Wolfson, Judith Abramson and David B. Soll, and U.S. 
            Healthcare, Inc., incorporated herein by reference to 
            U.S. Healthcare, Inc.'s 1995 Form 10-K filed on March 
            25, 1996.

<PAGE> 63

Item 6.  Exhibits and Reports on Form 8-K.  (Continued)

    (10.21) Split Dollar Insurance Agreement, dated as of January 
            21, 1991, among Marcy A. Shoemaker (formerly Marcy 
            Abramson), Nancy Wolfson, Judith Abramson, David B. 
            Soll, Jerome Goodman and Edward M. Glickman, and U.S. 
            Healthcare, Inc., and the related Collateral 
            Assignment Agreement, dated as of January 21, 1991, 
            among Marcy A. Shoemaker (formerly Marcy Abramson), 
            Nancy Wolfson, Judith Abramson, David B. Soll, Jerome 
            Goodman and Edward M. Glickman, and U.S. Healthcare, 
            Inc., incorporated herein by reference to U.S. 
            Healthcare, Inc.'s 1995 Form 10-K filed on March 25, 
            1996.

    (10.22) Description of Deferred Compensation Plan, 
            incorporated herein by reference to U.S. Healthcare, 
            Inc.'s 1995 Form 10-K filed on March 25, 1996.

    (10.23) Voting Agreement, dated as of March 30, 1996, among 
            Leonard Abramson, Aetna Life Insurance Company and 
            Aetna Life Insurance and Annuity Company, incorporated 
            herein by reference to Aetna Services, Inc.'s Form 10-Q 
            filed on April 26, 1996.

    (10.24) Agreement and Plan of Merger, dated as of March 30, 
            1996, among Aetna Services, Inc, U.S. Healthcare, 
            Inc., the company, Antelope Sub, Inc. and New Merger 
            Corporation, incorporated herein by reference to Aetna 
            Services, Inc.'s Form 10-Q filed on April 26, 1996. 

    (10.25) Amendment No. 1, dated as of May 30, 1996, to the 
            Agreement and Plan of Merger, dated as of March 30, 
            1996, among Aetna Services, Inc., U.S. Healthcare, 
            Inc., the company, Antelope Sub. Inc. and New Merger 
            Corporation, incorporated herein by reference to the 
            company's Registration Statement on Form S-4 
            (Registration No. 333-5791) filed on June 12, 1996.

    (10.26) Amendment No. 1, dated as of May 30, 1996, to the 
            Voting Agreement, dated as of March 30, 1996, among 
            Leonard Abramson, Aetna Life Insurance Company and 
            Aetna Life Insurance and Annuity Company, incorporated 
            herein by reference to the company's Registration 
            Statement on Form S-4 (Registration No. 333-5791) 
            filed on June 12, 1996.

    (10.27) Aetna Services, Inc. $2.5 billion Credit Facility, 
            incorporated herein by reference to Aetna Services, 
            Inc.'s Report on Form 8-K filed on July 16, 1996.

    Description of certain arrangements not embodied in formal 
    documents, as described under the heading "Management - 
    Compensation of Directors", incorporated by reference to the 
    company's Registration Statement on Form S-4 (Registration No. 
    333-5791) filed on June 12, 1996, and under the caption 
    "Executive Compensation," incorporated herein by reference to 
    the Aetna Services, Inc. 1996 Proxy Statement.


<PAGE> 64

Item 6.  Exhibits and Reports on Form 8-K. (Continued)

    (12)    Statement Re Computation of Ratios.

    (12.1)  Computation of ratio of earnings to fixed charges and 
            ratio of earnings to combined fixed charges and 
            preferred stock dividends for the nine months ended 
            September 30, 1996 and for the years ended
            December 31, 1995, 1994, 1993, 1992 and 1991.

    (15)    Letter Re Unaudited Interim Financial Information.

    (15.1)  Letter from KPMG Peat Marwick LLP acknowledging 
            awareness of the use of a report on unaudited interim 
            financial information, dated October 23, 1996.

    (27)    Financial Data Schedule.

    (99)    Additional Exhibits.

    (99.1)  Consent of Leonard Abramson.

       **Management contract or compensatory plan or arrangement.

(b) Reports on Form 8-K

    Aetna Life and Casualty Company filed a report on Form 8-K on 
    July 16, 1996, relating to changes in certain of its subsidiaries'
    ratings and a $2.5 billion Credit Agreement, dated as of 
    June 28, 1996, among Aetna Life and Casualty Company, as Borrower, 
    Aetna Inc., as Guarantor, The Banks listed therein and Morgan 
    Guaranty Trust Company of New York, as Administrative Agent.

    The company filed a report on Form 8-K on July 26, 1996, relating 
    to the merger with U.S. Healthcare, Inc. including certain financial 
    statements of Aetna Services, Inc. and U.S. Healthcare, Inc., an 
    unaudited consolidated balance sheet at June 30, 1996 of Aetna Inc., 
    and unaudited condensed consolidated pro forma financial statements 
    of Aetna Inc. for the six and twelve months ended June 30, 1996 
    and December 31, 1995, respectively.

    The company filed a report on Form 8-K on August 12, 1996, relating 
    to the consent of Leonard Abramson, dated August 8, 1996.

    The company filed a report on Form 8-K on August 15, 1996, relating 
    to the Pricing Agreement, dated August 14, 1996, to issue and sell 
    certain debt securities.


<PAGE> 65

                       SIGNATURES

Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.







                                              Aetna Inc.       
                                       _______________________
                                       (Registrant)


Date  October 25, 1996      By   /s/   Robert J. Price        
                                ______________________________
                                       (Signature)

                                      Robert J. Price
                                      Vice President
                                      and Corporate Controller
                                      (Chief Accounting Officer)