<PAGE>   1

================================================================================

                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                       ---------------------------------

                                   Form 10-Q/A


[X]     Quarterly report pursuant to Section 13 or 15(d) of the Securities
        Exchange Act of 1934, for the quarter ended MARCH 31, 1999.

                                       or

[ ]     Transition report pursuant to Section 13 or 15(d) of the Securities
        Exchange Act of 1934

                        ---------------------------------

                         Commission File Number 1-11913

                        ---------------------------------

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


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

         151 Farmington Avenue                              06156
         Hartford, Connecticut                            (ZIP Code)
(Address of principal executive offices)
</TABLE>

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

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


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.

<TABLE>
<S>                                             <C>
Common Capital Stock (par value $.01)                            141,289,941
-------------------------------------           -------------------------------------------
              (Class)                              Shares Outstanding at January 31, 2000
</TABLE>


================================================================================




<PAGE>   2


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                      Page
                                                                                      ----
<S>           <C>                                                                     <C>
PART I.       FINANCIAL INFORMATION

Item 1.       Financial Statements.
              Consolidated Statements of Income                                          4
              Consolidated Balance Sheets                                                5
              Consolidated Statements of Shareholders' Equity                            6
              Consolidated Statements of Cash Flows                                      7
              Condensed Notes to Consolidated Financial Statements                       8
              Independent Auditors' Review Report                                       22

Item 2.       Management's Discussion and Analysis of
              Financial Condition and Results of Operations.                            23

Item 3.       Quantitative and Qualitative Disclosures
              About Market Risk.                                                        39

PART II.      OTHER INFORMATION

Item 1.       Legal Proceedings.                                                        40

Item 5.       Other Information.                                                        40

Item 6.       Exhibits and Reports on Form 8-K.                                         42

Signatures                                                                              43
</TABLE>

                                     Page 2


<PAGE>   3


SIGNIFICANT FINANCIAL AND ACCOUNTING DEVELOPMENTS

Following a review by the staff of the Securities and Exchange Commission, Aetna
Inc. and its subsidiaries (collectively, the "Company") concluded that it would
restate its 1998 Form 10-K and 1999 Form 10-Qs. The purpose of this Form 10-Q/A
is to restate the Company's first quarter 1999 and 1998 financial statements,
and to add certain other disclosures (the "Restatement") to reflect, among other
things and to the extent applicable, the following changes:

-    Changes to the classification and timing of amounts earned by the Company
     following the 1997 sale of Human Affairs International, Incorporated
     ("HAI"). Contingent payments earned by the Company originally recorded as
     reductions of medical costs and as other income on a quarterly basis in
     1999 have instead been recorded as a realized capital gain during the third
     quarter of 1999. Contingent payments earned by the Company originally
     recorded as reductions of medical costs and as other income on a quarterly
     basis in 1998 have instead been recorded as a realized capital gain during
     the fourth quarter of 1998;

-    A liability relating to the extension period (2000-2003) of an unfavorable
     pharmacy contract originally recorded by the Company in connection with the
     July, 1998 acquisition of NYLCare has been reversed to reflect the
     elimination of this liability and reduction of goodwill;

-    The breakout of salaries and benefits expense originally included in other
     operating expenses for each period presented;

-    The reclassification of the Company's initial capital contributions to
     separate accounts and other excess funds not held to fund current separate
     account liabilities to other invested assets, originally recorded to
     separate account assets;

-    The reclassification of certain long-term debt (Puttable Reset Securities)
     to short-term debt; and

-    Expanded disclosures regarding the Company's discontinued products and
     goodwill amortization.

The principal effects of these changes on the accompanying financial statements
are presented in Note 2 to the Consolidated Financial Statements.

For purposes of this Form 10-Q/A, and in accordance with Rule 12b-15 under the
Securities and Exchange Act of 1934, as amended, the Company has amended and
restated in its entirety each item of the 1999 first quarter Form 10-Q which has
been affected by the Restatement. In order to preserve the nature and character
of the disclosures originally set forth in the 1999 first quarter Form 10-Q
filed on April 28, 1999, this Form 10-Q/A does not reflect events occurring
after the filing of the original Form 10-Q, or modify or update those
disclosures in any way, except as required to reflect the effects of the
Restatement. The Company will file its 1999 Form 10-K on or before March 30,
2000.


                                     Page 3



<PAGE>   4


PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS.


                           AETNA INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME


<TABLE>
<CAPTION>
                                                                                         As Restated
                                                                                     Three Months Ended
                                                                                            March 31,
                                                                                 ---------------------------
(Millions, except per common share data)                                              1999              1998
------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>                <C>
Revenue:
   Premiums                                                                       $4,381.4          $3,238.6
   Net investment income                                                             740.7             812.7
   Fees and other income                                                             548.2             541.8
   Net realized capital gains                                                         17.1              31.7
------------------------------------------------------------------------------------------------------------
Total revenue                                                                      5,687.4           4,624.8
------------------------------------------------------------------------------------------------------------
Benefits and expenses:
  Current and future benefits                                                      4,141.3           3,276.9
  Operating expenses:
      Salaries and related benefits                                                  471.3             396.5
      Other                                                                          567.5             481.7
  Interest expense                                                                    64.6              56.9
  Amortization of goodwill and other acquired intangible assets                      107.7              96.2
  Amortization of deferred policy acquisition costs                                   50.0              52.4
------------------------------------------------------------------------------------------------------------
Total benefits and expenses                                                        5,402.4           4,360.6
------------------------------------------------------------------------------------------------------------
Income before income taxes                                                           285.0             264.2
Income taxes (benefits):
  Current                                                                            105.3             126.3
  Deferred                                                                            10.1             (19.8)
------------------------------------------------------------------------------------------------------------
Total income taxes                                                                   115.4             106.5
------------------------------------------------------------------------------------------------------------
Net income                                                                        $  169.6          $  157.7
============================================================================================================
Net income applicable to common ownership                                         $  155.8          $  143.8
============================================================================================================

Results per common share:
  Basic                                                                           $   1.10          $    .99
  Diluted                                                                             1.09               .98
Dividends declared                                                                     .20               .20
------------------------------------------------------------------------------------------------------------
</TABLE>

See Condensed Notes to Consolidated Financial Statements.



                                     Page 4

<PAGE>   5




 ITEM 1.  FINANCIAL STATEMENTS.

                           AETNA INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                                                          As Restated
                                                                                                ---------------------------------
                                                                                                    March 31,         December 31,
(Millions)                                                                                              1999                 1998
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                             <C>                  <C>
Assets:
Investments:
  Debt securities available for sale, at fair value (amortized cost $30,258.6 and $30,730.1)      $ 31,117.9          $  32,180.8
  Equity securities, at fair value (cost $778.8 and $762.6)                                            813.7                800.5
  Short-term investments                                                                               790.6                942.2
  Mortgage loans                                                                                     3,517.3              3,553.0
  Real estate                                                                                          317.2                270.3
  Policy loans                                                                                         471.7                458.7
  Other                                                                                              1,335.1              1,300.3
----------------------------------------------------------------------------------------------------------------------------------
Total investments                                                                                   38,363.5             39,505.8
----------------------------------------------------------------------------------------------------------------------------------
  Cash and cash equivalents                                                                          2,008.1              1,951.5
  Short-term investments under securities loan agreement                                               696.1                753.6
  Accrued investment income                                                                            612.9                537.1
  Premiums due and other receivables                                                                 1,623.1              1,478.1
  Reinsurance recoverables                                                                           3,935.5              3,897.2
  Deferred income taxes                                                                                247.2                 46.6
  Deferred policy acquisition costs                                                                  1,836.5              1,768.6
  Goodwill and other acquired intangible assets                                                      9,177.3              9,143.5
  Other assets                                                                                         927.5              1,111.9
  Separate Accounts assets                                                                          46,717.0             44,936.0
----------------------------------------------------------------------------------------------------------------------------------
Total assets                                                                                      $106,144.7          $ 105,129.9
==================================================================================================================================
Liabilities:
  Future policy benefits                                                                          $ 18,571.9          $  18,541.1
  Unpaid claims                                                                                      4,008.4              3,953.9
  Unearned premiums                                                                                    227.8                428.9
  Policyholders' funds left with the Company                                                        17,239.9             17,632.5
----------------------------------------------------------------------------------------------------------------------------------
Total insurance liabilities                                                                         40,048.0             40,556.4
----------------------------------------------------------------------------------------------------------------------------------
  Dividends payable to shareholders                                                                     35.1                 35.2
  Short-term debt                                                                                    1,181.4              1,370.1
  Long-term debt                                                                                     2,219.5              2,214.5
  Payables under securities loan agreement                                                             696.1                753.6
  Current income taxes                                                                                 383.2                444.8
  Other liabilities                                                                                  3,135.7              3,007.0
  Minority and participating policyholders' interests                                                  160.3                148.4
  Separate Accounts liabilities                                                                     46,717.0             44,936.0
----------------------------------------------------------------------------------------------------------------------------------
Total liabilities                                                                                   94,576.3             93,466.0
----------------------------------------------------------------------------------------------------------------------------------
Aetna-obligated mandatorily redeemable preferred securities of subsidiary limited liability
  company holding primarily debentures guaranteed by Aetna                                             275.0                275.0
----------------------------------------------------------------------------------------------------------------------------------
Commitments and Contingent Liabilities (Notes 4 and 11)
Shareholders' Equity:
  Class C voting mandatorily convertible preferred stock ($.01 par value;
   15,000,000 shares authorized; 11,613,084 in 1999 and 11,614,816 in 1998 issued
   and outstanding)                                                                                    862.0                862.1
  Common stock ($.01 par value; 500,000,000 shares authorized; 140,983,921 in 1999 and
   141,272,628 in 1998 issued and outstanding)                                                       3,267.9              3,292.4
  Accumulated other comprehensive income (loss)                                                        (20.7)               177.8
  Retained earnings                                                                                  7,184.2              7,056.6
----------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity                                                                          11,293.4             11,388.9
----------------------------------------------------------------------------------------------------------------------------------
Total liabilities, redeemable preferred securities and shareholders' equity                       $106,144.7          $ 105,129.9
==================================================================================================================================
 </TABLE>


See Condensed Notes to Consolidated Financial Statements.



                                     Page 5


<PAGE>   6



ITEM 1.  FINANCIAL STATEMENTS.


                           AETNA INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY



<TABLE>
<CAPTION>


                                                                                           Accumulated Other
                                                                                      Comprehensive Income (Loss)
                                                    Class C Voting                   ------------------------------
(Millions, except share data)                          Mandatorily                      Unrealized
As Restated                                            Convertible          Common   Gains (Losses)     Foreign           Retained
Three Months Ended March 31, 1999           Total  Preferred Stock           Stock   on Securities     Currency           Earnings
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                <C>            <C>           <C>              <C>              <C>
Balances at December 31, 1998           $11,388.9           $862.1        $3,292.4         $ 387.2      $(209.4)          $7,056.6
Comprehensive loss:
  Net income                                169.6                                                                            169.6
  Other comprehensive loss, net of tax:
    Unrealized losses on securities
    ($(185.1) pretax) (1)                  (120.3)                                          (120.3)
    Foreign currency ($(120.3) pretax)      (78.2)                                                        (78.2)
                                        ---------
  Other comprehensive loss                 (198.5)
                                        ---------
Total comprehensive loss                    (28.9)
                                        =========
Common stock issued for benefit
  plans (204,875 shares)                     15.4                             15.4
Repurchase of common shares
  (495,000 shares)                          (40.0)                           (40.0)
Conversion of preferred securities (1,732
  preferred shares converted to 1,418
  common shares)                                -              (.1)             .1
Common stock dividends                      (28.2)                                                                           (28.2)
Preferred stock dividends                   (13.8)                                                                           (13.8)
----------------------------------------------------------------------------------------------------------------------------------
Balances at March 31, 1999              $11,293.4           $862.0        $3,267.9         $ 266.9      $(287.6)          $7,184.2
==================================================================================================================================
Three Months Ended March 31, 1998
----------------------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1997           $11,195.4           $865.4        $3,644.4         $ 504.1      $(197.0)          $6,378.5
Comprehensive income:
  Net income                                167.5                                                                            167.5
  Other comprehensive income, net of tax:
   Unrealized gains on securities
     ($100.5 pretax) (1)                     65.2                                             65.2
    Foreign currency ($5.3 pretax)            3.4                                                           3.4
                                        ---------
  Other comprehensive income                 68.6
                                        ---------
Total comprehensive income                  236.1
                                        =========
Common stock issued for benefit
  plans (141,530 shares)                      6.3                              6.3
Repurchase of common shares
  (461,700 shares)                          (36.9)                           (36.9)
Common stock dividends                      (28.9)                                                                           (28.9)
Preferred stock dividends                   (13.9)                                                                           (13.9)
----------------------------------------------------------------------------------------------------------------------------------
Balances at March 31, 1998              $11,358.1           $865.4        $3,613.8         $ 569.3      $(193.6)          $6,503.2
==================================================================================================================================
</TABLE>

(1)  Net of reclassification adjustments.

See Condensed Notes to Consolidated Financial Statements.



                                     Page 6


<PAGE>   7



ITEM 1.  FINANCIAL STATEMENTS.

                           AETNA INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                            As Restated
                                                                                                    Three Months Ended March 31,
                                                                                                    ----------------------------
(Millions)                                                                                                1999             1998
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                 <C>              <C>
Cash Flows from Operating Activities:
  Net income                                                                                         $   169.6        $   157.7
  Adjustments to reconcile net income to net cash used for operating activities:
    Depreciation and amortization (including investment discounts and premiums)                          108.6             87.2
    Net realized capital gains                                                                           (17.1)           (31.7)
    Changes in assets and liabilities:
       Increase in accrued investment income                                                             (65.2)           (21.3)
       Increase in premiums due and other receivables                                                    (15.8)          (151.5)
       Increase in deferred policy acquisition costs                                                     (83.0)           (70.2)
       Decrease in income taxes                                                                         (141.1)           (63.8)
       Net decrease in other assets and other liabilities                                                139.8             11.0
       Increase (Decrease) in insurance liabilities                                                      101.3            (84.2)
       Other, net                                                                                          4.6            (11.8)
--------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) operating activities                                                     201.7           (178.6)
--------------------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
  Proceeds from sales of:
    Debt securities available for sale                                                                 4,230.5          5,332.4
    Equity securities                                                                                     87.5            174.3
    Mortgage loans                                                                                        20.0             11.2
    Real estate                                                                                           29.4             80.0
    Other investments                                                                                    304.4             18.3
    Short-term investments                                                                             4,905.2          5,961.1
  Investment maturities and repayments of:
    Debt securities available for sale                                                                   688.8            965.0
    Mortgage loans                                                                                        51.6            285.8
  Cost of investments in:
    Debt securities available for sale                                                                (4,598.7)        (6,286.1)
    Equity securities                                                                                   (100.6)          (177.6)
    Mortgage loans                                                                                       (52.8)           (60.1)
    Real estate                                                                                          (63.6)           (18.3)
    Other investments                                                                                   (424.8)          (108.1)
    Short-term investments                                                                            (4,730.3)        (6,051.0)
    NYLCare health business                                                                              (48.8)                -
  (Increase) Decrease in property and equipment                                                          (14.8)             7.7
  Net decrease in Separate Accounts                                                                       44.6             27.0
  Other, net                                                                                             (53.0)            28.7
--------------------------------------------------------------------------------------------------------------------------------
Net cash provided by investing activities                                                                274.6            190.3
--------------------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
  Deposits and interest credited for investment contracts                                                751.6            450.8
  Withdrawals of investment contracts                                                                   (903.2)          (837.2)
  Repayment of long-term debt                                                                              (.1)          (141.2)
  Net increase in short-term debt                                                                       (189.1)           229.9
  Common stock issued under benefit plans                                                                 15.4              6.3
  Common stock acquired                                                                                  (40.0)           (36.9)
  Dividends paid to shareholders                                                                         (42.1)           (43.0)
  Other, net                                                                                             (11.0)                -
--------------------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities                                                                  (418.5)          (371.3)
--------------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents                                              (1.2)            (1.0)
--------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                                                      56.6           (360.6)
Cash and cash equivalents, beginning of period                                                         1,951.5          1,805.8
--------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period                                                             $ 2,008.1        $ 1,445.2
================================================================================================================================
Supplemental Cash Flow Information:
  Interest paid                                                                                      $    95.5        $    89.7
  Income taxes paid                                                                                      174.0            141.9
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>


See Condensed Notes to Consolidated Financial Statements.

                                     Page 7


<PAGE>   8



ITEM 1.  FINANCIAL STATEMENTS.


                           AETNA INC. AND SUBSIDIARIES
              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Restatement

The consolidated financial statements include Aetna Inc. and its majority-owned
subsidiaries (collectively, the "Company"), including Aetna Services, Inc.
("Aetna Services") and Aetna U.S. Healthcare Inc. ("Aetna 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 the
1998 financial information to conform to the 1999 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 Inc.'s
1998 Annual Report on Form 10-K/A. 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.

Subsequent to the issuance of the Company's first quarter 1999 financial
statements and the filing of its first quarter 1999 Form 10-Q with the
Securities and Exchange Commission (the "SEC"), and following discussions with
representatives of the SEC's Division of Corporate Finance and Office of the
Chief Accountant concerning its review of the Company's financial statements,
the Company concluded it would restate its first quarter 1999 financial
statements and related disclosures. (Refer to Note 2.)

New Accounting Standard

On January 1, 1999, the Company adopted Statement of Position ("SOP") 97-3,
Accounting by Insurance and Other Enterprises for Insurance-Related Assessments,
issued by the American Institute of Certified Public Accountants ("AICPA"). This
statement provides guidance for determining when an insurance or other
enterprise should recognize a liability for guaranty-fund and other
insurance-related assessments and guidance for measuring the liability. The
adoption of this standard did not have a material effect on the Company's
financial position or results of operations as the Company had previously
accounted for guaranty-fund and other insurance-related assessments in a manner
consistent with this statement.

Future Accounting Standards

In October 1998, the AICPA issued SOP 98-7, Deposit Accounting: Accounting for
Insurance and Reinsurance Contracts That Do Not Transfer Insurance Risk, which
provides guidance on how to account for all insurance and reinsurance contracts
that do not transfer insurance risk, except for long-duration life and health
insurance contracts. This statement is effective for the Company's financial
statements beginning January 1, 2000, with early adoption permitted. The Company
is currently evaluating the impact of the adoption of this standard and the
potential effect on its financial position and results of operations.

In June 1998, the Financial Accounting Standards Board issued Financial
Accounting Standard No. 133, Accounting for Derivative Instruments and Hedging
Activities. This standard requires companies to record all derivatives on the
balance sheet as either assets or liabilities and measure those instruments at
fair value. The manner in which companies are to record gains or losses
resulting from changes in the values of those derivatives depends on the use of
the derivative and whether it qualifies for hedge accounting. This standard is
effective for the Company's financial statements beginning January 1, 2000, with
early adoption permitted. The Company is currently evaluating the impact of the
adoption of this standard and the potential effect on its financial position and
results of operations.


                                     Page 8


<PAGE>   9


ITEM 1.  FINANCIAL STATEMENTS.

                           AETNA INC. AND SUBSIDIARIES
              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


(2)   RESTATEMENT

Subsequent to the issuance of the Company's first quarter 1999 financial
statements and the filing of its first quarter 1999 Form 10-Q with the
Securities and Exchange Commission (the "SEC"), and following discussions with
representatives of the SEC's Division of Corporate Finance and Office of the
Chief Accountant concerning its review of the Company's financial statements,
the Company concluded that it would restate its first quarter 1999 and 1998
financial statements and related disclosures to reflect, among other things, the
following changes:

-    Changes to the classification and timing of amounts earned by the Company
     following the 1997 sale of Human Affairs International, Incorporated
     ("HAI"). Contingent payments earned by the Company originally recorded as
     reductions of medical costs and as other income on a quarterly basis in
     1999 have instead been recorded as a realized capital gain during the third
     quarter of 1999. Contingent payments earned by the Company originally
     recorded as reductions of medical costs and as other income on a quarterly
     basis in 1998 have instead been recorded as a realized capital gain during
     the fourth quarter of 1998;

-    A liability relating to the extension period (2000-2003) of an unfavorable
     pharmacy contract originally recorded by the Company in connection with the
     July, 1998 acquisition of NYLCare has been reversed to reflect the
     elimination of this liability and reduction of goodwill;

-    The breakout of salaries and benefits expense originally included in other
     operating expenses for each period presented;

-    The reclassification of the Company's initial capital contributions to
     separate accounts and other excess funds not held to fund current separate
     account liabilities to other invested assets, originally recorded to
     separate account assets;

-    The reclassification of certain long-term debt (Puttable Reset Securities)
     to short-term debt; and

-    Expanded disclosures regarding the Company's discontinued products and
     goodwill amortization.

As a result of the foregoing and other factors, the Company's first quarter 1999
and 1998 financial statements have been restated from amounts previously
reported.



                                     Page 9


<PAGE>   10


ITEM 1.  FINANCIAL STATEMENTS.

                           AETNA INC. AND SUBSIDIARIES
              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

(2)   RESTATEMENT (CONTINUED)

Consolidated Statements of Income:

<TABLE>
<CAPTION>
                                                                                   For the three months ended March 31,
                                                                    --------------------------------------------------------------
                                                                                 1999                             1998
                                                                    ------------------------------    ----------------------------
                                                                              As   As Previously                As   As Previously
(Millions, except per common share data)                                Restated        Reported          Restated        Reported
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>          <C>                   <C>          <C>
Revenue:
   Premiums                                                             $4,381.4        $4,381.4          $3,238.6       $3,238.6
   Net investment income                                                   740.7           740.7             812.7          812.7
   Fees and other income                                                   548.2           556.9             541.8          550.5
   Net realized capital gains                                               17.1            17.1              31.7           31.7
----------------------------------------------------------------------------------------------------------------------------------
Total revenue                                                            5,687.4         5,696.1           4,624.8        4,633.5
----------------------------------------------------------------------------------------------------------------------------------
Benefits and Expenses:
   Current and future benefits                                           4,141.3         4,135.0           3,276.9        3,270.6
   Operating expenses:
     Salaries and related benefits                                         471.3               -             396.5              -
     Other                                                                 567.5         1,038.8             481.7          878.2
   Interest expense                                                         64.6            64.6              56.9           56.9
   Amortization of goodwill and other acquired intangible assets           107.7           107.7              96.2           96.2
   Amortization of deferred policy acquisition costs                        50.0            50.0              52.4           52.4
----------------------------------------------------------------------------------------------------------------------------------
Total benefits and expenses                                              5,402.4         5,396.1           4,360.6        4,354.3
----------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes                      285.0           300.0             264.2          279.2
Income taxes (benefits):
   Current                                                                 105.3           110.5             126.3          131.5
   Deferred                                                                 10.1            10.1             (19.8)         (19.8)
----------------------------------------------------------------------------------------------------------------------------------
Total income taxes                                                         115.4           120.6             106.5          111.7
----------------------------------------------------------------------------------------------------------------------------------
Net income                                                              $  169.6        $  179.4          $  157.7       $  167.5
==================================================================================================================================
Net income applicable to common ownership                               $  155.8        $  165.6          $  143.8       $  153.6
==================================================================================================================================
Results Per Common Share:
   Basic                                                                $   1.10        $   1.17          $    .99       $   1.05
   Diluted                                                                  1.09            1.16               .98           1.05
Dividends declared                                                           .20             .20               .20            .20
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

See Notes to Consolidated Financial Statements.



                                     Page 10



<PAGE>   11


ITEM 1.  FINANCIAL STATEMENTS.


                           AETNA INC. AND SUBSIDIARIES
              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


(6)   RESTATEMENT (CONTINUED)

Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                          As of March 31, 1999         As of December 31, 1998
                                                                       ----------------------------  --------------------------
                                                                               As   As Previously           As   As Previously
(Millions, except per common share data)                                 Restated        Reported     Restated        Reported
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>           <C>              <C>           <C>
Assets:
Investments:
 Debt securities available for sale, at fair value (amortized
   cost $30,258.6 and $30,730.1)                                       $ 31,117.9    $ 31,117.9      $ 32,180.8     $ 32,180.8
 Equity securities, at fair value (cost $778.8 and $762.6)                  813.7         813.7           800.5          800.5
 Short-term investments                                                     790.6         790.6           942.2          942.2
 Mortgage loans                                                           3,517.3       3,517.3         3,553.0        3,553.0
 Real estate                                                                317.2         317.2           270.3          270.3
 Policy loans                                                               471.7         471.7           458.7          458.7
 Other                                                                    1,335.1       1,315.9         1,300.3        1,264.5
------------------------------------------------------------------------------------------------------------------------------
Total investments                                                        38,363.5      38,344.3        39,505.8       39,470.0
------------------------------------------------------------------------------------------------------------------------------
 Cash and cash equivalents                                                2,008.1       2,008.1         1,951.5        1,951.5
 Short-term investments under securities loan agreement                     696.1         696.1           753.6          753.6
 Accrued investment income                                                  612.9         612.9           537.1          537.1
 Premiums due and other receivables                                       1,623.1       1,638.1         1,478.1        1,478.1
 Reinsurance recoverables                                                 3,935.5       3,935.5         3,897.2        3,897.2
 Deferred income taxes                                                      247.2         253.6            46.6           53.0
 Deferred policy acquisition costs                                        1,836.5       1,836.5         1,768.6        1,768.6
 Goodwill and other acquired intangible assets                            9,177.3       9,189.1         9,143.5        9,155.3
 Other assets                                                               927.5         927.5         1,111.9        1,111.9
 Separate Accounts assets                                                46,717.0      46,744.8        44,936.0       44,971.8
------------------------------------------------------------------------------------------------------------------------------
Total assets                                                           $106,144.7    $106,186.5      $105,129.9     $105,148.1
==============================================================================================================================
Liabilities:
 Future policy benefits                                                $ 18,571.9    $ 18,571.9      $ 18,541.1     $ 18,541.1
 Unpaid claims                                                            4,008.4       4,008.4         3,953.9        3,953.9
 Unearned premiums                                                          227.8         227.8           428.9          428.9
 Policyholders' funds left with the Company                              17,239.9      17,239.9        17,632.5       17,632.5
------------------------------------------------------------------------------------------------------------------------------
Total insurance liabilities                                              40,048.0      40,048.0        40,556.4       40,556.4
------------------------------------------------------------------------------------------------------------------------------
 Dividends payable to shareholders                                           35.1          35.1            35.2           35.2
 Short-term debt                                                          1,181.4         874.8         1,370.1        1,063.4
 Long-term debt                                                           2,219.5       2,526.1         2,214.5        2,521.2
 Payables under securities loan agreement                                   696.1         696.1           753.6          753.6
 Current income taxes                                                       383.2         388.4           444.8          444.8
 Other liabilities                                                        3,135.7       3,162.5         3,007.0        3,025.2
 Minority and participating policyholders' interests                        160.3         160.3           148.4          148.4
 Separate Accounts liabilities                                           46,717.0      46,717.0        44,936.0       44,936.0
------------------------------------------------------------------------------------------------------------------------------
Total liabilities                                                        94,576.3      94,608.3        93,466.0       93,484.2
------------------------------------------------------------------------------------------------------------------------------
Aetna-obligated mandatorily redeemable preferred securities of
 subsidiary limited liability company holding primarily
 debentures guaranteed by Aetna                                             275.0         275.0           275.0          275.0
------------------------------------------------------------------------------------------------------------------------------
Commitments and Contingent Liabilities (Notes 4 and 12)
Shareholders' Equity:
 Class C voting mandatorily convertible preferred stock ($.01 par
  value; 15,000,000 shares authorized; 11,613,084 in 1999 and
  11,614,816 in 1998 issued and outstanding)                                862.0         862.0           862.1          862.1
 Common stock ($.01 par value; 500,000,000 shares authorized;
  140,983,921 in 1999 and  141,272,628 in 1998 issued and outstanding)    3,267.9       3,267.9         3,292.4        3,292.4
 Accumulated other comprehensive income                                     (20.7)        (20.7)          177.8          177.8
 Retained earnings                                                        7,184.2       7,194.0         7,056.6        7,056.6
------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity                                               11,293.4      11,303.2        11,388.9       11,388.9
------------------------------------------------------------------------------------------------------------------------------
Total liabilities, redeemable preferred securities and
 shareholders' equity                                                  $106,144.7    $106,186.5      $105,129.9     $105,148.1
==============================================================================================================================
</TABLE>

See Notes to Consolidated Financial Statements.            Page 11



<PAGE>   12


ITEM 1.  FINANCIAL STATEMENTS.


                           AETNA INC. AND SUBSIDIARIES
              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


(3)   EARNINGS PER COMMON SHARE (AS RESTATED)

A reconciliation of the numerator and denominator of the basic and diluted
earnings per common share ("EPS") for the three months ended March 31 was as
follows:


<TABLE>
<CAPTION>
                                                                                 Income            Shares        Per Common
(Millions, except per common share data)                                    (Numerator)      (Denominator)     Share Amount
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>             <C>               <C>
1999
Net income                                                                      $169.6
Less:  preferred stock dividends                                                  13.8
                                                                                ------
Basic EPS
   Income applicable to common ownership                                        $155.8              141.4             $1.10
                                                                                ======                                =====
Effect of dilutive securities:
   Stock options and other (1)                                                                        1.2
                                                                                                   ------
Diluted EPS (2)
  Income applicable to common ownership and assumed conversions                 $155.8              142.6             $1.09
===========================================================================================================================
1998
Net income                                                                      $157.7
Less:  preferred stock dividends                                                  13.9
                                                                                ------
Basic EPS
   Income applicable to common ownership                                        $143.8              145.6             $ .99
                                                                                ======                               ======
Effect of dilutive securities:
   Stock options and other (1)                                                                        1.2
                                                                                                   ------
Diluted EPS (2)
  Income applicable to common ownership and assumed conversions                 $143.8              146.8             $ .98
===========================================================================================================================
</TABLE>

(1)   Options to purchase shares of common stock in 1999 and 1998 of 5.1 million
      and 1.6 million, respectively (with exercise prices ranging from $80.25 -
      $112.63), were not included in the calculation of diluted earnings per
      common share because the options' exercise price was greater than the
      average market price of common shares.

(2)   The issuable common stock related to Class C voting manditorily
      convertible preferred stock (10.9 million and 11.3 million weighted
      average shares in 1999 and 1998, respectively) was not included in the
      computation of diluted earnings per common share because to do so would be
      antidilutive.

(4)   ACQUISITIONS AND DISPOSITIONS

Aetna U.S. Healthcare

On December 9, 1998, the Company entered into definitive agreements with The
Prudential Insurance Company of America to acquire the Prudential health care
business ("PHC") for $1 billion. The acquisition is subject to approval by
federal antitrust and state regulators, and other customary closing conditions.
The Company received a second request for information from the Department of
Justice ("DOJ") in connection with the DOJ's federal antitrust review of the
transaction. The Company has complied with the second request, and continues to
hold discussions with the DOJ regarding issues they have raised in connection
with their review. The Company currently expects to complete the acquisition in
the second quarter of 1999.



                                     Page 12


<PAGE>   13


ITEM 1.  FINANCIAL STATEMENTS.

                           AETNA INC. AND SUBSIDIARIES
              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

(4)   ACQUISITIONS AND DISPOSITIONS (CONTINUED)

On July 15, 1998, the Company acquired New York Life Insurance Company's ("NYL")
NYLCare health business for a purchase price of $1.08 billion in cash, including
an adjustment as provided in the transaction agreements. The acquisition was
accounted for as a purchase. Originally, in addition to the cash purchase price,
payments totaling up to $300 million (up to $150 million in each of two years)
were potentially payable to the extent that predetermined earnings and
membership targets in future periods were achieved (the "Earnout"). On January
29, 1999, the Company and NYL agreed to resolve all purchase price adjustments
and obligations under the Earnout. Under this agreement, the Company paid NYL an
additional $50 million to resolve such matters. As a result, the total purchase
price is approximately $1.1 billion.

In addition to recording the assets and liabilities acquired at fair value, the
purchase price allocation included approximately $35 million pretax related to
an unfavorable contract with an affiliate of NYL for providing pharmaceutical
benefits services (the "pharmacy contract"). As a condition of closing the
transaction, the pharmacy contract was extended from January 1, 2000 through
December 31, 2003 (the "extension period"). The terms of the extension period
were believed to reflect an appropriate market price, however the terms of the
pharmacy contract prior to January 1, 2000 were determined to be unfavorable.
The purchase price allocation related to the pharmacy contract is being
amortized over the period from closing to December 31, 1999. For the three
months ended March 31, 1999, approximately $5 million pretax was amortized as a
reduction of pharmacy costs. Also, a $64 million liability related to the
expected costs associated with involuntarily terminating certain NYLCare
employees and exiting certain leased NYLCare facilities was established as part
of the purchase price allocation. These costs will be charged to this liability
as actions are taken and were not significant to the Company's combined revenues
or operating results.

The excess of the purchase price over the fair value of the net assets acquired
resulted in approximately $1.15 billion, net of related deferred taxes, being
allocated to goodwill and other acquired intangible assets, which is being
amortized over a 40-year period for goodwill and over a range of three to 20
years for other acquired intangible assets. The Company's consolidated results
of operations include the NYLCare health business from July 15, 1998.

Aetna Retirement Services

On October 1, 1998, the Company sold its domestic individual life insurance
business to Lincoln National Corporation ("Lincoln") for $1 billion in cash,
subject to adjustment as provided by the related agreements. The transaction was
generally in the form of an indemnity reinsurance arrangement, under which
Lincoln contractually assumed from the Company certain policyholder liabilities
and obligations, although the Company remains directly obligated to
policyholders. Assets related to and supporting the life policies were
transferred to Lincoln and the Company recorded a reinsurance receivable from
Lincoln. The transaction resulted in an after-tax gain on the sale of
approximately $152 million, of which $88 million was deferred and is being
recognized over approximately 15 years. Premiums ceded and reinsurance
recoveries made during 1999 totaled $135 million and $90 million, respectively.


                                     Page 13



<PAGE>   14


ITEM 1.  FINANCIAL STATEMENTS.


                           AETNA INC. AND SUBSIDIARIES
              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

(4)   ACQUISITIONS AND DISPOSITIONS (CONTINUED)

Aetna International

On April 18, 1999, Aetna International, Inc. entered into a definitive agreement
to sell its Canadian operations to John Hancock Canadian Holdings Limited, the
parent of The Maritime Life Assurance Company, for approximately $300 million in
cash. The sale is not expected to result in any material capital gain or loss.
The revenue and earnings of its Canadian operations are not material to the
Company. Completion of the sale, which is anticipated to occur in the fall of
1999, is subject to Canadian federal and other regulatory approvals and other
customary conditions. Proceeds from the sale are expected to be used for general
corporate purposes, including repayment of debt, internal growth, acquisitions
and share repurchases.

On February 16, 1999, the Company entered into a joint venture with Poland's
sixth-largest bank for a 40% ownership interest in a company that will sell
pension products throughout Poland following the reform and privatization of
Poland's pension sector, effective March 1, 1999.

On January 13, 1999, the Company acquired Asistencia Medica Social Argentina,
Argentina's largest health maintenance organization ("HMO"), for approximately
$100 million.

(5)   INVESTMENTS

Net investment income includes amounts allocable to experience-rated
contractholders of $256 million and $315 million for the three months ended
March 31, 1999 and 1998, respectively. Interest credited to contractholders is
included in current and future benefits.

Net realized capital gains allocable to experience-rated contractholders of $6
million and $8 million for the three months ended March 31, 1999 and 1998,
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 14


<PAGE>   15


ITEM 1.  FINANCIAL STATEMENTS.


                           AETNA INC. AND SUBSIDIARIES
              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


(5)   INVESTMENTS (CONTINUED)

The total recorded investment in mortgage loans that are considered to be
impaired (including problem loans, restructured loans and potential problem
loans) and related specific reserves are presented in the table below.


<TABLE>
<CAPTION>
                                                          March 31, 1999              December 31, 1998
                                                 -----------------------------    ---------------------------
                                                       Total                             Total
                                                    Recorded          Specific        Recorded      Specific
(Millions)                                        Investment          Reserves      Investment      Reserves
------------------------------------------------------------------------------------------------------------
<S>                                                <C>                   <C>          <C>              <C>
Supporting discontinued products                   $158.6                $22.2        $161.9           $22.9
Supporting experience-rated products                 92.6                 19.3          95.7            21.7
Supporting remaining products                        43.9                  2.2          43.6             3.2
------------------------------------------------------------------------------------------------------------
Total impaired loans                               $295.1(1)             $43.7        $301.2(1)        $47.8
============================================================================================================
</TABLE>

(1)   Includes impaired loans of $99.8 million and $96.0 million, respectively,
      for which no specific reserves are considered necessary.

The activity in the specific and general reserves for the three months ended
March 31, 1999 and 1998 is summarized below:


<TABLE>
<CAPTION>
                                                                       Supporting
                                                       Supporting     Experience-     Supporting
                                                     Discontinued           Rated      Remaining
(Millions)                                               Products        Products       Products       Total
------------------------------------------------------------------------------------------------------------
<S>                                                      <C>              <C>           <C>         <C>
Balance at December 31, 1998                               $29.5            $29.6          $7.8        $66.9
Credited to net realized capital loss                          -                -             -            -
Charged (credited) to other accounts                           -                -            .6           .6
Principal write-offs                                         (.6)            (2.4)         (1.4)        (4.4)
------------------------------------------------------------------------------------------------------------
Balance at March 31, 1999                                  $28.9            $27.2          $7.0        $63.1
============================================================================================================

Balance at December 31, 1997                               $68.7            $31.6         $14.2       $114.5
Credited to net realized capital loss                          -                -          (2.0)        (2.0)
Charged (credited) to other accounts                       (30.0)(1)         (2.0)(1)       4.8        (27.2)
Principal write-offs                                         (.4)               -          (1.1)        (1.5)
------------------------------------------------------------------------------------------------------------
Balance at March 31, 1998                                  $38.3            $29.6         $15.9      $  83.8
============================================================================================================
</TABLE>

(1)   Reflects adjustments to reserves related to assets supporting discontinued
      products and experience-rated products, which do not affect the Company's
      results of operations.

(2)   Total reserves at March 31, 1999 and 1998 include $43.7 million and $49.7
      million of specific reserves, respectively, and $19.4 million and $34.1
      million of general reserves, respectively.

Income earned (pretax) and cash received on the average recorded investment in
impaired loans was as follows:

<TABLE>
<CAPTION>
                                                      Three Months Ended                               Three Months Ended
                                                        March 31, 1999                                   March 31, 1998
                                         ------------------------------------------     -----------------------------------------
                                           Average                                        Average
                                          Impaired         Income              Cash      Impaired            Income          Cash
(Millions)                                  Loans          Earned          Received         Loans            Earned      Received
---------------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>              <C>               <C>        <C>                  <C>           <C>
Supporting discontinued products            $160.1           $2.7              $2.7       $186.7               $3.3          $3.5
Supporting experience-rated products          95.7            1.9               1.8        108.9                3.0           2.9
Supporting remaining products                 36.1             .8                .6         59.8                2.5           2.4
---------------------------------------------------------------------------------------------------------------------------------
Total                                       $291.9           $5.4              $5.1       $355.4               $8.8          $8.8
=================================================================================================================================
</TABLE>


(6)   SUPPLEMENTAL CASH FLOW INFORMATION

Significant noncash investing and financing activities included acquisition of
real estate through foreclosures of mortgage loans amounting to $8 million and
$4 million for the three months ended March 31, 1999 and 1998, respectively.


                                     Page 15


<PAGE>   16


ITEM 1.  FINANCIAL STATEMENTS.


                           AETNA INC. AND SUBSIDIARIES
              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


(7)   ADDITIONAL INFORMATION - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Changes in accumulated other comprehensive income (loss) related to changes in
unrealized gains (losses) on securities (excluding those related to
experience-rated contractholders and discontinued products) were as follows:


<TABLE>
<CAPTION>
                                                                                              Three Months Ended March 31,
                                                                                              ----------------------------
(Millions)                                                                                       1999              1998
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                                             <C>                 <C>
Unrealized holding gains (losses) arising during the period (1)                                 $ (95.5)            $127.4
Less:  reclassification adjustment for gains and other items included in net income (2)            24.8               62.2
--------------------------------------------------------------------------------------------------------------------------
Net unrealized gains (losses) on securities                                                     $(120.3)            $ 65.2
==========================================================================================================================
</TABLE>

(1)   Pretax unrealized holding gains (losses) arising during the period were
      $(146.9) million and $196.0 million for 1999 and 1998, respectively.

(2)   Pretax reclassification adjustments for gains and other items included in
      net income were $38.2 million and $95.5 million for 1999 and 1998,
      respectively.

(8)   DISCONTINUED PRODUCTS

The Company discontinued the sale of its fully guaranteed large case pension
products (single-premium annuities ("SPAs") and guaranteed investment contracts
("GICs")) in 1993. Under the Company's accounting for these discontinued
products, a reserve for anticipated future losses from these products was
established and the reserve is reviewed by management quarterly. As long as the
reserve continues to represent management's then best estimate of expected
future losses, results of operations of the discontinued products, including net
realized capital gains and losses, are credited/charged to the reserve and do
not affect the Company's results of operations. The Company's results of
operations would be adversely affected to the extent that future losses on the
products are greater than anticipated and positively affected to the extent that
future losses are less than anticipated. The current reserve reflects
management's best estimate of anticipated future losses.

The factors contributing to changes in the reserve for anticipated future losses
are: operating income or loss, realized capital gains or losses and mortality
gains or losses. Operating income or loss is equal to revenue less expenses.
Realized capital gains or losses reflect the excess (deficit) of sales price
over (below) the carrying value of assets sold. Mortality gains or losses
reflect the mortality and retirement experience related to SPAs. A mortality
gain (loss) occurs when an annuitant or a beneficiary dies sooner (later) than
expected. A retirement gain will occur on some contracts if an annuitant retires
later than expected (a loss if an annuitant retires earlier than expected).

At the time of discontinuance, a receivable from Large Case Pensions' continuing
products equivalent to the net present value of the anticipated cash flow
shortfalls was established for the discontinued products. Interest on the
receivable is accrued at the discount rate that was used to calculate the
reserve. The offsetting payable, on which interest is similarly accrued, is
reflected in continuing products. Interest on the payable generally offsets the
investment income on the assets available to fund the shortfall. At March 31,
1999, the receivable from continuing products, net of related deferred taxes
payable of $58 million on the accrued interest income, was $498 million. At
December 31, 1998, the receivable from continuing products, net of related
deferred taxes payable of $55 million on accrued interest income, was $493
million. These amounts were eliminated in consolidation.



                                     Page 16


<PAGE>   17


ITEM 1.  FINANCIAL STATEMENTS.


                           AETNA INC. AND SUBSIDIARIES
              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

(8)   DISCONTINUED PRODUCTS (CONTINUED)

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


<TABLE>
<CAPTION>
                                                                                   Charged (Credited)
                                                                                       to Reserve for
Three months ended March 31, 1999                                   Results             Future Losses                Net (1)
---------------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>                  <C>                         <C>
Net investment income                                               $122.1               $    -                      $122.1
Net realized capital gains                                            10.2                (10.2)                          -
Interest earned on receivable from continuing products                 8.4                    -                         8.4
Other income                                                          10.4                    -                        10.4
---------------------------------------------------------------------------------------------------------------------------
  Total revenue                                                      151.1                (10.2)                      140.9
---------------------------------------------------------------------------------------------------------------------------
Current and future benefits                                          130.2                  7.3                       137.5
Operating expenses                                                     3.4                    -                         3.4
---------------------------------------------------------------------------------------------------------------------------
  Total benefits and expenses                                        133.6                  7.3                       140.9
---------------------------------------------------------------------------------------------------------------------------
Results of discontinued products                                     $17.5               $(17.5)                     $    -
===========================================================================================================================

Three months ended March 31, 1998
---------------------------------------------------------------------------------------------------------------------------
Net investment income                                               $137.7               $    -                      $137.7
Net realized capital gains                                            65.1                (65.1)                          -
Interest earned on receivable from continuing products                 8.6                    -                         8.6
Other income                                                           5.9                    -                         5.9
---------------------------------------------------------------------------------------------------------------------------
  Total revenue                                                      217.3                (65.1)                      152.2
---------------------------------------------------------------------------------------------------------------------------
Current and future benefits                                          147.5                  1.6                       149.1
Operating expenses                                                     3.1                    -                         3.1
---------------------------------------------------------------------------------------------------------------------------
  Total benefits and expenses                                        150.6                  1.6                       152.2
---------------------------------------------------------------------------------------------------------------------------
Results of discontinued products                                     $66.7               $(66.7)                     $    -
===========================================================================================================================
</TABLE>

(1)   Amounts are reflected in the March 31, 1999 and 1998 Consolidated
      Statements of Income, except for interest earned on the receivable from
      continuing products which is eliminated in consolidation.

Assets and liabilities supporting discontinued products at March 31, 1999 and
December 31, 1998 were as follows (1):

<TABLE>
<CAPTION>
                                                                                 March 31,         December 31,
(Millions)                                                                           1999                 1998
--------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>                <C>
Debt securities available for sale                                               $5,550.8             $5,890.5
Mortgage loans                                                                      763.2                754.2
Real estate                                                                         103.4                104.2
Short-term and other investments                                                    331.3                350.7
--------------------------------------------------------------------------------------------------------------
Total investments                                                                 6,748.7              7,099.6
Short term investments under securities loan agreement                                  -                143.9
Current and deferred income taxes                                                   190.4                187.5
Receivable from continuing products (2)                                             556.4                548.0
--------------------------------------------------------------------------------------------------------------
Total assets                                                                     $7,495.5             $7,979.0
==============================================================================================================

Future policy benefits                                                           $4,636.3             $4,653.5
Policyholders' funds left with the Company                                        1,389.5              1,546.0
Reserve for anticipated future losses on discontinued products                    1,231.6              1,214.1
Payables under securities loan agreement                                                -                143.9
Other                                                                               238.1                421.5
--------------------------------------------------------------------------------------------------------------
Total liabilities                                                                $7,495.5             $7,979.0
==============================================================================================================
</TABLE>

(1)   Assets supporting the discontinued products are distinguished from other
      continuing operations assets.

(2)   The receivable from continuing products is eliminated in consolidation.


                                     Page 17


<PAGE>   18


ITEM 1.  FINANCIAL STATEMENTS.

                           AETNA INC. AND SUBSIDIARIES
              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


(8)   DISCONTINUED PRODUCTS (CONTINUED)

Net unrealized capital gains 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 is included in future policy
benefits on the Consolidated Balance Sheets.

The reserve for anticipated future losses on discontinued products represents
the present value (at the risk-free rate at the time of discontinuance,
consistent with the duration of the liabilities) of the difference between the
expected cash flows from the assets supporting discontinued products and the
cash flows expected to be required to meet the obligations of the outstanding
contracts. Calculation of the reserve for anticipated future losses requires
projection of both the amount and the timing of cash flows over approximately
the next 30 years, including consideration of, among other things, future
investment results, participant withdrawal and mortality rates and the cost of
asset management and customer service. There have been no significant changes to
the assumptions underlying the calculation of the reserve related to the
projection of the amount and timing of cash flows.

The projection of future investment results considers assumptions for interest
rates, bond discount rates and performance of mortgage loans and real estate.
Mortgage loan assumptions represent management's best estimate of current and
future levels of rent growth, vacancy and expenses based upon market conditions
at each reporting date. The performance of real estate assets has been
consistently estimated using the most recent forecasts available. During 1997, a
bond default assumption was included to reflect historical default experience,
since the bond portfolio increased as a percentage of the overall investment
portfolio and reflected more bond credit risk, concurrent with the decline in
the commercial mortgage loan and real estate portfolios.

The previous years' actual participant withdrawal experience is used for the
current year assumption. Prior to 1995, the Company used the 1983 Group
Annuitant Mortality table published by the Society of Actuaries (the "Society").
In 1995, the Society published the 1994 Uninsured Pensioner's mortality table
which has been used since then.

The Company's assumptions about the cost of asset management and customer
service reflect actual investment and general expenses allocated over invested
assets. Since inception, the expense assumption has increased as the level of
fixed expenses has not declined as rapidly as the liability run-off.

The activity in the reserve for anticipated future losses on discontinued
products for the three months ended March 31, 1999 was as follows (pretax):


<TABLE>
<CAPTION>
(Millions)
----------------------------------------------------------------------------------
<S>                                                                       <C>
Reserve at December 31, 1998                                              $1,214.1
Operating income                                                                .6
Net realized capital gains                                                    10.2
Mortality and other                                                            6.7
----------------------------------------------------------------------------------
Reserve at March 31, 1999                                                 $1,231.6
==================================================================================
</TABLE>




                                     Page 18



<PAGE>   19


ITEM 1.  FINANCIAL STATEMENTS.

                           AETNA INC. AND SUBSIDIARIES
              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


(9)   DEBT AND GUARANTEE OF DEBT SECURITIES

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 million 9.5% Subordinated Debentures due 2024
(the "Subordinated Debentures") issued to Aetna Capital L.L.C. ("ACLLC"), a
wholly owned subsidiary of Aetna Services (collectively the "Aetna Services
Debt"). ACLLC has issued $275 million of redeemable preferred stock, and the
Subordinated Debentures represent substantially all of the assets of ACLLC.

Aetna Services has a revolving credit facility in an aggregate amount of $1.5
billion with a worldwide group of banks that terminates in June 2001. 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 .2% per annum, depending upon its long-term
senior unsecured debt rating. The facility fee at March 31, 1999 is at an annual
rate of .08%. The facility also supports Aetna Services' commercial paper
borrowing program. As a guarantor of any amounts outstanding under the credit
facility, Aetna Inc. is required to maintain shareholders' equity, excluding net
unrealized capital gains and losses (accumulated other comprehensive income), of
at least $7.5 billion.

On April 1, 1999 Aetna Services entered into an additional revolving credit
facility in an aggregate amount of $500 million with a worldwide group of banks
that terminates on March 26, 2000. 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 .25% per annum, depending upon its long-term senior unsecured debt
rating. The facility also supports Aetna Services' commercial paper borrowing
program. As a guarantor of any amounts outstanding under this credit facility,
Aetna Inc. is required to maintain shareholders' equity, excluding net
unrealized capital gains and losses (accumulated other comprehensive income), of
at least $7.5 billion.

Consolidated financial statements of Aetna Services have not been presented
herein or in any separate reports filed with the Securities and Exchange
Commission 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 is as follows (in
millions):

Balance Sheets Information:


<TABLE>
<CAPTION>
                                                                                        As Restated
                                                                              -------------------------------
                                                                               March 31,           December 31,
                                                                                    1999                 1998
-------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>                   <C>
Total investments (excluding Separate Accounts)                                $36,622.8             $38,349.7
Total assets                                                                    94,480.0              93,190.9
Total insurance liabilities                                                     38,178.0              38,566.9
Total liabilities                                                               92,290.9              90,770.3
Total redeemable preferred stock                                                   275.0                 275.0
Total shareholder's equity                                                       1,905.5               2,145.6
-------------------------------------------------------------------------------------------------------------
</TABLE>


Statements of Income Information:


<TABLE>
<CAPTION>
                                                                                    Three Months Ended
                                                                                           March 31,
                                                                                ------------------------------
                                                                                    1999               1998
--------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>                   <C>
Total revenue                                                                   $2,653.2              $2,467.7
Total benefits and expenses                                                      2,465.2               2,230.3
Income before income taxes                                                         187.9                 237.3
Net income                                                                         128.5                 162.3
--------------------------------------------------------------------------------------------------------------
</TABLE>


                                     Page 19


<PAGE>   20


ITEM 1.  FINANCIAL STATEMENTS.


                           AETNA INC. AND SUBSIDIARIES
              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


(9)   DEBT AND GUARANTEE OF DEBT SECURITIES (CONTINUED)

The amount of dividends which may be paid to Aetna Services or Aetna U.S.
Healthcare by their domestic insurance and HMO subsidiaries at March 31, 1999
without prior approval by state regulatory authorities is limited to
approximately $516 million in the aggregate. There are no such restrictions on
distributions from Aetna Services or Aetna U.S. Healthcare to Aetna Inc. or on
distributions from Aetna Inc. to its shareholders.

(10)  SEGMENT INFORMATION

Summarized financial information for the Company's principal operations for the
three months ended March 31 was as follows:


<TABLE>
<CAPTION>
                                              As Restated        Aetna                                               As Restated
                                               Aetna U.S.   Retirement           Aetna   Large Case   Corporate            Total
(Millions)                                     Healthcare     Services   International     Pensions   and Other(1)       Company
--------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>           <C>          <C>             <C>          <C>            <C>
1999
Revenues from external customers                 $4,295.7       $155.3          $445.2       $ 33.1      $   .3         $4,929.6
Net investment income                               140.7        215.4            94.5        256.6         3.0            710.2
Equity in subsidiaries                                  -            -            30.5            -           -             30.5
--------------------------------------------------------------------------------------------------------------------------------
Total revenue excluding realized capital
 gains (losses)                                  $4,436.4       $370.7          $570.2       $289.7      $  3.3         $5,670.3
================================================================================================================================

Operating earnings (2)                           $  123.7       $ 53.0          $ 45.6       $ 22.5      $(59.5)        $  185.3
Other item (3)                                      (17.5)        (5.7)           (2.6)         (.2)        (.9)           (26.9)
Realized capital gains (losses), net of tax           4.7          1.9            (1.4)         6.0           -             11.2
--------------------------------------------------------------------------------------------------------------------------------
Net income                                       $  110.9       $ 49.2          $ 41.6       $ 28.3      $(60.4)        $  169.6
================================================================================================================================

1998
Revenues from external customers                 $3,181.3       $203.0          $351.2       $ 44.6      $   .3         $3,780.4
Net investment income                               121.7        267.6            90.2        303.7         1.4            784.6
Equity in subsidiaries                                  -            -            28.1            -           -             28.1
--------------------------------------------------------------------------------------------------------------------------------
Total revenue excluding realized capital
 gains (losses)                                  $3,303.0       $470.6          $469.5       $348.3      $  1.7         $4,593.1
================================================================================================================================

Operating earnings (losses) (2)                  $   90.7       $ 63.8          $ 37.5       $ 22.6      $(61.5)        $  153.1
Other item (3)                                       (8.8)        (4.1)           (1.7)         (.1)       (1.6)           (16.3)
Realized capital gains (losses), net of tax           7.1         (1.4)           (7.8)        24.7        (1.7)            20.9
--------------------------------------------------------------------------------------------------------------------------------
Net income (loss)                                $   89.0       $ 58.3          $ 28.0       $ 47.2      $(64.8)        $  157.7
================================================================================================================================
</TABLE>


(1)   Corporate and Other includes interest, staff area expenses, advertising,
      contributions, net investment income and other general expenses, as well
      as consolidating adjustments.

(2)   Operating earnings are comprised of net income (loss) excluding net
      realized capital gains and losses and other item. While operating earnings
      is the measure of profit or loss used by the Company's management when
      assessing performance or making operating decisions, it does not replace
      operating income or net income as a measure of profitability.

(3)   Other item includes Year 2000 costs for all segments.



                                     Page 20


<PAGE>   21


ITEM 1.  FINANCIAL STATEMENTS.


                           AETNA INC. AND SUBSIDIARIES
              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


(11)  COMMITMENTS AND CONTINGENT LIABILITIES

Commitments

In connection with the sale of its property-casualty operations in 1996, the
Company vacated, and the purchaser subleased, at market rates for a period of
eight years, the space that the Company occupied in the CityPlace office
facility in Hartford. In 1996, the Company recorded a charge of $292 million
pretax ($190 million after tax) which represented 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. Lease payments will be
charged to this reserve as they are made over the remaining lease term. At March
31, 1999 and December 31, 1998, the balance in this facilities reserve was $283
million and $288 million, respectively.

Litigation

Purported Class Action Complaints were filed in the United States District Court
for the Eastern District of Pennsylvania on November 5, 1997 by Eileen
Herskowitz and Michael Wolin, and on December 4, 1997 by Pamela Goodman and
Michael J. Oring. Other purported Class Action Complaints were filed in the
United States District Court for the District of Connecticut on November 25,
1997 by Evelyn Silvert, on November 26, 1997 by the Rainbow Fund, Inc., and on
December 24, 1997 by Terry B. Cohen. The Connecticut actions were transferred to
the United States District Court for the Eastern District of Pennsylvania (the
"Court") for consolidated pretrial proceedings with the cases pending there. The
plaintiffs filed a Consolidated and Amended Complaint (the "Complaint") seeking,
among other remedies, unspecified damages resulting from defendants' alleged
violations of federal securities laws. The Complaint alleged that the Company
and three of its current or former officers or directors, Ronald E. Compton,
Richard L. Huber, and Leonard Abramson, are liable for certain
misrepresentations and omissions regarding, among other matters, the integration
of the merger with U.S. Healthcare and the Company's medical claim reserves. The
Company and the individual defendants filed a motion to dismiss the Complaint on
July 31, 1998. On February 2, 1999, the Court dismissed the Complaint, but
granted the plaintiffs leave to file a second amended complaint. On February 22,
1999, the plaintiffs filed a second amended complaint against the Company,
Ronald E. Compton and Richard L. Huber. The Company and the remaining individual
defendants filed a motion to dismiss the second amended complaint, and the Court
denied that motion in March, 1999. Defendants are pursuing an interlocutory
appeal of that denial. Trial currently is scheduled to begin in December, 1999.
The Company is defending the actions vigorously.

The Company is also involved in numerous other lawsuits arising, for the most
part, in the ordinary course of its business operations, including bad faith,
medical malpractice, marketing and other litigation in its health business. Some
of these other lawsuits are purported to be class actions. Aetna U.S. Healthcare
of California Inc., an indirect subsidiary of the Company, is currently a party
to a bad faith and medical malpractice action brought by Teresa Goodrich,
individually and as successor in interest of David Goodrich. The action was
originally filed in March, 1996 in Superior Court for the state of California,
county of San Bernardino. The action alleges damages for unpaid medical bills,
punitive damages and compensatory damages for wrongful death based upon, among
other things, alleged denial of claims for services provided to David Goodrich
by out of network providers without prior authorization. On January 20, 1999 a
jury rendered a verdict in favor of the plaintiff for $750,000 for unpaid
medical bills, $3.7 million for wrongful death and $116 million for punitive
damages. On April 12, 1999 the trial court amended the judgment to include Aetna
Services, Inc., a direct subsidiary of the Company, as a defendant. On April 27,
1999 Aetna Services, Inc. and Aetna U.S. Healthcare of California Inc. filed
appeals with the California Court of Appeal and will continue to defend this
matter vigorously. While the ultimate outcome of these other lawsuits cannot be
determined at this time, after consideration of the defenses available to the
Company and any related reserves established, they are not expected to result in
liability for amounts material to the financial condition of the Company,
although they may adversely affect results of operations in future periods.



                                     Page 21


<PAGE>   22



                       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 March 31, 1999, and the related condensed
consolidated statements of income, shareholders' equity and cash flows for the
three-month periods ended March 31, 1999 and 1998. 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 Inc. and Subsidiaries as of
December 31, 1998, 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 3, 1999, 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, 1998, is fairly presented, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.

As discussed in Note 2, the accompanying condensed consolidated financial
statements have been restated.


                                                  /s/ KPMG LLP


Hartford, Connecticut
April 27, 1999, except to
Note 2, which is as of February 7, 2000



                                     Page 22


<PAGE>   23



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

The following discussion and analysis presents a review of Aetna Inc. and its
subsidiaries (collectively, the "Company") for the three months ended March 31,
1999 and 1998. This review should be read in conjunction with the consolidated
financial statements and other data presented herein as well as the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained in Aetna Inc.'s 1998 Annual Report on Form 10-K/A.

RESTATEMENT

Following a review by the staff of the Securities and Exchange Commission, the
Company concluded that it would restate its 1999 Form 10-Qs (the "Restatement").
For additional information concerning the Restatement refer to "Significant
Financial and Accounting Developments" contained elsewhere in this Form 10-Q/A.

OVERVIEW

General

The Company's current operations include three core businesses - Aetna U.S.
Healthcare, Aetna Retirement Services and Aetna International. Aetna U.S.
Healthcare provides a full spectrum of managed care, indemnity, and group life
and disability insurance products. Aetna Retirement Services offers a range of
financial services products including annuity contracts, investment advisory
services, financial planning and pension plan administration services. Aetna
International, through subsidiaries and joint venture operations, sells
primarily life insurance, health insurance and financial services products in
markets outside the United States. The Company also has a Large Case Pensions
business that manages a variety of retirement products for defined benefit and
defined contribution plans.

Consolidated Results

The Company reported net income of $170 million for the three months ended March
31, 1999 compared to $158 million for the same period in 1998. Net income per
diluted common share for the three months ended March 31, 1999 was $1.09,
compared with $.98 a year ago.

Net income reflects Year 2000 costs of $27 million for the first three months of
1999 and $16 million for the first three months of 1998. Results also included
net realized capital gains of $11 million for the three months ended March 31,
1999 and $21 million for the three months ended March 31, 1998. Excluding these
items, earnings were $185 million for the three months ended March 31, 1999
compared to $153 million for the same period in 1998.

Acquisitions and Dispositions

Aetna U.S. Healthcare

On December 9, 1998, the Company entered into definitive agreements with The
Prudential Insurance Company of America to acquire the Prudential health care
business ("PHC") for $1 billion. The acquisition is subject to approval by
federal antitrust and state regulators, and other customary closing conditions.
The Company received a second request for information from the Department of
Justice ("DOJ") in connection with the DOJ's federal antitrust review of the
transaction. The Company has complied with the second request, and continues to
hold discussions with the DOJ and state regulators regarding issues they have
raised in connection with their review. The Company currently expects to
complete the acquisition in the second quarter of 1999.



                                     Page 23


<PAGE>   24


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

OVERVIEW (CONTINUED)

The Company expects to finance the transaction by issuing $500 million of
three-year senior notes to the seller and by using cash the Company expects to
receive as a result of issuing additional debt securities prior to the closing.
The Company currently expects ultimately to finance the acquisition by the
issuance of medium- or long-term fixed income securities.

After the closing, the Company's results will be affected by, among other
things, the operating results of PHC, the costs of financing the transaction and
the amortization of intangible assets (primarily goodwill) expected to be
created as a result of the transaction. Refer to "Aetna U.S. Healthcare" and
"Liquidity and Capital Resources" for further discussion.

In July 1998, the Company acquired New York Life Insurance Company's ("NYL")
NYLCare health business ("NYLCare"). The total purchase price was approximately
$1.1 billion. Since the closing, the Company's results have been affected by,
among other things, the operating results of NYLCare, the costs of financing the
transaction and the amortization of intangible assets (primarily goodwill)
created by the transaction. The operations of NYLCare are reflected in the Aetna
U.S. Healthcare segment while the financing costs are reflected in the Corporate
segment. Refer to "Aetna U.S. Healthcare" and "Corporate," as well as Note 4 of
Condensed Notes to Consolidated Financial Statements, for further discussion.

Aetna Retirement Services

In October 1998, the Company sold its domestic individual life insurance
business to Lincoln National Corporation for approximately $1 billion. The
principal agreement to sell this business was generally in the form of an
indemnity reinsurance arrangement. For more details about the transaction and
the indemnity reinsurance arrangement, refer to "Aetna Retirement Services" and
Note 4 of Condensed Notes to Consolidated Financial Statements.

Aetna International

On April 18, 1999, Aetna International, Inc. entered into a definitive agreement
to sell its Canadian operations to John Hancock Canadian Holdings Limited, the
parent of The Maritime Life Assurance Company, for approximately $300 million in
cash. The sale is not expected to result in any material capital gain or loss.
The revenue and earnings of Aetna International's Canadian operations are not
material to the Company. Completion of the sale, which is anticipated to occur
in the fall of 1999, is subject to Canadian federal and other regulatory
approvals and other customary conditions. Proceeds from the sale are expected to
be used for general corporate purposes, including repayment of debt, internal
growth, acquisitions and share repurchases.



                                     Page 24


<PAGE>   25


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

AETNA U.S. HEALTHCARE

Operating Summary


<TABLE>
<CAPTION>
                                                                                             As Restated
                                                                                    Three Months Ended March 31,
                                                                           -----------------------------------------------
(Millions)                                                                     1999 (1)             1998          % Change
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                  <C>               <C>
Premiums                                                                   $3,912.6             $2,839.0              37.8%
Net investment income                                                         140.7                121.7              15.6
Fees and other income                                                         383.1                342.3              11.9
Net realized capital gains                                                      7.4                 11.0             (32.7)
--------------------------------------------------------------------------------------------------------------------------
Total revenue                                                               4,443.8              3,314.0              34.1
--------------------------------------------------------------------------------------------------------------------------
Current and future benefits                                                 3,364.6              2,442.9              37.7
Operating expenses                                                            770.9                610.7              26.2
Amortization of goodwill and other acquired intangible assets                 101.9                 90.7              12.3
--------------------------------------------------------------------------------------------------------------------------
Total benefits and expenses                                                 4,237.4              3,144.3              34.8
--------------------------------------------------------------------------------------------------------------------------
Income before income taxes                                                    206.4                169.7              21.6
Income taxes                                                                   95.5                 80.7              18.3
--------------------------------------------------------------------------------------------------------------------------
Net income                                                                 $  110.9             $   89.0              24.6%
==========================================================================================================================
Net realized capital gains, net of tax (included above)                    $    4.7             $    7.1             (33.8)%
==========================================================================================================================
</TABLE>


(1)   Results include the acquired NYLCare health business.

Aetna U.S. Healthcare's net income for the three months ended March 31, 1999
increased $22 million compared to the same period for 1998. Net income includes
Year 2000 costs of $18 million for the three months ended March 31, 1999 and $9
million for the three months ended March 31, 1998. Excluding Year 2000 costs and
net realized capital gains, results for the three months ended March 31, 1999
increased $33 million, or 36%, compared to the same period in 1998. The 1999
results reflect the inclusion of NYLCare.

Business Results

In order to provide a comparison that management believes better reflects the
underlying performance of Aetna U.S. Healthcare, the operating earnings
discussion that follows excludes amortization of goodwill and other acquired
intangible assets (including the goodwill associated with the U.S. Healthcare
and NYLCare acquisitions), Year 2000 costs and net realized capital gains in
both periods.


<TABLE>
<CAPTION>
                                                                               As Restated
                                                                      Three Months Ended March 31,
                                                                  ------------------------------------
(Millions)                                                               1999 (1)                1998
------------------------------------------------------------------------------------------------------
<S>                                                                <C>                      <C>
Operating earnings:
  Health Risk                                                         $ 126.1                 $  83.9
  Group Insurance and Other Health                                       80.1                    81.6
------------------------------------------------------------------------------------------------------
Total Aetna U.S. Healthcare                                           $ 206.2                 $ 165.5
======================================================================================================

Commercial HMO Premium PMPM                                           $138.70                 $135.07
------------------------------------------------------------------------------------------------------
Commercial HMO Medical Cost PMPM                                      $114.13                 $112.24
------------------------------------------------------------------------------------------------------
Commercial HMO Medical Loss Ratio                                        82.3%                   83.1%
------------------------------------------------------------------------------------------------------

Medicare HMO Premium PMPM                                             $485.32                 $469.10
------------------------------------------------------------------------------------------------------
Medicare HMO Medical Cost PMPM                                        $437.26                 $435.13
------------------------------------------------------------------------------------------------------
Medicare HMO Medical Loss Ratio                                          90.1%                   92.8%
------------------------------------------------------------------------------------------------------
</TABLE>

(1)   Operating results include the acquired NYLCare health business.


                                     Page 25


<PAGE>   26


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

AETNA U.S. HEALTHCARE (CONTINUED)

Health Risk

Health Risk (which includes all health products for which Aetna U.S. Healthcare
assumes all or a majority of health care cost and utilization risk) earnings
increased $42 million for the three months ended March 31, 1999 compared to the
corresponding period of 1998. This increase reflects favorable Commercial and
Medicare HMO results due to membership growth, premium rate increases, the
benefit of medical cost initiatives, the impact of exiting several Medicare
markets as of January 1, 1999 and the acquisition of NYLCare. These increases
were partially offset by increased operating expenses. Indemnity and preferred
provider organization ("PPO") results for the three months ended March 31, 1999
declined slightly compared to the corresponding period of 1998.

For the Health Risk business, medical claims payable reflect estimates of the
ultimate cost of claims that have been incurred but not yet reported or paid.
Medical claims payable are based on a number of factors including those derived
from historical claim experience. Medical claims payable are estimated
periodically, and any resulting adjustments are reflected in current period
results in current and future benefits.

Commercial HMO

Commercial HMO premium per member per month ("PMPM") increased 3% for the three
months ended March 31, 1999 compared to the corresponding period of 1998. This
increase was primarily due to premium rate increases, offset in part by
customers selecting lower premium plans, a shift in the geographic mix of
membership growth as well as the addition of NYLCare members. Commercial HMO
medical cost PMPM increased by 2% for the three months ended March 31, 1999
compared to the corresponding period of 1998. The 1999 increase was primarily
due to medical and pharmacy cost inflation as well as the addition of NYLCare
members. These increases were partially offset by medical cost initiatives. The
Commercial HMO medical loss ratio improved .8% for the three months ended March
31, 1999 compared to the corresponding period of 1998 reflecting the benefit of
rate increases and medical cost initiatives, partially offset by the addition of
NYLCare members.

Medicare HMO

Medicare HMO premiums PMPM increased 3% for the three months ended March 31,
1999 compared to the corresponding period of 1998 due to Health Care Financing
Administration rate increases and increases in supplemental premiums, partially
offset by a shift in the geographic mix of membership growth. Medicare HMO
medical costs PMPM increased by .5% for the three months ended March 31, 1999
compared to the corresponding period of 1998. The higher medical costs in 1999
were primarily due to medical cost inflation, partially offset by the favorable
impact of exiting several markets as of January 1, 1999. The Medicare HMO
medical loss ratio improved 2.7% for the three months ended March 31, 1999
compared to the corresponding period of 1998 primarily due to the favorable
impact of exiting several markets.

Group Insurance and Other Health

Group Insurance and Other Health includes group life and disability insurance
and long-term care insurance, offered on both an insured and employer-funded
basis, and all health products offered on an employer-funded basis. Group
Insurance and Other Health results for the three months ended March 31, 1999
decreased $2 million compared to the corresponding period of 1998. This reflects
less favorable developments in claim benefit reserve estimates for life and
disability products offset by higher investment income and improved Group Life
and Disability results.



                                     Page 26


<PAGE>   27


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

AETNA U.S. HEALTHCARE (CONTINUED)

Membership

Aetna U.S. Healthcare's membership was as follows:


<TABLE>
<CAPTION>
                                            March 31, 1999 (1)                              March 31, 1998
                               ------------------------------------------     -------------------------------------------
(Thousands)                           Risk         Nonrisk          Total            Risk        Nonrisk            Total
-------------------------------------------------------------------------------------------------------------------------
<S>                                <C>            <C>             <C>             <C>           <C>                <C>
HMO
   Commercial (2)                    5,344             705          6,049           3,851            523            4,374
   Medicare                            546               -            546             399             16              415
   Medicaid                            140              25            165              94              -               94
-------------------------------------------------------------------------------------------------------------------------
       Total HMO                     6,030             730          6,760           4,344            539            4,883
POS                                    225           2,455          2,680             274          2,527            2,801
PPO                                    945           2,942          3,887             598          2,867            3,465
Indemnity                              167           2,071          2,238             269          2,237            2,506
-------------------------------------------------------------------------------------------------------------------------
  Total Health Membership            7,367           8,198         15,565           5,485          8,170           13,655
=========================================================================================================================
Group Insurance:
   Group Life                                                       9,740                                           9,554
   Disability                                                       2,630                                           2,699
   Long-Term Care                                                      92                                              99
-------------------------------------------------------------------------------------------------------------------------
</TABLE>


(1)   Health membership for NYLCare at the date of acquisition (July 15, 1998)
      in thousands was 2,117 members, including 1,186 Commercial HMO risk, 111
      Medicare HMO risk, 56 Medicaid HMO risk, 135 HMO nonrisk, 452 PPO risk and
      177 PPO nonrisk. Group Insurance NYLCare membership at the date of
      acquisition was 791 thousand members.

(2)   Includes 1,455 thousand POS members who access primary care physicians and
      referred care through an HMO network at March 31, 1999 and 976 thousand at
      March 31, 1998.

Total Health membership as of March 31, 1999 increased by 1.9 million members,
or 14%, when compared to March 31, 1998 primarily due to the acquisition of
NYLCare. Excluding the impact of the NYLCare members at the date of acquisition,
HMO membership increases were more than offset by declines in point-of-service
("POS"), PPO and Indemnity enrollment.

Total Revenue and Expense

Revenue for Aetna U.S. Healthcare, excluding net realized capital gains,
increased by $1.1 billion, or 34%, for the three months ended March 31, 1999
when compared to the same period in 1998. This growth was primarily due to the
acquisition of NYLCare as well as to premium rate increases and Commercial HMO
membership growth.

Operating expenses for Aetna U.S. Healthcare, increased by $160 million, or 26%,
for the three months ended March 31, 1999 when compared to the same period in
1998. The increase in 1999 reflects the acquisition of NYLCare as well as costs
to support HMO membership increases. However, operating expenses as a percentage
of revenue decreased to 17% for the three months ended March 31, 1999 from 18%
for the corresponding period of 1998.

Acquisition of the NYLCare Health Business

On July 15, 1998, the Company acquired NYLCare for a purchase price of $1.08
billion in cash, subject to adjustment as provided in the transaction
agreements. Originally, in addition to the cash purchase price, payments
totaling up to $300 million (up to $150 million in each of two years) were
potentially payable to the extent that predetermined earnings and membership
targets in future periods were achieved (the "Earnout").

On January 29, 1999, the Company and NYL agreed to resolve all purchase price
adjustments and obligations under the Earnout. Under this agreement, the Company
paid NYL an additional $50 million to resolve such matters. As a result, the
total purchase price is approximately $1.1 billion.


                                     Page 27


<PAGE>   28


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

AETNA U.S. HEALTHCARE (CONTINUED)

Agreement to Acquire Prudential Health Care Business

On December 9, 1998, the Company entered into an agreement to acquire PHC.
Included in the acquisition are PHC's HMO, POS, PPO and Indemnity health lines,
as well as its dental business. At December 31, 1998, PHC had approximately 6.2
million health members and 8 million dental members. Refer to "Overview" for a
further discussion of the pending purchase.

AETNA RETIREMENT SERVICES

Operating Summary


<TABLE>
<CAPTION>
                                                                         Three Months Ended March 31,
                                                                 ---------------------------------------------
(Millions)                                                                1999           1998 (1)     % Change
--------------------------------------------------------------------------------------------------------------
<S>                                                               <C>              <C>              <C>
Premiums (2)                                                        $    23.6       $    40.3            (41.4)%
Net investment income                                                   215.4           267.6            (19.5)
Fees and other income                                                   131.7           162.7            (19.1)
Net realized capital gains (losses)                                       2.9            (2.2)               -
--------------------------------------------------------------------------------------------------------------
        Total revenue                                                   373.6           468.4            (20.2)
--------------------------------------------------------------------------------------------------------------
Current and future benefits (2)                                         183.0           250.3            (26.9)
Operating expenses                                                       92.5           101.7             (9.0)
Amortization of deferred policy acquisition costs                        24.9            34.0            (26.8)
--------------------------------------------------------------------------------------------------------------
        Total benefits and expenses                                     300.4           386.0            (22.2)
--------------------------------------------------------------------------------------------------------------
Income before income taxes                                               73.2            82.4            (11.2)
Income taxes                                                             24.0            24.1              (.4)
--------------------------------------------------------------------------------------------------------------
Net income                                                          $    49.2       $    58.3            (15.6)%
==============================================================================================================
Net realized capital gains (losses), net of tax (included above)    $     1.9       $    (1.4)               -%
==============================================================================================================
Deposits not included in premiums above:
    Annuities -- fixed options                                      $   545.2       $   333.1             63.7%
    Annuities -- variable options                                     1,484.1           907.1             63.6
    Individual life insurance                                               -           131.1           (100.0)
--------------------------------------------------------------------------------------------------------------
        Total                                                       $ 2,029.3       $ 1,371.3             48.0%
==============================================================================================================
Assets under management: (3)
    Annuities -- fixed options                                      $12,305.8       $12,069.9              2.0%
    Annuities -- variable options (4)                                27,238.7        22,852.1             19.2
    Other investment advisory                                        15,615.9        10,784.8             44.8
--------------------------------------------------------------------------------------------------------------
       Financial services                                            55,160.4        45,706.8             20.7
       Individual life insurance                                            -         2,769.3           (100.0)
--------------------------------------------------------------------------------------------------------------
        Total assets under management                                55,160.4        48,476.1             13.8
--------------------------------------------------------------------------------------------------------------
Assets under administration (5)                                       4,000.9         3,405.6             17.5
--------------------------------------------------------------------------------------------------------------
Total assets under management and administration                    $59,161.3       $51,881.7             14.0%
==============================================================================================================
</TABLE>

(1)   Operating results reflect the operations of the individual life business
      which was sold October 1, 1998.

(2)   Includes $17.7 million for the three months ended March 31, 1999 and
      $14.3 million for the three months ended March 31, 1998 for annuity
      premiums on contracts converting from the accumulation phase to payout
      options with life contingencies.

(3)   Excludes net unrealized capital gains of approximately $305.7 million at
      March 31, 1999 and $565.3 million at March 31, 1998.

(4)   Includes $8,404.7 million at March 31, 1999 and $6,029.3 million at March
      31, 1998 of assets held and managed by unaffiliated mutual funds.

(5)   Represents assets for which ARS only provides administrative services.

Aetna Retirement Services' ("ARS") net income for the three months ended March
31, 1999 decreased $9 million compared to the same period in 1998. Net income
includes Year 2000 costs of $6 million for the three months ended March 31, 1999
and $4 million for the three months ended March 31, 1998. The 1998 net income
included $23 million related to the individual life insurance business.
Excluding Year 2000 costs and net realized capital gains or losses, as well as
the 1998 individual life earnings, earnings results for the three months ended
March 31, 1999 increased $12 million, or 30%, compared to the first quarter of
1998.



                                     Page 28



<PAGE>   29



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

AETNA RETIREMENT SERVICES (CONTINUED)

ARS' earnings, excluding Year 2000 costs and net realized capital gains or
losses, were as follows:


<TABLE>
<CAPTION>
                                                  Three Months Ended March 31,
                                              -----------------------------------
(Millions)                                            1999                   1998
---------------------------------------------------------------------------------
<S>                                                  <C>                    <C>
Financial services                                   $53.0                  $40.8
Individual life insurance (1)                            -                   23.0
---------------------------------------------------------------------------------
    Total                                            $53.0                  $63.8
=================================================================================
</TABLE>


(1)   The individual life business was sold on October 1, 1998.

The increase in earnings for financial services products primarily reflect
increased fee income from increased assets under management. Assets under
management increased by 21% primarily due to appreciation in the stock market as
well as additional net deposits (deposits less surrenders), including deposits
from one large case. Partially offsetting the increases in fee income were
increased operating expenses. However, operating expenses as a percentage of
assets under management declined in both periods.

Of the $12.3 billion and $12.1 billion of fixed annuity assets under management
at March 31, 1999 and 1998, respectively, 25% were fully guaranteed and 75% were
experience-rated in each period. The average annualized earned rates on
investments supporting fully guaranteed investment contracts were 7.4% and 7.5%
and the average annualized earned rates on investments supporting
experience-rated investment contracts were 7.6% and 8.0% for the three months
ended March 31, 1999 and 1998, respectively. The average annualized credited
rates on fully guaranteed investment contracts were 6.3% and 6.5% and the
average annualized credited rates on experience-rated investment contracts were
5.6% and 5.9% for the three months ended March 31, 1999 and 1998, respectively.
The resulting annualized interest margins on fully guaranteed investment
contracts were 1.1% and 1.0% and on experience-rated investment contracts were
2.0% and 2.1% for the three months ended March 31, 1999 and 1998, respectively.

Sale of Individual Life Insurance Business

On October 1, 1998, the Company sold its domestic individual life insurance
business to Lincoln National Corporation ("Lincoln") for $1 billion in cash. The
sale resulted in an after-tax gain of approximately $152 million. Since the
principal agreement to sell this business was generally in the form of an
indemnity reinsurance arrangement, the Company deferred approximately $88
million of the gain and is recognizing it over approximately 15 years.
Approximately $2 million of the gain was recognized during the first three
months of 1999. Revenues from the business sold were $135 million for the three
months ended March 31, 1998. For more details about the transaction and the
indemnity reinsurance arrangement, refer to Note 4 of Condensed Notes to
Consolidated Financial Statements.



                                     Page 29





<PAGE>   30
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

AETNA INTERNATIONAL

Operating Summary


<TABLE>
<CAPTION>
                                                                             Three Months Ended March 31,
                                                                   --------------------------------------------------
(Millions)                                                                  1999               1998          % Change
---------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>                  <C>              <C>
Premiums                                                                  $416.6             $319.3              30.5%
Net investment income                                                      125.0              118.3               5.7
Fees and other income                                                       28.6               31.9             (10.3)
Net realized capital losses                                                 (2.5)             (12.3)             79.7
---------------------------------------------------------------------------------------------------------------------
        Total revenue                                                      567.7              457.2              24.2
---------------------------------------------------------------------------------------------------------------------
Current and future benefits                                                342.2              277.7              23.2
Operating expenses                                                         140.2              114.6              22.3
Interest expenses                                                            2.3                2.7             (14.8)
Amortization of goodwill and other acquired intangible assets                5.1                5.1                 -
Amortization of deferred policy acquisition costs                           25.0               18.3              36.6
---------------------------------------------------------------------------------------------------------------------
        Total benefits and expenses                                        514.8              418.4              23.0
---------------------------------------------------------------------------------------------------------------------
Income before income taxes                                                  52.9               38.8              36.3
---------------------------------------------------------------------------------------------------------------------
Income taxes                                                                11.3               10.8               4.6
---------------------------------------------------------------------------------------------------------------------
Net income                                                                $ 41.6             $ 28.0              48.6%
=====================================================================================================================
Net realized capital losses, net of tax (included above)                  $ (1.4)            $ (7.8)             82.1%
=====================================================================================================================
</TABLE>


Aetna International's net income for the three months ended March 31, 1999
increased by $14 million compared to the same period in 1998. Net income
includes Year 2000 costs of $3 million for the three months ended March 31, 1999
and $2 million for the three months ended March 31, 1998. Excluding Year 2000
costs and net realized capital losses, results for the three months ended March
31, 1999 increased $8 million, or 22%, compared to the same period in 1998. The
increase in 1999 results primarily reflects earnings growth, on a local currency
basis, in the Company's Mexican insurance businesses and earnings growth in
Brazil, Canada, Chile and Taiwan. The weakening of foreign currencies
substantially offset the growth in local currency earnings in Brazil and
partially offset local currency earnings in Mexico and Chile. Refer to
"Overview" for a discussion related to the pending sale of the Canadian
operations.

Further currency devaluations in Brazil, or in other countries where the Company
has established operations, could adversely affect future operating earnings
when translated into U.S. dollars. Refer to "Aetna International" and
"Forward-Looking Information/Risk Factors" in Aetna Inc.'s 1998 Annual Report on
Form 10-K/A for additional information.

Earnings by major geographic location, excluding Year 2000 costs and net
realized capital losses, were as follows:


<TABLE>
<CAPTION>
                                                              Three Months Ended March 31,
                                                         -------------------------------------
(Millions)                                                        1999                   1998
----------------------------------------------------------------------------------------------
<S>                                                            <C>                    <C>
Asia Pacific (1)                                                 $ 9.0                  $12.3
Americas (2)                                                      44.1                   28.6
Other (3)                                                         (7.5)                  (3.4)
----------------------------------------------------------------------------------------------
    Total                                                        $45.6                  $37.5
==============================================================================================
</TABLE>

(1)   Includes China, Hong Kong, Indonesia, Malaysia, New Zealand, Philippines,
      Taiwan and Thailand.

(2)   Includes Argentina, Brazil, Canada, Chile, Mexico, Peru, Poland and
      Venezuela.

(3)   Includes general and other miscellaneous expenses.



                                     Page 30
<PAGE>   31


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

LARGE CASE PENSIONS

Operating Summary


<TABLE>
<CAPTION>
                                                                        Three Months Ended March 31,
                                                                ---------------------------------------------
(Millions)                                                         1999                1998          % Change
-------------------------------------------------------------------------------------------------------------
<S>                                                           <C>                 <C>               <C>
Premiums                                                      $    28.6           $    40.0             (28.5)%
Net investment income                                             256.6               303.7             (15.5)
Fees and other income                                               4.5                 4.6              (2.2)
Net realized capital gains                                          9.2                37.9             (75.7)
-------------------------------------------------------------------------------------------------------------
        Total revenue                                             298.9               386.2             (22.6)
-------------------------------------------------------------------------------------------------------------
Current and future benefits                                       251.5               306.0             (17.8)
Operating expenses                                                  3.1                 6.0             (48.3)
-------------------------------------------------------------------------------------------------------------
        Total benefits and expenses                               254.6               312.0             (18.4)
-------------------------------------------------------------------------------------------------------------
Income before income taxes                                         44.3                74.2             (40.3)
Income taxes                                                       16.0                27.0             (40.7)
-------------------------------------------------------------------------------------------------------------
Net income                                                    $    28.3           $    47.2             (40.0)%
=============================================================================================================
Net realized capital gains, net of tax (included above)       $     6.0           $    24.7             (75.7)%
=============================================================================================================
Deposits not included in premiums above                       $   265.4           $   267.4               (.7)%
=============================================================================================================
Assets under management (1) (2)                               $27,793.3           $30,008.9              (7.4)%
=============================================================================================================
</TABLE>

(1)   Excludes net unrealized capital gains of approximately $331.0 million at
      March 31, 1999 and $590.7 million at March 31, 1998.

(2)   Includes assets under management of $6,546.7 million at March 31, 1999 and
      $7,265.6 million at March 31, 1998 related to discontinued products.

Large Case Pensions' net income for the three months ended March 31, 1999
decreased by $19 million compared with the same period in 1998. The decrease in
net income primarily relates to the decrease in net realized capital gains,
which reflects the redeployment of capital supporting this business. This
decrease also reflects the consolidation into the ARS segment of certain
products and services, partially offset by lower expenses. Net income includes
Year 2000 costs of $.2 million for the three months ended March 31, 1999 and $.1
million for the three months ended March 31, 1998. Excluding Year 2000 costs and
net realized capital gains in both periods, results for the three months ended
March 31, 1999 were consistent with the same period in 1998.

Assets under management at March 31, 1999 were 7% lower than a year earlier.
This decrease primarily resulted from the continuing runoff of underlying
liabilities and consolidation into the ARS segment of the Company's investment
advisory services and certain other products which complement ARS' business
strategy.

General account assets supporting experience-rated products (where the
contractholder, not the Company, assumes investment and other risks) may be
subject to participant or contractholder withdrawal. Experience-rated
contractholder and participant withdrawals and transfers were as follows
(excluding contractholder transfers to other Company products):


<TABLE>
<CAPTION>
                                                                                    Three Months Ended March 31,
                                                                              -------------------------------------
(Millions)                                                                               1999                  1998
-------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>                       <C>
Scheduled contract maturities and benefit payments (1)                                 $241.2                $237.1
Contractholder withdrawals other than scheduled contract maturities
   and benefit payments                                                                  75.3                  72.7
Participant directed withdrawals                                                         22.4                  27.8
-------------------------------------------------------------------------------------------------------------------
</TABLE>


(1)   Includes payments made upon contract maturity and other amounts
      distributed in accordance with contract schedules.



                                     Page 31






<PAGE>   32


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

LARGE CASE PENSIONS (CONTINUED)

The projection of future investment results considers assumptions for interest
rates, bond discount rates and performance of mortgage loans and real estate.
Mortgage loan assumptions represent management's best estimate of current and
future levels of rent growth, vacancy and expenses based upon market conditions
at each reporting date. The performance of real estate assets has been
consistently estimated using the most recent forecasts available. During 1997, a
bond default assumption was included to reflect historical default experience,
since the bond portfolio increased as a percentage of the overall investment
portfolio and reflected more bond credit risk, concurrent with the decline in
the commercial mortgage loan and real estate portfolios.

The previous years' actual participant withdrawal experience is used for the
current year assumption. Prior to 1995, the Company used the 1983 Group
Annuitant Mortality table published by the Society of Actuaries (the "Society").
In 1995, the Society published the 1994 Uninsured Pensioner's mortality table
which has been used since then.

The Company's assumptions about the cost of asset management and customer
service reflect actual investment and general expenses allocated over invested
assets. Since inception, the expense assumption has increased as the level of
fixed expenses has not declined as rapidly as the liability run-off.

The activity in the reserve for anticipated future losses on discontinued
products for the three months ended March 31, 1999 was as follows (pretax):


<TABLE>
<CAPTION>
(Millions)
----------------------------------------------------------------------------------
<S>                                                                      <C>
Reserve at December 31, 1998                                             $ 1,214.1
Operating income                                                                .6
Net realized capital gains                                                    10.2
Mortality and other                                                            6.7
----------------------------------------------------------------------------------
Reserve at March 31, 1999                                                $ 1,231.6
==================================================================================
</TABLE>


The discontinued products investment portfolio is as follows:


<TABLE>
<CAPTION>
(Millions)                                                    March 31, 1999                               December 31, 1998
--------------------------------------------------------------------------------------------------------------------------------
Class                                                       Amount          Percent                      Amount          Percent
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>                 <C>                    <C>                   <C>
Debt Securities                                          $ 5,550.8             82.3%                  $ 5,890.5             83.0%
Mortgage Loans                                               763.2             11.3                       754.2             10.6
Real Estate                                                  103.4              1.5                       104.2              1.5
Equities                                                     141.3              2.1                        98.5              1.4
Short-term and other investments                             190.0              2.8                       252.2              3.5
--------------------------------------------------------------------------------------------------------------------------------
Total                                                    $ 6,748.7            100.0%                  $ 7,099.6            100.0%
================================================================================================================================
</TABLE>


The investment portfolio declined in 1999 as assets were used to pay off
contractual liabilities.

Distributions on discontinued products were as follows:


<TABLE>
<CAPTION>
                                                                                Three Months Ended March 31,
                                                                             --------------------------------
(Millions)                                                                             1999              1998
-------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>               <C>
Scheduled contract maturities, settlements and benefit payments                     $ 310.5           $ 467.5
Participant directed withdrawals                                                        4.3               6.4
-------------------------------------------------------------------------------------------------------------
</TABLE>


Cash required to fund these distributions was provided by earnings and scheduled
payments on, and sales of, invested assets.

Refer to Note 8 of Condensed Notes to Consolidated Financial Statements and
"General Account Investments" for additional information.



                                     Page 33

<PAGE>   33
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

LARGE CASE PENSIONS (CONTINUED)

Discontinued Products

The Company discontinued the sale of its fully guaranteed large case pension
products (single-premium annuities ("SPAs") and guaranteed investment contracts
("GICs")) in 1993. The Company established a reserve for anticipated future
losses on these products based on the present value of the difference between
(a) the expected cash flows from the assets supporting these products and (b)
the cash flows expected to be required to meet the product obligations.

Results of operations of discontinued products, including net realized capital
gains or losses, are credited or charged to the reserve for anticipated losses.
The Company's results of operations would be adversely affected to the extent
that future losses on the products are greater than anticipated and positively
affected to the extent future losses are less than anticipated.

The factors contributing to changes in the reserve for anticipated future losses
are: operating income or loss, realized capital gains or losses and mortality
gains or losses. Operating income or loss is equal to revenue less expenses.
Realized capital gains or losses reflect the excess (deficit) of sales price
over (below) the carrying value of assets sold. Mortality gains or losses
reflect the mortality and retirement experience related to SPAs. A mortality
gain (loss) occurs when an annuitant or a beneficiary dies sooner (later) than
expected. A retirement gain will occur on some contracts if an annuitant retires
later than expected (a loss if an annuitant retires earlier than expected).

The results of discontinued products were as follows:


<TABLE>
<CAPTION>
                                                                                      Three Months Ended March 31,
                                                                                ----------------------------------
(Millions)                                                                             1999                   1998
------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>                      <C>
Interest deficit (1)                                                                 $ (5.3)               $ (6.4)
Net realized capital gains                                                              6.6                  42.3
Interest earned on receivable from continuing products                                  5.5                   5.6
Other, net                                                                              4.6                   (.3)
------------------------------------------------------------------------------------------------------------------
Results of discontinued products, after tax                                          $ 11.4                $ 41.2
==================================================================================================================
Results of discontinued products, pretax                                             $ 17.5                $ 66.7
==================================================================================================================
Net realized capital gains from sales of bonds, after tax (included above)           $  5.5                $ 23.1
==================================================================================================================
</TABLE>

(1)   The interest deficit is the difference between earnings on invested assets
      and interest credited to contractholders.

The interest deficit for 1999 remained relatively level compared to 1998. Net
realized capital gains for the three months ended March 31, 1998 reflect gains
of $21 million related to continued favorable developments in real estate
markets.

At the time of discontinuance, a receivable from Large Case Pensions' continuing
products equivalent to the net present value of the anticipated cash flow
shortfalls was established for the discontinued products. Interest on the
receivable is accrued at the discount rate that was used to calculate the
reserve. Total assets supporting discontinued products and the reserve include a
receivable from continuing products of $498 million at March 31, 1999, net of
related deferred taxes payable.

The reserve for anticipated future losses on discontinued products represents
the present value (at the risk-free rate at the time of discontinuance,
consistent with the duration of the liabilities) of the difference between the
expected cash flows from the assets supporting discontinued products and the
cash flows expected to be required to meet the obligations of the outstanding
contracts. Calculation of the reserve for anticipated future losses requires
projection of both the amount and the timing of cash flows over approximately
the next 30 years, including consideration of, among other things, future
investment results, participant withdrawal and mortality rates, as well as the
cost of asset management and customer service. There have been no significant
changes to the assumptions underlying the calculation of the reserve related to
the projection of the amount and timing of cash flows.



                                     Page 32
<PAGE>   34
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

CORPORATE

Operating Summary

<TABLE>
<CAPTION>

                                                                   Three Months Ended March 31,
                                                       -------------------------------------------------
(Millions, after tax)                                          1999             1998           % Change
--------------------------------------------------------------------------------------------------------
<S>                                                           <C>              <C>               <C>
Interest expense                                              $40.6            $35.2               15.3%
========================================================================================================
Other operating expenses, net                                 $19.8            $27.9              (29.0)%
Net realized capital losses                                       -              1.7             (100.0)
--------------------------------------------------------------------------------------------------------
Total other expense                                           $19.8            $29.6              (33.1)%
========================================================================================================
</TABLE>


The Corporate segment includes interest expense and other expenses that are not
directly related to the Company's business segments. "Other Operating Expenses"
include corporate expenses such as staff area expenses, advertising and
contributions, which are partially offset by net investment income.

The 1999 increase in interest expense primarily results from additional debt
incurred in connection with the NYLCare acquisition.

Other operating expenses include Year 2000 costs of $1 million for the three
months ended March 31, 1999 and $2 million for the three months ended March 31,
1998. Other operating expenses, excluding Year 2000 costs, decreased $7 million
primarily due to system implementation costs in 1998 not present in 1999 as well
as continued cost reduction initiatives.

GENERAL ACCOUNT INVESTMENTS

Investments disclosed in this section relate to the Company's total general
account portfolio (including assets supporting discontinued products and
experience-rated products).

Total Investments

<TABLE>
<CAPTION>
                                                                              As Restated
                                                                 -------------------------------------
                                                                    March 31,              December 31,
(Millions)                                                              1999                      1998
-------------------------------------------------------------------------------------------------------
<S>                                                               <C>                       <C>
Debt securities                                                    $31,117.9                 $32,180.8
Equity securities                                                      813.7                     800.5
Short-term investments                                                 790.6                     942.2
Mortgage loans                                                       3,517.3                   3,553.0
Real estate                                                            317.2                     270.3
Policy loans                                                           471.7                     458.7
Other                                                                1,335.1                   1,300.3
-------------------------------------------------------------------------------------------------------
Total investments                                                  $38,363.5                 $39,505.8
=======================================================================================================
</TABLE>


                                    Page 34
<PAGE>   35

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

GENERAL ACCOUNT INVESTMENTS (CONTINUED)

Debt Securities

Debt securities represented 81% of the Company's total general account invested
assets at March 31, 1999 and December 31, 1998.  Debt securities were as
follows:

<TABLE>
<CAPTION>
                                                             March 31,              December 31,
(Millions)                                                        1999                      1998
------------------------------------------------------------------------------------------------
<S>                                                         <C>                      <C>
Supporting discontinued products                             $ 5,550.8                 $ 5,890.5
Supporting experience-rated products                          12,759.3                  13,197.3
Supporting remaining products                                 12,807.8                  13,093.0
------------------------------------------------------------------------------------------------
   Total debt securities (1)                                 $31,117.9                 $32,180.8
================================================================================================
</TABLE>

(1)   Total debt securities include "Below Investment Grade" securities of $2.0
      billion at March 31, 1999 and December 31, 1998 of which 46.5% at March
      31, 1999 and 50.8% at December 31, 1998 support discontinued and
      experience-rated products. Refer to Aetna Inc.'s 1998 Annual Report on
      Form 10-K/A for a discussion of "Below Investment Grade" securities.

Debt securities reflected net unrealized capital gains of $.9 billion at March
31, 1999 compared to $1.5 billion at December 31, 1998. Of the net unrealized
capital gains at March 31, 1999, $202 million related to assets supporting
discontinued products and $330 million related to assets supporting
experience-rated contracts.

Residential Collateralized Mortgage Obligations

Included in the Company's debt securities are residential collateralized
mortgage obligations ("CMOs") of $1.9 billion at March 31, 1999 and $2.0 billion
at December 31, 1998. There are various categories of CMOs that are subject to
different degrees of risk from changes in interest rates and, for CMOs that are
not agency backed, defaults. The principal risks inherent in holding CMOs are
prepayment and extension risks related to dramatic decreases and increases in
interest rates resulting in the repayment of principal from the underlying
mortgages either earlier or later than originally anticipated. At March 31, 1999
and December 31, 1998, approximately 2% of the Company's CMO holdings were
invested in CMOs that are subject to more prepayment and extension risk than
traditional CMOs (such as interest- or principal-only strips).

Mortgage Loans

At March 31, 1999 and December 31, 1998, the Company's mortgage loan
investments, net of impairment reserves, were as follows:

<TABLE>
<CAPTION>

                                                        March 31,              December 31,
(Millions)                                                   1999                      1998
-------------------------------------------------------------------------------------------
<S>                                                     <C>                    <C>
Supporting discontinued products                         $  763.2                  $  754.2
Supporting experience-rated products                      1,150.1                   1,183.3
Supporting remaining products                             1,604.0                   1,615.5
-------------------------------------------------------------------------------------------
   Total mortgage loan investments                       $3,517.3                  $3,553.0
===========================================================================================
</TABLE>


During the first three months of 1999, the Company began to manage its mortgage
loan portfolio to maintain the balance in absolute terms, relative to invested
assets, by selectively pursuing refinance opportunities. The mortgage loan
portfolio balance at March 31, 1999 remained essentially the same as December
31, 1998 at $3.5 billion.

                                    Page 35
<PAGE>   36

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

GENERAL ACCOUNT INVESTMENTS (CONTINUED)

Problem, restructured, and potential problem loans included in mortgage loans
were $295 million at March 31, 1999 and $301 million at December 31, 1998 of
which 85% at March 31, 1999 and 86% at December 31, 1998 support discontinued
and experience-rated products. Refer to Aetna Inc.'s 1998 Annual Report on Form
10-K/A for a discussion of problem, restructured and potential problem loans.
Specific impairment reserves on these loans were $44 million at March 31, 1999
and $48 million at December 31, 1998. (Refer to Note 5 of Condensed Notes to
Consolidated Financial Statements).

Risk Management and Market Sensitive Instruments

Interest rate risk is managed within a tight duration band, and credit risk is
managed by maintaining high average quality ratings and diversified sector
exposure within the debt securities portfolio. The Company's use of derivatives
is generally limited to hedging purposes and has principally consisted of using
interest rate swap agreements, futures contracts, warrants, foreign exchange
forward contracts, currency swap agreements and written options to hedge certain
market risks such as interest rate, equity price and foreign exchange risk.

The Company regularly evaluates market risk sensitive instruments by examining,
among other things, levels of or changes in domestic and/or foreign interest
rates (short-term or long-term), duration, exchange rates, prepayment rates,
equity markets or credit ratings/spreads.

Management also reviews, on a quarterly basis, hypothetical net losses in the
Company's consolidated near-term financial position, results of operations and
cash flows under certain assumed market rate changes.

Based on the Company's overall exposure to interest rate, equity price and
foreign exchange risks, the Company believes that these hypothetical changes in
market rates and prices would not materially affect the consolidated near-term
financial position, results of operations or cash flows of the Company as of
March 31, 1999. Refer to Aetna Inc.'s 1998 Annual Report on Form 10-K/A for a
more complete discussion of "Risk Management and Market Sensitive Instruments".

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

Generally, the Company meets its operating requirements by maintaining
appropriate levels of liquidity in its investment portfolio and using overall
cash flows from premiums, deposits and income received on investments. Overall
cash flows are used primarily for claim and benefit payments, contract
withdrawals and operating expenses. In addition, the Company uses cash to invest
in core businesses, make acquisitions, repurchase common stock and pay
shareholder dividends.

During the first three months of 1999, net cash generated from investing,
financing and operating activities was used to make approximately $165 million
of investments in core businesses and acquisitions, pay approximately $40
million for common stock repurchases and pay approximately $42 million of
dividends to shareholders.

During the corresponding period of 1998, net cash generated from investing,
financing and operating activities was used to make approximately $8 million of
investments in core businesses and acquisitions, pay approximately $37 million
for common stock repurchases and pay approximately $43 million of dividends to
shareholders. Refer to the "Consolidated Statements of Cash Flows" for
additional information.

                                    Page 36
<PAGE>   37
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

Dividends

On February 26, 1999, the Company's Board of Directors declared a quarterly
dividend of $.20 per share of common stock and $1.18945 per share of 6.25% Class
C Voting Mandatorily Convertible Preferred Stock to shareholders of record at
the close of business on April 30, 1999, payable May 15, 1999.

Financings and Financing Capacity

Substantially all of the Company's borrowings and financings are conducted
through Aetna Services, Inc. and are fully and unconditionally guaranteed by
Aetna Inc. Refer to Note 9 of Condensed Notes to Consolidated Financial
Statements for additional information.

The Company has significant short-term liquidity supporting its businesses. The
Company uses short-term borrowings from time to time to address timing
differences between receipts and disbursements. The maximum amount of domestic
short-term borrowings outstanding was $1.1 billion during the first three months
of 1999 and $.7 billion during the first three months of 1998.

The Company funded the acquisition of NYLCare with cash made available from
issuing additional commercial paper. The Company issued $300 million of debt in
the fourth quarter of 1998 and expects to issue additional medium- or long-term
fixed income securities in 1999, subject to market conditions, to replace some
of the commercial paper.

The acquisition of PHC, which is anticipated to be completed in the second
quarter of 1999, is currently expected to be ultimately financed by the issuance
of medium- or long-term fixed income securities.

Common Stock Transactions

In January 1999, the Board authorized the repurchase of 5.0 million shares of
common stock. As of March 31, 1999, 495,000 shares of common stock had been
repurchased under this authorization at a cost of $40 million.

GOODWILL AND OTHER ACQUIRED INTANGIBLE ASSETS

Goodwill and other acquired intangible assets were $9.2 billion at March 31,
1999, or approximately 81% of consolidated shareholders' equity. The
amortization of goodwill and other acquired intangible assets was $108 million
for the three months ended March 31, 1999, or approximately 38% of pretax
income. The amortization of other acquired intangible assets reflects
management's estimate of the useful life of acquired intangible assets
(primarily customer lists, health provider networks and computer systems),
generally over various periods not exceeding 25 years. Management's estimate of
the useful life of goodwill, which represents the excess of cost over the fair
value of net assets acquired, is over periods not exceeding 40 years. The risk
associated with the carrying value of goodwill and other acquired intangible
assets is whether future operating income (before amortization of goodwill and
other acquired intangible assets) will be sufficient on an undiscounted basis to
recover the carrying value. The Company regularly evaluates the recoverability
of goodwill and other acquired intangible assets and believes such amounts are
currently recoverable. However, any significant change in the useful lives of
goodwill or other acquired intangible assets, as estimated by management, could
have a material adverse affect on results of operations and financial condition.

NEW ACCOUNTING STANDARDS

Refer to Note 1 of Condensed Notes to Consolidated Financial Statements for a
discussion of recently issued accounting standards.

                                    Page 37
<PAGE>   38

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

YEAR 2000

The Company relies heavily on information technology ("IT") systems and other
systems and facilities, such as telephones, building access control systems and
heating and ventilation equipment ("embedded systems") to conduct its business.
The Company also has business relationships with health care providers,
financial institutions, financial intermediaries, public utilities and other
critical vendors, as well as regulators and customers who are themselves reliant
on IT and embedded systems to conduct their businesses.

State of Readiness

In 1997, the Company organized a multidisciplinary Year 2000 Project Team that
includes outside consultants. The Year 2000 Project Team and the Company's
businesses have developed and are currently executing a comprehensive plan
designed to make the Company's mission-critical IT systems and embedded systems
Year 2000 ready. Outside consultants have reviewed the Company's overall
process, plan and progress to date. The Company's plan for IT systems consists
of several phases: (i) inventory -- identifying all IT systems and risk rating
each according to its potential business impact; (ii) assessment -- identifying
IT systems that use date functions and assessing them for Year 2000
functionality; (iii) remediation -- reprogramming, or replacing where necessary,
inventoried items to make them Year 2000 ready; and (iv) testing and
certification -- testing the code modifications and new inventory with other
associated systems, including extensive date testing, and performing quality
assurance testing to determine if they will successfully operate in the
post-1999 environment.

The Company completed the inventory and assessment phases for substantially all
of its IT systems by year-end 1997. The Company's IT systems are currently in
the remediation and testing and certification phases. The Company has completed
the remediation of substantially all of its IT systems and is scheduled to
complete the testing and certification of substantially all of its IT systems by
June 30, 1999.

The Company has inventoried and risk rated substantially all of its embedded
systems. The results of these processes indicate that embedded systems should
not present a material Year 2000 risk to the Company. The Company's remaining
steps include testing selected embedded systems and remediating and certifying
systems that exhibit Year 2000 issues. The Company is focusing its testing and
remediation efforts on select embedded systems of its mission-critical
facilities, such as data centers, service centers, communications centers and
select office locations. The Company plans to complete the testing of these
systems by mid-1999, and the remediation and certification of these systems by
year-end 1999.

The Company believes that its Year 2000 project is on schedule.

External Relationships

The Company also faces the risk that one or more of its critical suppliers or
customers ("external relationships") will not be able to interact with the
Company due to the third party's inability to resolve its own Year 2000 issues,
including those associated with its own external relationships. The Company has
completed its inventory of external relationships and risk rated each external
relationship based upon the potential business impact, available alternatives
and cost of substitution. In the case of mission-critical suppliers, such as
banks, financial intermediaries, telecommunications providers and other
utilities, mutual fund companies, IT vendors, financial market data providers,
national pharmacy chains, electronic claims clearinghouses, major physician
groups and major hospitals, the Company is engaged in discussions with the third
parties and is attempting to obtain detailed information as to those parties'
Year 2000 plans and state of readiness. The Company, however, does not have
sufficient information at the current time to predict whether its external
relationships will be Year 2000 ready.

                                    Page 38
<PAGE>   39

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

YEAR 2000 (CONTINUED)

Year 2000 Costs

Total Year 2000 project costs are currently estimated to be at least $85 million
(after tax) in 1999. A large majority of these costs are expected to be
incremental expenses that will not recur in 2000 or thereafter. Year 2000 costs
were $27 million (after tax) for the first three months of 1999 and $16 million
(after tax) for the first three months of 1998. The Company expects that Year
2000 costs in 2000 will be immaterial. The Company expenses these costs as
incurred and funds these costs through operating cash flows.

Year 2000 readiness is critical to the Company. The Company has redeployed some
resources from noncritical system enhancements to address Year 2000 issues. Due
to the importance of IT systems to the Company's business, management has not
deferred mission-critical systems enhancements to become Year 2000 ready. The
Company does not expect these redeployments to have a material impact on the
Company's financial condition or results of operations.

Risks and Contingency/Recovery Planning

If the Company's Year 2000 issues were unresolved, potential consequences would
include, among other possibilities, the inability to accurately and timely
process benefits claims; update customers' accounts; process financial
transactions; bill customers; assess exposure to risks; determine liquidity
requirements or report accurate data to management, shareholders, customers,
regulators and others; as well as business interruptions or shutdowns; financial
losses; reputational harm; increased scrutiny by regulators; and litigation
related to Year 2000 issues. The Company's international affiliates face
additional Year 2000 risk due to the diverse environments in which they operate.
The Company is attempting to limit the potential impact of the Year 2000 by
monitoring the progress of its own Year 2000 project and those of its critical
external relationships and by developing contingency/recovery plans. The Company
cannot guarantee that it will be able to resolve all of its Year 2000 issues.
Any critical unresolved Year 2000 issues at the Company or its external
relationships, however, could have a material adverse effect on the Company's
results of operations, liquidity or financial condition.

The Company has begun to develop contingency/recovery plans aimed at sustaining
the continuity of critical business functions before and after December 31,
1999. As part of that process, the Company has begun to identify reasonably
possible Year 2000 failure scenarios and is developing contingency plans for
those failure scenarios it believes could have a significant impact on the
Company's operations. The Company is developing these contingency plans in an
effort to reduce the impact on the Company, and provide methods of returning to
normal operations, if one or more of those failure scenarios occur. The Company
expects contingency/recovery planning to be substantially complete by September
1999.

FORWARD-LOOKING INFORMATION/RISK FACTORS

Refer to "Forward-Looking Information/Risk Factors" in Aetna Inc.'s 1998 Annual
Report on Form 10-K/A for factors that could cause actual Year 2000 results to
differ from the Company's expectations. The "Forward-Looking Information/Risk
Factors" and "Regulatory Environment" portions of that Annual Report also
contain a general discussion of other important risks related to the Company's
businesses.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.


Refer to the information contained in "Management's Discussion and Analysis of
Financial Condition and Results of Operations - General Account Investments".

                                    Page 39
<PAGE>   40

PART II. OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS.

Purported Class Action Complaints were filed in the United States District
Court for the Eastern District of Pennsylvania on November 5, 1997 by Eileen
Herskowitz and Michael Wolin, and on December 4, 1997 by Pamela Goodman and
Michael J. Oring. Other purported Class Action Complaints were filed in the
United States District Court for the District of Connecticut on November 25,
1997 by Evelyn Silvert, on November 26, 1997 by the Rainbow Fund, Inc., and on
December 24, 1997 by Terry B. Cohen. The Connecticut actions were transferred
to the United States District Court for the Eastern District of Pennsylvania
(the "Court") for consolidated pretrial proceedings with the cases pending
there. The plaintiffs filed a Consolidated and Amended Complaint (the
"Complaint") seeking, among other remedies, unspecified damages resulting from
defendants' alleged violations of federal securities laws. The Complaint
alleged that the Company and three of its current or former officers or
directors, Ronald E. Compton, Richard L. Huber, and Leonard Abramson, are
liable for certain misrepresentations and omissions regarding, among other
matters, the integration of the merger with U.S. Healthcare and the Company's
medical claim reserves. The Company and the individual defendants filed a
motion to dismiss the Complaint on July 31, 1998. On February 2, 1999, the
Court dismissed the Complaint, but granted the plaintiffs leave to file a
second amended complaint. On February 22, 1999, the plaintiffs filed a second
amended complaint against the Company, Ronald E. Compton and Richard L. Huber.
The Company and the remaining individual defendants filed a motion to dismiss
the second amended complaint, and the Court denied that motion in March, 1999.
Defendants are pursuing an interlocutory appeal of that denial. Trial currently
is scheduled to begin in December, 1999. The Company is defending the actions
vigorously.

The Company is also involved in numerous other lawsuits arising, for the most
part, in the ordinary course of its business operations, including bad faith,
medical malpractice, marketing and other litigation in its health business. Some
of these other lawsuits are purported to be class actions. Aetna U.S. Healthcare
of California Inc., an indirect subsidiary of the Company, is currently a party
to a bad faith and medical malpractice action brought by Teresa Goodrich,
individually and as successor in interest of David Goodrich. The action was
originally filed in March, 1996 in Superior Court for the state of California,
county of San Bernardino. The action alleges damages for unpaid medical bills,
punitive damages and compensatory damages for wrongful death based upon, among
other things, alleged denial of claims for services provided to David Goodrich
by out of network providers without prior authorization. On January 20, 1999 a
jury rendered a verdict in favor of the plaintiff for $750,000 for unpaid
medical bills, $3.7 million for wrongful death and $116 million for punitive
damages. On April 12, 1999 the trial court amended the judgment to include Aetna
Services, Inc., a direct subsidiary of the Company, as a defendant. On April 27,
1999 Aetna Services, Inc. and Aetna U.S. Healthcare of California Inc. filed
appeals with the California Court of Appeal and will continue to defend this
matter vigorously. While the ultimate outcome of these other lawsuits cannot be
determined at this time, after consideration of the defenses available to the
Company and any related reserves established, they are not expected to result in
liability for amounts material to the financial condition of the Company,
although they may adversely affect results of operations in future periods.


ITEM 5.  OTHER INFORMATION.


(a)      NAIC IRIS Ratios

The National Association of Insurance Commissioners ("NAIC") Insurance
Regulatory Information Systems ("IRIS") ratios cover 12 categories of financial
data with defined usual ranges for each category. The ratios are intended to
provide insurance regulators "early warnings" as to when a given company might
warrant special attention. An insurance company may fall out of the usual range
for one or more ratios and such variances may result from specific transactions
that are in themselves immaterial or eliminated at the consolidated level. None
of Aetna Inc.'s significant subsidiaries had more than two IRIS ratios that were
outside of the NAIC usual ranges for 1998.

                                    Page 40

<PAGE>   41


ITEM 5.  OTHER INFORMATION.  (CONTINUED)


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


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


<TABLE>
<CAPTION>
                                                 As Restated
                                              Three Months Ended
                                                   March 31,                    Years Ended December 31,
                                              -------------------    ------------------------------------------
Aetna Inc.                                     1999       1998         1998      1997     1996     1995   1994
---------------------------------------------------------------------------------------------------------------
<S>                                           <C>        <C>         <C>       <C>      <C>       <C>     <C>
Ratio of Earnings to Fixed Charges             4.05       4.05         4.96      5.74     2.45     4.97    4.74
Ratio of Earnings to Combined Fixed
  Charges and Preferred Stock Dividends        3.26       3.18         3.94      4.46     2.10     4.97    4.74
---------------------------------------------------------------------------------------------------------------
</TABLE>


<TABLE>
<CAPTION>
                                                Three Months Ended
                                                    March 31,                   Years Ended December 31,
                                             ------------------------     ------------------------------------
Aetna Services, Inc.                         1999                1998          1998           1997        1996
--------------------------------------------------------------------------------------------------------------
<S>                                         <C>                 <C>          <C>             <C>        <C>
Ratio of Earnings to Fixed Charges           3.04                3.77          4.31           5.78        2.44
Ratio of Earnings to Combined Fixed
  Charges and Preferred Stock Dividends      3.04                3.77          4.31           5.78        2.44
--------------------------------------------------------------------------------------------------------------
</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
include the dividends paid to preferred shareholders of a subsidiary. (Refer to
Note 16 of Notes to Consolidated Financial Statements in Aetna Inc.'s 1998
Annual Report on Form 10-K/A.) During 1995 and 1994 there was no preferred stock
outstanding, and 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.

(c)     Ratings

The ratings of certain Aetna Inc.'s subsidiaries follow:

<TABLE>
<CAPTION>
                                                                                        Rating Agencies
                                                                   ----------------------------------------------------
                                                                                              Moody's
                                                                                    Duff &    Investors    Standard
                                                                      A.M. Best     Phelps    Service      & Poor's
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>            <C>       <C>         <C>
Aetna Services, Inc. (senior debt)**
    February 1, 1999 (1)                                                  *           A            A3          A
    April 27, 1999 (1)                                                    *           A            A3          A

Aetna Services, Inc. (commercial paper)**
    February 1, 1999 (1)                                                  *          D-1          P-2         A-1
    April 27, 1999 (1)                                                    *          D-1          P-2         A-1

Aetna Life Insurance Company (claims paying/financial strength)
    February 1, 1999 (1)                                                  A          AA-           A1         A+
    April 27, 1999 (1)                                                    A          AA-           A1         A+

Aetna Life Insurance and Annuity Company
        (claims paying/financial strength)
    February 1, 1999 (1)                                                  A           AA          Aa3         AA-
    April 27, 1999 (1)                                                    A           AA          Aa3         AA-

-----------------------------------------------------------------------------------------------------------------------
</TABLE>

*   Nonrated by the agency.

** Fully and unconditionally guaranteed by Aetna Inc.

(1) These ratings are currently under review by certain rating agencies pending
    completion of their analysis of the pending Prudential health care
    acquisition. Duff and Phelps Credit Rating Company has the debt ratings of
    Aetna Services on credit watch negative. Standard and Poor's has the debt
    and financial strength ratings on credit watch negative. Moody's Investors
    Service has the debt and financial strength ratings on outlook negative.

                                    Page 41
<PAGE>   42


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.


(a)      Exhibits



         (10)          Material Contracts.

         10.1          1999 Director Charitable Award Program, incorporated
                       herein by reference to the Company's Form 10-Q filed on
                       April 28, 1999.*

         10.2          Employment Agreement, dated as of June 11, 1998, by and
                       between the Company and Alan J. Weber, incorporated
                       herein by reference to the Company's Form 10-Q filed on
                       April 28, 1999.*

         10.3          $500,000,000 Credit Agreement dated as of April 1, 1999
                       among Aetna Services, Inc. as Borrower, Aetna Inc. as
                       Guarantor, the banks listed on the signature pages
                       thereof, Morgan Guaranty Trust Company of New York as
                       Administrative Agent, J.P. Morgan Securities Inc. as
                       Arranger, Deutsche Bank AG, New York Branch, as
                       Co-Administrative Agent, The Chase Manhattan Bank, as
                       Senior Managing Agent and Citibank, N.A. as Syndication
                       Agent, incorporated herein by reference to the Company's
                       Form 10-Q filed on April 28, 1999.

         (12)          Statement Re:  Computation of Ratios.

                       Statement re: computation of ratio of earnings to fixed
                       charges and ratio of earnings to combined fixed charges
                       and preferred stock dividends for the three months ended
                       March 31, 1999 and for the years ended December 31,
                       1998, 1997, 1996, 1995 and 1994 for Aetna Inc. and for
                       the three months ended March 31, 1999 and for the years
                       ended December 31, 1998, 1997 and 1996 for Aetna
                       Services, Inc.

         (15)          Letter Re: Unaudited Interim Financial Information.

                       Letter from KPMG LLP acknowledging awareness of the use
                       of a report on unaudited interim financial information,
                       dated April 27, 1999.

         (27)          Financial Data Schedule.

                    *  Management contract or compensatory plan or arrangement.


(b)      Reports on Form 8-K.

         None.


                                    Page 42
<PAGE>   43

                                   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 February 15 , 2000              By    /s/  Alan M. Bennett
                                          ---------------------------
                                                 Alan M. Bennett
                                                 Vice President
                                                 and Corporate Controller
                                                 (Chief Accounting Officer)


                                    Page 43
<PAGE>   44

                                   AETNA INC.

                                 EXHIBIT INDEX

===============================================================================


EXHIBIT
NUMBER           DESCRIPTION
-------          -----------

   (12)          Statement Re:  Computation of Ratios.

                 Statement re: computation of ratio of earnings to fixed
                 charges and ratio of earnings to combined fixed charges and
                 preferred stock dividends for the three months ended March 31,
                 1999 and for the years ended December 31, 1998, 1997, 1996,
                 1995 and 1994 for Aetna Inc. and for the three months ended
                 March 31, 1999 and for the years ended December 31, 1998, 1997
                 and 1996 for Aetna Services, Inc.

   (15)          Letter Re: Unaudited Interim Financial Information.

                 Letter from KPMG LLP acknowledging awareness of the use
                 of a report on unaudited interim financial information,
                 dated April 27, 1999.

   (27)          Financial Data Schedule.


                                    Page 44