<PAGE> 1
                                                        Exhibit 13
Selected Financial Data

<TABLE>
<CAPTION>
(Millions, except per common share data)    1996        1995        1994        1993        1992
                                            ____        ____        ____        ____        ____
<S>                                         <C>         <C>         <C>         <C>         <C>
Premiums:
  Aetna U.S. Healthcare                     $  7,765.2  $  5,949.7  $  5,611.5  $  4,700.6  $  4,586.7
  Aetna Retirement Services                      180.7       260.2       235.7       189.8       182.3
  International                                1,166.1     1,038.5       887.1       909.5       814.8
  Large Case Pensions                            176.8       264.9       234.4       185.9       204.2
                                            __________________________________________________________
   Total Premiums                              9,288.8     7,513.3     6,968.7     5,985.8     5,788.0
______________________________________________________________________________________________________
Net Investment Income, Fees and Other
 Income, and Net Realized Capital Gains
 (Losses):
  Aetna U.S. Healthcare                        1,968.5     1,665.7     1,527.6     1,405.4     1,345.4
  Aetna Retirement Services                    1,581.5     1,445.9     1,269.1     1,269.6     1,129.9
  International                                  464.9       421.3       409.9       369.8       387.6
  Large Case Pensions                          1,761.5     2,004.0     2,120.8     2,380.1     2,547.1
  Corporate: Other                                98.0         9.7        (9.7)       (6.9)      (42.7)
                                            __________________________________________________________
   Total Net Investment Income, Fees
    and Other Income, and Net Realized
    Capital Gains (Losses)                     5,874.4     5,546.6     5,317.7     5,418.0     5,367.3
______________________________________________________________________________________________________
     Total Revenue                          $ 15,163.2  $ 13,059.9  $ 12,286.4  $ 11,403.8  $ 11,155.3
______________________________________________________________________________________________________
                                            __________________________________________________________
Income (Loss) from Continuing Operations
 before Extraordinary Item and
 Cumulative Effect Adjustments:
  Aetna U.S. Healthcare                     $     58.7  $    286.0  $    341.7  $    272.2  $    274.3
  Aetna Retirement Services                      186.2       198.0       159.1       111.4        99.0
  International                                  109.9        86.6        71.2        55.0        25.1

  Large Case Pensions                            258.4        89.2        54.4      (822.3)      (17.3)
  Corporate:  Interest                          (103.9)      (70.4)      (60.5)      (44.7)      (50.9)
              Other                             (304.2)     (115.5)     (156.5)     (173.9)     (229.2)
______________________________________________________________________________________________________
Income (Loss) from Continuing
 Operations before Extraordinary Item and
 Cumulative Effect Adjustments                   205.1       473.9       409.4      (602.3)      101.0
______________________________________________________________________________________________________
Net Income (Loss)                                651.0       251.7       467.5      (365.9)       56.0
______________________________________________________________________________________________________
Net Realized Capital Gains (Losses),

 Net of Tax (included above)                      85.9        29.5       (41.2)      (42.0)      (76.7)
______________________________________________________________________________________________________
Total Assets                                  92,912.9    84,323.7    75,486.7    81,572.8    77,022.0
______________________________________________________________________________________________________
Total Long-Term Debt                           2,380.0       989.1     1,079.2     1,112.2       900.9
______________________________________________________________________________________________________
Aetna-Obligated Mandatorily Redeemable
 Preferred Securities of Subsidiary
 Limited Liability Company Holding
 Primarily Debentures Guaranteed by Aetna        275.0       275.0       275.0           -           -
______________________________________________________________________________________________________
Shareholders' Equity                          10,889.7     7,272.8     5,503.0     7,043.1     7,238.3
______________________________________________________________________________________________________
                                            __________________________________________________________
Per Common Share Data:
Income (Loss) from Continuing Operations
 before Extraordinary Item and
 Cumulative Effect Adjustments              $     1.36  $     4.16  $     3.63  $    (5.42) $      .92
Net Income (Loss)                                 4.74        2.21        4.14       (3.29)        .51
Dividends Declared                                1.29        2.76        2.76        2.76        2.76
Shareholders' Equity                             66.79       63.39       48.85       62.77       65.64
Market Price at Year End                         80.00       69.25       47.13       60.38       46.50
______________________________________________________________________________________________________
<FN>

See Notes to Financial Statements and Management's Discussion and Analysis of Financial Condition
and Results of Operations for significant events affecting the comparability of current year
results with 1995 and 1994 results.  Refer to Note 2 of Notes to Financial Statements for
matters relating to the merger with U.S. Healthcare, and to Note 9 for matters relating to
discontinued products.
</TABLE>


<PAGE> 2

Management's Discussion and Analysis of Financial Condition and
Results of Operations*

Management's Discussion and Analysis of Financial Condition and
Results of Operations addresses the financial condition of Aetna Inc.
and its subsidiaries (collectively, the "Company") as of December 31,
1996 and 1995, and its results of operations for 1996, 1995 and 1994.

Index

Consolidated Results of Operations:  Operating Summary        2
Overview                                                      3
Aetna U.S. Healthcare                                         7
Aetna Retirement Services                                    11
International                                                14
Large Case Pensions                                          16
Corporate                                                    20
Severance and Facilities Charges                             21
General Account Investments                                  23
Liquidity and Capital Resources                              30
Regulatory Environment                                       35
New Accounting Pronouncements                                36
Forward-Looking Information                                  37

Consolidated Results of Operations:  Operating Summary

<TABLE>
<CAPTION>
(Millions, except per common share data)         1996           1995           1994
_________________________________________________________________________________________
<S>                                              <C>            <C>            <C>
Premiums                                         $  9,288.8     $    7,513.3   $  6,968.7
Net investment income                               3,565.2          3,575.1      3,631.4
Fees and other income                               2,174.8          1,924.3      1,741.5
Net realized capital gains (losses)                   134.4             47.2        (55.2)
                                                 ________________________________________
    Total revenue                                  15,163.2         13,059.9     12,286.4
                                                 ________________________________________
Current and future benefits                        10,341.4          9,109.1      8,719.4
Operating expenses                                  3,319.8          2,951.8      2,680.3
Interest expense                                      168.3            115.9         98.6
Amortization of goodwill and
 other acquired intangible assets                     172.5             17.8         27.0
Amortization of deferred policy
 acquisition costs                                    160.1            139.1        133.6
Reductions of loss on discontinued products          (202.3)               -            -
Severance and facilities charges                      864.7                -            -
                                                 ________________________________________
    Total benefits and expenses                    14,824.5         12,333.7     11,658.9
                                                 ________________________________________
Income from continuing operations
 before income taxes                                  338.7            726.2        627.5
Income taxes                                          133.6            252.3        218.1
                                                 ________________________________________
Income from continuing operations                     205.1            473.9        409.4
Discontinued Operations, net of tax:
 Income (Loss) from operations                        182.2           (222.2)        58.1
 Gain on sale                                         263.7                -            -
                                                 ________________________________________
Net income                                       $    651.0     $      251.7   $    467.5
_________________________________________________________________________________________
                                                 ________________________________________
Net income applicable to common ownership        $    625.9     $      251.7   $    467.5
_________________________________________________________________________________________
                                                 ________________________________________
Net realized capital gains (losses) from
 continuing operations, net of tax
 (included above)                                $     85.9     $       29.5   $    (41.2)
_________________________________________________________________________________________
                                                 ________________________________________
Per common share data:
    Income from continuing operations            $     1.36     $       4.16   $     3.63
    Discontinued Operations, net of tax:
     Income (Loss) from operations                     1.38            (1.95)         .51
     Gain on sale                                      2.00                -            -
                                                 ________________________________________
    Net income                                   $     4.74     $       2.21   $     4.14
                                                 ________________________________________
                                                 ________________________________________
    Dividends declared                           $     1.29     $       2.76   $     2.76
                                                 ________________________________________
                                                 ________________________________________
    Shareholders' equity                         $    66.79     $      63.39   $    48.85
_________________________________________________________________________________________
                                                 ________________________________________
Sources of earnings:
  Aetna U.S. Healthcare                          $     58.7     $      286.0   $    341.7
  Aetna Retirement Services                           186.2            198.0        159.1
  International                                       109.9             86.6         71.2
  Large Case Pensions                                 258.4             89.2         54.4
  Corporate:  Interest                               (103.9)           (70.4)       (60.5)
              Other                                  (304.2)          (115.5)      (156.5)
                                                 ________________________________________
    Total from continuing operations                  205.1            473.9        409.4
  Discontinued Operations                             445.9           (222.2)        58.1
                                                 ________________________________________
Net income                                       $    651.0     $      251.7   $    467.5
_________________________________________________________________________________________
                                                 ________________________________________
<FN>
* This Management's Discussion and Analysis of Financial Condition and Results of Operations
  is as of February 4, 1997.
</TABLE>

<PAGE> 3

Overview

Strategy

Aetna sold its property-casualty operations on April 2, 1996 for
approximately $4.1 billion in cash.  Aetna merged with U.S.
Healthcare, Inc. on July 19, 1996 in a cash and stock transaction
valued at approximately $8.9 billion.  As a result, Aetna Inc.
became the new parent corporation of Aetna Services, Inc.
(formerly Aetna Life and Casualty Company) and U.S. Healthcare.

As a result of these and other actions taken by Aetna in recent
years to strategically reposition itself, Aetna's current
operations include three core businesses:  Aetna U.S. Healthcare,
Aetna Retirement Services and International - with Aetna U.S.
Healthcare being the largest.

For additional information about the merger with U.S. Healthcare,
which has been accounted for as a purchase, see Note 2 of Notes to
Financial Statements.  See Note 3 of Notes to Financial Statements
for a discussion of certain indemnifications and other information
related to the property-casualty sale.

Financial Overview

The U.S. Healthcare merger and the property-casualty sale, as well
as severance charges recorded in 1996, reserve reductions for
Large Case Pensions, and certain other factors complicate the
comparison of Aetna's results over the last three years.  These
factors are described in more detail below.  The discussion of
earnings below excludes these factors because management believes
it provides a comparison of reported results that better reflects
the underlying performance of Aetna's business.

     Consolidated Results

Aetna reported income from continuing operations of $205 million
in 1996, $474 million in 1995 and $409 million in 1994.  These
results include severance and facilities charges for Aetna U.S.
Healthcare, Aetna Retirement Services and Corporate aggregating
$562 million in 1996 (see "Severance and Facilities Charges"),
reserve reductions for Large Case Pensions' discontinued products
of $132 million in 1996, and net realized capital gains or losses
in all three years.  Excluding these factors, income from
continuing operations would have been $550 million in 1996, $444
million in 1995 and $451 million in 1994.

Consolidated 1996 results reflect increased earnings in each
business segment and business growth in each core business, lower
net corporate operating expenses and higher interest expense due
to additional debt incurred in connection with the U.S. Healthcare
merger.  (See "Aetna U.S. Healthcare" for a discussion of pro
forma results as though the merger had occurred on January 1,
1995.)  Consolidated 1995 results reflect improved earnings in
each business segment other than health operations, as well as
lower net corporate operating expenses and higher interest
expense.

Total revenue from continuing operations increased 16% in 1996 and
6% in 1995.  The 1996 increase was primarily attributable to the
inclusion of U.S. Healthcare results from the merger date.
Increased revenues in the other core businesses contributed to the
1996 and 1995 increases.

<PAGE> 4

Overview (Continued)

      Underlying Business Results

   Aetna U.S. Healthcare.  Earnings improved in 1996 primarily due
   to increased earnings from group insurance and noninsured
   health products.  These increased earnings were due to
   favorable mortality experience and higher Group Insurance sales
   and enrollment.  Results of HMO and other insured health
   products were significantly affected in 1996 by increases in
   Commercial and Medicare HMO medical costs and decreases in
   Commercial HMO premiums on a per member per month basis.  The
   merger significantly increased revenues in 1996, but it did not
   materially affect 1996 earnings because the addition of U.S.
   Healthcare's results from July 19, 1996 was substantially
   offset by the amortization of goodwill and other acquired
   intangible assets created as a result of the merger.  Revenue
   in 1995 increased because of a movement toward higher revenue
   products.  However, this segment's 1995 earnings decreased due
   to increased investments in managed care and an increase in
   medical costs for certain health products.

   Aetna Retirement Services.  Results improved in 1996 and 1995,
   primarily reflecting fees earned on a growing base of assets
   under management.  Assets under management grew primarily due
   to increased deposits for financial services products and to
   stock market appreciation.  However, business growth and
   investments in distribution channels increased operating
   expenses in 1996.  Results in 1996 also reflect favorable
   mortality experience on life products.

   International.  Results improved in 1996 and 1995.  Results in
   1996 reflect business and earnings growth in Asia Pacific and
   Latin American operations, partially offset by increased losses
   from start-up operations and decreased earnings in Mexico.
   Results in 1995 reflect growth in Asia Pacific operations and
   increased earnings in Mexico.

   Large Case Pensions.  Results improved in 1996 and 1995
   although assets under management declined in both years.  These
   improved results were caused by increased distributions
   received in 1996 on certain investments supporting the capital
   in this business, increases in fees and other income in 1995,
   and improved interest margins in both years.  Earnings of this
   segment, however, are expected to decline.  (See "Large Case
   Pensions - Outlook.")

   Corporate.  This segment reflects lower staff area expenses and
   increased interest expense for both 1996 and 1995.  The
   increase in interest expense in 1996 was due to additional debt
   incurred in connection with the merger.  This increase in 1996
   was partially offset by interest income on the net proceeds
   from the property-casualty sale, from April 2, 1996 to July 19,
   1996.


<PAGE> 5

Overview (Continued)

Factors Affecting Comparison of Results

Detailed information regarding certain factors that affect the
comparison of results of continuing operations (after tax) of the
Company for 1996, 1995 and 1994 is set forth below.

      Factors Primarily Related to the Merger

         Income from continuing operations includes U.S.
         Healthcare results from July 19, 1996.

         As a result of the merger, severance and facilities
         charges of $275 million were recorded in 1996,
         principally related to the integration of the health
         businesses of Aetna Services and U.S. Healthcare.

         Results of continuing operations in 1996 reflected an
         increase in amortization of goodwill and other acquired
         intangible assets of $126 million, primarily related to
         the amortization from July 19, 1996 of approximately $7.9
         billion of intangible assets created as a result of the
         merger.

         A portion of the merger consideration paid consisted of
         cash from the net proceeds received from the sale of the
         Company's property-casualty operations.  Results of
         continuing operations in 1996 included $37 million of
         interest income earned on such net proceeds from April 2,
         1996 through July 19, 1996.

         Results of continuing operations in 1996 included an
         increase in interest expense of $34 million primarily
         related to borrowings incurred in connection with the
         merger.

         As a result of the merger, the Company issued
         approximately 35.0 million shares of common stock and
         11.7 million shares of mandatorily convertible preferred
         stock.  The increase in the number of common shares
         outstanding and the dividends on the mandatorily
         convertible preferred stock affect the comparability of
         per common share amounts.  (See Notes 1 and 2 of Notes to
         Financial Statements.)

Other Significant Factors

         Results of continuing operations in 1996 included
         additional severance and facilities charges of $287
         million.

         Results of continuing operations in 1996 included $132
         million of benefits from reductions of the reserve for
         anticipated future losses on discontinued products,
         primarily as a result of favorable developments in real
         estate markets.

         Results of continuing operations in 1996 included net
         after-tax realized capital gains of $86 million compared
         with $30 million in 1995 and net after-tax realized
         capital losses of $41 million in 1994.  Net realized
         capital gains in 1996 include $52 million of net gains
         related to sales of equity and real estate investments
         and $40 million of gains related to sales of
         subsidiaries.  Net realized capital losses in 1994
         primarily reflect impairment losses attributable to
         mortgage loans and real estate.

<PAGE> 6

Overview (Continued)

Net Income

The Company's 1996 net income was $651 million, compared with
$252 million in 1995 and $468 million in 1994.  Net income in 1996
included income from property-casualty operations ("Discontinued
Operations") of $182 million and a gain from the sale of such
operations of $264 million.  Net income in 1995 included a loss
from Discontinued Operations of $222 million compared with income
of $58 million in 1994.

Return on Average Shareholders' Equity

Return on average shareholders' equity for the years ended
December 31 was as follows:

<TABLE>
<CAPTION>
                                                 1996         1995          1994
________________________________________________________________________________
<S>                                              <C>          <C>           <C>

Return on average shareholders' equity            7.2%         3.9% (1)      7.5% (1)

<FN>
(1)  Return on average shareholders' equity excluding additions to environmental and
     asbestos-related claims reserves within the Company's Discontinued Operations in
     1995 and 1994 were 14.8% and 10.0%, respectively.

</TABLE>

This Overview is a summary of certain information that appears
later in this Management's Discussion and Analysis.  Important
additional information about the businesses' 1996, 1995 and 1994
results, as well as their outlook for 1997, and about the
Company's financial condition and liquidity and capital resources
follows.  Because it has been summarized, the information
presented in the Overview is qualified by the more detailed
information appearing later.  Because of the importance of this
detailed information, you should read Management's Discussion and
Analysis in its entirety.



<PAGE> 7

Aetna U.S. Healthcare

<TABLE>
<CAPTION>

Operating Summary (Millions)               1996        1995        1994
____________________________________________________________________________
<S>                                        <C>         <C>         <C>
Premiums                                   $ 7,765.2   $ 5,949.7   $ 5,611.5
Net investment income                          414.6       364.0       351.6
Fees and other income                        1,495.9     1,312.3     1,197.2
Net realized capital gains (losses)             58.0       (10.6)      (21.2)
                                           _________________________________
    Total revenue                            9,733.7     7,615.4     7,139.1
                                           _________________________________
Current and future benefits                  6,622.4     5,100.4     4,755.1
Operating expenses                           2,351.5     2,023.2     1,782.5
Amortization of goodwill and
  other acquired intangible assets             169.4        15.2        22.9
Amortization of deferred policy
  acquisition costs                             11.9        22.2        40.5
Severance and facilities charges               453.0           -           -
                                           _________________________________
Income before income taxes                     125.5       454.4       538.1
Income taxes                                    66.8       168.4       196.4
                                           _________________________________
Net income                                 $    58.7   $   286.0   $   341.7
____________________________________________________________________________
                                           _________________________________
Net realized capital gains (losses),
  net of tax (included above)              $    37.9   $    (7.1)  $   (13.6)
____________________________________________________________________________
                                           _________________________________

</TABLE>

Aetna U.S. Healthcare provides a full spectrum of health products
(managed care and indemnity) and group insurance products (life,
disability and long-term care) on both an insured and an employer-
funded basis.  Under insured plans, the Company assumes all or a
majority of health care cost, utilization, mortality, morbidity or
other risk depending on the product.  Under employer-funded plans,
the customer, and not the Company, assumes all or a majority of
these risks.

Aetna U.S. Healthcare consists of the Health Risk business and the
Group Insurance and Other Health business.  Health products
include health maintenance organization (HMO), point-of-service
(POS), preferred provider organization (PPO) and indemnity
products.  The Health Risk business includes such health products
offered on an insured basis.  The Group Insurance and Other Health
business includes group life and disability insurance, long-term
care insurance and all health products offered on an employer-
funded basis.

Actual Results

Aetna U.S. Healthcare's net income decreased $227 million in 1996,
following a $56 million decrease in 1995.  Results in 1996, 1995
and 1994 include amortization of goodwill and other acquired
intangible assets ($141 million, $15 million and $23 million,
respectively, after tax), and unusual items, primarily severance
and facilities charges (see "Severance and Facilities Charges"),
of $321 million (after tax) in 1996.  Excluding these items and
net realized capital gains and losses, 1996 results increased
$174 million, primarily reflecting the inclusion of U.S.
Healthcare from July 19, 1996.  On a comparable basis (excluding
the items noted above), results in 1995 decreased $70 million
primarily due to expenses associated with an increase in managed
care investments and an increase in medical costs in the first
half of 1995 on indemnity and PPO health products, partially
offset by increased earnings from HMO operations and improved
operating expense management.

Net realized capital gains for 1996 included a $15 million (after
tax) gain from the sale of an HMO subsidiary.  The earnings of
this subsidiary were not material to results.


<PAGE> 8

Aetna U.S. Healthcare (Continued)

Pro Forma Results

The remainder of the discussion of Aetna U.S. Healthcare is on a
pro forma basis as if the merger had occurred at the beginning of
1995.

<TABLE>
<CAPTION>
Pro Forma Operating Summary (1)
(Millions)                                  1996         1995
__________________________________________________________________
<S>                                         <C>          <C>
Premiums                                    $10,096.6    $ 9,436.1
Net investment income                           441.3        408.2
Fees and other income                         1,549.2      1,368.0
Net realized capital gains                       52.5          4.5
                                            ______________________
   Total revenue                             12,139.6     11,216.8
                                            ______________________
Current and future benefits                   8,387.0      7,627.9
Operating expenses                            2,683.3      2,517.6
Amortization of goodwill and other
 acquired intangible assets                     364.6        371.2
Amortization of deferred policy
 acquisition costs                               11.9         22.2
Severance and facilities charges                453.0            -
                                            ______________________
Income before income taxes                      239.8        677.9
Income taxes                                    146.7        332.7
                                            ______________________
Net income                                  $    93.1    $   345.2
__________________________________________________________________
                                            ______________________
Net realized capital gains, net of
 tax (included above)                       $    34.4    $     2.1
__________________________________________________________________
                                            ______________________
<FN>

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

In order to provide a comparison that management believes better
reflects the underlying performance of the Health Risk and Group
Insurance and Other Health businesses, the pro forma earnings
discussion that follows excludes amortization of goodwill and
other acquired intangible assets, severance and facilities
charges, and the other items mentioned above.  The table below
sets forth earnings on such a basis for the Health Risk and Group
Insurance and Other Health businesses, and other related
information.

<TABLE>
<CAPTION>

(Millions)                                 1996           1995
_________________________________________________________________
<S>                                        <C>            <C>

Health Risk                                $ 461.9        $ 499.1
Group Insurance and Other Health             218.2          151.6
                                           _______        _______
   Total Aetna U.S. Healthcare             $ 680.1        $ 650.7
                                           _______        _______
                                           _______        _______

Health Risk Medical Loss Ratios               81.5%          78.5%
                                           _______        _______
                                           _______        _______
Health Risk SG&A Ratios                       14.5%          14.9%
                                           _______        _______
                                           _______        _______
</TABLE>

Although Aetna U.S. Healthcare's 1996 pro forma earnings on this
basis increased $29 million, the segment's results reflect a
decrease in Health Risk earnings of $37 million.


<PAGE> 9

Aetna U.S. Healthcare (Continued)

The decrease in 1996 pro forma earnings in the Health Risk
business resulted from two offsetting components.  These earnings
were significantly impacted by 4% lower Commercial HMO premiums
per member per month combined with 4% higher Commercial HMO and
13% higher Medicare HMO medical costs per member per month.
Partially offsetting these negative factors were material benefits
from increased HMO enrollment, favorable adjustments to claim
benefit reserve estimates for indemnity and PPO products,
favorable tax reserve developments, increased net investment
income and slower growth in operating expenses relative to
premiums.  The decrease in Commercial HMO premiums per member per
month resulted from competitive pricing pressures and changes in
product mix.  The increase in Commercial HMO medical costs per
member per month resulted from higher outpatient facility and
pharmacy costs.  The increase in Medicare HMO medical costs per
member per month resulted from increased inpatient facility and
pharmacy costs.

The increase in 1996 pro forma earnings for the Group Insurance
and Other Health business is primarily attributable to favorable
group life mortality experience, as well as increased Group
Insurance sales and enrollment in nonrisk health products,
partially offset by increased costs resulting from higher
disability claim volume.

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

<TABLE>
<CAPTION>
                                     December 31, 1996              December 31, 1995*
                              ______________________________    _____________________________
(Thousands)                   Risk      Nonrisk      Total      Risk      Nonrisk      Total
____________________________________________________________    _____________________________
<S>                           <C>       <C>          <C>        <C>       <C>         <C>
HMO
  Commercial (1)               3,326       531         3,857     2,950       330        3,280
  Medicare                       303        19           322       207        18          225
  Medicaid                       134         -           134       115         -          115
                               _____     _____        ______     _____     _____       ______
    Total HMO                  3,763       550         4,313     3,272       348        3,620
POS                              325     2,334         2,659       230     1,895        2,125
PPO                              776     3,050         3,826       833     3,039        3,872
CHAMPUS                            -         -             -       721         -          721
Indemnity                        530     2,882         3,412       758     3,300        4,058
                               _____     _____        ______     _____     _____       ______
  Total Health Membership      5,394     8,816        14,210     5,814     8,582       14,396
                               _____     _____        ______     _____     _____       ______
                               _____     _____        ______     _____     _____       ______
Group Insurance (2):
  Group Life (3)                                       8,533                            8,017
                                                      ______                           ______
                                                      ______                           ______
  Disability                                           2,495                            2,155
                                                      ______                           ______
                                                      ______                           ______
  Long-Term Care                                          93                               93
                                                      ______                           ______
                                                      ______                           ______
<FN>
*   1995 membership is presented on a basis consistent with 1996.
(1) Includes 806 thousand and 504 thousand POS members who utilize the HMO network at
    December 31, 1996 and 1995, respectively.
(2) Many Group Insurance members participate in more than one type of Aetna U.S. Healthcare
    coverage and are counted in each.
(3) Group Life includes members with accident coverages.
</TABLE>

Total health membership as of December 31, 1996 increased by .5
million members, or 4% when compared to December 31, 1995,
excluding a reduction of .7 million members resulting from the
nonrenewal of the Civilian Health and Medical Program of the
Uniformed Services ("CHAMPUS") contract.  Membership increases in
Commercial HMO (increased by 18%) and POS (increased by 25%) were
offset by a decline in indemnity enrollment (decreased by 16%),
which includes the continued migration of indemnity members to
POS.

Revenue in 1996 for Aetna U.S. Healthcare, excluding net realized
capital gains, increased by $875 million or 8%, primarily due to
increases in the number of members enrolled in Commercial and
Medicare HMO and POS products and covered by Group Insurance.
These increases were partially offset by the nonrenewal of the
CHAMPUS contract and lower PPO and indemnity premiums resulting
from declines in membership.


<PAGE> 10

Aetna U.S. Healthcare (Continued)

Operating expenses for Aetna U.S. Healthcare increased during 1996
due primarily to the continued migration of members from the
indemnity product to more resource-intensive POS and HMO products.
Such increase was partially offset by the impact of continuing
cost reduction efforts which have resulted in a reduction in
operating expenses as a percentage of revenue.

Outlook

Management expects that Aetna U.S. Healthcare will be the primary
source of earnings for the Company.  The Company intends to
continue to enter new geographic markets and expand its presence
in the Medicare and Commercial risk business.  In doing so, the
Company may seek investments or divestitures in order to
effectively focus resources and strengthen its market position.

With the market shift from traditional indemnity plans toward HMO,
POS and other managed care products and the increased importance
of managed care to the Company since the merger with U.S.
Healthcare, the ability to profitably grow the managed care risk
business and obtain adequate pricing in an increasingly
competitive environment while effectively managing medical costs
and operating expenses, and successfully integrate the former
separate health operations of Aetna Services and U.S. Healthcare
is of increasing importance.

See "Liquidity and Capital Resources - Health Legislation and
Regulation" and "Forward-Looking Information" for information
regarding other important factors that may materially affect Aetna
U.S. Healthcare.


<PAGE> 11

Aetna Retirement Services

<TABLE>
<CAPTION>

Operating Summary (Millions)                1996         1995         1994
________________________________________________________________________________
<S>                                         <C>          <C>          <C>
Premiums (1)                                $    180.7   $    260.2   $    235.7
Net investment income                          1,086.7      1,044.1        958.7
Fees and other income                            467.7        359.1        316.0
Net realized capital gains (losses)               27.1         42.7         (5.6)
                                            ____________________________________
    Total revenue                              1,762.2      1,706.1      1,504.8
                                            ____________________________________
Current and future benefits (1)                1,035.9      1,061.4        983.5
Operating expenses                               337.5        303.8        258.9
Amortization of deferred policy
  acquisition costs                               74.3         46.1         27.4
Severance and facilities charge                   49.0            -            -
                                            ____________________________________
Income before income taxes                       265.5        294.8        235.0
Income taxes                                      79.3         96.8         75.9
                                            ____________________________________
Net income                                  $    186.2   $    198.0   $    159.1
________________________________________________________________________________
                                            ____________________________________
Net realized capital gains (losses),
  net of tax (included above)               $     17.8   $     27.0   $     (3.8)
________________________________________________________________________________
                                            ____________________________________
Deposits not included in premiums above:
  Annuities - fixed options                 $  1,362.3   $  1,306.8   $  1,307.2
  Annuities - variable options                 2,759.3      1,939.2      1,340.4
  Individual Life Insurance                      443.2        539.1        318.7
                                            ____________________________________
      Total                                 $  4,564.8   $  3,785.1   $  2,966.3
________________________________________________________________________________
                                            ____________________________________
Assets under management:(2)
  Annuities - fixed options                 $ 11,692.4   $ 11,076.8   $ 10,070.3
  Annuities - variable options (3)            14,468.1     10,489.0      7,146.6
  Other investment advisory (4)                3,064.9        968.6        906.0
                                            ____________________________________
      Financial services                      29,225.4     22,534.4     18,122.9
  Individual Life Insurance                    2,837.3      2,599.7      2,226.9
                                            ____________________________________
      Total                                 $ 32,062.7   $ 25,134.1   $ 20,349.8
________________________________________________________________________________
                                            ____________________________________

Individual life insurance coverage issued   $  5,740.3   $  6,200.6   $  5,606.2
________________________________________________________________________________
                                            ____________________________________

Individual life insurance coverage in force $ 48,983.4   $ 47,173.5   $ 43,173.8
________________________________________________________________________________
                                            ____________________________________
<FN>

(1) Includes $71.8 million, $81.9 million and $67.4 million for 1996, 1995 and 1994,
    respectively, for annuity premiums on contracts converting from the accumulation
    phase to payout options with life contingencies.

(2) Excludes net unrealized capital gains (losses) of $366 million, $797 million and
    $(387) million at December 31, 1996, 1995 and 1994, respectively.

(3) Includes $4,724.8 million, $2,604.2 million and $902.9 million at December 31, 1996,
    1995 and 1994, respectively, related to assets held and managed by unaffiliated
    mutual funds.

(4) 1996 includes $1,957.3 million of assets under management that were previously
    reported in the Large Case Pensions segment, reflecting the consolidation of the
    Company's investment advisory services.
</TABLE>

Aetna Retirement Services ("ARS") offers financial services and
individual life insurance products.  Financial services products
include fixed and variable annuity contracts, investment advisory
services and pension plan administrative services and are offered
primarily to individuals, pension plans, small businesses, and
employer-sponsored groups in the health care, government, and
education markets.  Individual life insurance products include
universal life, variable universal life, traditional whole life
and term insurance.

<PAGE> 12

Aetna Retirement Services (Continued)

ARS' 1996 net income includes an after-tax severance and
facilities charge of $32 million (see "Severance and Facilities
Charges").  Excluding this charge and net realized capital gains
and losses, ARS' results increased $29 million and $8 million in
1996 and 1995, respectively, reflecting improved earnings from
financial services products, and, in 1996, individual life
insurance products.

The table below sets forth earnings by product type, excluding the
1996 severance and facilities charge and net realized capital
gains and losses:

<TABLE>
<CAPTION>

(Millions)                                       1996        1995        1994
________________________________________________________________________________
<S>                                              <C>         <C>         <C>

Financial services                               $ 120.7     $  99.8     $  91.6
Individual life insurance                           79.5        71.2        71.3
                                                 _______     _______     _______
 Total                                           $ 200.2     $ 171.0     $ 162.9
                                                 _______     _______     _______
                                                 _______     _______     _______

</TABLE>

The increases in 1996 and 1995 earnings for financial services
products reflect increased fee income primarily from increased
assets under management.  Assets under management increased from
continued business growth through deposits and appreciation in the
stock market.  These improved 1996 earnings also reflect increased
interest margins, primarily related to experience rated contracts.
Partially offsetting increases in fee income were increased
operating expenses associated with business growth and, in 1996,
investments in nontraditional distribution channels such as
broker/dealers and banks.

Earnings from individual life insurance products increased $8
million in 1996, primarily due to favorable mortality experience.

Premiums relate to traditional life insurance and annuity products
containing life contingencies.  Premiums decreased by $80 million
in 1996 and increased by $25 million in 1995.  The 1996 decrease
resulted primarily from ARS ceasing to write structured settlement
annuities in the fourth quarter of 1995.  The 1995 increase
resulted primarily from increases in annuitizations (participants
electing to convert contracts from the accumulation phase to
payout options with life contingencies) and immediate annuity
sales.

Deposits relate to annuity contracts not involving life
contingencies and to universal life contracts.  Deposits increased
21% in 1996 reflecting continued business growth.  The increase in
1995 reflected the acquisition of a $471 million variable annuity
and universal life block of business.

Assets under management increased by 20% (excluding $2.0 billion
of assets under management that were previously reported in the
Large Case Pensions segment) during 1996 primarily due to
continued business growth and overall improvement in the stock
market.


<PAGE> 13

Aetna Retirement Services (Continued)

Of the $11.7 billion, $11.1 billion and $10.1 billion of fixed
annuity assets under management at December 31, 1996, 1995 and
1994, respectively, 25%, 23% and 20%, respectively, were fully
guaranteed and 75%, 77% and 80%, respectively, were experience
rated.  The average earned rate on investments supporting fully
guaranteed investment contracts was 7.9%, 8.2% and 8.5%, and the
average earned rate on investments supporting experience rated
investment contracts was 8.0%, 8.1% and 8.2% for the years ended
December 31, 1996, 1995 and 1994, respectively.  The average
credited rate on fully guaranteed investment contracts was 6.7%,
6.9% and 6.7%, and the average credited rate on experience rated
investment contracts was 6.0%, 6.2% and 6.2% for the years ended
December 31, 1996, 1995 and 1994, respectively.  The resulting
interest margins on fully guaranteed investment contracts were
1.2%, 1.3% and 1.8% and on experience rated investment contracts
were 2.0%, 1.9% and 2.0% for the years ended December 31, 1996,
1995 and 1994, respectively.

The duration of the investment portfolios supporting ARS'
liabilities is regularly monitored and adjusted in order to
maintain an aggregate duration that is within 0.5 years of the
estimated duration of the underlying liabilities (see "General
Account Investments").

Outlook

ARS' strategy involves a variety of actions designed to increase
assets under management or otherwise improve profitability.  ARS
recently established, and plans to expand, its financial planning
business, which offers financial advice on planning for
retirement.  In connection with broadening its financial planning
relationships with existing customers, ARS intends to increase the
number of products sold per customer.  ARS will also seek to
increase sales of proprietary investment products such as variable
funding options, by developing new products and expanding
marketing.  ARS will examine opportunities to increase revenue
derived from arrangements with unaffiliated investment managers
whose products are offered as variable funding options.  ARS
expects to realize expense savings as a result of the severance
and facilities actions taken in 1996 and will also explore
opportunities to continue to manage expenses to make its
businesses more competitive.  Management believes that ARS will be
an important source of earnings to the Company.

See "Forward-Looking Information" for information regarding other
important factors that may materially affect ARS.



<PAGE> 14

International

<TABLE>
<CAPTION>
Operating Summary (Millions)                1996        1995        1994
____________________________________________________________________________
<S>                                         <C>         <C>         <C>
Premiums                                    $1,166.1    $1,038.5    $  887.1
Net investment income                          334.2       308.7       308.4
Fees and other income                          124.2       115.0        97.0
Net realized capital gains (losses)              6.5        (2.4)        4.5
                                            ________________________________
  Total revenue                              1,631.0     1,459.8     1,297.0
                                            ________________________________
Current and future benefits                    996.8       911.2       782.7
Operating expenses                             377.2       340.6       340.2
Interest expense                                 8.2         7.4         5.6
Amortization of goodwill and other
  acquired intangible assets                     3.0         2.5         4.0
Amortization of deferred policy
  acquisition costs                             73.9        70.8        65.7
                                            ________________________________
Income before income taxes                     171.9       127.3        98.8
Income taxes                                    62.0        40.7        27.6
                                            ________________________________
Net income                                  $  109.9    $   86.6     $  71.2
____________________________________________________________________________
                                            ________________________________
Net realized capital gains (losses),
  net of tax (included above)               $    4.4    $   (2.1)    $   2.1
____________________________________________________________________________
                                            ________________________________
</TABLE>

The International segment, through subsidiaries and joint venture
operations, sells primarily life insurance, health insurance and
financial services products in non-U.S. markets including Taiwan,
Mexico, Canada, Chile, Malaysia, Hong Kong, New Zealand, Peru,
Argentina, Philippines and Indonesia.

International's net income increased $23 million in 1996,
following a $15 million increase in 1995.  Excluding net realized
capital gains and losses and amortization of goodwill and other
acquired intangible assets, earnings increased $17 million in
1996, following an $18 million increase in 1995.  Results in 1996
reflected continued growth in the established Asia Pacific and
Latin American operations, particularly Taiwan and Chile, despite
the weakening of certain Asia Pacific currencies.  Partially
offsetting such improvement were increased losses related to
start-up operations in Peru, Argentina, the Philippines and
Indonesia, and decreased earnings in Mexico due to a decline in
interest rates.  Results in 1995 reflected growth in the Asia
Pacific operations and increased earnings in Mexico.  Changes in
exchange rates in 1996 and 1995 did not have a material impact on
International's earnings.

Premiums in 1996 were 12% higher than in 1995, following a 17%
increase in 1995 premiums as compared with 1994.  The increases in
premiums were primarily due to increased sales in the Asia Pacific
market.  Partially offsetting the 1995 increase was a reduction in
premiums due to the Company's change during 1994 of its accounting
for an affiliate from the consolidated basis of accounting to the
equity basis of accounting.  Excluding the change in accounting,
1995 premiums increased 29%.  The lower premium growth rate in
1996 was primarily due to strategic decisions to exit low margin
product businesses in Canada and Latin America.

In December 1996, the Company acquired a 49.0% stake in a new bank
assurance joint venture with its Mexican partner that offers
insurance products through the partner's bank subsidiary.  The
Company invested $115 million in the joint venture and agreed to
invest up to an additional $63 million based on the performance of
the new company over the first five years of operations.  The
Company invested approximately $36 million and acquired a 49.0%
stake in a separate joint venture to manage pension funds
privatized under recent Mexican legislation.  The Company also
increased its ownership in its existing Mexican insurance joint
venture from 44.5% to 49.0% for an additional $20 million.


<PAGE> 15

International (Continued)

Outlook

International seeks to invest in new emerging markets outside the
U.S. that have the potential for attractive long-term returns.
The Company also explores opportunities for additional investments
in markets where it currently has a presence.  These investments
are generally made through the acquisition of part or all of an
existing company or an investment in a start-up operation.
Acquisitions of existing companies generally require large initial
capital expenditures and may result in immediate earnings.  These
earnings may, however, be offset in whole or in part, by the
amortization of goodwill and intangible assets related to the
acquisition.  Investments in start-up operations generally require
less initial capital, but generally do not generate earnings for a
number of years.

In February 1997, the Company entered into an agreement in
principle to acquire up to 49% of a joint venture to be formed
with Sul America Seguros, Brazil's largest insurance company.  The
joint venture would provide health, life and private pension plan
products.  The Company would invest approximately $300 million in
the joint venture initially and up to an additional $90 million
over time based on future performance of the joint venture.  The
transaction is subject to completion of due diligence, regulatory
approvals, final documentation, and other customary conditions and
is expected to close during the second quarter of 1997.

Management believes that International will be an important source
of earnings to the Company.

See "Forward-Looking Information" for information regarding other
important factors that may materially affect International.


<PAGE> 16

Large Case Pensions

<TABLE>
<CAPTION>
Operating Summary (Millions)               1996         1995         1994
_______________________________________________________________________________
<S>                                        <C>          <C>          <C>
Premiums                                   $    176.8   $    264.9   $    234.4
Net investment income                         1,649.2      1,850.6      2,017.4
Fees and other income                            81.4        135.3        128.4
Net realized capital gains (losses)              30.9         18.1        (25.0)
                                           ____________________________________
    Total revenue                             1,938.3      2,268.9      2,355.2
                                           ____________________________________
Current and future benefits                   1,686.3      2,036.1      2,175.9
Operating expenses                               58.6        100.1         98.2
Reductions of loss on discontinued
 products                                      (202.3)           -            -
                                           ____________________________________
Income before income taxes                      395.7        132.7         81.1
Income taxes                                    137.3         43.5         26.7
                                           ____________________________________
Net income                                 $    258.4   $     89.2   $     54.4
_______________________________________________________________________________
                                           ____________________________________
Net realized capital gains (losses),
  net of tax (included above)              $     20.8   $     11.0   $    (17.0)
_______________________________________________________________________________
                                           ____________________________________
Deposits not included in premiums above:
    Fully guaranteed discontinued
     products                              $     17.7   $     31.5   $    212.3
    Experience rated                            789.0        719.9        630.8
    Nonguaranteed                               975.1        848.8      1,139.1
                                           ____________________________________
      Total                                $  1,781.8   $  1,600.2   $  1,982.2
_______________________________________________________________________________
                                           ____________________________________
Assets under management: (1)(2)
    Fully guaranteed discontinued
     products                              $  8,477.1   $  9,903.6   $ 12,100.1
    Experience rated                         16,103.2     17,078.6     16,212.3
    Nonguaranteed                            10,749.3     18,634.1     18,568.5
                                           ____________________________________
      Total                                $ 35,329.6   $ 45,616.3   $ 46,880.9
_______________________________________________________________________________
                                           ____________________________________
<FN>

(1) Excludes net unrealized capital gains (losses) of $321 million, $789 million
    and $(539) million at December 31, 1996, 1995 and 1994, respectively.

(2) 1996 excludes $1,957.3 million of assets under management which were transferred
    to the Aetna Retirement Services segment, reflecting the consolidation of the
    Company's investment advisory services.

</TABLE>

The Large Case Pensions segment manages a variety of retirement
products (including pension and annuity products) for primarily
defined benefit and defined contribution plans.  These products
provide a variety of funding and benefit payment distribution
options and other services.  Certain products provide investment
guarantees.

Large Case Pensions' net income increased $169 million in 1996,
following a $35 million increase in 1995.  Large Case Pensions'
earnings, excluding the 1996 reductions of the loss on
discontinued products ($132 million after tax) discussed below,
and net realized capital gains and losses, increased $28 million
in 1996, following a $7 million increase in 1995.  Earnings in
1996 included a $10 million increase in investment income from
distributions from leveraged buyout and venture capital limited
partnership investments supporting Large Case Pensions' capital
and an increase in net interest margins.  The increase in 1995
earnings reflected an increase in fees and other income and in net
interest margins.  Results in 1996 and 1995 were partially offset
by the effect of reduced net investment income as a result of
reducing capital supporting the Large Case Pensions segment and
also lower interest rates in 1995.

After-tax net realized capital gains in 1996 include a gain of $25
million on the sale of Aetna Realty Investors ("ARI"), which was
partially offset by net realized capital losses on bond sales.
The earnings of ARI were not material to Large Case Pensions' net
income.

Assets under management decreased during 1996 primarily as a
result of the sale of Insurance Company Investment Management
("ICIM"), a specialized asset manager.  ICIM was not a significant
contributor to Large Case Pensions' earnings.

<PAGE> 17

Large Case Pensions (Continued)

General account assets supporting experience rated products may be
subject to participant or contractholder withdrawal. Participant
withdrawals are generally subject to significant tax and plan
constraints.  Experience rated contractholder and participant
withdrawals and transfers were as follows (excluding contractholder
transfers to other Company products):

<TABLE>
<CAPTION>
(Millions)                                         1996        1995        1994
___________________________________________________________________________________
<S>                                                <C>         <C>         <C>
Scheduled contract maturities
  and benefit payments (1)                         $1,089.1    $1,012.3    $1,000.1
Contractholder withdrawals other than scheduled
  contract maturities and benefit payments (2)        506.2 (3)   381.3       590.6
Participant withdrawals (2)                           170.8       182.2       183.6

<FN>
(1) Includes payments made upon contract maturity and other amounts distributed in
    accordance with contract schedules.
(2) At December 31, 1996, approximately $2.0 billion of experience rated pension contracts
    allowed for unscheduled contractholder withdrawals, subject to timing restrictions and
    formula-based market value adjustments.  Further, at December 31, 1996, approximately
    $3.5 billion of such contracts supported by general account assets could be withdrawn or
    transferred to other plan investment options at the direction of plan participants
    without market value adjustment.
(3) Increase primarily relates to an unscheduled withdrawal by one contractholder in
    the first quarter of 1996.
</TABLE>

Outlook

Large Case Pensions' earnings are expected to decline due to
reductions in net interest margins and fees resulting from lower
assets under management as obligations mature and benefits are paid,
and reductions in investment income, as capital supporting Large Case
Pensions is redeployed to other businesses.

See "Forward-Looking Information" for information regarding other
important factors that may materially affect Large Case Pensions.

Discontinued Products

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

Under the Company's accounting for its discontinued fully guaranteed
large case pension products, the reserves for anticipated future
losses are reviewed by management quarterly.  Accordingly, as long as
the reserves represent management's then best estimates of expected
future losses, results of operations of the discontinued products,
including net realized capital gains and losses, are credited/charged
to the respective reserve and do not affect the Company's results of
operations.  As a result of management's reviews in 1996, $202
million (pretax) of the reserve related to GICs was released
primarily as a result of favorable developments in real estate
markets.  The reserves at December 31, 1996 reflect management's best
estimate of the anticipated future net losses for GICs and SPAs.  To
the extent that actual future losses are greater or less than
anticipated, the Company's results of operations would be adversely
or positively affected, respectively.

<PAGE> 18

Large Case Pensions (Continued)

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 each
discontinued product.  Interest is accrued on the receivables at
the discount rate used to calculate the loss on discontinuance.
The offsetting payable, on which interest is similarly accrued, is
reflected in continuing products.  Interest on the payable
generally offsets the investment income on the assets available to
fund the shortfall.  During 1996, the GIC receivable of $315
million, net of the related deferred taxes payable on the accrued
interest income of $19 million, was funded from continuing
products to meet liquidity needs from maturing GICs.  At December
31, 1996, for SPAs, the receivable from continuing products, net
of related deferred taxes payable of $32 million on the accrued
interest income, was $493 million.  As of December 31, 1996, no
funding of the SPA receivable had taken place.

GIC and SPA results were as follows:

<TABLE>
<CAPTION>
(Millions)                                   1996       1995       1994
___________________________________________________________________________
<S>                                          <C>        <C>        <C>
GICs:
Interest margin                              $   10.5    $ (61.1)  $  (86.1)
Net realized capital gains (losses)              56.7*     (38.8)     (97.6)
Interest earned on receivable from
  continuing products                             9.5       13.2       12.6
Other, net                                        3.1        3.9        6.5
                                             ________    _______   ________
Results of GICs, after tax                   $   79.8    $ (82.8)  $ (164.6)
                                             ________    _______   ________
                                             ________    _______   ________
Results of GICs, pretax                      $  124.9    $(124.2)  $ (254.4)
                                             ________    _______   ________
                                             ________    _______   ________
Net realized capital gains (losses)
   from sales of bonds, after tax,
   included above                            $    3.9    $  (1.8)  $  (35.5)
                                             ________    _______   ________
                                             ________    _______   ________

SPAs:
Interest margin                              $   15.8   $    2.5   $    (.7)
Net realized capital gains (losses)              22.5*      30.2      (38.2)
Interest earned on receivable from
  continuing products                            20.2       19.8       18.3
Other, net                                       13.2        4.1       13.1
                                             ________   ________    _______
Results of SPAs, after tax                   $   71.7   $   56.6   $   (7.5)
                                             ________   ________   ________
                                             ________   ________   ________
Results of SPAs, pretax                      $  105.4   $   86.0   $  (18.6)
                                             ________   ________   ________
                                             ________   ________   ________
Net realized capital gains (losses)
   from sales of bonds, after tax,
   included above                            $    3.8   $   41.7   $  (15.7)
                                             ________   ________   ________
                                             ________   ________   ________
<FN>

* Includes net realized capital gains of $52.6 million for GICs and $20.1 million for
  SPAs resulting from the sale of a real estate investment and other gains from
  favorable developments in the real estate market.
</TABLE>

The interest margin for the discontinued products represents the
difference between the earnings on the invested assets supporting
fully guaranteed large case pension contracts and the interest
credited to the holders of such contracts.  The interest margins
for GICs and SPAs for the year ended 1996 were favorably affected
by, and the respective reserves for anticipated future losses were
credited for, nonrecurring items including rental income received
on a foreclosed property of $6 million (after tax) related to GICs
and $3 million (after tax) related to SPAs, as well as other
favorable results on the invested assets.  This rental income had
previously not been recognized due to uncertainties associated
with its ultimate collection.  The interest margins for the GIC
products for 1996, 1995 and 1994 include losses (pretax) of $4
million, $50 million and $4 million, respectively, due to the
early retirement of $183 million, $728 million and $633 million of
contract liabilities in 1996, 1995 and 1994, respectively.  These
losses improve interest margins in future periods.


<PAGE> 19

Large Case Pensions (Continued)

The Company periodically reviews its liquidity needs associated
with GIC and SPA contract liabilities.  The Company continually
considers the need for liquidity such as borrowings between GICs
and SPAs or from continuing products, as well as funding of the
SPA receivable from continuing products.

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

<TABLE>
<CAPTION>

(Millions)                           GICs        SPAs        Total
_____________________________________________________________________
<S>                                  <C>         <C>         <C>

Reserve at December 31, 1993         $  600.0    $  670.0    $1,270.0
  Results of discontinued products     (254.4)      (18.6)     (273.0)
                                     ________    ________    ________
Reserve at December 31, 1994            345.6       651.4       997.0
  Results of discontinued products     (124.2)       86.0       (38.2)
                                     ________    ________    ________
Reserve at December 31, 1995            221.4       737.4       958.8
  Results of discontinued products      124.9       105.4       230.3
  Reserve releases                     (202.3)          -      (202.3)
                                     ________    ________    ________
Reserve at December 31, 1996         $  144.0    $  842.8    $  986.8
                                     ________    ________    ________
                                     ________    ________    ________
</TABLE>

Distributions on GICs and SPAs were as follows:

<TABLE>
<CAPTION>
(Millions)                          1996       1995       1994
__________________________________________________________________
<S>                                 <C>        <C>        <C>
GICs:
Scheduled contract maturities,
 GIC settlements and benefit
 payments (1)                       $2,082.6   $2,685.6   $2,340.3

Participant directed withdrawals        52.0       92.8      198.5

SPAs:
Scheduled contract maturities
 and benefit payments                  526.4      522.9      531.6

<FN>
(1)  Includes early retirement of GIC liabilities of $183.3 million, $728.0 million
     and $632.6 million in 1996, 1995 and 1994, respectively.
</TABLE>

Cash required to fund these distributions was provided by earnings
and scheduled payments on and sales of invested assets and, for
GICs, from the funding of the receivable from continuing products
which was established at the time of discontinuance.

At December 31, 1996, contractholder liabilities were $3.3 billion
and $4.8 billion for GICs and SPAs, respectively.  Scheduled
maturities, future benefit payments, and other expected payments
of GICs and SPAs, including future interest, were as follows:

<TABLE>
<CAPTION>
(Millions)                         GICs            SPAs
____________________________________________________________
<S>           <C>                  <C>             <C>
                    1997           $1,205.5        $  519.1
                    1998              915.0           511.0
                    1999              753.0           503.1
                    2000              396.8           495.1
                    2001              328.6           489.9
               2002-2006              265.1         2,347.3
               2007-2011               13.4         2,126.6
               2012-2016                1.4         1,787.7
               2017-2021                  -         1,399.7
              Thereafter                  -         2,548.7
</TABLE>

See Note 9 of Notes to Financial Statements and "General Account
Investments."


<PAGE> 20

Corporate

<TABLE>
<CAPTION>

Operating Summary (Millions, after tax)     1996         1995         1994
________________________________________________________________________________

<S>                                         <C>          <C>          <C>
Interest expense                            $    103.9   $     70.4   $     60.5
Other expense, net (1)                      $    304.2   $    115.5   $    156.5
<FN>

(1) Includes after-tax net realized capital gains of $5.0 million and $.7 million
    in 1996 and 1995, respectively, and net realized capital losses of $8.9 million
    in 1994.

</TABLE>

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

The 1996 increase in interest expense resulted from borrowings
incurred in connection with the U.S. Healthcare merger.  The 1995
increase in interest expense resulted primarily from the issuance
by a subsidiary of 9 1/2% cumulative monthly income preferred
securities in November 1994.

Excluding net realized capital gains and losses and an after-tax
severance and facilities charge of $235 million in 1996 (see
"Severance and Facilities Charges"), other expense decreased $43
million in 1996 and $31 million in 1995.  Other expense in 1996
included $37 million (after tax) of interest income earned on the
net proceeds from the sale of the Company's property-casualty
operations from April 2, 1996, the date of the property-casualty
sale, through July 19, 1996, the closing date of the merger with
U.S. Healthcare.  Other expense in 1996 also reflected
significantly lower corporate staff area expenses due to increased
cost reduction efforts, partially offset by higher advertising
costs.  The decrease in other expense in 1995 resulted primarily
from a reduction of corporate staff area expenses as a result of
previous restructurings.


<PAGE> 21

Severance and Facilities Charges

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

         Aetna U.S. Healthcare - In the fourth quarter, Aetna U.S.
         _____________________
         Healthcare recorded a charge of $275 million (after tax)
         principally related to actions taken or expected to be
         taken with respect to the integration of the health
         businesses of Aetna Services and U.S. Healthcare.  The
         severance portion of this charge is based on a plan to
         eliminate 7,500 positions (primarily service center,
         medical management, administrative and data center
         personnel).  A charge of $20 million (after tax) was also
         recorded by Aetna U.S. Healthcare in the second quarter
         primarily related to actions, not related to the U.S.
         Healthcare merger, taken or expected to be taken to
         reduce information technology costs.  The severance
         portion of this charge included a plan to eliminate 675
         positions.  By year-end, a large portion of these actions
         was completed.

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

         Corporate - In connection with the sale of the Company's
         _________
         property-casualty operations, the Company vacated, and
         Travelers subleased, the space that the Company occupied
         in the CityPlace office facility in Hartford at market
         rates for a period of eight years.  The Company recorded
         a charge of $190 million (after tax) during the second
         quarter representing the present value of the difference
         between rent required to be paid by the Company under the
         lease and future rentals expected to be received by the
         Company.  The Company also recorded a charge of
         $45 million (after tax) during the second quarter for
         actions taken or expected to be taken to reduce the level
         of corporate expenses and other costs previously absorbed
         by the property-casualty operations.  The severance
         portion of this charge includes the planned elimination
         of 475 positions.

These charges for 1996 include the following components (pretax):

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

Aetna U.S. Healthcare               $  277.9      $   84.9      $   64.5      $   25.7     $  453.0
Aetna Retirement Services               42.8           1.5           1.9           2.8         49.0
Corporate:  Other                       28.5          18.0         313.2 (1)       3.0        362.7
                                    ________      ________      ________      ________     ________

     Total Company                  $  349.2      $  104.4      $  379.6      $   31.5     $  864.7
                                    ________      ________      ________      ________     ________
                                    ________      ________      ________      ________     ________

<FN>
(1)  Includes $292.2 million related to the CityPlace lease.

</TABLE>

<PAGE> 22

Severance and Facilities Charges (Continued)

The Aetna U.S. Healthcare severance actions related to the charge
recorded in the fourth quarter are expected to be substantially
completed by the end of 1998.  The Aetna Retirement Services
severance actions are expected to be substantially completed by
March 31, 1998.  The Corporate severance actions and the vacating
of the leased office space are expected to be substantially
completed in 1997.  The remaining lease payments (net of expected
subrentals) on these facilities (other than the CityPlace office
facility) are payable over approximately the next three years.
(See Note 8 of Notes to Financial Statements.)

<PAGE> 23

General Account Investments

Overview

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

<TABLE>
<CAPTION>
                                                          December 31,
                                                    ________________________
(Millions)                                          1996          1995
____________________________________________________________________________
<S>                                                 <C>           <C>
Invested Assets:
    Fully Guaranteed                                $ 11,075.5    $ 13,490.3
    Experience Rated                                  18,810.2      19,188.7
    Other                                             13,600.5      11,371.3
                                                    __________     _________
Total General Account Invested Assets, net of
 impairment reserves                                $ 43,486.2    $ 44,050.3
____________________________________________________________________________
                                                    ________________________

Net investment income                               $  3,565.2    $  3,575.1
____________________________________________________________________________
                                                    ________________________

</TABLE>

The Company's investment objective is to fund policyholder and
other liabilities in a manner that enhances shareholder and
contractholder value, subject to appropriate risk constraints.
The Company seeks to meet this investment objective through a mix
of investments that reflect the characteristics of the liabilities
they support, diversify the types of investment risks by interest
rate, liquidity, credit and equity price risk, and achieve asset
diversification by investment type, industry, issuer and
geographic location.  The Company regularly projects duration and
cash flow characteristics of its liabilities and makes appropriate
adjustments in its investment portfolios.

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.  In pursuing its investment and risk management
objectives, the Company uses assets whose market value is at least
partially determined by, among other things, levels of or changes
in domestic and/or foreign interest rates (short term or long
term), exchange rates, prepayment rates, equity markets or credit
ratings/spreads.  (See "Use of Derivatives and Other
Investments.")

Using financial modeling and other techniques, the Company
regularly evaluates the appropriateness of investments relative to
its management-approved investment guidelines and the business
objectives of the portfolios (including evaluating the interest
rate, liquidity, credit and equity price risk resulting from
derivative and other portfolio activities).  During 1996, the
Company operated within these investment guidelines by maintaining
a mix of investments that diversified its assets and reflected the
characteristics of the liabilities that they support.

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

<PAGE> 24

General Account Investments (Continued)

Debt Securities

As of December 31, 1996 and 1995, debt securities represented 74%
and 72%, respectively, of the Company's total general account
invested assets and were as follows:

<TABLE>
<CAPTION>
(Millions)                                      1996               1995
____________________________________________________________________________
<S>                                             <C>                <C>
Supporting discontinued products                $ 5,189.3          $ 5,765.2
Supporting experience rated products             14,888.9           14,243.4
Supporting remaining products                    12,258.1           11,851.7
____________________________________________________________________________
  Total debt securities                         $32,336.3          $31,860.3
____________________________________________________________________________
                                                ____________________________

</TABLE>

The increase in debt securities primarily reflects the addition of
approximately $655 million of debt securities acquired in
connection with the U.S. Healthcare merger and the investment of
net cash flow from mortgage loans, real estate and deposits to ARS
fixed funding options.  These increases were partially offset by a
decrease in net unrealized capital gains included in the debt
securities portfolio due to an increase in interest rates.  Debt
securities reflected net unrealized capital gains of $895 million
at December 31, 1996 compared with $1.9 billion at December 31,
1995.  Of these net unrealized capital gains at December 31, 1996,
$205 million and $399 million related to assets supporting
discontinued products and experience rated pension
contractholders, respectively.

The debt securities in the Company's portfolio are generally rated
by external rating agencies, and, if not externally rated, are
rated by the Company on a basis believed to be similar to that
used by the rating agencies.  As of December 31, 1996 and 1995,
the Company's investments in debt securities had average quality
ratings of AA- (38% and 40%, respectively, were AAA).  "Below
investment grade" debt securities which include "problem" debt
securities and "potential problem" debt securities (see page 25)
and carry a rating of below BBB-/Baa3 represented 5% of the
portfolio at December 31, 1996 and 1995.  See Note 4 of Notes to
Financial Statements for disclosures related to debt securities by
market sector.

Below Investment Grade, Problem and Potential Problem Debt Securities

Included in the Company's debt securities were the following:

<TABLE>
<CAPTION>
(Millions)                                                December 31,
__________________________________________________________________________
                                                       1996       1995
                                                       ____       ____
<S>                                                    <C>        <C>
"Below Investment Grade" Securities (1)(2)             $1,666.0   $1,623.8
"Problem" Debt Securities (included above)                 36.4       81.0
"Potential Problem" Debt Securities (included above)       82.5       90.4

<FN>
(1)  "Below Investment Grade" securities at December 31, 1996 and 1995 include
      24% and 33%, respectively, supporting discontinued products and 49% and
      43%, respectively, supporting experience rated products.
(2)  "Below Investment Grade" securities at December 31, 1996 and 1995 include
      $441.6 million and $625.1 million, respectively, of securities that were
      investment grade when purchased, but have since deteriorated in quality.
</TABLE>


<PAGE> 25

General Account Investments (Continued)

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

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

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

Residential Collateralized Mortgage Obligations

Included in the Company's debt securities were residential
collateralized mortgage obligations ("CMOs") supporting the
following:

<TABLE>
<CAPTION>

(Millions)                                      1996                        1995
___________________________________________________________________________________________
                                         Fair         Amortized      Fair         Amortized
                                         Value          Cost         Value          Cost
                                         _________    _________      ________     _________
<S>                                      <C>          <C>            <C>          <C>
Total residential CMOs (1)               $ 2,764.7    $ 2,665.8      $ 3,073.9    $ 2,866.5
                                         _________    _________      _________    _________
                                         _________    _________      _________    _________

Percentage of total:
  Supporting discontinued products             8.0%                        7.7%
  Supporting experience rated products        77.3                        78.3
  Supporting remaining products               14.7                        14.0
                                         _________                   _________
                                             100.0%                      100.0%
                                         _________                   _________
                                         _________                   _________

<FN>
(1)  At December 31, 1996 and 1995, approximately 66% and 70%, respectively, of the
     Company's residential CMO holdings were backed by government agencies
     such as GNMA, FNMA and FHLMC.
</TABLE>

There are various categories of CMOs which are subject to
different degrees of risk from changes in interest rates and, for
nonagency-backed CMOs, 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 December 31, 1996 and 1995, approximately 67% and 76%,
respectively, of the Company's CMO holdings were in planned
amortization class ("PAC") and sequential structure tranches,
which are subject to less prepayment and extension risk than other
types of CMO instruments.  At December 31, 1996 and 1995,
approximately 3% and 2%, respectively, of the Company's CMO
holdings were in interest-only ("IOs") and principal-only ("POs")
tranches, which are subject to more prepayment and extension risks
than other types of CMO instruments.  Remaining CMO holdings have
prepayment and extension risks falling between the degree of risk
associated with PACs and sequentials, and IOs and POs.


<PAGE> 26

General Account Investments (Continued)

Mortgage Loans

At December 31, 1996 and 1995, the Company's mortgage loan
investments, net of impairment reserves, supported the following
types of business:

<TABLE>
<CAPTION>
(Millions)                                 1996               1995
______________________________________________________________________
<S>                                        <C>                <C>
Supporting discontinued products           $ 2,730.7         $ 3,388.6
Supporting experience rated products         2,370.5           3,013.4
Supporting remaining products                1,599.7           1,925.2
______________________________________________________________________
   Total mortgage loans                    $ 6,700.9         $ 8,327.2
______________________________________________________________________
                                           ___________________________

</TABLE>

During 1996, the Company continued to manage its mortgage loan
portfolio to reduce the balance in absolute terms and relative to
invested assets, and to reduce its overall risk.  The $1.6 billion
decrease in the total mortgage loan portfolio primarily reflects
loan prepayments, repayments of maturing loans and foreclosures.

The Company has a comprehensive process for assessing individual
mortgage loans which includes an ongoing evaluation of key
attributes of the mortgage investment, specifically, debt service
coverage, cash flow sustainability, property condition, loan to
value, market/economic trends, deal structure, borrower strength
and ability to refinance.  Management establishes action plans
intended to reduce potential risk and maximize return on the
investment.  In addition, management performs a collateral
valuation on a regular basis for mortgage loans with a balance
greater than $5 million (approximately 83% of the total principal
balance of the portfolio) to help determine whether adjustments to
impairment reserves are warranted.

In 1996, the Company foreclosed on loans with a principal balance
of $261 million and collateral with a fair market value of $139
million.  Additional loans with a principal balance of $69 million
were in the process of foreclosure at year end.  In certain cases,
the Company has taken substantive possession of the property
supporting its loan, coupled with the borrower surrendering its
interest in the future economic benefits in the property.  Where
this has occurred, the loans are considered in-substance
foreclosures, and the Company writes them down to their fair
market value less selling costs and classifies them as real estate
held for sale.

Problem, Restructured and Potential Problem Loans

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

"Restructured loans" are loans where the Company modified the
original contract terms to grant concessions to the borrower and
are currently performing pursuant to the modified terms.
Restructured loans yielded cash returns of approximately 7% during
1996 and 1995.


<PAGE> 27

General Account Investments (Continued)

If a restructured loan has a market rate of interest at the time
of the restructure (which represents the interest rate the Company
would charge for a new loan with comparable risk) and demonstrates
sustainable performance (as generally evidenced by six months of
pre- or post-restructuring payment performance in accordance with
the restructured terms), the Company may return the loan to
performing status.

"Potential problem loans" are loans which are performing pursuant
to existing terms, but are loans the Company considers likely to
become classified as problem or restructured loans.  The Company
identifies these loans through the portfolio review process on the
basis of known information about the ability of borrowers to
comply with present loan terms.  Identifying potential problem
loans requires significant judgment as to likely future market
conditions and developments specific to individual properties and
borrowers.  The Company includes provision for losses that
management believes are likely to arise from such potential
problem loans in the specific impairment reserves.

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

<TABLE>
<CAPTION>
(Millions)                                      December 31,
___________________________________________________________________
                                            1996           1995
                                            ____           ____
<S>                                         <C>            <C>
Problem loans                               $  183.6       $  160.3
Restructured loans                             377.6          514.1
Potential problem loans                        239.9          839.1
                                            ________       ________
  Total (1)                                 $  801.1       $1,513.5
                                            ________       ________
                                            ________       ________

Specific impairment reserves on loans (2)   $  144.1       $  361.2
                                            ________       ________
                                            ________       ________

<FN>
(1) Total problem, restructured and potential problem loans at December 31, 1996
    and 1995 include 48% and 50%, respectively, supporting discontinued products
    and 32% and 34%, respectively, supporting experienced rated products.
(2) See Note 4 of Notes to Financial Statements.
</TABLE>

The Company does not accrue interest on problem loans or
restructured loans when management believes the collection of
interest is unlikely.  The amount of pretax investment income
required by the original terms of such problem and restructured
loans outstanding at December 31 and the portion thereof actually
recorded as income were as follows:

<TABLE>
<CAPTION>

(Millions)                             1996       1995       1994
____________________________________________________________________
<S>                                    <C>        <C>        <C>
Income which would have been recorded
 under original terms of loans         $  56.0    $  72.2    $ 127.2
Income recorded                           38.6       42.4       64.5
                                       _______    _______    _______
Lost investment income (1)             $  17.4    $  29.8    $  62.7
                                       _______    _______    _______
                                       _______    _______    _______

<FN>
(1) Lost investment income for 1996, 1995 and 1994 included 66%, 35% and 46%,
    respectively, related to income allocated to investments supporting discontinued
    products, and 22%, 52% and 36%, respectively, related to income allocated to
    investments supporting experience rated products.


</TABLE>

<PAGE> 28

General Account Investments (Continued)

Real Estate

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

<TABLE>
<CAPTION>
(Millions)                                  December 31,
____________________________________________________________
                                       1996         1995
                                       ____         ____
<S>                                    <C>          <C>
Investment real estate                 $  192.0     $  153.0


Properties held for sale (1)(2)(3)        658.2      1,124.3
                                       ________     ________
  Total                                $  850.2     $1,277.3
                                       ________     ________
                                       ________     ________
<FN>
(1) Includes $133.2 million and $190.4 million of in-substance foreclosures
    at December 31, 1996 and 1995, respectively.
(2) Properties held for sale at December 31, 1996 and 1995 include 48% and 56%,
    respectively, supporting discontinued products and 36% and 29%, respectively,
    supporting experience rated products.
(3) Foreclosed real estate classified as properties held for sale was carried at 57%
    and 61% of the Company's cash investment (unpaid mortgage balance plus capital
    additions) at December 31, 1996 and 1995, respectively.

</TABLE>

During 1996, 1995 and 1994, the Company sold real estate with a
carrying value of $666 million, $262 million and $415 million,
respectively, (including real estate supporting discontinued and
experience rated products).  These sales generated $113 million
(substantially all of which was allocable to discontinued and
experience rated products), $18 million and $11 million of after-
tax net realized capital gains in those years, respectively.
Total after-tax net realized capital (gains) losses from real
estate write-downs and changes in the valuation reserves were as
follows:

<TABLE>
<CAPTION>
(Millions)                                   1996        1995        1994
___________________________________________________________________________

<S>                                          <C>         <C>         <C>
Allocable to discontinued products           $ (1.6)     $ 30.9      $ 12.8
Allocable to experience rated products          2.9         5.1         2.9
Allocable to remaining products                17.6         2.2        (3.0)

</TABLE>

The Company intends to sell a significant amount of properties
held for sale over the next three years, real estate and capital
market conditions permitting.



<PAGE> 29

General Account Investments (Continued)

Use of Derivatives and Other Investments

The Company's use of derivatives is generally limited to hedging
activity and has principally consisted of using foreign exchange
forward contracts, futures contracts, interest rate swap
agreements and warrants to hedge interest rate, price and currency
risks.  These instruments, viewed separately, subject the Company
to varying degrees of market and credit risk.  However, when used
for hedging, the expectation is that these instruments would
reduce overall market risk.  Market risk is the possibility that
future changes in market prices may decrease the market value of
one or all of these financial instruments.  Credit risk arises
from the possibility that counterparties may fail to perform under
the terms of the contracts.  Management does not believe that its
current hedging activity will have a material effect on the
Company's liquidity or results of operations.  (See Note 5 of
Notes to Financial Statements.)

The Company also has investments in certain debt instruments with
derivative characteristics, including those where market value is
at least partially determined by, among other things, levels of or
changes in domestic and/or foreign interest rates (short term or
long term), exchange rates, prepayment rates, equity markets or
credit ratings/spreads.  The amortized cost and fair value of
these securities included in the debt securities portfolio as of
December 31, 1996 was as follows:

<TABLE>
<CAPTION>
                                                          Amortized       Fair
(Millions)                                                  Cost          Value
________________________________________________________________________________
<S>                                                       <C>           <C>
Residential collateralized mortgage obligations:          $2,665.8      $2,764.7
  Principal-only strips (included above)                      44.5          53.3
  Interest-only strips (included above)                       10.9          23.0
Other structured securities with derivative
  characteristics (1)                                        126.3         129.2

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

<PAGE> 30

Liquidity and Capital Resources

<TABLE>
<CAPTION>
(Millions)                                1996          1995           1994
________________________________________________________________________________
<S>                                       <C>           <C>            <C>
Consolidated Assets                       $92,912.9     $84,323.7 (1)  $75,486.7 (1)
________________________________________________________________________________
                                          ______________________________________

Shareholders' Equity                      $10,889.7     $ 7,272.8      $ 5,503.0
________________________________________________________________________________
                                          ______________________________________

Cash and Cash Equivalents
and Short-Term Investments                $ 2,185.8     $ 2,320.5      $ 2,621.6
________________________________________________________________________________
                                          ______________________________________

Aetna-obligated mandatorily redeemable
preferred securities of subsidiary
limited liability company holding
primarily debentures guaranteed by Aetna  $   275.0     $   275.0      $   275.0
________________________________________________________________________________
                                          ______________________________________

Long-Term Debt                            $ 2,380.0     $   989.1      $ 1,079.2
________________________________________________________________________________
                                          ______________________________________

Average Short-Term Debt                   $   427.4     $    96.0      $   213.7
________________________________________________________________________________
                                          ______________________________________

Interest Expense                          $   168.3     $   115.9      $    98.6
________________________________________________________________________________
                                          ______________________________________

<FN>
(1)  Includes net assets of Discontinued Operations of $3,932.8 million and
     $3,167.3 million in 1995 and 1994, respectively.
</TABLE>

The liquidity needs of the Company's businesses have generally
been met by cash provided by premiums, deposits, asset maturities
and income received on investments.  Cash provided from these
sources is used primarily for claim and benefit payments, contract
withdrawals and operating expenses.

See "Large Case Pensions" for a discussion of the liquidity
requirements specific to that business.  The following discussion
addresses the sources of liquidity available to meet the needs of
all of the Company's businesses.

Debt securities and mortgage loans have durations that were
selected to approximate the durations of the liabilities they
support.  The duration of these investments is monitored, and
investment purchases and sales are executed with the objective of
having adequate funds available to satisfy the Company's maturing
liabilities.

As the Company's investment strategy focuses on matching asset and
liability durations, and not specific cash flows, and since these
duration assessments are dependent on numerous cash flow
assumptions, asset sales may, from time to time, be required to
satisfy liability obligations and/or rebalance asset portfolios.
The investment portfolios are closely monitored to assess asset
and liability matching in order to rebalance the portfolios as
conditions warrant.


<PAGE> 31

Liquidity and Capital Resources (Continued)

The Company has significant short-term liquidity supporting its
businesses.  At year-end 1996, cash and cash equivalents were
$1.5 billion and short-term securities were $.7 billion.

Given the high quality of the debt securities portfolio (see
"General Account Investments"), management expects the vast
majority of the Company's investments in debt securities to be
repaid in accordance with contractual terms.  In addition, most of
the debt securities in the portfolio are highly marketable and can
be sold to enhance cash flow before maturity.

At December 31, 1996, scheduled mortgage loan principal repayments
were as follows:

<TABLE>
<CAPTION>
(Millions)
________________________________________
<S>               <C>           <C>
                  1997          $  702.2
                  1998             636.2
                  1999             757.4
                  2000           1,037.4
                  2001             268.6
            Thereafter           3,546.1

</TABLE>

Consolidated Cash Flows

<TABLE>
<CAPTION>
(Millions)                           1996         1995          1994
___________________________________________________________________________
<S>                                  <C>          <C>           <C>
Net cash provided by (used for)
 operating activities                $   (883.2)  $    647.7    $     840.8
                                     _______________________________________
                                     _______________________________________
Net cash provided by investing
 activities                          $    425.4   $    122.2    $   1,496.8
                                     ______________________________________
                                     ______________________________________
Net cash used for financing
 activities                          $   (558.6)  $ (1,336.4)   $  (1,609.8)
                                     ______________________________________
                                     ______________________________________
Cash and cash equivalents            $  1,462.6   $  1,712.7    $   2,277.2
                                     ______________________________________
                                     ______________________________________
</TABLE>

The Company's cash flow requirements for 1996 were met by funds
provided from operations, from the maturity and sale of
investments (including the sale of the property-casualty
operations) and from financing activities (including common and
preferred equity and debt securities issued in conjunction with
the U.S. Healthcare acquisition).

Net cash provided by (used for) investing activities included
$1,937 million, $2,048 million and $2,359 million from net sales,
including a securitization in 1995, as well as maturities and
repayments of mortgage loans and real estate in 1996, 1995 and
1994, respectively.

<PAGE> 32

Liquidity and Capital Resources (Continued)

Net cash used for financing activities included cash generated by
sales of investment contracts which was lower in 1996, 1995 and
1994 than cash paid for maturing investment contracts and other
withdrawals.  During 1996, the Company paid dividends to common
stock shareholders of $1.78 per share (approximately $219 million
in total) (reflecting lower dividends per share in 1996 following
the merger), and paid $2.76 per share in 1995 and 1994.  During
1996, the Company also paid dividends to Class C preferred stock
shareholders of $1.55955 per share or approximately $18 million.
(See "Parent Company Cash Flow" below and "Financings and
Financing Capacity" on page 33.)

Ratings

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

<TABLE>
<CAPTION>
                                                    Rating Agencies
                             ____________________________________________________________
                                                             Moody's Investors   Standard
                             A.M. Best      Duff & Phelps        Service         & Poor's
                             ____________________________________________________________
<S>                               <C>       <C>                  <C>             <C>
Aetna Services, Inc.
  (senior debt) ***
    February 6, 1996              *         A **                 A2              A- **
    February 4, 1997              *         A                    A2              A-

Aetna Services, Inc.
  (commercial paper) ***
    February 6, 1996              *         D-1 **               P-1             A-2 **
    February 4, 1997              *         D-1                  P-1             A-2

Aetna Life Insurance Company
  (claims paying)
    February 6, 1996              A         AA- **               Aa3             A+ **
    February 4, 1997              A         AA-                  Aa3             A

Aetna Life Insurance and Annuity Company
  (claims paying)
    February 6, 1996              A+        AA+                  Aa2             AA **
    February 4, 1997              A+        AA+                  Aa2             AA-
<FN>

*    Not rated by the agency.
**   On rating watch-up or credit watch with positive implications.
***  Fully and unconditionally guaranteed by Aetna Inc.
</TABLE>

In addition, certain of the Company's HMO subsidiaries are rated
on their claims paying ability by A.M. Best.  All such ratings are
in the "Excellent" or "Superior" categories.

Parent Company Cash Flow

Aetna Inc.'s recurring cash flow needs are primarily shareholder
dividends.  The Board of Directors (the "Board") reviews Aetna
Inc.'s common stock dividend each quarter.  Among the factors
considered by the Board in determining the dividend are the
Company's results of operations, and the capital requirements,
growth and other characteristics of its businesses. Aetna Inc.
also may fund growth or meet capital needs of the Company's
businesses.  Parent company cash flow may be met through dividends
from operating subsidiaries which may reflect excess capital or
borrowings.  The Company continually monitors existing and
alternative financing sources to support the Company's capital and
liquidity needs, including, but not limited to, debt issuance,
preferred or common stock issuance, intercompany borrowings and
pledging or selling of assets.



<PAGE> 33

Liquidity and Capital Resources (Continued)

Financings and Financing Capacity

Substantially all of the Company's short-term and long-term borrowings
and financings are conducted through Aetna Services and are fully and
unconditionally guaranteed by Aetna Inc.  (See Note 13 of Notes to
Financial Statements.)

The Company uses short-term borrowings from time to time to address
timing differences between receipts and disbursements.  In 1996, the
Company used funds made available from the issuance of $1.4 billion of
commercial paper to fund a portion of the consideration paid in
connection with the U.S. Healthcare merger.

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

Aetna Services has a revolving credit facility in an aggregate amount of
$1.5 billion with a worldwide group of banks.  The facility terminates
in June 2001.  (See Note 13 of Notes to Financial Statements.)

Aetna-Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Limited Liability Company Holding Primarily Debentures
Guaranteed by Aetna

In November 1994, Aetna Capital L.L.C. ("ACLLC"), a subsidiary of Aetna
Services, issued $275 million (11,000,000 shares) of 9 1/2% cumulative
monthly income preferred securities.  ACLLC loaned the proceeds from the
preferred stock issuance to Aetna Services.  Aetna Services used the
proceeds of the loan for general corporate purposes.  (See Note 14 of
Notes to Financial Statements.)

Common Stock Transactions

The Company issued 34,988,615 shares of common stock on July 19, 1996 in
connection with the U.S. Healthcare merger.

The Company issued 1,563,491 shares, 2,069,335 shares and 457,191 shares
of treasury stock or previously unissued shares for benefit plans in
1996, 1995 and 1994, respectively.

On October 25, 1996, the Board adopted a resolution authorizing Aetna
Inc. to repurchase up to 5 million shares of its common stock from time
to time.  As of December 31, 1996, 1,194,400 shares of common stock had
been repurchased at a cost of $83 million.  In 1995 and 1994, the
Company did not acquire any shares of its common stock.

Restrictions on Certain Payments by the Company

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

<PAGE> 34

Liquidity and Capital Resources (Continued)

Solvency Regulation

In recent years, state insurance regulators have been considering
changes in statutory accounting practices and other initiatives to
strengthen solvency regulation.  The National Association of
Insurance Commissioners ("NAIC") adopted risk-based capital ("RBC")
standards for life insurers which are designed to identify weakly
capitalized companies by comparing the adjusted surplus to the
required surplus, which reflects the risk profile of the company
("RBC ratio").  Within certain ratio ranges, regulators have
increasing authority to take action as the RBC ratio decreases.
There are four levels of regulatory action ranging from requiring
insurers to submit a comprehensive plan to the state insurance
commissioner to when the state insurance commissioner places the
insurer under regulatory control.  The RBC ratio for each of the
Company's primary life insurance subsidiaries as measured at
December 31, 1996 was significantly above the levels which would
require regulatory action.  Rating agencies use their own RBC
standards as part of determining a company's rating.

The NAIC has developed a model investment law providing for limits on
the types and amounts of investments by insurance companies, as well
as certain amendments to the model holding company law.  Management
believes that these changes to the model laws, if adopted by states
regulating the Company, will not materially affect the Company.  The
NAIC also is considering several other solvency-related laws or
regulations, such as RBC standards for health plans, including HMOs
and an alternative to the new model investment law.  Because these
other initiatives are in a preliminary stage, management cannot
assess the potential impact of their adoption on the Company.

<PAGE> 35

Regulatory Environment

A variety of legislative and regulatory proposals have been made at
both the federal and state government levels to address various
aspects of the health care system.

Presently under consideration are various legislative proposals which
would reform the federal Medicare program.  Although certain proposed
changes may provide the Company with additional opportunities to
increase its Medicare risk HMO enrollment, others would reduce
premiums paid by the Health Care Financing Administration ("HCFA") to
the Company.  The Company's financial results could be adversely
affected to the extent such reductions are not offset by increases in
member premiums, benefit reductions or reductions in rates of payment
to contracted providers.  Also being explored by HCFA are various
competitive bidding and other changes to Medicare risk HMO program
regulations which, if enacted, could adversely affect the Company's
financial results.

The Health Insurance Portability and Accountability Act of 1996
("Kennedy-Kassebaum Bill"), was enacted to (i) ensure portability of
coverage to individuals changing jobs or moving to individual
coverage by limiting preexisting condition exclusions, (ii) guarantee
availability of coverage to employees in the small group market, and
(iii) prevent exclusion of individuals from coverage under group
plans based on health status.  This legislation will become effective
on July 1, 1997 and will be subject to differing interpretation and
potential expansion under state laws.  Other federal legislation,
effective January 1, 1998, mandates minimum hospital stays after
childbirth and parity applying lifetime limits to mental health
benefits.

In New York, the Health Care Reform Act of 1996 ("the Act"),
effective January 1, 1997, allowed all private health care payors to
negotiate payment rates for inpatient hospital services; previously
only HMOs were permitted to negotiate such rates.  The Act also
provides for direct funding by private payors of hospital bad debt
and charity care and graduate medical education by payments to state
funding pools rather than through surcharges on payments for hospital
services.  The Company is negotiating arrangements with hospitals in
its New York network to adjust the payments it makes to network
hospitals to reflect the direct payments from the Company required by
the Act.  However, there can be no assurance that the Company will
reach agreement on these adjustments with all such hospitals or that
premium increases will offset all of the payments required under the
Act.

Several other states, including states in which the Company has
substantial managed care membership, have enacted legislation or
regulation related to the operation of managed care plans.  Such
legislation or regulation varies, but has included, among other
things, mandatory maternity lengths of stay, regulation of
utilization review, mandated consumer disclosures, required payment
for emergency room services, mandated grievance and appeal
procedures, hearings on termination of physicians from networks,
prohibition of so-called "gag" clauses, and provisions similar to
those in the Kennedy-Kassebaum legislation.  There can be no
assurance that the Company can recoup, through higher premiums or
other measures, the increased costs of mandated lengths of stay or
other benefits, or other increased costs caused by such legislation
or regulation.

<PAGE> 36

Regulatory Environment (Continued)

Other potential legislative and regulatory changes related to managed
care products that are receiving a high level of attention at both
the state and federal levels include, but are not limited to (i)
prohibition or limitation of arrangements designed to manage medical
costs and improve quality of care, such as capitated arrangements
with providers or provider financial incentives, (ii) limitations on
utilization management methods, (iii) additional benefit mandates
(including mandatory lengths of stay for certain procedures such as
mastectomies), (iv) regulation of the composition of the Company's
provider networks, such as any willing provider or pharmacy laws, (v)
changes to licensure or certification requirements, (vi) mandatory
participation in governmental programs such as Medicaid, (vii)
assessments, surcharges or taxes on premiums or provider payments to
fund uncompensated care, graduate medical education or government
programs, (viii) extension of malpractice and other liability for
medical decisions from providers to managed care plans, (ix)
limitations on the marketing of Medicare plans directly to Medicare
beneficiaries, (x) mandatory direct access to specialists, (xi)
mandatory point-of-service benefits, (xii) mandatory coverage of
experimental procedures and drugs, (xiii) third party review of
denials of benefits, (xiv) enhanced liability for negligent denials
of benefits, and (xv) prohibition of so-called "gag" clauses in
provider contracts.  At this time, the Company is unable to predict
the impact of the foregoing federal or state legislation or
regulation, or of any future legislation or regulatory changes that
may be enacted, although it can be anticipated that certain of these
measures, if enacted, would adversely affect the Company.

For other important information regarding regulation of the Company's
health and other businesses, see the Company's 1996 Annual Report on
Form 10-K.

New Accounting Pronouncements

See Note 1 of Notes to Financial Statements for a discussion of
recently issued accounting pronouncements.

<PAGE> 37

Forward-Looking Information

The Private Securities Litigation Reform Act of 1995 (the "Act")
provides a "safe harbor" for forward-looking statements, so long as
those statements are identified as forward-looking and are
accompanied by meaningful cautionary statements identifying important
factors that could cause actual results to differ materially from
those discussed in the statement.  The Company desires to take
advantage of these safe harbor provisions.  Certain information
contained herein is forward-looking within the meaning of the Act or
Securities and Exchange Commission rules including, but not limited
to, the information that appears under the headings "Outlook" in the
discussion of results of operations of each of the Company's
businesses.  Words such as expects, anticipates, intends, plans,
believes, seeks or estimates, or variations of such words and similar
expressions are also intended to identify forward-looking statements.
These forward-looking statements are subject to significant
uncertainties and contingencies, many of which are beyond the control
of the Company.  Set forth below are certain important factors that,
in addition to general economic conditions and other factors, some of
which are discussed elsewhere in this Annual Report or the Company's
1996 Annual Report on Form 10-K, may affect these forward-looking
statements and the Company's businesses generally.

Certain Factors Particular to Health Operations

Premiums; Medical Cost Increases.  Premiums in the Company's Health
Risk business are generally fixed for one-year periods and actual
cost levels in excess of those estimated and reflected in pricing
cannot be recovered in the contract year through higher premiums from
customers.  Increased utilization, increases in provider contract
rates, changes in legislation or regulation, changes in health
practices and medical technologies and price increases in
pharmaceuticals and durable medical equipment and other factors may
increase medical costs.

Health Business Legislative and Regulatory Environment.  As
discussed above (see "Regulatory Environment"), certain
legislative and regulatory changes related to health products have
recently been enacted or proposed, and a variety of other
potential legislative and regulatory changes are receiving a high
level of attention at both the state and federal levels.  At this
time the Company is unable to predict the impact of these changes,
although it can be anticipated that certain of these measures, if
enacted, would adversely affect health operations through (i)
reducing premiums, (ii) increasing, or reducing the ability to
manage medical costs, (iii) increasing other operating expenses,
(iv) regulating levels and permitted lines of business, or (v)
regulating other business practices.

Business Mix.  The selection by employers and individuals of plans
with higher copayments or deductibles, or of coinsurance plans,
may lower certain medical costs, but generally results in lower
premiums to the Company.  In addition, continued migration of
employers to self-funded coverage, or increased membership in
Medicare risk plans (plans which the Company intends to expand),
or the selection by plan participants of other health products
with higher medical loss ratios may make the Company's margins
more sensitive to changes in medical costs and premiums.  Adverse
publicity regarding managed care may influence the selection of
health care coverages by plan participants.


<PAGE> 38

Forward-Looking Information (Continued)

Government Payors.  In government-funded health programs such as
Medicare and Medicaid, premium levels are determined by the
government payor.  Unilateral reduction of premium levels or
limits on governmentally funded programs could adversely affect
these lines of business.  In addition, for plans covering
government employees, the Company may be subject to retroactive
reductions of premium rates by the government payor.

Accreditation.  For certain of the Company's health plans,
accreditation by independent quality accrediting agencies such as the
National Committee for Quality Assurance is an important competitive
factor.  Any loss of or denial of accreditation may adversely affect
customer selection of health products, and, in some jurisdictions may
affect licensure status.

Integration of Health Operations.  Growth in the Company's
profitability is dependent, in part, on its ability to successfully
integrate the separate health operations of Aetna Services and U.S.
Healthcare.  Factors affecting successful integration include, but
are not limited to, timely integration of management and information
systems, the application of U.S. Healthcare's managed care expertise
to a broader membership base, and the timely elimination of
duplicative administrative and customer service functions.

Certain Factors Particular to Financial Services Operations

Ratings.  Adverse changes in the claims-paying ratings of the
Company's financial services subsidiaries could have the effect of
decreasing new sales and deposits and increasing withdrawals and
surrenders in the Company's Aetna Retirement Services and Large Case
Pensions businesses, which would adversely affect the level of asset-
based fees of those businesses.

Product Retention.  The Company incurs up-front costs, such as
commissions, in sales of its annuity, life insurance and other
financial services products, including international financial
services products.  These costs are generally deferred and recognized
by the Company over time, and the retention of assets under those
products is an important component of profitability.  The Company
generally seeks to structure its products and sales to encourage
retention of assets under management, through surrender charges, more
favorable credited rates to customers on assets the Company retains
for longer periods, renewal commissions, service fees or other terms.
However, customer withdrawal of assets earlier than anticipated by
the Company in pricing its products would adversely affect
profitability.

Significant Changes in Financial Markets.  Significant changes in
financial markets could impact the level of assets under management
in the Company's Aetna Retirement Services, Large Case Pensions and
International businesses, and, in turn, the Company's level of asset-
based fees in those businesses.  For example, significant increases
in interest rates or decreases in equity markets, in addition to
directly affecting the level of assets under management, may increase
the level of withdrawals and decrease the level of deposits by
customers.  Customers under those circumstances may seek to diversify
among asset managers or seek investment alternatives not offered by
the Company.  Significant declines in the value of investments may
also affect the Company's ability to pass through investment losses
to certain experience rated customers, whether due to triggering
minimum guarantees or other business reasons.



<PAGE> 39

Forward-Looking Information (Continued)

Certain Factors Particular to International Operations

Currency Devaluation.  The Company generally does not hedge the
currency exposure of investments in its foreign affiliates, because
it views these investments as long term.  In preparing its
consolidated financial statements, the Company translates its results
from the foreign currency in which it operates in a particular
country into U.S. dollars.  Devaluation of a country's currency,
however, would adversely affect results of operations when translated
into U.S. dollars.  Also, when economies, such as Mexico and Brazil,
are considered highly inflationary (generally, cumulative inflation
levels in excess of 100% over a three-year period), changes in the
value of net monetary assets or liabilities would be recognized
currently in earnings, rather than through shareholders' equity,
making reported earnings potentially more volatile.  In addition,
although the Company considers foreign exchange trends when deciding
to invest in particular countries, currency devaluation may also
affect the value of international investments when translated to U.S.
dollars.

International Market Factors.  The Company's International
operations involve certain other risks not typically associated
with doing business in the United States.  These risks include
investment and other controls that may be imposed by governments,
such as permitted levels of equity ownership of companies by
foreign persons, remittances of foreign earnings or repatriation
of capital, exchange of currency and restrictions on entry into
new lines of business, requirements that portions of business be
reinsured through state-affiliated institutions and other
requirements affecting the conduct of business.  Additionally,
interest rate risk management may be more difficult due to the
relatively short durations of investments available in currencies
that match long-term liabilities for international fixed-rate
products.  Foreign economies may also experience increased
volatility of equity markets and high rates of inflation and be
subject to other political and economic factors such as more rapid
change of regulatory policy.

Other Factors Affecting All of the Company's Businesses

Retention of Key Senior Executives.  The Company's success is
dependent, in part, on its ability to attract and retain key
senior executives.  The Company has entered into employment
agreements with certain of these executives, although an
employment agreement does not guarantee that an executive's
services with the Company will continue.

Other Adverse Changes in Regulation.  In addition to its health
business, each of Aetna's other businesses is subject to
comprehensive regulation.  These businesses could be adversely
affected by (i) increases in minimum capital and other financial
viability requirements for health and other insurance operations,
(ii) removal of barriers preventing banks from engaging in
insurance and mutual fund businesses, (iii) the taxation of
insurance companies, and (iv) changes in the tax treatment of
insurance products.


<PAGE> 40

Management's Responsibility for Financial Statements

Management is responsible for the financial statements of
Aetna Inc., which have been prepared in accordance with generally
accepted accounting principles.  The financial statements are the
product of a number of processes that include the gathering of
financial data developed from the records of the Company's day-to-
day business transactions.  Informed judgments and estimates are
used for those transactions not yet complete or for which the
ultimate effects cannot be measured precisely.  The Company
emphasizes the selection and training of personnel who are
qualified to perform these functions.  In addition, Company
personnel are subject to rigorous standards of ethical conduct
that are widely communicated throughout the organization.

The Company's internal controls are designed to reasonably assure
that Company assets are safeguarded from unauthorized use or
disposition and that Company transactions are authorized, executed
and recorded properly.  Company personnel maintain and monitor
these internal controls on an ongoing basis.  In addition, the
Company's internal auditors review and report upon the functioning
of these controls with the right of full access to all Company
personnel.

The Company engages KPMG Peat Marwick LLP as independent auditors
to audit its financial statements and express their opinion
thereon.  Their audits include reviews and tests of the Company's
internal controls to the extent they believe necessary to
determine and conduct the audit procedures that support their
opinion.  Members of that firm also have the right of full access
to each member of management in conducting their audits.  The
report of KPMG Peat Marwick LLP appears on page 95.

Aetna's Board of Directors has an Audit Committee composed solely
of independent directors.  The Committee meets periodically with
management, the internal auditors and KPMG Peat Marwick LLP to
oversee and monitor the work of each and to inquire of each as to
their assessment of the performance of the others in their work
relating to the Company's financial statements.  Both the
independent and internal auditors have, at all times, the right of
full access to the Audit Committee, without management present, to
discuss any matter they believe should be brought to the attention
of the Committee.


<PAGE> 41

Consolidated Statements of Income

For the years ended December 31,

<TABLE>
<CAPTION>
(Millions, except share and per common share data)  1996              1995              1994
__________________________________________________________________________________________________
<S>                                                 <C>               <C>               <C>
Revenue:

Premiums                                            $     9,288.8     $  7,513.3        $  6,968.7
Net investment income                                     3,565.2        3,575.1           3,631.4
Fees and other income                                     2,174.8        1,924.3           1,741.5
Net realized capital gains (losses)                         134.4           47.2             (55.2)
                                                    ______________________________________________

Total revenue                                            15,163.2       13,059.9          12,286.4
__________________________________________________________________________________________________

Benefits and Expenses:

Current and future benefits                              10,341.4        9,109.1           8,719.4
Operating expenses                                        3,319.8        2,951.8           2,680.3
Interest expense                                            168.3          115.9              98.6
Amortization of goodwill and other acquired
 intangible assets                                          172.5           17.8              27.0
Amortization of deferred policy
 acquisition costs                                          160.1          139.1             133.6
Reductions of loss on discontinued products                (202.3)             -                 -
Severance and facilities charges                            864.7              -                 -
                                                    ______________________________________________

Total benefits and expenses                              14,824.5       12,333.7          11,658.9
__________________________________________________________________________________________________

Income from continuing operations
 before income taxes                                        338.7          726.2             627.5

Income taxes                                                133.6          252.3             218.1
                                                    ______________________________________________

Income from continuing operations                           205.1          473.9             409.4

Discontinued Operations, net of tax:
  Income (Loss) from operations                             182.2         (222.2)             58.1
  Gain on sale                                              263.7              -                 -
                                                    ______________________________________________

Net income                                          $       651.0     $    251.7        $    467.5
                                                    ______________________________________________
                                                    ______________________________________________

Net income applicable to common ownership           $       625.9     $    251.7        $    467.5
__________________________________________________________________________________________________
                                                    ______________________________________________

Results Per Common Share:

Income from continuing operations                   $        1.36     $     4.16        $     3.63
Discontinued Operations, net of tax:
  Income (Loss) from operations                              1.38          (1.95)              .51
  Gain on sale                                               2.00              -                 -
                                                    ______________________________________________

Net income                                          $        4.74     $     2.21        $     4.14
__________________________________________________________________________________________________
                                                    ______________________________________________


Weighted average common shares and common
  share equivalents                                   132,155,336    113,897,633       112,848,653
__________________________________________________________________________________________________
<FN>

See Notes to Financial Statements.
</TABLE>

<PAGE> 42

Consolidated Balance Sheets

As of December 31,

<TABLE>
<CAPTION>
(Millions, except share and per common share data)    1996             1995
__________________________________________________________________________________
<S>                                                   <C>              <C>
Assets:
Investments:
 Debt securities available for sale, at fair value
      (amortized cost $31,441.4 and $29,962.5)        $   32,336.3     $  31,860.3
 Equity securities, at fair value (cost $963.4
  and $597.8)                                              1,332.8           659.7
 Short-term investments                                      723.2           607.8
 Mortgage loans                                            6,700.9         8,327.2
 Real estate                                                 850.2         1,277.3
 Policy loans                                                707.3           629.4
 Other                                                       835.5           688.6
                                                      ____________________________
Total investments                                         43,486.2        44,050.3
__________________________________________________________________________________

 Cash and cash equivalents                                 1,462.6         1,712.7
 Accrued investment income                                   598.6           618.3
 Premiums due and other receivables                        1,190.4         1,080.9
 Deferred income taxes                                           -           271.5
 Deferred policy acquisition costs                         2,226.9         1,953.1
 Goodwill and other acquired intangible assets             8,432.6           147.3
 Other assets                                              1,070.1           857.1
 Separate Accounts assets                                 34,445.5        29,699.7

 Net assets of Discontinued Operations                           -         3,932.8
                                                      ____________________________
Total assets                                          $   92,912.9     $  84,323.7
__________________________________________________________________________________
__________________________________________________________________________________

Liabilities:
 Future policy benefits                               $   18,983.3     $  18,372.9
 Unpaid claims                                             1,829.3         1,563.1
 Unearned premiums                                           333.6           142.4
 Policyholders' funds left with the Company               19,901.7        22,898.7
                                                      ____________________________
Total insurance liabilities                               41,047.9        42,977.1

 Dividends payable to shareholders                            36.9            79.2
 Short-term debt                                             282.8           389.6
 Long-term debt                                            2,380.0           989.1
 Current income taxes                                        164.3           154.0
 Deferred income taxes                                        31.7               -
 Other liabilities                                         3,202.3         2,344.2
 Participating policyholders' interests                      221.7           204.8
 Separate Accounts liabilities                            34,380.6        29,637.9
                                                      ____________________________
Total liabilities                                         81,748.2        76,775.9
__________________________________________________________________________________

 Minority Interest:
  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 3, 5 and 18)

Shareholders' Equity:
 Class C Voting Mandatorily Convertible Preferred
  Stock ($.01 par value; 15,000,000 shares
  authorized in 1996; 11,655,546 issued and
  outstanding)                                               865.4               -
 Common Stock ($.01 par value and no par value;
  500,000,000 and 250,000,000 shares authorized;
  150,084,799 and 115,013,675 issued, and
  150,084,799 and 114,727,093 outstanding)                 4,032.8         1,448.2
 Net unrealized capital gains                                340.0           641.1
 Retained earnings                                         5,651.5         5,195.6
 Treasury stock, at cost (286,582 shares)                        -           (12.1)
                                                      ____________________________
Total shareholders' equity                                10,889.7         7,272.8
__________________________________________________________________________________

Total liabilities, minority interest and
  shareholders' equity                                $   92,912.9     $  84,323.7
__________________________________________________________________________________
__________________________________________________________________________________

Shareholders' equity per common share                 $      66.79     $     63.39
__________________________________________________________________________________
__________________________________________________________________________________
<FN>
See Notes to Financial Statements.
</TABLE>

<PAGE> 43

Consolidated Statements of Shareholders' Equity

<TABLE>
<CAPTION>

                                                  Class C Voting        Net
                                                  Mandatorily           Unrealized
                                                  Convertible           Capital
(Millions, except share data)                     Preferred   Common    Gains      Retained  Treasury
Three years ended December 31, 1996   Total       Stock       Stock     (Losses)   Earnings  Stock
_____________________________________________________________________________________________________
<S>                                   <C>         <C>         <C>       <C>        <C>       <C>

Balances at December 31, 1993         $ 7,043.1   $       -   $ 1,422.0 $  648.2   $ 5,103.3 $ (130.4)
_____________________________________________________________________________________________________

Net income                                467.5                                        467.5
Change in net unrealized capital
 gains or losses                       (1,719.7)                        (1,719.7)
Common stock issued for benefit plans
 (457,191 shares)                          26.1                                                  26.1
Loss on issuance of treasury stock         (2.8)                   (2.8)
Common stock dividends                   (311.2)                                     (311.2)
                                      _______________________________________________________________

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

Net income                                251.7                                        251.7
Change in net unrealized capital
 gains or losses                        1,712.6                          1,712.6
Common stock issued for benefit plans
(2,069,335 shares)                         97.4                     5.2                          92.2
Gain on issuance of treasury stock         23.8                    23.8
Common stock dividends                   (315.7)                                      (315.7)
                                      _______________________________________________________________

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

Net income                                651.0                                        651.0
Change in net unrealized capital
 gains or losses                         (301.1)                          (301.1)
Class C Voting Mandatorily Convertible
  Preferred stock issued for U.S.
  Healthcare merger (11,655,546 shares)   865.4        865.4
Common shares issued for U.S.
 Healthcare merger (34,988,615 shares)  2,580.1                 2,580.1
Stock options issued for U.S.
 Healthcare merger                         24.8                    24.8
Common stock issued for benefit plans
  (1,563,491 shares)                       75.1                    75.1
Repurchase of common shares (1,194,400
  shares)                                 (83.3)                  (83.3)
Common stock dividends                   (170.0)                                      (170.0)
Preferred stock dividends                 (25.1)                                       (25.1)
Treasury stock retired                        -                   (12.1)                         12.1
                                      _______________________________________________________________
Balances at December 31, 1996         $10,889.7   $    865.4  $ 4,032.8 $  340.0   $ 5,651.5 $      -
_____________________________________________________________________________________________________
_____________________________________________________________________________________________________
<FN>

See Notes to Financial Statements.
</TABLE>


<PAGE> 44

Consolidated Statements of Cash Flows

For the years ended December 31,
<TABLE>
<CAPTION>
(Millions)                                                 1996            1995            1994
_____________________________________________________________________________________________________
<S>                                                        <C>             <C>             <C>
Cash Flows from Operating Activities:
 Net income                                                $   651.0       $    251.7      $    467.5
 Adjustments to reconcile net income to
  net cash (used for) provided by operating activities:
   (Income) Loss from Discontinued Operations                 (182.2)           222.2           (58.1)
   Decrease (increase) in accrued investment income             24.9            (21.0)          (25.9)
   Decrease (increase) in premiums due and other
    receivables                                                 12.0           (250.7)          144.3
   Increase in deferred policy acquisition costs              (275.1)          (267.1)         (193.5)
   Depreciation and amortization                               338.9            175.8           174.1
   (Decrease) increase in income taxes                        (155.8)           263.0           321.9
   Net decrease (increase) in other assets and
    other liabilities                                          184.0            (55.5)           10.3
   (Decrease) increase in other insurance liabilities         (956.8)           522.4            95.8
   Net realized capital (gains) losses                        (134.4)           (47.2)           55.2
   Gain on sale of Discontinued Operations                    (263.7)               -               -
   Amortization of net investment discounts                   (131.5)          (123.7)         (141.3)
   Other, net                                                    5.5            (22.2)           (9.5)
                                                           __________________________________________
    Net cash (used for) provided by operating activities      (883.2)           647.7           840.8
                                                           __________________________________________
Cash Flows from Investing Activities:
 Proceeds from sales of:
  Debt securities available for sale                        13,625.6         13,747.2        14,801.6
  Equity securities                                            565.6            355.9           124.2
  Mortgage loans                                               154.9            668.4           162.1
  Real estate                                                  689.5            317.1           543.4
  Other investments                                            838.6            761.4           718.1
  Short-term investments                                    34,679.2         48,763.1        51,936.7
  Discontinued Operations                                    4,134.1                -               -
 Investment maturities and repayments of:
  Debt securities available for sale                         3,567.0          2,190.9         2,499.6
  Debt securities held for investment                              -                -           573.5
  Mortgage loans                                             1,569.7          1,404.2         1,960.5
 Cost of investments in:
  Debt securities available for sale                       (16,922.5)       (16,842.1)      (17,639.5)
  Debt securities held for investment                              -                -          (350.3)
  Equity securities                                           (859.5)          (353.2)         (353.7)
  Mortgage loans                                              (360.5)          (244.9)         (247.7)
  Real estate                                                 (116.4)           (96.9)          (59.1)
  Other investments                                         (1,064.9)          (841.1)         (998.8)
  Short-term investments                                   (34,703.0)       (49,024.1)      (51,811.1)
  U.S. Healthcare                                           (5,243.9)               -               -
 Increase in property and equipment                            (78.2)          (155.3)         (135.9)
 (Increase) decrease in Separate Accounts                       (3.2)            57.3             4.1
 Other, net                                                    (46.7)          (585.7)         (230.9)
                                                           __________________________________________
  Net cash provided by investing activities                    425.4            122.2         1,496.8
                                                           __________________________________________
Cash Flows from Financing Activities:
 Deposits and interest credited for investment contracts     1,968.1          2,017.1         3,063.7
 Withdrawals of investment contracts                        (3,561.1)        (3,442.3)       (4,609.1)
 Issuance of long-term debt                                  1,389.3             52.4            62.5
 Repayment of long-term debt                                       -           (144.6)          (91.8)
 Net (decrease) increase in short-term debt                   (109.4)           375.5           (22.2)
 Issuance of preferred securities by subsidiary                    -                -           275.0
 Stock issued under benefit plans                               75.1            121.2            23.3
 Common stock acquired during the year                         (83.3)               -               -
 Dividends paid to shareholders                               (237.3)          (315.7)         (311.2)
                                                           __________________________________________
Net cash used for financing activities                        (558.6)        (1,336.4)       (1,609.8)
_____________________________________________________________________________________________________
Effect of exchange rate changes on cash
 and cash equivalents                                           (0.3)             2.0            (4.2)
 ____________________________________________________________________________________________________
Net (decrease) increase in cash and cash equivalents        (1,016.7)          (564.5)          723.6
Cash acquired from U.S. Healthcare                             766.6                -               -
Cash and cash equivalents, beginning of year                 1,712.7          2,277.2         1,553.6
                                                           __________________________________________
Cash and cash equivalents, end of year                     $ 1,462.6        $ 1,712.7     $   2,277.2
_____________________________________________________________________________________________________
_____________________________________________________________________________________________________
<FN>
See Notes to Financial Statements.
</TABLE>

<PAGE> 45

Notes to Financial Statements

1.  Summary of Significant Accounting Policies

Aetna Inc., through its subsidiaries, provides health care
benefits, group insurance, financial services and individual life
insurance.  Aetna U.S. Healthcare provides a full spectrum of
managed care, indemnity and group life and disability insurance
products in the U.S.  Aetna Retirement Services offers financial
services and individual life insurance products, including fixed
and variable annuity contracts, investment advisory services and
pension plan administrative services, universal life, variable
universal life, traditional whole life and term insurance in the
U.S.  The International segment, through subsidiaries and joint
venture operations, sells primarily life insurance, health
insurance and financial services products in non-U.S. markets.
The Large Case Pensions segment manages a variety of retirement
products (including pension and annuity products) for primarily
defined benefit and defined contribution plans in the U.S.
Discontinued Operations included commercial and personal property-
casualty operations.  (Refer to Note 3.)  All footnote disclosures
reflect continuing operations only, unless otherwise noted.

Principles of Consolidation

The consolidated financial statements include Aetna Inc. and its
majority-owned subsidiaries (collectively, the "Company"),
including Aetna Services, Inc. (formerly Aetna Life and Casualty
Company), and, from July 19, 1996, U.S. Healthcare, Inc.  (Refer
to Note 2.)  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.
Certain reclassifications have been made to 1995 and 1994
financial information to conform to the 1996 presentation.

Accounting Changes

Accounting for Stock-Based Compensation

As of December 31, 1996, the Company adopted Financial Accounting
Standard ("FAS") No. 123, Accounting for Stock-Based Compensation.
This statement addresses the accounting for the cost of stock-
based compensation, such as stock options.  The Company has
selected the disclosure alternative.  (Refer to Note 11.)


<PAGE> 46

Notes to Financial Statements (Continued)

1.  Summary of Significant Accounting Policies (Continued)

Accounting Changes (Continued)

Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of

As of January 1, 1996, the Company adopted FAS No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of.  This statement requires long-lived assets to
be held and used to be written down to fair value when they are
considered impaired.  Long-lived assets to be disposed of (e.g.,
real estate held for sale) are to be carried at the lower of cost
or fair value less estimated selling costs.  In addition, this
statement does not allow long-lived assets to be disposed of to be
depreciated.  As a result of the adoption of FAS No. 121,
valuation reserves at January 1, 1996 were increased by
$53 million in connection with the reversal of previously recorded
accumulated depreciation related to properties held for sale.  The
adoption of FAS No. 121 did not materially impact results of
operations.

Accounting by Creditors for Impairment of a Loan

As of January 1, 1995, the Company adopted FAS No. 114, Accounting
by Creditors for Impairment of a Loan and FAS No. 118, Accounting
by Creditors for Impairment of a Loan - Income Recognition and
Disclosures.  Under these standards, a loan is considered impaired
when it is probable that the Company will be unable to collect
amounts due according to the contractual terms of the loan
agreement.

Prior to the adoption of FAS Nos. 114 and 118, general reserves
were established for estimated losses on potential problem loans
(other than those allocable to experience rated products) which
management believed were likely to become classified as problem or
restructured in the next 12 months or so.  Adoption of these
standards had no impact on results of operations.


<PAGE> 47

Notes to Financial Statements (Continued)

1.  Summary of Significant Accounting Policies (Continued)

Future Application of Accounting Standards

Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities

FAS No. 125, Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities, was issued in June
1996.  This statement provides accounting and reporting standards
for transfers of financial assets and extinguishments of
liabilities.  Transactions covered by this statement would include
securitizations, sales of partial interests in assets, repurchase
agreements and securities lending.  This statement requires that
after a transfer of financial assets, an entity would recognize
any assets it controls and liabilities it has incurred.  An entity
would not recognize assets when control has been surrendered or
liabilities which have been satisfied.  Portions of this statement
are effective for each of 1997 and 1998 financial statements and
early adoption is not permitted.  The Company does not expect
adoption of this statement to have a material effect on its
financial position or results of operations.

Use of Estimates

The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes.  Actual results
could differ from reported results using those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, money market
instruments and other debt issues with a maturity of 90 days or
less when purchased.


<PAGE> 48

Notes to Financial Statements (Continued)

1.  Summary of Significant Accounting Policies (Continued)

Investments


Debt and equity securities are classified as available for sale
and carried at fair value.  These securities are written down (as
realized capital losses) for other than temporary declines in
value.  Unrealized capital gains and losses related to available
for sale investments, other than amounts allocable to experience
rated contractholders and discontinued products, are reflected in
shareholders' equity, net of related taxes.

Fair values for debt and equity securities are based on quoted
market prices or dealer quotations.  Where quoted market prices or
dealer quotations are not available, fair values are measured
utilizing quoted market prices for similar securities or by using
discounted cash flow methods.  Cost for mortgage-backed securities
is adjusted for unamortized premiums and discounts, which are
amortized using the interest method over the estimated remaining
term of the securities, adjusted for anticipated prepayments.

Purchases and sales of debt and equity securities are recorded on
the trade date.  Sales of mortgage loans and real estate are
recorded on the closing date.

Mortgage loans and policy loans are carried at unpaid principal
balances, net of impairment reserves.  A mortgage loan is
considered impaired when it is probable that the Company will be
unable to collect amounts due according to the contractual terms
of the loan agreement (delays of up to 60 days may not result in a
loan being considered impaired).  For impaired loans, a specific
impairment reserve is established for the difference between the
recorded investment in the loan and the estimated fair value of
the collateral.  The Company applies this loan impairment policy
individually to all loans in the portfolio and does not aggregate
loans for the purpose of applying such provisions.  The Company
records full or partial charge-offs of loans at the time an event
occurs affecting the legal status of the loan, typically at the
time of foreclosure (actual or in-substance) or upon a loan
modification giving rise to forgiveness of debt.  A general
reserve is established for losses management believes are likely
to arise from loans in the portfolio, other than those which have
been specifically reserved for.

<PAGE> 49

Notes to Financial Statements (Continued)

1.  Summary of Significant Accounting Policies (Continued)

Investments (Continued)

Investment real estate, which the Company has the intent to hold
for the production of income, is carried at depreciated cost,
including capital additions, net of write-downs for other than
temporary declines in fair value.  Properties held for sale
(primarily acquired through foreclosure) are carried at the lower
of cost or fair value less estimated selling costs.  As a result
of adopting FAS No. 121, the Company no longer depreciates
properties held for sale.  Adjustments to the carrying value of
properties held for sale are recorded in a valuation reserve when
the fair value less estimated selling costs is below cost.  Fair
value is generally estimated using a discounted future cash flow
analysis in conjunction with comparable sales information.
Property valuations are reviewed regularly by investment
management.

Short-term investments, consisting primarily of money market
instruments and other debt purchased with a maturity of 91 days to
one year, are considered available for sale and are carried at
fair value, which approximates amortized cost.

Other invested assets consist primarily of partnerships and equity
subsidiaries.  Partnerships and equity subsidiaries are carried on
an equity basis.

The Company utilizes foreign exchange forward contracts, futures
contracts, warrants and swap agreements for other than trading
purposes in order to manage investment returns and price risk and
to align maturities, interest rates, currency rates and funds
availability with its obligations.  (Refer to Note 5.)

Foreign exchange forward contracts which are designated at
inception and are effective as hedges of foreign translation
exposures and foreign transaction exposures related to investments
classified as available for sale are accounted for using the
deferral method.  Accordingly, realized and unrealized gains and
losses from these forward contracts are deferred on the
Consolidated Balance Sheets, net of tax, in net unrealized capital
gains or losses. Upon disposal of the hedged item, deferred gains
and losses are recognized in net realized capital gains or losses.
Excess realized or unrealized gain or loss, if any, from the
foreign exchange forward contract compared to the foreign
investment being hedged, is reported as a net realized capital
gain or loss.

<PAGE> 50

Notes to Financial Statements (Continued)

1.  Summary of Significant Accounting Policies (Continued)

Investments (Continued)

Futures contracts are carried at fair value and require daily cash
settlement.  Changes in the fair value of futures contracts that
qualify as hedges are deferred and recognized as an adjustment to
the hedged asset or liability.  Deferred gains or losses on such
futures contracts are amortized over the life of the acquired
asset or liability as a yield adjustment or through net realized
capital gains or losses upon disposal of an asset.  Changes in the
fair value of futures contracts that do not qualify as hedges are
recorded in net realized capital gains or losses.  Hedge
designation requires specific asset or liability identification, a
probability at inception of high correlation with the position
underlying the hedge, and that high correlation be maintained
throughout the hedge period.  If a hedging instrument ceases to be
highly correlated with the position underlying the hedge, hedge
accounting ceases at that date and excess gains and losses on the
hedging instrument are reflected in net realized capital gains or
losses.

Warrants represent the right to purchase specific securities and
are accounted for as hedges.  Upon exercise, the cost of the
warrants are added to the basis of the securities purchased.

Swap agreements which are designated as interest rate risk
management instruments at inception are accounted for using the
accrual method.  Accordingly, the difference between amounts paid
and received on such agreements is reported in net investment
income.  There is no recognition in the Consolidated Balance
Sheets of changes in the fair value of the agreement.


<PAGE> 51

Notes to Financial Statements (Continued)

1.  Summary of Significant Accounting Policies (Continued)


Foreign Currency Translation

The financial statements of the Company's foreign subsidiaries,
where the local currency is the functional currency, are
translated into U.S. dollars at the exchange rate in effect at
each year end for assets and liabilities and average exchange
rates during the year for results of operations.  The related
unrealized gains or losses resulting from translation of the net
assets are included in shareholders' equity.  If the economy of
the country where a foreign subsidiary is located is considered
highly inflationary (generally, cumulative inflation levels in
excess of 100% over a three-year period), changes in the value of
net monetary assets or liabilities would be recognized currently
in earnings.

Goodwill and Other Acquired Intangible Assets

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

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

Deferred Policy Acquisition Costs

Certain costs of acquiring insurance business are deferred.  These
costs, all of which vary with and are primarily related to the
production of new and renewal business, consist principally of
commissions, certain expenses of underwriting and issuing
contracts, and certain agency expenses.  For fixed ordinary life
contracts, such costs are amortized over expected premium-paying
periods (up to 20 years).  For universal life and certain annuity
and pension contracts, such costs are amortized in proportion to
estimated gross profits and adjusted to reflect actual gross
profits over the life of the contracts (up to 20 years for annuity
and pension contracts).

Deferred policy acquisition costs are written off to the extent
that it is determined that future policy premiums and investment
income or gross profits are not adequate to cover related losses
and expenses.


<PAGE> 52

Notes to Financial Statements (Continued)

1.  Summary of Significant Accounting Policies (Continued)

Separate Accounts


Separate Accounts assets and liabilities generally represent funds
maintained to meet specific investment objectives of
contractholders who bear the investment risk, subject, in some
cases, to minimum guaranteed rates.  Investment income and
investment gains and losses generally accrue directly to such
contractholders.  The assets of each account are legally
segregated and are not subject to claims that arise out of any
other business of the Company.  The assets and liabilities are
carried at market value.  Deposits, net investment income and
realized capital gains and losses on Separate Accounts assets are
not reflected in the Consolidated Statements of Income.
Management fees charged to contractholders are included in fees
and other income.

Insurance Liabilities


Future policy benefits include reserves for universal life,
limited payment and traditional life insurance contracts.
Reserves for universal life contracts are equal to cumulative
premiums less charges plus credited interest thereon.  Reserves
for limited payment and traditional life insurance contracts are
computed on the basis of assumed investment yield, mortality,
morbidity and expenses, including a margin for adverse deviation.
Such assumptions generally vary by plan, year of issue and policy
duration.  Reserve interest rates range from 2.25% to 12.00%.
Investment yield is based on the Company's experience.  Mortality,
morbidity and withdrawal rate assumptions are based on the
experience of the Company and are periodically reviewed against
both industry standards and experience.

Policyholders' funds left with the Company include reserves for
pension and annuity investment contracts.  Reserves on such
contracts are equal to cumulative deposits less charges plus
credited interest thereon (rates range from 2.50% to 17.75%) net
of adjustments for investment experience that the Company is
entitled to reflect in future credited interest.  Reserves on
contracts subject to experience rating reflect the rights of
contractholders, plan participants and the Company.

<PAGE> 53

Notes to Financial Statements (Continued)

1.  Summary of Significant Accounting Policies (Continued)

Insurance Liabilities (Continued)


Unpaid claims related to the Company's prepaid health care
services (primarily health maintenance organizations) consist
principally of medical claims and capitation costs.  Medical
claims include estimates of payments to be made on claims reported
and estimates of health care services rendered but not reported to
the Company as of the balance sheet date.  Such estimates include
the cost of services which will continue to be rendered after the
balance sheet date if the Company is obligated to pay for such
services in accordance with contract provisions or regulatory
requirements.  Medical claims payable are estimated periodically
and any resulting adjustments are included in current operations.

Unpaid claim reserves for other group health products and medical
claims payable reflect estimates, derived from past experience, of
the ultimate cost of incurred claims, including claims that have
been incurred but not reported, and claims that have been
reported, but not settled.

Revenue Recognition


For universal life and certain annuity contracts, charges assessed
against policyholders' funds for the cost of insurance, surrender
charges, actuarial margin and other fees are recorded as revenue
in fees and other income.  Other amounts received for these
contracts are reflected as deposits and are not recorded as
revenue.  Life insurance premiums, other than premiums for
universal life and certain annuity contracts, are recorded as
premium revenue when due.  Related policy benefits are recorded in
relation to the associated premiums or gross profit so that
profits are recognized over the expected lives of the contracts.
When annuity payments begin under contracts that were initially
investment contracts, the accumulated balance in the account is
treated as a single premium for the purchase of an annuity,
reflected as an offsetting amount in both premiums and current and
future benefits in the Consolidated Statements of Income.

Group health and group insurance premiums are generally recorded
as premium revenue over the term of the coverage.  Some group
contracts allow for premiums to be adjusted to reflect actual
experience.  Such premiums are recognized as the experience
emerges.

Fees and other income are derived primarily from contracts for
claim processing or other administrative services and are recorded
over the period the service is provided.

<PAGE> 54

Notes to Financial Statements (Continued)

1.  Summary of Significant Accounting Policies (Continued)

Income Taxes


The Company is taxed at regular corporate rates after adjusting
income reported for financial statement purposes for certain
items.  The Company files a consolidated federal income tax
return.  Foreign subsidiaries and U.S. subsidiaries operating
outside of the United States are taxed under applicable foreign
statutes.  Deferred income tax expenses/benefits result from
changes during the year in cumulative temporary differences
between the tax basis and book basis of assets and liabilities.

Earnings Per Common Share

Primary earnings per common share are computed using net income
less preferred stock dividends divided by the weighted average
number of common shares outstanding (including common share
equivalents).  Fully diluted earnings per common share are
computed using net income divided by the weighted average number
of common shares outstanding (including common share equivalents
and other potentially dilutive securities).  In determining
primary earnings per common share, the 6.25% Class C Voting
Preferred Stock ("Class C Stock") is not considered a common stock
equivalent.  It is included in the calculation of the Company's
fully diluted earnings per common share.  The weighted average
number of shares of Class C Stock outstanding for 1996 was 5.3
million.  There is not a material difference between primary and
fully diluted earnings per common share.

Reinsurance

The Company utilizes reinsurance agreements to reduce exposure to
large losses in all aspects of its insurance business.
Reinsurance permits recovery of a portion of losses from
reinsurers, although it does not discharge the primary liability
of the Company as direct insurer of the risks reinsured.  Only
those reinsurance recoverables deemed probable of recovery are
reflected as assets.

<PAGE> 55

Notes to Financial Statements (Continued)

2.  Merger with U.S. Healthcare

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

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

The Company's consolidated results of operations include U.S.
Healthcare from July 19, 1996.  The pro forma information below
presents combined results of operations as if the merger (as well
as the sale of Aetna's property-casualty operations - refer to
Note 3) had occurred at the beginning of 1995 and reflects
adjustments which include interest expense related to the assumed
financing of a portion of the cash consideration paid, interest
income foregone related to the balance of the cash consideration
paid, amortization of goodwill and other acquired intangible
assets, and adjustments to conform U.S. Healthcare's accounting
policies with the Company's and to remove the effect of merger-
related costs incurred by U.S. Healthcare prior to the
acquisition.  Severance and facility charges incurred as a result
of the integration ($275 million, after tax) are included in 1996
results (refer to Note 8), but no adjustment has been made to give
effect to any synergies which may be realized as a result of the
merger.


<PAGE> 56

Notes to Financial Statements (Continued)

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

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

<TABLE>
<CAPTION>
(Millions, except per common share data)           December 31,
____________________________________________________________________
                                             1996          1995
                                             _____         ____
<S>                                          <C>           <C>

Revenue                                      $17,528.5     $16,611.9
                                             _________     _________
                                             _________     _________

Net realized capital gains
  included in revenue                        $   128.9     $    62.3
                                             _________     _________
                                             _________     _________

Income before income taxes                   $   354.6     $   849.2
                                             _________     _________

Income taxes                                 $   180.7     $   377.7
                                             _________     _________

Net income                                   $   173.9     $   471.5
                                             _________     _________
                                             _________     _________

Net income per common share                  $     .78     $    2.79
                                             _________     _________
                                             _________     _________
</TABLE>

3.  Sale of Subsidiaries

On April 2, 1996, the Company sold its property-casualty
operations to an affiliate of The Travelers Insurance Group Inc.
("Travelers") for approximately $4.1 billion in cash.  The sale
resulted in an after-tax gain of $264 million
($218 million pretax).

The operating results and net assets of the property-casualty
operations were presented as Discontinued Operations through the
sale date.  Operating results for the period from January 1 to
April 2, 1996 and for the years ended December 31, 1995 and 1994
were:

<TABLE>
<CAPTION>
(Millions)                                           1996        1995         1994
_______________________________________________________________________________________
<S>                                                 <C>          <C>          <C>

Total revenue                                       $ 1,539.3    $ 5,258.2    $ 5,338.9
                                                    _________    _________    _________
                                                    _________    _________    _________
Income (loss) before income taxes                   $   262.7    $  (384.3)   $    30.8
Income taxes (benefits)                                  80.5       (162.1)       (27.3)
                                                    _________    _________    _________
Income (loss)                                       $   182.2    $  (222.2)   $    58.1
_____________________________________________________________    ______________________
                                                    _________    _________    _________
</TABLE>

Net assets at December 31, 1995 consisted of:

<TABLE>
<CAPTION>
(Millions)
_____________________________________________________________
<S>                                                 <C>
Total investments                                   $13,986.5
                                                    _________
Total assets                                        $23,502.4
                                                    _________
Total insurance liabilities                         $18,008.7
                                                    _________
Total liabilities                                   $19,569.6
_____________________________________________________________
</TABLE>

<PAGE> 57

Notes to Financial Statements (Continued)

3.  Sale of Subsidiaries (Continued)

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


<PAGE> 58

Notes to Financial Statements (Continued)

4.  Investments
<TABLE>
<CAPTION>
Debt securities available for sale at December 31 were as follows:
                                                                 Gross         Gross
(Millions)                                         Amortized     Unrealized    Unrealized   Fair
1996                                               Cost          Gains         Losses       Value
_______________________________________________________________________________________________________
<S>                                                <C>           <C>           <C>          <C>
Bonds:
  U.S. government and government agencies and
   authorities                                     $  3,723.0    $    82.9     $   32.8     $   3,773.1
  States, municipalities and political
   subdivisions                                         348.4          7.3           .4           355.3
  U.S. corporate securities:
    Utilities                                         2,355.3         85.8         20.8         2,420.3
    Financial                                         4,486.0         82.5         22.0         4,546.5
    Transportation/capital goods                      2,373.7        136.6         17.5         2,492.8
    Health care/consumer products                     1,754.0         64.6         14.9         1,803.7
    Natural resources                                 1,287.7         44.1         13.9         1,317.9

    Other corporate securities                        1,488.1         46.4         14.7         1,519.8
                                                   ____________________________________________________
      Total U.S. corporate securities                13,744.8        460.0        103.8        14,101.0
  Foreign:
    Government, including political subdivisions      2,407.5        111.2         13.3         2,505.4
    Utilities                                           740.3         55.0          5.1           790.2
    Other                                             3,376.3        148.3         11.5         3,513.1
                                                   ____________________________________________________
      Total foreign securities                        6,524.1        314.5         29.9         6,808.7
  Residential mortgage-backed securities:
    Pass-throughs                                     1,771.5         88.6         11.7         1,848.4
    Collateralized mortgage obligations               2,665.8        117.6         18.7         2,764.7
                                                   ____________________________________________________
      Total residential mortgage-backed securities    4,437.3        206.2         30.4         4,613.1
  Commercial/Multifamily mortgage-backed
       securities                                     1,131.5         27.8         15.0         1,144.3
  Other asset-backed securities (1)                   1,458.0         10.3          3.7         1,464.6
                                                   ____________________________________________________
Total Bonds                                          31,367.1      1,109.0        216.0        32,260.1
Redeemable Preferred Stocks                              74.3          1.9            -            76.2
                                                   ____________________________________________________
  Total Debt Securities                            $ 31,441.4    $ 1,110.9      $ 216.0      $ 32,336.3
_______________________________________________________________________________________________________
                                                   ____________________________________________________
</TABLE>

<TABLE>
<CAPTION>
                                                                 Gross         Gross
(Millions)                                         Amortized     Unrealized    Unrealized    Fair
1995                                               Cost          Gains         Losses        Value
_______________________________________________________________________________________________________
<S>                                                <C>           <C>           <C>           <C>
Bonds:
  U.S. government and government agencies and
   authorities                                     $  3,528.5    $   193.0     $    1.0     $   3,720.5
  States, municipalities and political subdivisions      69.1         12.7           .3            81.5
  U.S. corporate securities:
    Utilities                                         2,172.8        163.4          3.2         2,333.0
    Financial                                         4,527.8        185.4          8.9         4,704.3
    Transportation/capital goods                      2,486.6        245.9          2.6         2,729.9
    Health care/consumer products                     1,783.6        149.5          8.3         1,924.8
    Natural resources                                 1,186.3         93.7          1.2         1,278.8

    Other corporate securities                        1,732.0        137.3         10.1         1,859.2
                                                   ____________________________________________________
      Total U.S. corporate securities                13,889.1        975.2         34.3        14,830.0
  Foreign:
    Government, including political subdivisions      1,892.6         86.8         11.1         1,968.3
    Utilities                                           706.8         73.4           .1           780.1
    Other                                             2,792.6        201.3          7.6         2,986.3
                                                   ____________________________________________________
      Total foreign securities                        5,392.0        361.5         18.8         5,734.7
  Residential mortgage-backed securities:
    Pass-throughs                                     1,738.1        136.9         10.6         1,864.4
    Collateralized mortgage obligations               2,866.5        213.1          5.7         3,073.9
                                                   ____________________________________________________
      Total residential mortgage-backed securities    4,604.6        350.0         16.3         4,938.3
  Commercial/Multifamily mortgage-backed
       securities                                       741.9         32.3           .2           774.0
  Other asset-backed securities (1)                   1,728.5         45.2          1.2         1,772.5
                                                   ____________________________________________________
Total Bonds                                          29,953.7      1,969.9         72.1        31,851.5
Redeemable Preferred Stocks                               8.8           .5           .5             8.8
                                                   ____________________________________________________
  Total Debt Securities                            $ 29,962.5    $ 1,970.4      $  72.6      $ 31,860.3
_______________________________________________________________________________________________________
                                                   ____________________________________________________
(1) Includes approximately $108.0 million of subordinate and residual certificates from a mortgage loan
    securitization in 1995 which were retained by the Company.
</TABLE>

<PAGE> 59

Notes to Financial Statements (Continued)

4.  Investments (Continued)

At December 31, 1996 and 1995, net unrealized appreciation on
available for sale debt securities included $399 million and
$960 million, respectively, related to experience rated contracts
and $205 million and $421 million, respectively, related to
discontinued products (refer to Note 9), which were not reflected
in shareholders' equity.

The carrying and fair value of debt securities are shown below by
contractual maturity.  Actual maturities may differ from
contractual maturities because securities may be restructured,
called or prepaid.

<TABLE>
<CAPTION>
1996                                        Amortized      Fair
(Millions)                                  Cost           Value
____________________________________________________________________
<S>                                         <C>            <C>

Due to mature:
  One year or less                          $ 1,515.5      $ 1,522.3
  After one year through five years           7,190.7        7,296.4
  After five years through ten years          7,215.9        7,391.4
  After ten years                             8,492.5        8,904.2
  Mortgage-backed securities                  5,568.8        5,757.4
  Other asset-backed securities               1,458.0        1,464.6
____________________________________________________________________
    Total                                   $31,441.4      $32,336.3
____________________________________________________________________
                                            ________________________
</TABLE>

The Company engages in securities lending whereby certain
securities from its portfolio are loaned to other institutions for
short periods of time.  Collateral, primarily cash, which is in
excess of the market value of the loaned securities, is deposited
by the borrower with a lending agent, and retained and invested by
the lending agent to generate additional income for the Company.
The market value of the loaned securities is monitored on a daily
basis with additional collateral obtained or refunded as the
market value fluctuates.  At December 31, 1996 and 1995, the
Company had loaned securities (which are reflected as invested
assets) with a market value of approximately $1.3 billion.

Investments in equity securities were as follows:

<TABLE>
<CAPTION>
                                           Gross         Gross
                                           Unrealized    Unrealized    Fair
(Millions)                   Cost          Gains         Losses        Value
________________________________________________________________________________
<S>                          <C>           <C>           <C>           <C>
1996
________________________________________________________________________________
Equity securities            $   963.4    $   397.9     $    28.5      $ 1,332.8
________________________________________________________________________________
                             ___________________________________________________

1995
________________________________________________________________________________
Equity securities            $   597.8    $    85.1     $    23.2      $   659.7
________________________________________________________________________________
                             ___________________________________________________
</TABLE>

<PAGE> 60

Notes to Financial Statements (Continued)

4.  Investments (Continued)

Real Estate holdings at December 31 were as follows:

<TABLE>
<CAPTION>
(Millions)                                    1996         1995
____________________________________________________________________
<S>                                           <C>          <C>

Properties held for sale                      $  771.7    $  1,230.2
Investment real estate                           220.6         177.7
                                              ______________________
                                                 992.3       1,407.9
Valuation reserve                                142.1         130.6
                                              ______________________
  Net carrying value of real estate           $  850.2    $  1,277.3
____________________________________________________________________
                                              ______________________
  Net carrying value of real estate of
   discontinued products (included above)     $  367.7    $    635.0
_____________________________________________________________________
                                              _______________________
</TABLE>

Accumulated depreciation for real estate was $21 million and
$117 million at December 31, 1996 and 1995, respectively.

Total real estate write-downs included in the net carrying value
of the Company's real estate holdings at December 31, 1996 and
1995 were $347 million and $555 million, respectively, (including
$224 million and $299 million, respectively, attributable to
assets of discontinued products).

At December 31, 1996 and 1995, 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 as follows:

<TABLE>
<CAPTION>
                                                      1996                        1995
                                              ___________________________________________________
                                              Total                       Total
                                              Recorded     Specific       Recorded     Specific
(Millions)                                    Investment   Reserves       Investment   Reserves
_________________________________________________________________________________________________
<S>                                           <C>          <C>            <C>          <C>

Supporting discontinued products              $  387.3     $     86.9     $   755.4    $    200.9
Supporting experience rated products             258.3           40.0         439.2         115.1
Supporting remaining products                    160.1           17.2         329.8          45.2
                                              ___________________________________________________
   Total Impaired Loans                       $  805.7 (1) $    144.1     $ 1,524.4(1) $    361.2
_________________________________________________________________________________________________
                                              ___________________________________________________
<FN>

(1) Includes impaired loans of $227.0 million and $417.0 million, respectively, for which no
    specific reserves are considered necessary.
</TABLE>

<PAGE> 61

Notes to Financial Statements (Continued)

4.  Investments (Continued)

The activity in the specific and general mortgage loan impairment
reserves as of December 31 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, 1994          $   372.1       $   364.6     $   119.3     $   856.0
_________________________________________________________________________________
                            _____________________________________________________

Charged to
 net realized capital loss          -               -          10.4          10.4

Charged (credited) to
 other accounts (1)              25.2           (30.2)            -          (5.0)


Principal write-offs           (109.8)         (106.1)        (40.6)       (256.5)
                            _____________________________________________________

Balance at

 December 31, 1995 (2)          287.5           228.3          89.1         604.9
_________________________________________________________________________________
                             ____________________________________________________

Credited to
 net realized capital gain          -               -         (33.0)        (33.0)

Credited to
 other accounts (1)             (10.0)          (57.6)            -         (67.6)


Principal write-offs           (140.8)          (96.0)        (20.5)       (257.3)
                            _____________________________________________________

Balance at

 December 31, 1996 (2)      $   136.7        $   74.7     $    35.6     $   247.0
_________________________________________________________________________________
                            _____________________________________________________
<FN>

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

(2)  Total reserves at December 31, 1996 and 1995 include $144.1 million and
     $361.2 million of specific reserves and $102.9 million and $243.7 million of
     general reserves, respectively.



</TABLE>


<PAGE> 62

Notes to Financial Statements (Continued)

4.  Investments (Continued)

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

Income earned (pretax) and received on the average recorded
investment in impaired loans for the twelve months ended
December 31 was as follows:

<TABLE>
<CAPTION>
                                                   1996                               1995
                                      __________________________________________________________________
                                      Average                            Average
                                      Impaired   Income     Income       Impaired   Income     Income
(Millions)                            Loans      Earned     Received     Loans      Earned     Received
________________________________________________________________________________________________________
<S>                                   <C>        <C>        <C>          <C>        <C>        <C>

Supporting discontinued products      $   675.0  $  54.6    $  55.8      $   952.9  $    81.9  $    81.0
Supporting experience rated products      474.7     33.1       33.2          739.8       50.6       51.6
Supporting remaining products             211.6     16.6       16.8          292.5       21.6       22.1
                                      __________________________________________________________________
  Total                               $ 1,361.3  $ 104.3    $ 105.8      $ 1,985.2  $   154.1  $   154.7
________________________________________________________________________________________________________
                                      __________________________________________________________________
</TABLE>

The carrying values of investments that were nonincome producing
for the twelve months preceding the Consolidated Balance Sheet
date were as follows:

<TABLE>
<CAPTION>
(Millions)                         1996         1995
________________________________________________________
<S>                                <C>          <C>

Debt securities                    $  13.7      $    6.9
Mortgage loans                        21.5          57.9
Real estate                           60.0          95.8
                                   _____________________
  Total nonincome producing
  assets                           $  95.2      $  160.6
________________________________________________________
                                   _____________________
  Nonincome producing
  assets of discontinued
  products (included above)        $  32.5      $   33.9
________________________________________________________
                                   _____________________
</TABLE>

Significant noncash investing and financing activities include
acquisition of real estate through foreclosures (including in-
substance foreclosures) of mortgage loans amounting to
$141 million and $264 million for 1996 and 1995, respectively.

<PAGE> 63

Notes to Financial Statements (Continued)

4.  Investments (Continued)

At December 31, 1996 and 1995, the Company's mortgage loan
balances, net of specific impairment reserves, by geographic
region and property type were as follows:

<TABLE>
<CAPTION>

(Millions)            1996       1995           (Millions)          1996       1995
_________________________________________       ________________________________________
<S>                   <C>        <C>                                <C>        <C>
South Atlantic        $ 1,311.6  $ 1,755.6      Office              $ 3,056.4  $ 3,619.9
Middle Atlantic         1,592.9    1,562.7      Retail                1,369.3    1,834.4
New England               745.1      985.4      Apartment               428.8      600.6
South Central             334.5      656.6      Hotel/Motel             572.0      921.9
North Central             749.4      933.1      Industrial              584.7      726.9
Pacific and Mountain    1,412.4    1,902.8      Mixed Use               430.0      360.8
Other                     657.9      774.7      Other                   362.6      506.4
                      ____________________                          ____________________
  Total                 6,803.8    8,570.9       Total                6,803.8    8,570.9

Less general                                    Less general
 impairment reserve       102.9      243.7       impairment reserve     102.9      243.7
                      ____________________                          ____________________

Net mortgage                                    Net mortgage
 loan balance         $ 6,700.9  $ 8,327.2       loan balance       $ 6,700.9  $ 8,327.2
__________________________________________      ________________________________________
                      ____________________                          ____________________


</TABLE>

5.  Financial Instruments

Estimated Fair Value

The carrying values and estimated fair values of certain of the
Company's financial instruments at December 31, 1996 and 1995 were
as follows:

<TABLE>
<CAPTION>
(Millions)                                      1996                      1995
                                      _________________________________________________
                                       Carrying     Fair         Carrying     Fair
                                       Value        Value        Value        Value
                                       ________     _____        ________     _____
<S>                                    <C>          <C>          <C>          <C>
Assets:
  Mortgage loans                       $ 6,700.9    $ 6,705.0    $ 8,327.2    $ 8,544.0

Liabilities:
  Investment contract liabilities:
    With a fixed maturity              $ 7,328.2    $ 7,336.2    $ 9,779.6    $ 9,738.2
    Without a fixed maturity            11,859.1     11,764.3     12,316.2     12,332.7
  Long-term debt                         2,380.0      2,374.6        989.1        988.3
</TABLE>

<PAGE> 64

Notes to Financial Statements (Continued)

5.  Financial Instruments (Continued)

Estimated Fair Value (Continued)

Fair value estimates are made at a specific point in time, based
on available market information and judgments about the financial
instrument, such as estimates of timing and amount of future cash
flows.  Such estimates do not reflect any premium or discount that
could result from offering for sale at one time the Company's
entire holdings of a particular financial instrument, nor do they
consider the tax impact of the realization of unrealized capital
gains or losses.  In many cases, the fair value estimates cannot
be substantiated by comparison to independent markets, nor can the
disclosed value be realized in immediate settlement of the
instrument.  In evaluating the Company's management of interest
rate, price and liquidity risks, and currency exposures, the fair
values of all assets and liabilities should be taken into
consideration, not only those presented above.

The following valuation methods and assumptions were used by the
Company in estimating the fair value of the above financial
instruments:

Mortgage loans:  Fair values are estimated by discounting expected
mortgage loan cash flows at market rates which reflect the rates
at which similar loans would be made to similar borrowers.  The
rates reflect management's assessment of the credit quality and
the remaining duration of the loans.  The fair value estimates of
mortgage loans of lower credit quality, including problem and
restructured loans, are based on the estimated fair value of the
underlying collateral.

Investment contract liabilities (included in policyholders' funds
left with the Company):

With a fixed maturity:  Fair value is estimated by discounting
cash flows at interest rates currently being offered by, or
available to, the Company for similar contracts.

Without a fixed maturity:  Fair value is estimated as the amount
payable to the contractholder upon demand.  However, the Company
has the right under such contracts to delay payment of withdrawals
which may ultimately result in paying an amount different than
that determined to be payable on demand.

Long-term debt:  Fair value is based on quoted market prices for
the same or similar issued debt or, if no quoted market prices are
available, on the current rates estimated to be available to the
Company for debt of similar terms and remaining maturities.


<PAGE> 65

Notes to Financial Statements (Continued)

5.  Financial Instruments (Continued)

Off-Balance-Sheet and Other Financial Instruments:


The notional amounts, carrying values and estimated fair values of
the Company's off-balance-sheet and other financial instruments at
December 31 were as follows:

<TABLE>
<CAPTION>
                                            1996                              1995
                                 ____________________________     ____________________________
                                            Carrying                         Carrying
                                            Value                            Value
                                 Notional   Asset       Fair      Notional   Asset       Fair
(Millions)                       Amount    (Liability)  Value     Amount    (Liability)  Value
______________________________________________________________________________________________
<S>                              <C>       <C>          <C>       <C>       <C>          <C>

Foreign exchange forward
 contracts - sell:
  Related to net investments in
   foreign affiliates            $  29.7    $    (.6)   $   (.6)  $ 210.4   $  (2.0)     $  (3.5)
  Related to investments in
   nondollar denominated assets    213.1         3.0        3.4      54.0       (.1)         (.1)
Foreign exchange forward
 contracts - buy:
  Related to net investments in
   foreign affiliates               25.3           -          -       2.7        .2           .4
  Related to investments in
   nondollar denominated assets     23.5          .5         .5      43.8        .1           .6
Interest rate swaps                 43.0           -        6.4      43.0         -          9.5
Futures contracts to sell
  debt securities                      -           -          -      20.9        .2           .2
Forward swap agreements                -           -          -     100.0         -           .1
Warrants to purchase debt
  securities                        19.0         3.9        3.9      19.0       4.5          4.5
</TABLE>

The notional amounts of these instruments do not represent the
Company's risk of loss.  The fair value of these instruments was
estimated based on quoted market prices, dealer quotations or
internal price estimates believed to be comparable to dealer
quotations.  These fair value amounts reflect the estimated
amounts that the Company would have to pay or would receive if the
contracts were terminated.


<PAGE> 66

Notes to Financial Statements (Continued)

5.  Financial Instruments (Continued)

Off-Balance-Sheet and Other Financial Instruments (Continued):


The Company engages in hedging activities to manage interest rate,
price and currency risks.  Such hedging activities have
principally consisted of using off-balance-sheet instruments such
as those in the above table. All of these instruments involve, to
varying degrees, elements of market risk and credit risk in excess
of the amounts recognized in the Consolidated Balance Sheets.  The
Company evaluates the risks associated with these instruments in a
manner similar to that used to evaluate the risks associated with
on-balance-sheet financial instruments. Market risk is the
possibility that changes in market prices may decrease the market
value of one or all of these financial instruments.  For off-
balance-sheet financial instruments used for hedging, such market
price changes are generally offset by the market price changes in
the hedged instruments held by the Company.  Credit risk arises
from the possibility that counterparties may fail to perform under
the terms of the contract, which could result in an unhedged
position.  However, unlike on-balance-sheet financial instruments,
where credit risk generally is represented by the notional or
principal amount, the off-balance-sheet financial instruments'
risk of credit loss generally is significantly less than the
notional value of the instrument and is represented by the
positive fair value of the instrument.  The Company generally does
not require collateral or other security to support the financial
instruments discussed below.  However, the Company controls its
exposure to credit risk through credit approvals, credit limits
and regular monitoring procedures.  There were no material
concentrations of off-balance-sheet financial instruments at
December 31, 1996.

<PAGE> 67

Notes to Financial Statements (Continued)

5.  Financial Instruments (Continued)

Off-Balance-Sheet and Other Financial Instruments (Continued):


Foreign Exchange Forward Contracts:

Foreign exchange forward contracts are agreements to exchange
fixed amounts of two different currencies at a specified future
date and at a specified price.  The Company utilizes foreign
exchange forward contracts to hedge its foreign currency exposure
arising from certain investments in foreign affiliates (primarily
Canada) and nondollar denominated investment securities. The
Company generally utilizes foreign currency contracts with terms
of up to three months.

At December 31, 1996 and 1995, the Company had unhedged foreign
currency exposures (for which either no market exists for hedging
or a decision was made not to hedge the risk) of $727 million and
$677 million, respectively, related to net investments in foreign
affiliates (primarily Taiwan, Mexico, Chile and Malaysia) and
$67 million and $69 million, respectively, related to investments
in nondollar denominated assets.

Interest Rate Swaps:

The Company utilizes interest rate swaps to manage certain
exposures related to changes in interest rates primarily by
exchanging variable rate returns for fixed rate returns.

Futures Contracts:

Futures contracts represent commitments to either purchase or sell
securities at a specified future date and at a specified price or
yield.  Futures contracts trade on organized exchanges and,
therefore, have minimal credit risk.

Warrants:

Warrants are instruments giving the Company the right, but not the
obligation to buy a security at a given price during a specified
period.

<PAGE> 68

Notes to Financial Statements (Continued)

6.  Net Investment Income

Sources of net investment income were as follows:

(Millions)                  1996         1995         1994
                            __________   __________   ________

Debt securities             $ 2,312.1    $ 2,275.9    $ 2,250.0
Equity securities                34.0         22.0         29.2
Short-term investments           29.0         25.1         14.0
Mortgage loans                  761.8        962.6      1,146.8
Real estate                     300.2        306.4        302.0
Policy loans                     37.2         30.6         28.0
Other                           120.0        133.2         86.2
Cash equivalents                168.6        151.8        109.1
                            ___________________________________
Gross investment
   income                     3,762.9      3,907.6      3,965.3
Less: investment
   expenses                     197.7        332.5        333.9
                            ___________________________________
  Net investment

   income (1)(2)            $ 3,565.2    $ 3,575.1    $ 3,631.4
_______________________________________________________________
                            ___________________________________

(1) Includes $67.1 million and $76.2 million from real estate properties
     held for sale at the end of 1996 and 1995, respectively.

(2) Includes amounts allocable to experience rated contractholders of $1.4
    billion, $1.5 billion and $1.4 billion during 1996, 1995 and 1994,
    respectively.  Interest credited to contractholders is included in
    current and future benefits.

7.  Capital Gains and Losses on Investment Operations

Realized capital gains or losses are the difference between the
carrying value and sale proceeds of specific investments sold.
Provisions for impairments and changes in the fair value of real
estate held for sale are also included in net realized capital
gains or losses.

Net realized capital gains (losses) on investments were as
follows:

<TABLE>
<CAPTION>
(Millions)                  1996           1995        1994
                            _________      _________   ________
<S>                         <C>            <C>         <C>
Debt securities             $   (11.8)     $   34.4    $  (42.3)
Equity securities                46.3          18.2          .8
Mortgage loans                   33.9          (9.4)      (39.0)
Real estate                       4.7           3.5        30.0
Sales of subsidiaries (1)        60.1             -        (3.9)
Other                             1.2            .5         (.8)
                            ___________________________________
  Pretax realized
   capital gains (losses)   $   134.4      $   47.2    $  (55.2)
_______________________________________________________________
                            ___________________________________
  After-tax realized

   capital gains (losses)   $    85.9      $   29.5    $  (41.2)
_______________________________________________________________
                            ___________________________________
<FN>

(1) Realized capital gains in 1996 include pretax gains of $39.3 million
    from the sale of Aetna Realty Investors and $20.8 million
    from the sale of Aetna Health Plans of Western Pennsylvania.
</TABLE>


<PAGE> 69

Notes to Financial Statements (Continued)

7.  Capital Gains and Losses on Investment Operations
    (Continued)

Net realized capital gains of $199 million and $97 million for
1996 and 1995, respectively, and net realized capital losses of
$195 million for 1994 allocable to experience rated
contractholders were deducted from net realized capital gains
(losses) and an offsetting amount was reflected in policyholders'
funds left with the Company.

Net realized capital gains of $122 million for 1996 and net
realized capital losses of $7 million and $209 million for 1995
and 1994, respectively, allocable to discontinued products were
deducted from net realized capital gains (losses) and an
offsetting amount was reflected in the reserve for anticipated
future losses on discontinued products.

Proceeds from the sale of available for sale debt securities and
the related gross gains and losses were as follows:

<TABLE>
<CAPTION>
(Millions)                  1996        1995        1994
                            __________  _________   _________
<S>                         <C>         <C>         <C>
Proceeds on sales           $ 13,625.6  $13,747.2   $14,801.6
Gross gains                       77.6      124.0        62.3
Gross losses                      89.4       89.6       100.8
</TABLE>

Changes in shareholders' equity related to changes in unrealized
capital gains (losses) (excluding those related to experience
rated contractholders and discontinued products) were as follows:

<TABLE>
<CAPTION>
(Millions)                                    1996           1995           1994
______________________________________________________________________________________
<S>                                           <C>            <C>            <C>
Continuing Operations:
  Debt securities                             $   (225.8)    $    984.8     $   (867.9)
  Equity securities                                307.5           41.3          (28.9)
  Foreign exchange and other, net                  (70.9)         (23.3)         (82.5)
Discontinued Operations                           (474.0)         900.9         (910.5)
                                              ________________________________________
   Subtotal                                       (463.2)       1,903.7       (1,889.8)
Increase (Decrease) in deferred
 income taxes                                     (162.1)         191.1         (170.1)
                                              ________________________________________
Net changes in unrealized capital gains
 (losses)                                     $   (301.1)    $  1,712.6     $ (1,719.7)
______________________________________________________________________________________
                                              ________________________________________
</TABLE>

<PAGE> 70

Notes to Financial Statements (Continued)

7.  Capital Gains and Losses on Investment Operations
    (Continued)

Shareholders' equity included the following unrealized capital
gains (losses), which are net of amounts allocable to experience
rated contractholders and discontinued products, at December 31:

<TABLE>
<CAPTION>
(Millions)                                    1996         1995
____________________________________________________________________
<S>                                           <C>          <C>
Continuing Operations:
  Debt securities available for sale:
    Gross unrealized capital gains            $   378.5    $   574.9
    Gross unrealized capital losses               (87.6)       (58.2)
                                              ______________________
                                                  290.9        516.7
  Equity securities:
    Gross unrealized capital gains                397.9         85.1
    Gross unrealized capital losses               (28.5)       (23.2)
                                              ______________________
                                                  369.4         61.9
  Foreign exchange and other, net                (137.2)       (66.3)
Discontinued Operations                               -        474.0
Deferred income taxes                             183.1        345.2
                                              ______________________
  Net unrealized capital gains                $   340.0    $   641.1
____________________________________________________________________
                                              ______________________
</TABLE>

8.  Severance and Facilities Charges

Severance and facilities charges during 1996, as described below,
included the following (pretax):

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

Aetna U.S. Healthcare          $277.9         $ 84.9        $ 64.5      $ 25.7    $453.0
Aetna Retirement Services        42.8            1.5           1.9         2.8      49.0
Corporate:  Other                28.5           18.0         313.2 (1)     3.0     362.7
                               _________________________________________________________

  Total Company                $349.2         $104.4        $379.6      $ 31.5    $864.7
________________________________________________________________________________________
                               _________________________________________________________
<FN>

(1)  Includes $292.2 million related to the CityPlace lease.
</TABLE>

In the fourth quarter of 1996, Aetna U.S. Healthcare recorded a
charge of $275 million after tax ($423 million pretax) principally
related to actions taken or expected to be taken with respect to
the integration of the health businesses of Aetna Services and
U.S. Healthcare.  The severance portion of this charge is based on
a plan to eliminate 7,500 positions (primarily service center,
medical management, administrative and data center personnel).  A
charge of $20 million after tax ($30 million pretax) also was
recorded by Aetna U.S. Healthcare in the second quarter of 1996
primarily related to actions, not related to the U.S. Healthcare
merger, taken or expected to be taken to reduce information
technology costs. The severance portion of this charge included a
plan to eliminate 675 positions.  By year-end, a large portion of
these actions was completed.

<PAGE> 71

Notes to Financial Statements (Continued)

8.  Severance and Facilities Charges (Continued)

In the third quarter of 1996, Aetna Retirement Services recorded a
$32 million after tax ($49 million pretax) charge principally
related to actions taken or expected to be taken to improve its
cost structure relative to its competitors.  The severance portion
of the charge is based on a plan to eliminate 723 positions
(primarily customer service, sales and information technology
support staff).  The facilities portion of the charge is based on
a plan to consolidate sales/service field offices.

In connection with the sale of the Company's property-casualty
operations, the Company vacated, and Travelers subleased, the
space that the Company occupied in the CityPlace office facility
in Hartford at market rates for a period of eight years.  The
Company recorded a charge of $190 million after tax ($292 million
pretax) during the second quarter representing the present value
of the difference between rent required to be paid by the Company
under the lease and future rentals expected to be received by the
Company.  (Refer to Note 18).  The Company also recorded a charge
of $45 million after tax ($71 million pretax) during the second
quarter for actions taken or expected to be taken to reduce the
level of corporate expenses and other costs previously absorbed by
the property-casualty operations.  The severance portion of this
charge includes the planned elimination of 475 positions.

The activity during 1996 within the severance and facilities
reserve (pretax, in millions) and the number of positions
eliminated related to such actions were as follows:

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

Beginning of year                                 $    -                      -
Severance and facilities charges                   864.7                  9,373
Actions taken                                      139.5  (1)             2,421
                                                  ______                  _____

   End of year                                    $725.2                  6,952
_______________________________________________________________________________
                                                  _____________________________
<FN>

(1)  Includes $84.6  million of severance-related actions.
</TABLE>

<PAGE> 72

Notes to Financial Statements (Continued)

8.  Severance and Facilities Charges (Continued)

The 2,421 positions eliminated during 1996 related to the
following segments:  78% - Aetna U.S. Healthcare, 8% - Aetna
Retirement Services and 14% - Corporate.  The Aetna U.S.
Healthcare severance actions related to the charge recorded in the
fourth quarter are expected to be substantially completed by the
end of 1998.  The Aetna Retirement Services severance actions are
expected to be substantially completed by March 31, 1998.  The
Corporate severance actions and the vacating of the leased office
space are expected to be substantially completed in 1997.  The
remaining lease payments (net of expected subrentals) on these
facilities (other than the CityPlace office facility) are payable
over approximately the next three years.

9.  Discontinued Products

Under the Company's accounting for its discontinued fully
guaranteed large case pension products (guaranteed investment
contracts ("GICs") and single-premium annuities ("SPAs")), the
respective reserves for anticipated future losses on these
products are reviewed by management quarterly.  Accordingly, as
long as the reserves represent management's then best estimates of
expected future losses, results of operations of the discontinued
products, including net realized capital gains and losses, are
credited/charged to the respective reserve and do not affect the
Company's results of operations.  As a result of management's
reviews during 1996, $202 million (pretax) of the reserve related
to GICs was released primarily as a result of favorable
developments in real estate markets.  The reserves at December 31,
1996 reflect management's best estimate of the anticipated future
net losses for GICs and SPAs.  To the extent that actual future
losses are greater than anticipated, the Company's results of
operations would be adversely affected.  Conversely, if actual
future losses are less than anticipated, the Company's results of
operations would be favorably affected.


<PAGE> 73

Notes to Financial Statements (Continued)

9.  Discontinued Products (Continued)

Results of discontinued products were as follows (pretax):

<TABLE>
<CAPTION>
                                                                              Charged
                                                                              (Credited)
                                                                              to Reserve for
(Millions)                           GICs           SPAs           Total      Future Losses    Net(1)
________________________________________________________________________________________________________
1996
<S>                                  <C>            <C>            <C>        <C>              <C>

Net investment income                $   376.1      $   442.2      $   818.3  $        -       $   818.3
Net realized capital gains                87.2           34.6          121.8      (121.8)              -
Interest earned on receivable from
 continuing products                      14.6           31.1           45.7           -            45.7
Change in Accounting Policy -
 FAS No. 121 (2)                           5.4            2.9            8.3           -             8.3
Other income                               9.7           21.8           31.5           -            31.5
                                     ___________________________________________________________________
  Total revenue                          493.0          532.6        1,025.6      (121.8)          903.8
                                     ___________________________________________________________________

Current and future benefits (3)          360.0          417.8          777.8       108.5           886.3
Operating expenses                         8.1            9.4           17.5           -            17.5
                                     ___________________________________________________________________
  Total benefits and expenses            368.1          427.2          795.3       108.5           903.8
                                     ___________________________________________________________________

Results of discontinued products     $   124.9      $   105.4      $   230.3  $   (230.3)      $       -
________________________________________________________________________________________________________
________________________________________________________________________________________________________
1995

Net investment income                $   515.4      $   447.5      $   962.9  $       -        $   962.9
Net realized capital gains (losses)      (56.4)          49.3           (7.1)       7.1                -
Interest earned on receivable from
 continuing products                      20.3           30.5           50.8          -             50.8
Other income                               8.8           11.9           20.7          -             20.7
                                     ___________________________________________________________________
  Total revenue                          488.1          539.2        1,027.3        7.1          1,034.4
                                     ___________________________________________________________________

Current and future benefits (3)          609.4          443.7        1,053.1      (31.1)         1,022.0
Operating expenses                         2.9            9.5           12.4          -             12.4
                                     ___________________________________________________________________
  Total benefits and expenses            612.3          453.2        1,065.5      (31.1)         1,034.4
                                     ___________________________________________________________________

Results of discontinued products     $  (124.2)     $    86.0      $   (38.2) $    38.2        $       -
________________________________________________________________________________________________________
________________________________________________________________________________________________________
1994

Premiums                             $       -      $    57.3      $    57.3  $       -        $    57.3
Net investment income                    633.1          433.0        1,066.1          -          1,066.1
Net realized capital losses             (150.2)         (58.8)        (209.0)     209.0                -
Interest earned on receivable from
 continuing products                      19.4           28.1           47.5          -             47.5
Other income                              14.9           16.2           31.1          -             31.1
                                     ___________________________________________________________________
  Total revenue                          517.2          475.8          993.0      209.0          1,202.0
                                     ___________________________________________________________________

Current and future benefits (3)          765.5          491.4        1,256.9      (64.0)         1,192.9
Operating expenses                         6.1            3.0            9.1          -              9.1
                                     ___________________________________________________________________

  Total benefits and expenses            771.6          494.4        1,266.0      (64.0)         1,202.0
                                     ___________________________________________________________________

Results of discontinued products     $  (254.4)     $   (18.6)     $  (273.0) $   273.0        $       -
________________________________________________________________________________________________________
________________________________________________________________________________________________________
<FN>

(1) Amounts are reflected in the 1996, 1995 and 1994 Consolidated Statements of Income, except for
    interest earned on the receivable from continuing products which is eliminated in consolidation.
(2) Refer to Note 1 for a discussion of FAS No. 121.
(3) 1995 current and future benefits include losses of $49.5 million (pretax) due to early retirement of
    GICs.  Such losses were immaterial in 1996 and 1994.
</TABLE>

Deposits of $18 million, $32 million and $212 million were
received during 1996, 1995 and 1994, respectively, under
preexisting GICs.

<PAGE> 74

Notes to Financial Statements (Continued)

9.  Discontinued Products (Continued)

Net realized capital gains (losses) from the sale of bonds
supporting GICs and SPAs were as follows (pretax):

<TABLE>
<CAPTION>
(Millions)                  1996         1995         1994
_____________________________________________________________
<S>                         <C>          <C>          <C>

GICs                        $  6.0       $  (2.8)     $ (54.6)

SPAs                           5.9          64.2        (24.1)
_____________________________________________________________
</TABLE>

Assets and liabilities of discontinued products were as follows:
(1)(2)

<TABLE>
<CAPTION>
                                     December 31, 1996                     December 31, 1995
                            __________________________________________________________________________
(Millions)                  GICs         SPAs         Total       GICs         SPAs         Total
______________________________________________________________________________________________________
<S>                         <C>          <C>          <C>         <C>          <C>          <C>

Debt securities
 available for sale         $ 1,556.0    $ 3,633.3    $ 5,189.3   $  2,120.3   $  3,644.9   $  5,765.2
Mortgage loans                1,438.1      1,292.6      2,730.7      1,883.0      1,505.6      3,388.6
Real estate                     266.1        101.6        367.7        457.3        177.7        635.0
Short-term and other
 investments                    234.1        160.4        394.5        425.3        110.5        535.8
                            __________________________________________________________________________
  Total investments           3,494.3      5,187.9      8,682.2      4,885.9      5,438.7     10,324.6
Current and deferred
 income taxes                    56.2        109.8        166.0        135.7        123.1        258.8
Receivable from continuing
 products (1)                       -        524.7        524.7        429.7        493.6        923.3
______________________________________________________________________________________________________
  Total Assets              $ 3,550.5    $ 5,822.4    $ 9,372.9   $  5,451.3   $  6,055.4   $ 11,506.7
______________________________________________________________________________________________________
______________________________________________________________________________________________________

Future policy benefits      $       -    $ 4,793.7    $ 4,793.7   $        -   $  4,924.5   $  4,924.5
Policyholders' funds left
 with the Company             3,288.7            -      3,288.7      5,058.9            -      5,058.9
Reserve for anticipated
 future losses
 on discontinued products       144.0        842.8        986.8        221.4        737.4        958.8

Other                           117.8        185.9        303.7        171.0        393.5        564.5


  Total Liabilities         $ 3,550.5    $ 5,822.4    $ 9,372.9   $  5,451.3   $  6,055.4   $ 11,506.7
______________________________________________________________________________________________________
______________________________________________________________________________________________________
<FN>

(1) The receivable from continuing products is eliminated in consolidation.
(2) Assets supporting the discontinued products are distinguished from other continuing
    operation assets.
</TABLE>

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 on GICs is included in policyholders' funds left
with the Company, and the reserve for anticipated future losses on
SPAs is included in future policy benefits on the Consolidated
Balance Sheets.


<PAGE> 75

Notes to Financial Statements (Continued)

9.  Discontinued Products (Continued)

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 (a) the expected cash flows from the
assets supporting discontinued products, and (b) 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 cost of asset
management and customer service.  Projections of future investment
results consider both industry and Company data and are based on
performance of mortgage loan and real estate assets, projections
regarding levels of future defaults and prepayments, and
assumptions regarding future real estate market conditions, which
assumptions management believes are reasonable.  Management
believes that the reserve for anticipated future losses is
adequate to provide for the future losses associated with the
runoff of the liabilities.

At December 31, estimated future net realized capital losses
attributable to mortgage loans and real estate expected to be
charged to the reserve for anticipated future losses were as
follows (pretax):

<TABLE>
<CAPTION>
(Millions)                                           1996        1995
________________________________________________________________________
<S>                                                 <C>          <C>

GICs                                                $ 93.6       $ 142.8

SPAs                                                  87.2          58.5
________________________________________________________________________
</TABLE>



<PAGE> 76

Notes to Financial Statements (Continued)

9.  Discontinued Products (Continued)

The activity in the reserve for anticipated future losses since
December 31, 1993 was as follows (pretax):

(Millions)                              GICs          SPAs           Total
_____________________________________________________________________________
[S]                                     [C]           [C]            [C]

Reserve at December 31, 1993            $  600.0      $  670.0       $1,270.0
Results of discontinued products          (254.4)        (18.6)        (273.0)
                                        _____________________________________
Reserve at December 31, 1994               345.6         651.4          997.0
Results of discontinued products          (124.2)         86.0          (38.2)
                                        _____________________________________
Reserve at December 31, 1995               221.4         737.4          958.8
Results of discontinued products           124.9         105.4          230.3
Reserve releases                          (202.3)            -         (202.3)
                                        _____________________________________
Reserve at December 31, 1996            $  144.0      $  842.8       $  986.8
_____________________________________________________________________________
_____________________________________________________________________________

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 each
discontinued product.  Interest is accrued on the receivables at
the discount rate used to calculate the loss on discontinuance.
The offsetting payable, on which interest is similarly accrued, is
reflected in continuing products.  Interest on the payable
generally offsets the investment income on the assets available to
fund the shortfall.  During 1996, the GIC receivable of
$315 million, net of the related deferred taxes payable on the
accrued interest income of $19 million, was funded from continuing
products to meet liquidity needs from maturing GICs.  At
December 31, 1996, for SPAs, the receivable from continuing
products, net of the related deferred taxes payable of $32 million
on the accrued interest income, was $493 million.  As of
December 31, 1996, no funding of the SPA receivable had taken
place.  At December 31, 1995, for GICs and SPAs, the receivables
from continuing products, net of the related deferred taxes
payable of $14 million and $21 million, respectively, on the
accrued interest income were $416 million and $473 million,
respectively.  These amounts are eliminated in consolidation.


<PAGE> 77

Notes to Financial Statements (Continued)

10.  Income Taxes

Income taxes (benefits) for continuing operations consist of:

<TABLE>
<CAPTION>
(Millions)             1996        1995          1994
                       ____        ____          ____
<S>                    <C>         <C>           <C>

Current taxes
 (benefits):
  Income Taxes:
   Federal             $ 190.8     $   225.7     $  267.8
   State (1)              15.6             -            -
   Foreign                10.4           8.0          6.6
   Realized capital
    gains (losses)        41.1          34.4       (292.5)
                       __________________________________
                         257.9         268.1        (18.1)
                       __________________________________
Deferred taxes
 (benefits):
  Income Taxes:
   Federal              (150.8)        (10.2)       (44.2)
   State (1)               2.4             -            -
   Foreign                13.2           9.9           .5
   Realized capital
    gains (losses)        10.9         (15.5)       279.9
                       __________________________________
                        (124.3)        (15.8)       236.2
                       __________________________________
Total                  $ 133.6     $   252.3     $  218.1
_________________________________________________________
                       __________________________________
<FN>

(1) For years prior to the merger with U.S. Healthcare, state income taxes
    were immaterial and were included in operating expenses.
</TABLE>


Income taxes were different from the amount computed by applying
the federal income tax rate to income from continuing operations
before income taxes for the following reasons:

<TABLE>
<CAPTION>
(Millions)                                 1996         1995        1994
                                           ____         ____        ____
<S>                                        <C>          <C>         <C>

Income from U.S.
 operations                                $  162.5     $   544.8   $  502.2
Income from non-U.S.
 operations                                   176.2         181.4      125.3
                                           _________________________________
  Income before income
   taxes                                      338.7         726.2      627.5
Tax rate                                         35%           35%        35%
                                           _________________________________
Application of the tax
 rate                                         118.5         254.2      219.6
Tax effect of:
  Tax-exempt interest                          (4.4)         (4.3)      (7.8)
  Foreign operations                           (4.9)         10.1       (1.8)
  Excludable dividends                        (10.5)         (9.8)      (8.8)
  Goodwill amortization                        30.7           5.5        8.6
  State income tax                             11.7             -          -
  Other, net                                   (7.5)         (3.4)       8.3
                                           _________________________________
Income taxes                               $  133.6     $   252.3   $  218.1
____________________________________________________________________________
                                           _________________________________
</TABLE>


<PAGE> 78

Notes to Financial Statements (Continued)

10.  Income Taxes (Continued)

The tax effects of temporary differences that give rise to
deferred tax assets and deferred tax liabilities at December 31,
are presented below:

<TABLE>
<CAPTION>
(Millions)                               1996         1995
_______________________________________________________________
<S>                                      <C>          <C>
Deferred tax assets:
  Insurance reserves                     $  391.5     $   284.6
  Reserve for anticipated future
   losses on discontinued products          335.6         325.4
  Reserve for severance and
   facilities charges                       308.9          13.9
  Impairment reserves                        42.4          49.2
  Other postretirement benefits             224.1         229.4
  Net operating loss carryforward            59.1          79.4
  Deferred compensation plans                91.3          46.5
  Other                                      10.4          47.5
                                         ______________________
Total gross assets                        1,463.3       1,075.9
Less valuation allowance                     23.0          34.3
                                         ______________________
Assets, net of valuation allowance        1,440.3       1,041.6

Deferred tax liabilities:
  Deferred policy acquisition costs         645.5         571.8
  Acquired intangibles other than
   goodwill                                 496.1             -
  Net unrealized capital gains              175.8         117.7
  Market discount                            57.3          62.1
  Other                                      97.3          18.5
                                         ______________________
Total gross liabilities                   1,472.0         770.1
                                         ______________________
  Net deferred tax (liability) asset     $  (31.7)    $   271.5
_______________________________________________________________
                                         ______________________
</TABLE>

Valuation allowances are provided when it is not considered more
likely than not that deferred tax assets will be realized.  The
valuation allowances relate to future tax benefits on certain
purchased domestic and foreign net operating losses.

The Company has not recognized U.S. deferred taxes related to the
estimated cumulative amount of undistributed earnings of
approximately $265 million on its foreign corporations because the
Company does not expect to repatriate these earnings.  A U.S.
deferred tax liability will be recognized when the Company expects
that it will recover these undistributed earnings in a taxable
manner, such as through a receipt of dividends or a sale of the
investment.

<PAGE> 79

Notes to Financial Statements (Continued)

10.  Income Taxes (Continued)

The "Policyholders' Surplus Account," which arose under prior tax
law, is generally that portion of a life insurance company's
statutory income that has not been subject to taxation.  As of
December 31, 1983, no further additions could be made to the
Policyholders' Surplus Account for tax return purposes under the
Deficit Reduction Act of 1984.  The balance in such account was
$908 million at December 31, 1996 adjusted for Internal Revenue
Service (the "Service") audits finalized to date.  This amount
would be taxed only under certain conditions.  No income taxes
have been provided on this amount since management believes the
conditions under which such taxes would become payable are remote.

The Service has completed examination of the consolidated federal
income tax returns of Aetna Services and affiliated companies
through 1990 and U.S. Healthcare through 1992.  Discussions are
being held with the Service with respect to proposed adjustments.
Management believes there are adequate defenses against, or
sufficient reserves to provide for, any such adjustments.  The
Service has commenced its examination for the years 1991 through
1994 for Aetna Services and for the years 1993 and 1994 for
U.S. Healthcare.

The Company paid net income taxes of $249 million and $135 million
in 1996 and 1995, respectively, and received net income tax
refunds of $18 million in 1994.

11.  Benefit Plans

Pension Plans - The Company has noncontributory defined benefit
pension plans covering substantially all Aetna Services employees
and certain agents.  The plans provide pension benefits based on
years of service and average annual compensation (measured over 60
consecutive months of highest earnings in a 120-month period).
Contributions are determined by using the Projected Unit Credit
Method and, for qualified plans subject to ERISA requirements, are
limited to amounts that are tax deductible.

<PAGE> 80

Notes to Financial Statements (Continued)

11.  Benefit Plans (Continued)

Components of the net periodic pension cost in continuing
operations were as follows:

<TABLE>
<CAPTION>
(Millions)                                    1996         1995         1994
________________________________________________________________________________
<S>                                           <C>          <C>          <C>

Return on plan assets                         $ 373.1      $  427.5     $    8.2
Service cost - benefits earned
 during the period                              (77.7)        (86.7)       (92.7)
Interest cost on projected
 benefit obligation                            (217.0)       (192.9)      (175.2)
Net amortization and deferral                  (128.8)       (222.0)       202.3
________________________________________________________________________________

Net periodic cost (1)                         $ (50.4)     $  (74.1)    $  (57.4)
________________________________________________________________________________
                                              __________________________________
<FN>

(1) A curtailment loss of $95.6 million (pretax) is included in the
    gain on the sale of Discontinued Operations in 1996.
</TABLE>

As of the measurement date (September 30), the funded status of
plans for which assets exceeded accumulated benefits was as
follows:

<TABLE>
<CAPTION>
(Millions)                                    1996         1995
____________________________________________________________________
<S>                                           <C>          <C>

Actuarial present value of vested
 benefit obligation                           $ 2,820.8    $ 2,451.0

____________________________________________________________________
Actuarial present value of
 accumulated benefit obligation               $ 2,840.2    $ 2,472.1

____________________________________________________________________
Plan assets at fair value                     $ 2,932.3    $ 2,506.3
Actuarial present value of
 projected benefit obligation                   3,006.9      2,650.5
                                              ______________________
Plan assets less than
 projected benefit obligation                     (74.6)      (144.2)
Unrecognized net loss                              86.7        129.1
Unrecognized service cost - prior
 period                                             3.4          7.5
Unrecognized net asset at date of
 adoption of FAS No. 87                            (2.0)       (30.1)
                                              ______________________

Prepaid (accrued) pension cost                $    13.5    $   (37.7)
____________________________________________________________________
                                              ______________________
</TABLE>

Nonfunded plans had projected benefit obligations of $143 million
and $167 million for 1996 and 1995, respectively.  The 1996 and
1995 accumulated benefit obligations for these plans were
$126 million and $156 million, respectively, and the related
accrued pension cost was $132 million and $121 million,
respectively.

<PAGE> 81

Notes to Financial Statements (Continued)

11.  Benefit Plans (Continued)

The weighted average discount rate was 7.5% for 1996 and 1995, and
8.0% for 1994.  The expected long-term rate of return on plan
assets was 8.5% for 1996, 1995 and 1994. The rate of increase in
future compensation was 4.5% for 1996 and 1995, and 5.0% for 1994.
The future annual cost-of-living adjustment was 2.8% for 1996 and
3% for 1995 and 1994.

Plan assets, primarily investments in domestic equities and fixed-
income instruments, are held in trust and benefit payments are
administered by Aetna Life Insurance Company and affiliates.
Approximately 15% of the fixed income investments at December 31,
1996 are held in the general account of Aetna Life Insurance
Company.

U.S. Healthcare has a defined contribution pension plan which
covers substantially all of its employees, subject to certain age
and service requirements.  U.S. Healthcare's contribution for each
eligible employee is a percentage of the employee's compensation,
as defined.  Pretax charges for the U.S. Healthcare defined
contribution pension plan were $7 million from July 19, 1996.



Postretirement Benefits - In addition to providing pension
benefits, the Company currently provides certain health care and
life insurance benefits for retired employees of Aetna Services.
A comprehensive medical and dental plan is offered to all full-
time employees retiring at age 50 with 15 years of service or at
age 65 with 10 years of service.  Retirees are generally required
to contribute to the plans based on their years of service with
the Company.

Effective March 1, 1994, the Company modified its postretirement
benefit plan to cap the portion of the cost paid by the Company
relating to medical and dental benefits.

Components of the net periodic postretirement benefit cost in
continuing operations were as follows:

<TABLE>
<CAPTION>
(Millions)                                    1996         1995         1994
_________________________________________________________________________________
<S>                                           <C>          <C>          <C>
Service cost - benefits earned
 during the year                              $  (7.3)     $    (8.3)   $    (8.6)
Interest cost                                   (34.7)         (34.7)       (34.2)
Net amortization                                 26.4           28.3         31.2
Return on plan assets                             1.4            2.0          3.2
                                              ___________________________________

Net periodic cost (1)                         $ (14.2)     $   (12.7)   $    (8.4)
_________________________________________________________________________________
                                              ___________________________________
<FN>

(1) A curtailment gain of $77.4 million (pretax) is included in the
    gain on the sale of Discontinued Operations in 1996.
</TABLE>

<PAGE> 82

Notes to Financial Statements (Continued)

11.  Benefit Plans (Continued)

As of the measurement date (September 30), the funded status of
the postretirement benefit plans was as follows:

<TABLE>
<CAPTION>
(Millions)                                    1996         1995
____________________________________________________________________
<S>                                           <C>          <C>
Actuarial present value of accumulated
  postretirement benefit obligation:
   Retirees                                   $  329.1     $   313.5
   Fully eligible active employees                17.9          70.9
   Active employees not eligible to
    retire                                        70.2         107.6
                                              ______________________
      Total                                      417.2         492.0

Plan assets at fair value                         54.0          54.3
                                              ______________________
Accumulated postretirement benefit
 obligation in excess of plan assets             363.2         437.7
Unrecognized net gain                             84.0          24.8
Prior service cost                               100.0         173.6
____________________________________________________________________

Accrued postretirement benefit cost           $  547.2     $   636.1
____________________________________________________________________
                                              ______________________
</TABLE>

The weighted average discount rates were 7.5% for 1996 and 1995,
and 8.0% for 1994.  The health care cost trend rate for the 1996
valuation decreased gradually from 10.5% for 1997 to 5.5% by the
year 2005.  For the 1995 valuation, the rates decreased gradually
from 10.5% for 1996 to 5.5% by the year 2005.  Increasing the
health care cost trend rate by one percentage point would increase
the accumulated postretirement benefit obligation at 1996 by
$29 million and would increase the net periodic cost for 1996 by
$3 million (pretax).

It is the Company's practice to fund amounts for postretirement
life insurance benefits to the extent the contribution is
deductible for federal income taxes.  The plan assets are held in
trust and administered by Aetna Life Insurance Company.  The
assets are in the general account of Aetna Life Insurance Company,
and the expected rate of return on the plan assets was 7% for
1996, 1995 and 1994.

<PAGE> 83

Notes to Financial Statements (Continued)

11.  Benefit Plans (Continued)

The U.S. Healthcare retiree health benefit plan is a defined
contribution plan which covers substantially all of
U.S. Healthcare's employees, subject to certain age and service
requirements.  Contributions are at U.S. Healthcare's sole
discretion.  Accumulated contributions and interest thereon are
used to fund all or a portion of the premiums for health care
benefit coverage for eligible retired employees and their eligible
spouses.  When funds are exhausted, U.S. Healthcare has no
obligation to make any further contributions or payments.  No
contributions have been made to the U.S. Healthcare retiree health
benefit plan since July 19, 1996.

Incentive Savings Plans - Substantially all Aetna Services
employees are eligible to participate in a savings plan under
which designated contributions, which may be invested in common
stock of Aetna Inc. or certain other investments, are matched, up
to 5% of compensation, by the Company.  The U.S. Healthcare
savings plan, which has not been merged into the Company's
incentive savings plan, provides for a match of up to 2% of
compensation in common stock of Aetna Inc.  Pretax charges to
operations (including continuing and Discontinued Operations) for
the incentive savings plans were $50 million for 1996, and $60
million for 1995 and 1994. Plan trustees held 4,252,001 shares,
5,015,075 shares and 6,380,355 shares of the Company's common
stock for plan participants at the end of 1996, 1995 and 1994,
respectively.

1996 Stock Incentive Plan - The Company's 1996 Stock Incentive
Plan (the "1996 Plan") replaced the Company's and U.S.
Healthcare's previous stock incentive plans.  Effective with the
merger, stock options of Aetna Inc. were substituted for options
outstanding under the previous Aetna Life and Casualty Company
plans and for that portion of options outstanding under the
previous U.S. Healthcare plans that were not satisfied in cash
pursuant to the merger agreement.  The 1996 Plan provides for
stock options (see "Stock Options" below), deferred contingent
common stock or equivalent cash awards (see "Incentive Units"
below) or restricted stock to certain key employees.  The maximum
number of shares of common stock initially issuable under the 1996
Plan (including shares issuable in respect of options and units
granted under predecessor plans that were outstanding prior to the
merger) is 13,270,000.  At December 31, 1996, 5,570,875 shares
were available for grant under the 1996 Plan.

<PAGE> 84

Notes to Financial Statements (Continued)

11.  Benefit Plans (Continued)

The compensation expense charged to operations related to the
Incentive Units was $27 million, $36 million and $19 million,
pretax, for 1996, 1995 and 1994, respectively.  The Company does
not recognize compensation expense for stock options granted at or
above the market price on the date of grant under its stock
incentive plans. Had compensation expense for grants since January
1, 1995 been determined based upon the fair value at the grant
date as prescribed by FAS No. 123, the Company's net income and
earnings per share, on a pro forma basis, which may not be
indicative of pro forma effects in future years, would have been
as follows:

<TABLE>
<CAPTION>
(Millions)                                       1996         1995
______________________________________________________________________
<S>                                              <C>          <C>

Net income:
 As reported                                     $ 651.0      $  251.7
 Pro forma                                       $ 638.4      $  247.3

Primary earnings per common share:
 As reported                                     $  4.74      $   2.21
 Pro forma                                       $  4.64      $   2.17
______________________________________________________________________
</TABLE>

The fair value of the stock options included in the pro forma
amounts shown above was estimated as of the grant date using the
Black-Scholes option-pricing model with the following weighted-
average assumptions:


<TABLE>
<CAPTION>
                                                 1996         1995
____________________________________________________________________
<S>                                              <C>          <C>

Dividend yield                                     2%          5%
Expected volatility                               26%         22%
Risk-free interest rate                            6%          7%
Expected life                                     4 years     4 years
_____________________________________________________________________
</TABLE>

The weighted-average grant date fair values for options granted in
1996 and 1995 were $17.00 and $9.22, respectively.

Stock Options - Executive and middle management employees may be
granted options to purchase common stock of the Company at or
above the market price on the date of grant.  Options generally
become 100% vested three years after the grant is made, with one-
third of the options vesting each year.  From time to time, the
Company has issued options with different vesting provisions.
Vested options may be exercised at any time during the 10 years
after grant, except in certain circumstances generally related to
employment termination or retirement.  At the end of the
10-year period, any unexercised options expire.

<PAGE> 85

Notes to Financial Statements (Continued)

11.  Benefit Plans (Continued)

Stock option transactions for 1996, 1995 and 1994 were as follows:

<TABLE>
<CAPTION>
                                  1996                    1995                    1994
_______________________________________________________________________________________________________
<S>                               <C>                     <C>                     <C>

                                               Weighted                Weighted                Weighted
                                  Number       Average    Number       Average    Number       Average
                                  of           Exercise   of           Exercise   of           Exercise
                                  Shares       Price      Shares       Price      Shares       Price
                                  _____________________________________________________________________

Outstanding, beginning of year     4,883,661   $  53.72    5,072,958   $  52.44    4,609,523   $  51.42
 Granted                           3,185,180   $  70.78    2,131,100   $  55.61    1,140,100   $  54.97
 Exchanged for
  U.S. Healthcare options (1)        800,610   $  32.72            -   $      -            -   $      -
 Exercised                        (1,438,730)  $  51.94   (2,198,219)  $  52.46     (464,790)  $  46.75
 Expired or forfeited               (202,171)  $  62.02     (122,178)  $  56.19     (211,875)  $  56.23
                                  ___________             __________               _________

Outstanding, end of year           7,228,550   $  58.99    4,883,661   $  53.72    5,072,958   $  52.44
_______________________________________________________________________________________________________
                                  _____________________________________________________________________

Options exercisable at year end    2,749,017   $  47.47    2,110,474   $  51.43    3,967,608   $  51.74
_______________________________________________________________________________________________________
                                  _____________________________________________________________________
<FN>

(1) Effective with the merger, stock options of Aetna Inc. were substituted for that portion
    of options outstanding under the previous U.S. Healthcare plans that were not satisfied
    in cash pursuant to the merger agreement.
</TABLE>

The following is a summary of information about options
outstanding and options exercisable at December 31, 1996:

<TABLE>
<CAPTION>
                             Options Outstanding               Options Exercisable
                    _________________________________________________________________
<C>                 <C>            <C>           <C>        <C>              <C>

                                   Weighted
                                   Average       Weighted                    Weighted
Range of                           Remaining     Average                     Average
Exercise            Number         Contractual   Exercise   Number           Exercise
Prices              Outstanding    Life (Years)  Price      Exercisable      Price
_____________________________________________________________________________________

$ 6.50 - $ 38.72(1)     704,103            8     $ 33.58        704,103      $ 33.58
$41.50 - $ 46.75        615,142            6     $ 45.10        606,576      $ 45.08
$50.50 - $ 59.38      2,627,770            8     $ 54.70      1,365,346      $ 54.76
$61.63 - $ 75.50      3,281,535           10     $ 70.50         72,992      $ 64.88
                    ___________                             ___________
                      7,228,550                               2,749,017
_____________________________________________________________________________________
                    ___________                             ___________
<FN>

(1) This range of exercise prices relates to Aetna Inc. options which were substituted for
    U.S. Healthcare stock options effective with the merger.
</TABLE>


<PAGE> 86

Notes to Financial Statements (Continued)

11.  Benefit Plans (Continued)

Incentive Units - Executives may be granted incentive units which
are rights to receive common stock or an equivalent value in cash.
There have been two cycles of incentive unit grants made, each of
which vests at the end of a four-year vesting period (currently
1996 and 1998) conditioned upon the employee's continued
employment during that period and achievement of specified Company
performance goals related to the Company's total return to
shareholders over the four-year measurement period.  The incentive
units may vest within a range from 0% to 175% at the end of the
four-year period based on the attainment of these performance
goals.  The incentive unit holders are not entitled to dividends
during the vesting period.

Incentive unit transactions related to the 1996 Plan under which
holders may be entitled to receive common stock, are as follows:

<TABLE>
<CAPTION>
                                          Number of Incentive Units
_________________________________________________________________________
<S>                                   <C>           <C>           <C>
                                         1996         1995          1994
                                      ________      _______       _______

Outstanding, beginning of year         564,920      345,800             -
 Granted                                 3,425      243,440       362,800
 Vested                               (191,928)     (24,320)            -
 Expired or forfeited                   (8,200)           -       (17,000)
                                      ________      _______       _______

Outstanding end of year                368,217      564,920       345,800
_________________________________________________________________________
                                      ___________________________________
</TABLE>

The weighted-average grant date fair values for units granted in
1996 and 1995 were $71.88 and $54.33, respectively.

12.  Participating Policyholders' Interests

Under participating life insurance contracts issued by the
Company, the policyholder is entitled to share in the earnings of
such contracts.  This business is accounted for in the Company's
consolidated financial statements on a statutory basis since any
adjustments to policy acquisition costs and reserves on this
business would have no effect on the Company's net income or
shareholders' equity.  Premiums and assets allocable to the
participating policyholders were as follows:

<TABLE>
<CAPTION>
(Millions)                                  1996         1995         1994
______________________________________________________________________________
<S>                                         <C>          <C>          <C>

Premiums                                    $  48.4      $   50.1     $   52.0
______________________________________________________________________________

Assets                                      $ 702.1      $  688.3     $  700.8
______________________________________________________________________________
</TABLE>


<PAGE> 87

Notes to Financial Statements (Continued)

13.  Debt and Guarantee of Debt Securities

<TABLE>
<CAPTION>
(Millions)                                            1996         1995
____________________________________________________________________________
<S>                                                   <C>          <C>

Long-term debt:
 Domestic:
  Notes, 8.625% due 1998                              $     99.9   $    99.8
  Notes, 6.75% due 2001                                    299.6           -
  Notes, 6.375% due 2003                                   199.1       198.9
  Notes, 7.125% due 2006                                   347.5           -
  Debentures, 6.75% due 2013                               199.8       198.4
  Eurodollar Notes, 7.75% due 2016                          63.6        63.5
  Debentures, 8% due 2017 (1)                              200.0       199.1
  Mortgage Notes and Other Notes, 3%-11%
   due in varying amounts to 2018                            6.0        13.1
  Debentures, 7.25% due 2023                               200.0       198.3
  Debentures, 7.625% due 2026                              445.9           -
  Debentures, 6.97% due 2036 (putable at
   par in 2004)                                            300.0           -
 International:
  Mortgage Notes, 6.5%-11.875% due in
   varying amounts to 2006                                  18.6        18.0
                                                      ______________________
    Total                                             $  2,380.0   $   989.1
____________________________________________________________________________
                                                      ______________________
<FN>

(1) Subject to various redemption options beginning on January 15, 1997.
</TABLE>

On August 19, 1996, Aetna Services issued the following debt:
$300,000,000 6.75% Notes due 2001; $350,000,000 7.125% Notes due
2006; $450,000,000 7.625% Debentures due 2026; and $300,000,000
6.97% Debentures due 2036 (putable at par in 2004).

Aetna Inc. has fully and unconditionally guaranteed the payment of
all principal, premium, if any, and interest on all outstanding
debt securities of Aetna Services, including the $348,000,000 9.5%
Subordinated Debentures due 2024 (the "Subordinated Debentures")
issued to Aetna Capital L.L.C., a wholly owned subsidiary of Aetna
Services (refer to Note 14) (collectively the "Aetna Services
Debt").

At December 31, 1996, $283 million of short-term borrowings were
outstanding. 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 .20% per annum,
depending upon its long-term senior unsecured debt rating.  The
facility fee at December 31, 1996 is at an annual rate of .08%.
The facility also supports Aetna Services' commercial paper
borrowing program.

As a guarantor to the credit facility, Aetna Inc. is required to
maintain shareholders' equity, excluding net unrealized capital
gains and losses, of at least $7.5 billion.


<PAGE> 88

Notes to Financial Statements (Continued)

13.  Debt and Guarantee of Debt Securities (Continued)

Aggregate maturities of long-term debt and sinking fund
requirements for 1997 through 2001 are $10 million, $101 million,
$2 million, $4 million and $301 million, respectively, and $1,962
million thereafter.

Total interest paid by the Company was $130 million, $122 million
and $99 million in 1996, 1995 and 1994, respectively.

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 for the year ended December 31, 1996, is as follows (in
millions):

Balance Sheet Information:

Total investments (excluding
  Separate Accounts)                     $ 42,555.0
                                         __________


Total assets                             $ 83,171.6
                                         __________


Total insurance liabilities              $ 40,357.4
                                         __________

Total liabilities                        $ 80,352.8
                                         __________


Total redeemable preferred stock         $    275.0
                                         __________

Total shareholder's equity               $  2,543.8
                                         __________



Statement of Income Information:

Total revenue                            $ 13,011.4
                                         __________


Total benefits and expenses              $ 12,676.4
                                         __________


Income from
  continuing operations
  before income taxes                    $    335.0
                                         __________


Income from
  continuing operations                  $    233.9
                                         __________


Net income                               $    679.8
                                         __________


<PAGE> 89

Notes to Financial Statements (Continued)

14.  Aetna-Obligated Mandatorily Redeemable Preferred
     Securities of Subsidiary Limited Liability Company
     Holding Primarily Debentures Guaranteed by Aetna

On November 22, 1994, Aetna Capital L.L.C. ("ACLLC"), a wholly
owned subsidiary of Aetna Services, issued $275 million
(11,000,000 shares) of 9.5% Cumulative Monthly Income Preferred
Securities, Series A.  The securities are redeemable, at the
option of ACLLC with Aetna Services' consent, in whole or in part,
from time to time, on or after November 30, 1999, or at any time
under certain limited circumstances related to tax events, at a
redemption price of $25 per security plus accumulated and unpaid
dividends to the redemption date. The securities are scheduled to
become due and payable in 2024.  The maturity date may be changed
under certain circumstances.

ACLLC loaned the proceeds from the preferred stock issuance and
the common capital contributions to Aetna Services.  In return,
Aetna Services issued to ACLLC approximately $348 million
principal amount of 9.5% Subordinated Debentures due in 2024 which
are fully and unconditionally guaranteed by Aetna Inc. on a
subordinated basis.  (Refer to Note 13.)  These Subordinated
Debentures represent substantially all of the assets of ACLLC.
Interest on these debentures is payable monthly, and under certain
circumstances, principal may be due prior to or later than the
original maturity date.  This loan is eliminated in the
Consolidated Balance Sheets.  The interest and other payment dates
on the debentures correspond to the distribution and other payment
dates on the preferred and common securities of ACLLC.  Aetna
Inc.'s obligations under the debentures and related agreements,
taken together, constitute a full and unconditional guarantee of
payments due on the preferred securities of ACLLC.

15.  Capital Stock

In addition to the capital stock disclosed on the Consolidated
Balance Sheets, Aetna Inc. has the following authorized capital
stock:  15,000,000 shares of Class A Voting Preferred Stock, $.01
par value per share; 15,000,000 shares of Class B Voting Preferred
Stock, $.01 par value per share; and 15,000,000 shares of Class D
Non-Voting Preferred Stock, par value $.01 per share.


<PAGE> 90

Notes to Financial Statements (Continued)

15.  Capital Stock (Continued)

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

At December 31, 1996 and 1995, 13,204,381 and 10,732,316 common
shares, respectively, were reserved for Aetna Inc.'s stock option
plans.

Pursuant to Aetna Inc.'s Rights Agreement, one share purchase
right (a "Right") is attached to each share of outstanding common
stock and common stock subsequently issued, prior to the time at
which the Rights become exercisable, expire or are redeemed.

The Rights trade with the common stock until they become
exercisable.  The Rights become exercisable 10 days after:  (i) a
public announcement that a person or group ("person") has acquired
15% or more of the outstanding shares of common stock or, 10% or
more of the outstanding shares of common stock if such person is
declared by the Board to be an "adverse person" ("triggering
acquisition"); or (ii) a person commences a tender offer or
exchange offer, the consummation of which could result in such
person owning 15% or more of the common stock; or (iii), in either
event, such later date as the Board may determine.


<PAGE> 91

Notes to Financial Statements (Continued)

15.  Capital Stock (Continued)

Upon becoming exercisable, each Right will entitle the holder
thereof (the "Holder") to purchase one one-hundredth of a share of
Aetna Inc.'s Class B Voting Preferred Stock, Series A (a
"Fractional Preferred Share") at a price of $200 (the "Exercise
Price").  Each Fractional Preferred Share has dividend, voting and
liquidation rights designed to make it approximately equal in
value to one share of common stock.  Under certain circumstances,
including a triggering acquisition, each Right (other than Rights
that were or are owned by the acquirer, which are void) thereafter
will entitle the Holder to purchase common stock (or economically
equivalent securities, under certain circumstances) worth twice
the Exercise Price.  Under certain circumstances, including
certain acquisitions of Aetna Inc. in a merger or sale of its
assets, each Right thereafter will entitle the Holder to purchase
equity securities of the acquirer at a 50% discount.

Under certain circumstances, Aetna Inc. may redeem all of the
Rights at a price of $.01 per Right.  The Rights will expire on
November 7, 1999, unless earlier redeemed.  The Rights have no
dilutive effect on earnings per share until exercised.

16.  Dividend Restrictions and Shareholders' Equity

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

The amount of dividends that may be paid to Aetna Services or
U.S. Healthcare by their domestic insurance and HMO subsidiaries
in 1997 without prior approval by state regulatory authorities is
limited to approximately $476 million in the aggregate.  There are
no such restrictions on distributions from Aetna Services or U.S.
Healthcare to Aetna Inc. or on distributions from Aetna Inc. to
its shareholders.

<PAGE> 92

Notes to Financial Statements (Continued)

16.  Dividend Restrictions and Shareholders' Equity (Continued)

The combined statutory net income (loss) for the years ended and
statutory surplus as of December 31 for the domestic insurance and
HMO subsidiaries of the Company, reflecting intercompany
eliminations, were as follows:

<TABLE>
<CAPTION>
(Millions)                        1996         1995
________________________________________________________
<S>                               <C>          <C>

Statutory net income (loss)(1)    $   418.5    $   (13.4)
Statutory surplus                 $ 3,512.7    $ 4,275.1
________________________________________________________

(1)  Statutory net income includes results for U.S. Healthcare from July 19, 1996.
<FN>

As of December 31, 1996, the Company does not utilize any
statutory accounting practices which are not prescribed by state
regulatory authorities that, individually or in the aggregate,
materially affect statutory surplus.


<PAGE> 93

Notes to Financial Statements (Continued)

17.  Segment Information (1)(2)

Summarized financial information for the Company's principal
operations was as follows:


</TABLE>
<TABLE>
<CAPTION>
(Millions)                                       1996        1995        1994
__________________________________________________________________________________
<S>                                              <C>         <C>         <C>

Revenue:
  Aetna U.S. Healthcare (3)                      $ 9,733.7   $ 7,615.4   $ 7,139.1
  Aetna Retirement Services                        1,762.2     1,706.1     1,504.8
  International                                    1,631.0     1,459.8     1,297.0
  Large Case Pensions                              1,938.3     2,268.9     2,355.2
  Corporate: Other                                    98.0         9.7        (9.7)
                                                 _________________________________
     Total revenue                               $15,163.2   $13,059.9   $12,286.4
__________________________________________________________________________________
                                                 _________________________________

Income from continuing operations
 before income taxes:
  Aetna U.S. Healthcare                          $   125.5   $   454.4   $   538.1
  Aetna Retirement Services                          265.5       294.8       235.0
  International                                      171.9       127.3        98.8
  Large Case Pensions                                395.7       132.7        81.1
  Corporate:  Interest                              (159.9)     (108.3)      (94.8)
              Other                                 (460.0)     (174.7)     (230.7)
                                                 _________________________________
  Total income from continuing
   operations before income taxes                $   338.7   $   726.2   $   627.5
__________________________________________________________________________________
                                                 _________________________________

Net income:
  Aetna U.S. Healthcare                          $    58.7   $   286.0   $   341.7
  Aetna Retirement Services                          186.2       198.0       159.1
  International                                      109.9        86.6        71.2
  Large Case Pensions                                258.4        89.2        54.4
  Corporate:  Interest                              (103.9)      (70.4)      (60.5)
              Other                                 (304.2)     (115.5)     (156.5)
                                                 _________________________________
Income from continuing operations                    205.1       473.9       409.4
Discontinued Operations, net of tax                  445.9      (222.2)       58.1
                                                 _________________________________
Net income                                       $   651.0   $   251.7   $   467.5
__________________________________________________________________________________
                                                 _________________________________
</TABLE>

<TABLE>
<CAPTION>
(Millions)                                1996          1995
__________________________________________________________________
<S>                                       <C>           <C>

Assets:
  Aetna U.S. Healthcare                   $ 15,831.0    $  6,317.0
  Aetna Retirement Services                 32,310.1      27,509.6
  International                              5,999.6       5,265.3
  Large Case Pensions (4)                   38,123.4      40,833.4
  Corporate                                    648.8         465.6
  Discontinued Operations, net                     -       3,932.8
                                          ________________________
Total assets                              $ 92,912.9    $ 84,323.7
__________________________________________________________________
                                          ________________________
<FN>

(1) The 1996 results include severance and facilities charges of $561.8 million, after
    tax.  Of this charge $294.5 million related to Aetna U.S. Healthcare, $31.8 million
    related to Aetna Retirement Services and $235.5 million related to Corporate.
(2) The 1996 results include a benefit of $131.5 million, after tax, from reductions of
    the loss on discontinued products in Large Case Pensions.
(3) Premiums and fees from the federal government accounted for 18% of Aetna U.S.
    Healthcare's revenue in 1996, as determined on a pro forma basis for the U.S.
    Healthcare acquisition.  (Refer to Note 2.)  Contracts with the Health Care Financing
    Administration accounted for 70% of these premiums and fees, with the balance from
    other federal employee benefit programs.
(4) Assets at December 31, 1996 and 1995 include $8.8 billion and $10.6 billion,
    respectively, of assets attributable to discontinued products.
</TABLE>

<PAGE> 94

Notes to Financial Statements (Continued)

18.  Commitments and Contingent Liabilities

Commitments

The Company has agreed with its Mexican partner to invest up to an
additional $63 million in a joint venture that offers insurance
products through the partner's bank subsidiary based on the
performance of the new company over the first five years of
operations.

In February 1997, the Company entered into an agreement in
principle to invest $300 million in a joint venture with Sul
America Seguros.  In addition, the Company would invest up to an
additional $90 million over time, based on future performance of
the joint venture.

Leases

The Company has entered into operating leases for office space and
certain computer and other equipment.  Rental expenses for these
items were $179 million, $203 million and $206 million for 1996,
1995 and 1994, respectively.  The unrecorded obligations for
future net minimum payments under noncancelable leases for 1997
through 2001 are estimated to be $142 million, $115 million,
$84 million, $59 million, $43 million, respectively, and
$246 million thereafter.

In connection with the sale of the Discontinued Operations, the
Company vacated, and Travelers subleased, the space that the
Company occupied in the CityPlace office facility in Hartford at
market rates for a period of eight years.  The Company recorded a
charge of $292 million pretax ($190 million after tax) which
represents 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.  Future payments
under the lease, net of expected subrentals (which are to be
applied against the reserve and are not included in the unrecorded
obligations above), are $145 million and $280 million,
attributable to the next five and subsequent seven years,
respectively.

Litigation

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

<PAGE> 95

Independent Auditors' Report

The Shareholders and Board of Directors
Aetna Inc.:

We have audited the consolidated balance sheets of Aetna Inc. and
Subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, shareholders' equity, and cash
flows for each of the years in the three-year period ended
December 31, 1996.  These consolidated financial statements are
the responsibility of the Company's management.  Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted
auditing standards.  Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements.  An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation.  We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the aforementioned consolidated financial
statements present fairly, in all material respects, the financial
position of Aetna Inc. and Subsidiaries at December 31, 1996 and
1995, and the results of their operations and their cash flows for
each of the years in the three-year period ended December 31,
1996, in conformity with generally accepted accounting principles.












/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
February 4, 1997


<PAGE> 96

Quarterly Data (Unaudited)

<TABLE>
<CAPTION>
(Millions, except per common share data)
__________________________________________________________________________________________________
<S>                                       <C>            <C>            <C>            <C>
1996 (1)(2)                               First          Second         Third          Fourth
__________________________________________________________________________________________________

Total revenue                             $  3,330.3     $  3,169.4     $  4,173.6     $   4,489.9
__________________________________________________________________________________________________

Income (Loss) from continuing operations
   before income taxes (benefits)         $    246.3     $     35.9     $    205.4     $    (148.9)
Income taxes (benefits)                         80.8           11.6           83.0           (41.8)
                                         _________________________________________________________
  Income (Loss) from continuing
   operations                                  165.5           24.3          122.4          (107.1)
Income from Discontinued
 Operations, net of tax                        182.2              -              -               -
Gain on sale of Discontinued Operations,
 net of tax                                        -          263.7              -               -
                                          _________________________________________________________
Net income (loss)                         $    347.7     $    288.0     $    122.4     $    (107.1)
__________________________________________________________________________________________________
                                          ________________________________________________________
Net income (loss) applicable to common
 shareholders                             $    347.7     $    288.0     $    111.2     $    (121.0)
__________________________________________________________________________________________________
                                          ________________________________________________________
Per Common Share Results: (3)
Income (Loss) from continuing operations  $     1.43     $      .21     $      .77     $      (.80)
Income from Discontinued
 Operations, net of tax                         1.57              -              -               -
Gain on sale of Discontinued Operations,
 net of tax                                        -           2.26              -               -
                                          ________________________________________________________
Net income (loss)                         $     3.00     $     2.47     $      .77     $      (.80)
__________________________________________________________________________________________________
                                          ________________________________________________________
Common Stock Data: (4)
Dividends Declared                        $      .69     $        -     $      .40     $       .20
Common Stock Prices, High                      78.50          75.13          73.63           81.63
Common Stock Prices, Low                       67.13          67.13          58.00           60.13
__________________________________________________________________________________________________
<FN>

(1) Second, third and fourth quarters include after-tax severance and facilities charges
    of $255.0 million, $31.8 million and $275.0 million, respectively, after tax.
(2) Second and fourth quarters include benefits of $110.5 million and $21.0 million,
    respectively, after tax, from a reduction of the loss on discontinued products.
(3) Calculation of the earnings per share is based on average shares outstanding at the end of each
    quarter and the sum does not equal the total for the year.
(4) Aetna Life and Casualty Company common shares through the date of the merger with U.S. Healthcare,
    Aetna Inc. common shares thereafter.
</TABLE>

<TABLE>
<CAPTION>
_________________________________________________________________________________________________
<S>                                       <C>            <C>            <C>            <C>
1995                                      First          Second         Third          Fourth
_________________________________________________________________________________________________

Total revenue                             $  3,217.3     $  3,263.4     $  3,212.4     $  3,366.8
_________________________________________________________________________________________________

Income from continuing
 operations before income taxes           $    143.4     $    181.6     $    176.0     $    225.2
Income taxes                                    51.0           60.5           63.4           77.4
                                          _______________________________________________________
  Income from continuing operations             92.4          121.1          112.6          147.8
Income (Loss) from Discontinued
 Operations, net of tax (1)(2)                  68.4         (418.0)          99.5           27.9
                                          _______________________________________________________
Net income (loss)                         $    160.8     $   (296.9)    $    212.1     $    175.7
_________________________________________________________________________________________________
                                          _______________________________________________________
Per Common Share Results: (3)
Income from continuing operations         $      .82     $     1.07     $      .99     $     1.28
Income (Loss) from Discontinued
 Operations, net of tax (1)(2)                   .60          (3.69)           .87            .25
                                          _______________________________________________________
Net income (loss)                         $     1.42     $    (2.62)    $     1.86     $     1.53
_________________________________________________________________________________________________
                                          _______________________________________________________
Common Stock Data:
Dividends Declared                        $      .69     $      .69     $      .69     $      .69
Common Stock Prices, High                      57.00          64.25          74.38          75.88
Common Stock Prices, Low                       46.88          54.50          60.38          67.88
_________________________________________________________________________________________________
<FN>

(1) Second quarter includes reserve additions of $487.5 million, after tax,
    related to environmental-related claims.
(2) Fourth quarter includes reserve additions of $218.1 million, after tax,
    related to asbestos-related claims.
(3) Earnings per share calculations are based on results of stand-alone quarters.
</TABLE>