<Page>


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-Q

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


For the quarterly period ended September 30, 2001
                               ------------------

                                                Commission file number  33-23376
                                                                        --------

                    AETNA LIFE INSURANCE AND ANNUITY COMPANY
--------------------------------------------------------------------------------
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

         Connecticut                                         71-0294708
--------------------------------------------------------------------------------
 (STATE OR OTHER JURISDICTION OF                         (I.R.S. EMPLOYER
 INCORPORATION OR ORGANIZATION)                          IDENTIFICATION NO.)

  151 Farmington Avenue, Hartford, Connecticut             06156
--------------------------------------------------------------------------------
    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)             (ZIP CODE)


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

                                     None
--------------------------------------------------------------------------------
FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR IF CHANGED SINCE LAST REPORT


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

                  Yes       X                 No
                     ----------------           ----------------


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

                                                           Shares Outstanding
Title of Class                                            at November 9, 2001
--------------                                            -------------------
Common Stock, par value $50                                     55,000


The registrant meets the conditions set forth in General Instruction H(1)(a) and
(b) of Form 10-Q and is therefore filing this Form with the reduced disclosure
format.

<Page>


           AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
         (A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)



                                TABLE OF CONTENTS
<Table>
<Caption>

                                                                                     PAGE
                                                                                   -------
PART I.         FINANCIAL INFORMATION
<S>             <C>                                                                <C>
   Item 1.      Financial Statements (Unaudited):
                    Consolidated Statements of Income                                    3
                    Consolidated Balance Sheets                                          4
                    Consolidated Statements of Changes in Shareholder's Equity           5
                    Consolidated Statements of Cash Flows                                6
                    Condensed Notes to Consolidated Financial Statements                 7
                Independent Accountants' Review Report                                  17

   Item 2.      Management's Analysis of the Results of Operations                      18


PART II.        OTHER INFORMATION

   Item 1.      Legal Proceedings                                                       29

   Item 5.      Other Information                                                       30

   Item 6.      Exhibits and Reports on Form 8-K                                        30

Signature                                                                               31
</Table>

                                       2
<Page>


PART I.   FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

            AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
         (A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)

                        Consolidated Statements of Income
                                   (Unaudited)
                                   (millions)
<Table>
<Caption>

                                                         THREE MONTHS ENDED SEPTEMBER 30,        NINE MONTHS ENDED SEPTEMBER 30,
                                                        ------------------------------------------------------------------------
                                                              2001             2000                    2001               2000
                                                              ----             ----                    ----               ----
<S>                                                     <C>              <C>                     <C>                <C>
Revenue:
  Premiums                                                   $22.2             $41.8                  $ 83.1             $117.1
  Charges assessed against policyholders                      92.7             119.9                   290.2              351.0
  Net investment income                                      222.4             231.9                   662.1              681.5
  Net realized capital gains (losses)                         10.0             (11.2)                   30.3              (23.1)
  Other income                                                39.9              44.0                   128.9              117.5
                                                        -----------      ------------            ------------       ------------
Total revenue                                                387.2             426.4                 1,194.6            1,244.0

Benefits and expenses:
  Current and future benefits                                181.8             199.8                   547.2              598.3
  Operating expenses:
      Salaries and related benefits                           48.3              52.3                   135.2              144.0
      Other                                                   43.2              60.1                   151.4              166.4
  Amortization of deferred policy acquisition costs
      and value of business acquired                          30.6              36.8                    89.3               96.4
  Amortization of goodwill                                    14.4                 -                    43.3                  -
                                                        -----------      ------------            ------------       ------------
Total benefits and expenses                                  318.3             349.0                   966.4            1,005.1

                                                        -----------      ------------            ------------       ------------
Income from continuing operations before income taxes         68.9              77.4                   228.2              238.9

  Income taxes                                                27.1              22.7                    94.4               75.9
                                                        -----------      ------------            ------------       ------------

Income from continuing operations                             41.8              54.7                   133.8              163.0
Discontinued operations, net of tax:
  Amortization of deferred gain on sale                          -               1.5                       -                4.7
                                                        -----------      ------------            ------------       ------------

Net income                                                   $41.8            $ 56.2                  $133.8             $167.7
                                                        ===========      ============            ============       ============
</Table>


See Condensed Notes to Consolidated Financial Statements.

                                       3
<Page>


                           Consolidated Balance Sheets
                          (millions, except share data)

<Table>
<Caption>

                                                                                SEPTEMBER 30,        DECEMBER 31,
ASSETS                                                                              2001                 2000
------                                                                              ----                 ----
                                                                                 (UNAUDITED)
<S>                                                                             <C>                  <C>
Investments:
  Debt securities available for sale, at fair value
    (amortized cost:  $12,712.8 and $11,120.0)                                       $13,126.3            $11,244.7
Equity securities, at fair value:
    Nonredeemable preferred stock (cost: $28.5 and  $109.0)                               23.5                100.7
    Investment in affiliated mutual funds (cost:  $23.5 and $9.6)                         24.8                 12.7
    Common stock (cost:  $6.9 and $2.2)                                                    4.7                  3.5
  Short-term investments                                                                  20.7                109.4
  Mortgage loans                                                                         192.9                  4.6
  Policy loans                                                                           334.7                339.3
  Other investments                                                                       15.4                 13.4
  Securities pledged to creditors (amortized cost: $812.8 and $126.8)                    822.3                129.0
                                                                               ----------------     ----------------
Total investments                                                                     14,565.3             11,957.3

  Cash and cash equivalents                                                               40.2                796.3
  Short-term investments under securities loan agreement                                 851.4                131.8
  Accrued investment income                                                              179.7                147.2
  Premiums due and other receivables                                                     175.6                 82.9
  Reinsurance recoverable                                                              2,989.7              3,005.8
  Current income taxes                                                                       -                 40.6
  Deferred policy acquisition costs                                                       97.5                 12.3
  Value of business acquired                                                           1,776.4              1,780.9
  Goodwill                                                                             2,265.7              2,297.4
  Other assets                                                                           161.3                154.7
  Separate Accounts assets                                                            30,668.7             36,745.8
                                                                               ----------------     ----------------

Total assets                                                                         $53,771.5            $57,153.0
                                                                               ================     ================

LIABILITIES AND SHAREHOLDER'S EQUITY

Liabilities:
  Future policy benefits                                                              $3,995.1            $ 3,977.7
  Unpaid claims and claim expenses                                                        25.0                 29.6
  Policyholders' funds left with the Company                                          12,006.6             11,125.6
                                                                               ----------------     ----------------
Total insurance reserve liabilities                                                   16,026.7             15,132.9
  Payables under securities loan agreement                                               851.4                131.8
  Current income taxes                                                                    76.8                    -
  Deferred income taxes                                                                  263.6                248.0
  Other liabilities                                                                    1,363.8                549.9
  Separate Accounts liabilities                                                       30,668.7             36,745.8
                                                                               ----------------     ----------------
Total liabilities                                                                     49,251.0             52,808.4
                                                                               ----------------     ----------------

Shareholder's equity:
  Common stock, par value $50 (100,000 shares
   authorized; 55,000 shares issued and outstanding)                                       2.8                  2.8
  Paid-in capital                                                                      4,303.8              4,303.8
  Accumulated other comprehensive gain                                                    67.5                 25.4
  Retained earnings                                                                      146.4                 12.6
                                                                               ----------------     ----------------
Total shareholder's equity                                                             4,520.5              4,344.6
                                                                               ----------------     ----------------

Total liabilities and shareholder's equity                                           $53,771.5            $57,153.0
                                                                               ================     ================
</Table>

                                       4
<Page>



           Consolidated Statements of Changes in Shareholder's Equity
                                   (Unaudited)
                                   (millions)

<Table>
<Caption>

                                                                   NINE MONTHS ENDED SEPTEMBER 30,
                                                                  --------------------------------
                                                                        2001               2000
                                                                        ----               ----
<S>                                                               <C>                <C>
Shareholder's equity, beginning of period                             $4,344.6            $1,385.7

Comprehensive income:
   Net income                                                            133.8               167.7
   Other comprehensive income, net of tax:
      Unrealized gains on securities ($64.8, $46.6
      pretax) (1)                                                         42.1                30.3
                                                                  -------------      --------------
Total comprehensive income                                               175.9               198.0
                                                                  -------------      --------------

Other changes                                                                -                 0.9

Common stock dividends                                                       -               (10.1)
                                                                  -------------      --------------

Shareholder's equity, end of period                                   $4,520.5            $1,574.5
                                                                  =============      ==============
</Table>


(1) Net of reclassification adjustments.



See Condensed Notes to Consolidated Financial Statements.

                                       5
<Page>



                      Consolidated Statements of Cash Flows
                                   (Unaudited)
                                   (millions)

<Table>
<Caption>

                                                                                    NINE MONTHS ENDED SEPTEMBER 30,
                                                                              ----------------------------------------
                                                                                           2001                  2000
                                                                                           ----                  ----
<S>                                                                           <C>                   <C>
Cash Flows from Operating Activities:
     Net income                                                                        $  133.8              $  167.7
     Adjustments to reconcile net income to net cash (used for) provided by
     operating activities:
         Net accretion of discount on investments                                          (9.9)                (25.2)
         Amortization of deferred gain on sale                                                -                  (4.7)
         Net realized capital (gains) losses                                              (30.3)                 23.1
         Changes in assets and liabilities:
                 (Increase) decrease  in accrued investment income                        (32.5)                  2.0
                 Decrease in premiums due and other receivables                            77.9                  13.2
                 Decrease (increase) in policy loans                                        4.6                 (24.6)
                 Increase in deferred policy acquisition costs                            (85.2)               (108.8)
                 Decrease in value of business acquired                                     4.5                     -
                 Goodwill amortization, net of adjustments                                 31.7                     -
                 Net increase in universal life account balances                           19.1                  21.0
                 (Decrease) increase in other insurance reserve liabilities               (97.0)                 84.6
                 Increase in other liabilities and other assets                          (171.0)                (69.0)
                 Increase in income taxes                                                 111.5                  36.6
                                                                              ------------------   -------------------
Net cash (used for) provided by operating activities                                      (42.8)                115.9
                                                                              ------------------   -------------------

Cash Flows from Investing Activities:
         Proceeds from sales of:
            Debt securities available for sale                                          8,167.9               9,074.5
            Equity securities                                                               4.3                 107.4
            Mortgage loans                                                                  3.8                   2.1
         Investment maturities and collections of:
            Debt securities available for sale                                            824.8                 488.0
            Short-term investments                                                      3,695.1                  57.2
         Cost of investment purchases in:
            Debt securities available for sale                                        (10,046.6)             (9,128.6)
            Equity securities                                                             (28.7)                (16.5)
            Mortgages loans                                                              (192.2)                    -
            Short-term investments                                                     (3,602.8)                (89.9)
         Increase (decrease) in property and equipment                                    (33.0)                  2.9
         Other, net                                                                        (1.8)                 (4.6)
                                                                              ------------------   -------------------
Net cash (used for) provided by investing activities                                   (1,209.2)                492.5
                                                                              ------------------   -------------------

Cash Flows from Financing Activities:
         Deposits and interest credited for investment contracts                        1,464.2               1,275.1
         Withdrawals of investment contracts                                             (852.7)             (1,606.9)
         Dividends paid to Shareholder                                                        -                 (10.1)
         Other, net                                                                      (115.6)                 24.4
                                                                              ------------------   -------------------
Net cash provided by (used for) financing activities                                      495.9                (317.5)
                                                                              ------------------   -------------------

Net (decrease) increase in cash and cash equivalents                                     (756.1)                290.9
Effect of exchange rate changes on cash and cash equivalents                                  -                   2.0
Cash and cash equivalents, beginning of period                                            796.3                 694.4
                                                                              ------------------   -------------------

Cash and cash equivalents, end of period                                                 $ 40.2               $ 987.3
                                                                              ==================   ===================

Supplemental cash flow information:
          Income taxes (received) paid, net                                             $ (26.8)             $   39.4
                                                                              ==================   ===================
</Table>

           See Condensed Notes to Consolidated Financial Statements.

                                       6
<Page>


CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.    BASIS OF PRESENTATION

      The consolidated financial statements include Aetna Life Insurance and
      Annuity Company ("ALIAC") and its wholly owned subsidiaries, Aetna
      Insurance Company of America ("AICA"), Aetna Investment Adviser Holding
      Company, Inc. ("IA Holdco") and Aetna Investment Services, LLC ("AIS").
      ALIAC, together with its wholly owned subsidiaries, is herein called the
      "Company". ALIAC is a wholly owned subsidiary of Aetna Retirement
      Holdings, Inc. ("HOLDCO"), which is a wholly owned subsidiary of Aetna
      Retirement Services, Inc. ("ARSI"). ARSI is indirectly owned by ING Groep
      N.V. ("ING").

      On June 30, 2000, HOLDCO contributed AIS to the Company. (Refer to Note
      6).

      The Company has three business segments: Worksite Products, Individual
      Products and Investment Management Services. On October 1, 1998, the
      Company sold its individual life insurance business to Lincoln National
      Corporation ("Lincoln") and accordingly, it is now classified as
      Discontinued Operations.

      These consolidated financial statements have been prepared in accordance
      with accounting principles generally accepted in the United States of
      America and are unaudited. The contribution of AIS to the Company was
      accounted for in a manner similar to that of a pooling-of-interests and,
      accordingly, the Company's historical consolidated financial statements
      have been restated to include the accounts and results of operations of
      AIS. These interim financial statements necessarily rely heavily on
      estimates, including assumptions as to annualized tax rates. In the
      opinion of management, all adjustments necessary for a fair statement of
      results for the interim periods have been made. All such adjustments are
      of a normal, recurring nature. Certain reclassifications have been made to
      2000 financial information to conform to the 2001 presentation.

      The accompanying condensed consolidated financial statements should be
      read in conjunction with the consolidated financial statements and related
      notes as presented in ALIAC's 2000 Annual Report on Form 10-K. Certain
      financial information that is normally included in annual financial
      statements prepared in accordance with accounting principles generally
      accepted in the United States of America, but that is not required for
      interim reporting purposes, has been condensed or omitted.

      Operating results for three and nine months ended September 30, 2001, are
      not necessarily indicative of the results that may be expected for the
      year ended December 31, 2001.

2.    NEW ACCOUNTING STANDARD

      As of January 1, 2001, the Company adopted FAS No. 133, Accounting for
      Derivative Instruments and Hedging Activities, as amended and interpreted
      by FAS No. 137, Accounting for Derivative Instruments and Hedging
      Activities - Deferral of the Effective Date of FASB Statement No. 133, FAS
      No 138, Accounting for Certain Derivative Instruments and Certain Hedging
      Activities - an Amendment of FASB Statement No 133, and certain FAS No 133
      implementation issues. This standard, as amended, requires companies to
      record all derivatives on the balance sheet as either

                                       7
<Page>


      assets or liabilities and measure those instruments at fair value. The
      manner in which companies are to record gains or losses resulting from
      changes in the fair values of those derivatives depends on the use of the
      derivative and whether it qualifies for hedge accounting.

      Adoption of FAS No. 133 did not have a material effect on the Company's
      financial position or results of operations given the Company's limited
      derivative and embedded derivative holdings. (Refer to Note 7.)

      The Company utilizes futures contracts, options, interest rate floors and
      warrants in order to manage interest rate and price risk (collectively,
      market risk). These financial exposures are monitored and managed by the
      Company as an integral part of its overall risk management program. (Refer
      to Note 7.) Derivatives are recognized on the balance sheet at their fair
      value. The Company chose not to designate its derivative instruments as
      part of hedge transactions. Therefore changes in the fair value of the
      Company's derivative instruments are recorded immediately in the
      consolidated statements of income as part of realized capital gains and
      losses.

      Warrants are carried at fair value and are recorded as either derivative
      instruments or FAS No. 115 available for sale securities. Warrants that
      are considered derivatives are carried at fair value if they are readily
      convertible to cash. The values of these warrants can fluctuate given that
      the companies which underlie the warrants are non-public companies. At
      September 30, 2001, the estimated value of these warrants was immaterial.
      These warrants will be revalued each quarter and the change in the value
      of the warrants will be included in the consolidated statements of income.

      The Company, at times, may own warrants on common stock which are not
      readily convertible to cash as they contain certain conditions which
      preclude their convertibility and therefore, will not be included in
      assets or liabilities as derivatives. If conditions are satisfied and the
      underlying stocks become marketable, the warrants would be reclassified as
      derivatives and recorded at fair value as an adjustment through current
      period results of operations.

      The Company occasionally purchases a financial instrument that contains a
      derivative that is "embedded" in the instrument. In addition the Company's
      insurance products are reviewed to determine whether they contain an
      embedded derivative. The Company assesses whether the economic
      characteristics of the embedded derivative are clearly and closely related
      to the economic characteristics of the remaining component of the
      financial instrument or insurance product (i.e., the host contract) and
      whether a separate instrument with the same terms as the embedded
      instrument would meet the definition of a derivative instrument. When it
      is determined that the embedded derivative possesses economic
      characteristics that are not clearly and closely related to the economic
      characteristics of the host contract and that a separate instrument with
      the same terms would qualify as a derivative instrument, the embedded
      derivative is separated from the host contract and carried at fair value.
      However, in cases where the host contract is measured at fair value, with
      changes in fair value reported in current period earnings or the Company
      is unable to reliably identify and measure the embedded derivative for
      separation from its host contract, the entire contract is carried on the
      balance sheet at fair value and is not designated as a hedging instrument.
      The Company had approximately $1 million of embedded derivatives relating
      to investments at September 30, 2001.

                                       8

<Page>


3.    FUTURE ACCOUNTING STANDARD

      ACCOUNTING FOR GOODWILL AND INTANGIBLE ASSETS

      In July 2001, the Financial Accounting Standards Board ("FASB") issued
      Financial Accounting Standard ("FAS") No. 142, Accounting for Goodwill and
      Intangible Assets. Under the new standard, goodwill and intangible assets
      deemed to have indefinite lives will no longer be amortized but will be
      subject to annual impairment tests in accordance with the new standard.
      Other intangible assets will continue to be amortized over their useful
      lives.

      The Company will apply the new rules on accounting for goodwill and other
      intangible assets beginning in the first quarter of 2002. Application of
      the nonamortization provisions of the new standard is expected to result
      in an increase in net income; however, the Company is still assessing the
      impact of the new standard. During 2002, the Company will perform the
      required impairment tests of goodwill as of January 1, 2002 and has not
      yet determined what the effect of these tests will be on the earnings and
      financial position of the Company.

4.    SALE OF AETNA FINANCIAL SERVICES AND AETNA INTERNATIONAL

      On December 13, 2000, ING America Insurance Holdings, Inc., an indirect
      wholly owned subsidiary of ING, acquired Aetna Inc., comprised of the
      Aetna Financial Services business, of which the Company is a part, and the
      Aetna International business, for approximately $7.7 billion. The purchase
      price was comprised of approximately $5.0 billion in cash and the
      assumption of $2.7 billion of outstanding debt and other net liabilities.
      In connection with the acquisition, Aetna Inc. was renamed Lion
      Connecticut Holdings Inc. ("Lion"). At the time of the sale, Lion entered
      into certain transition services agreements with a former related party,
      Aetna U.S. Healthcare, which was renamed Aetna Inc. ("former Aetna").

      For accounting purposes, the acquisition was accounted for as of November
      30, 2000 using the purchase method. The application of the purchase
      method, including the recognition of goodwill, was pushed down and
      reflected on the financial statements of certain ARSI subsidiaries,
      including ALIAC.

      The purchase price was allocated to assets and liabilities based on their
      respective fair values. This revaluation resulted in a net increase to
      assets, excluding the effects of goodwill, of $592.0 million and a net
      increase to liabilities of $310.6 million. Additionally, the Company
      established goodwill of $2.3 billion. Goodwill is being amortized over a
      period of 40 years. The allocation of the purchase price to assets and
      liabilities is subject to further refinement.

      Unaudited proforma consolidated income from continuing operations and net
      income of the Company for the nine months ended September 30, 2000,
      assuming that the acquisition of the Company occurred at the beginning of
      2000, would each have been approximately $119.0 million.

                                       9
<Page>


      The pro forma adjustments, which do not affect revenues, reflect primarily
      goodwill amortization, amortization of a favorable lease asset and the
      elimination of amortization of the deferred gain on the sale of the
      individual life business to Lincoln.

5.   REVISION OF PRELIMINARY ALLOCATION OF PURCHASE PRICE

      ING America Insurance Holdings, Inc., an indirect wholly owned subsidiary
      of ING, acquired Aetna Inc., comprised of the Aetna Financial Services
      business, of which the Company is a part, and the Aetna International
      business, on December 13, 2000.

      The preliminary allocation of the purchase price did not reflect any
      market value adjustments related to the Company's investment portfolios.
      The Company, after giving consideration to certain exposures in the
      general market place which, while existing prior to the acquisition,
      subsequently took on more significance, determined that a reduction in
      carrying value was warranted.

      The preliminary allocation of the purchase price reflected the write down
      of certain fixed assets resulting from conforming accounting policies.
      Subsequent to the date of acquisition, the Company completed a full review
      of the fixed assets that existed at or prior to the acquisition and
      determined that an additional write down was necessary.

      The amount of the reductions in the carrying values of the investment
      portfolios and the fixed assets were accounted for as components of the
      purchase price and the amounts assigned to the Company's assets and
      liabilities in the allocation of the purchase price were adjusted
      appropriately. The adjustment was generally reflected as an adjustment to
      goodwill.

      The Company generally would be required to recognize a charge to income in
      its final preacquisition consolidated statement of income for the
      reduction in the carrying value of the fixed assets.

6.    CONTRIBUTION OF AIS FROM HOLDCO

      On June 30, 2000, HOLDCO contributed AIS to the Company. AIS is registered
      with the Securities and Exchange Commission as a broker/dealer and is a
      member of the National Association of Securities Dealers, Inc. It is also
      registered with the appropriate state securities authorities as a
      broker/dealer and is a Registered Investment Advisor. The principal
      operation of AIS is the sale of fixed and variable annuities and mutual
      funds through its registered representatives.

7.    DERIVATIVE INSTRUMENTS

      The Company enters into derivative instruments to manage interest rate and
      equity price risks. By using derivative instruments to manage exposures in
      these risks, the Company exposes itself to credit risk and market risk.
      Credit risk is the failure of the counterparty to perform under the terms
      of the derivative contract. When the fair value of a derivative contract
      is positive, the counterparty owes the Company, which creates credit risk
      for the Company. The Company generally does not

                                       10
<Page>


      require collateral or other security to support the types of financial
      instruments presented below. However, the Company minimizes its credit
      risk exposure by entering into transactions with high credit quality
      counterparties, limiting the amount of exposure to each counterparty and
      monitoring the financial condition of its counterparties. At September 30,
      2001, such counterparties' credit ratings averaged A- or higher.

      Market risk is the risk of change in the market price of the underlying
      instrument and the related derivative instrument. Such price changes
      result from movements in interest rates and equity markets as well as time
      value and volatility considerations. The Company's exposure to market risk
      for changes in interest rates and equity prices relates primarily to the
      Company's investment portfolio and debt obligations. The portfolio
      includes only marketable securities with active secondary or resale
      markets to ensure portfolio liquidity.

      The Company maintains an interest rate risk management strategy that uses
      derivatives instruments to minimize significant unanticipated earnings
      fluctuations caused by interest rate volatility. As a result of interest
      rate fluctuations, assets and liabilities will appreciate or depreciate in
      market value. Income or loss on the derivative instruments that are linked
      to the related assets or liabilities will generally offset the effect of
      this unrealized appreciation or depreciation. The Company views this
      strategy as a prudent management of interest rate sensitivity, such that
      earnings are not exposed to undue risk presented by changes in interest
      rates.

      The notional amounts, carrying amounts and estimated fair values of the
      Company's financial instruments at September 30, were as follows:

<Table>
<Caption>

                                                            2001                                          2000
                                          --------------------------------------------  ---------------------------------------
                                               NOTIONAL    CARRYING    ESTIMATED FAIR       NOTIONAL     CARRYING     ESTIMATED
      (MILLIONS)                               AMOUNTS      AMOUNTS        VALUE             AMOUNTS     AMOUNTS     FAIR VALUE
      -------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>         <C>         <C>                  <C>          <C>         <C>
      Futures contracts  to sell
      securities                               $   -         $   -        $    -             $ 113.2         $ 0.6     $   0.6
      Interest Rate Floors                      300.0           1.9           1.9                 -             -           -
      Warrants                                     -             -             -                  -            0.3         0.3
      Embedded Derivatives -  investments
                                                   -            1.0           1.0                 -            2.0         2.0
      -------------------------------------------------------------------------------------------------------------------------
</Table>

      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.

      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. Cash settlements are made daily based on changes in
      the prices of the underlying assets.

                                       11
<Page>


      INTEREST RATE FLOORS

      Interest Rate Floors are over-the-counter contracts in which the purchaser
      pays a premium to reduce the risk associated with a decline in a reference
      rate or index. The amount of protection is based upon a nominal or
      notional amount over a set period of time. Interim interest payments are
      made to the purchaser when the reference rate or index falls below a
      specified level.

      OPTION CONTRACTS

      Options are contracts that grant the purchaser, for a fee, the right but
      not the obligation, to buy or sell a security at a contracted price on or
      before a specified date. The option writer is obligated to buy or sell the
      security if the purchaser chooses to exercise the option. The purchaser
      pays a nonrefundable fee (premium) to the writer of the option. The buyer
      of the option has limited risk. The maximum loss to the buyer is the
      premium paid.

      As of September 30, 2001, the Company did not have any investment income
      or loss for writing call options on underlying securities and, as of
      September 30, 2000, had a $1.1 million investment loss for writing call
      options on underlying securities.

      WARRANTS

      Warrants are instruments that give the holder the right, but not the
      obligation, to buy or sell a fixed amount of an underlying asset at a
      fixed price in the future.

8.    ADDITIONAL INFORMATION - ACCUMULATED OTHER COMPREHENSIVE INCOME

      Changes in accumulated other comprehensive income related to changes in
      unrealized gains on securities (excluding those related to
      experience-rated contractholders) were as follows:
<Table>
<Caption>

                                                                                                NINE MONTHS ENDED SEPTEMBER 30,
                                                                                            -------------------------------------
      (MILLIONS)                                                                                   2001                   2000
      ---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                            <C>                     <C>
      Unrealized holding gains arising during the period (1)                                   $   68.2                $   31.7
      Less:  reclassification adjustments for accretion of net investment discounts and
         gains included in net income (2)                                                          26.1                     1.4
      ------------------------------------------------------------------------------------- -------------------- ----------------
      Net unrealized losses  on securities                                                     $   42.1                $   30.3
      ===================================================================================== ==================== ================
</Table>

(1)   Pretax unrealized holding gains arising during the period were
      $105.0 million and $48.7 million for the nine months ended
      September 30, 2001 and September 30, 2000, respectively.
(2)   Pretax reclassification adjustments for accretion of net investment
      discounts and gains included in net income for the period were $40.2
      million and $2.1 million for the nine months ended September 30, 2001
      and September 30, 2000, respectively.

                                       12
<Page>


9.    VALUE OF BUSINESS ACQUIRED

      Value of business acquired ("VOBA") is an asset and represents the present
      value of estimated net cash flows embedded in the Company's contracts
      indirectly acquired by ING. VOBA is amortized in proportion to estimated
      gross profits and adjusted to reflect actual gross profits over the
      contracts (up to 30 years for annuity contracts and pension contracts).

      Activity for the nine months ended September 30, 2001 within VOBA was as
      follows:
<Table>
<Caption>

       (MILLIONS)
      ---------------------------------------------------------- --------------------
<S>                                                                   <C>
       Balance at December 31, 2000                                   $  1,780.9
       Additions                                                            79.4
       Interest accrued at 7 %                                              86.8
       Amortization                                                       (170.7)
      ---------------------------------------------------------- --------------------
       Balance at September 30, 2001                                  $  1,776.4
      ========================================================== ====================
</Table>

10.   SEVERANCE

      In December 2000, the Company, in accounting for its acquisition by ING,
      established a severance liability related to actions taken or expected to
      be taken with respect to the integration of the Company's and ING's
      businesses.

      Activity for the nine months ended September 30, 2001 within the severance
      liability and positions eliminated related to such actions was as follows:

<Table>
<Caption>

      (MILLIONS)                                         SEVERANCE LIABILITY            POSITIONS
      ------------------------------------------------------------------------------------------------
<S>                                                      <C>                            <C>
      Balance at December 31, 2000                             $   10.7                      175
      Actions taken                                                (5.9)                     (89)
      ---------------------------------------------------------------------------- -------------------
      Balance at September 30, 2001                            $    4.8                       86
      ================================================================================================
</Table>

      Severance actions are expected to be substantially complete by March 31,
2002.

                                       13
<Page>


11. SEGMENT INFORMATION

    Summarized financial information for the Company's principal operations
    for the three months ended September 30, was as follows:

<Table>
<Caption>

                                                                             INVESTMENT
                                                WORKSITE     INDIVIDUAL      MANAGEMENT    DISCONTINUED
 (MILLIONS)                                   PRODUCTS (1)  PRODUCTS (1)    SERVICES (1)   OPERATIONS (1)   OTHER (1)      TOTAL
 ---------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>           <C>             <C>            <C>              <C>          <C>
 2001
 Revenues from external customers               $  100.9      $   33.5         $   28.0      $     -        $   (7.6)    $  154.8
 Net investment income                             203.0          25.0              0.4            -            (6.0)       222.4
 ---------------------------------------------------------------------------------------------------------------------------------
 Total revenue excluding net realized
   capital gains                                $  303.9      $   58.5         $   28.4      $     -        $  (13.6)    $  377.2
 =================================================================================================================================
 Operating earnings (2)                         $   41.3      $    1.8         $    6.2      $     -        $  (13.9)    $   35.4
 Net realized capital gains, net of tax              4.3           2.1               -             -               -          6.4
 ---------------------------------------------------------------------------------------------------------------------------------
 Net income (loss)                              $   45.6      $    3.9         $    6.2      $              $  (13.9)    $   41.8
 =================================================================================================================================
 2000
 Revenues from external customers               $  151.8      $   30.6         $   36.4      $      -       $  (13.1)    $  205.7
 Net investment income                             200.5          29.5              0.9             -            1.0        231.9
 ---------------------------------------------------------------------------------------------------------------------------------
 Total revenue excluding net realized
   capital losses                               $  352.3      $   60.1         $   37.3      $      -       $  (12.1)    $  437.6
 =================================================================================================================================
 Operating earnings (2)                         $   40.7      $    9.8         $    9.2      $      -       $    2.3     $   62.0
 Net realized capital losses, net of tax            (6.8)         (0.5)               -             -             -          (7.3)
 ---------------------------------------------------------------------------------------------------------------------------------
 Income  from continuing operations                 33.9           9.3              9.2             -            2.3         54.7
 Discontinued operations, net of tax:
    Amortization of deferred gain on sale             -             -                -             1.5            -           1.5
 ---------------------------------------------------------------------------------------------------------------------------------
 Net income                                     $   33.9      $    9.3         $    9.2      $     1.5      $    2.3     $   56.2
 =================================================================================================================================
</Table>

 (1) Worksite Products include deferred annuity contracts that fund defined
     contribution and deferred compensation plans; immediate annuity contracts;
     mutual funds; distribution services for annuities and mutual funds;
     programs offered to defined contribution and deferred compensation plans
     that package administrative and recordkeeping services along with a menu of
     investment options; wrapper agreements containing certain benefit
     responsive guarantees that are entered into with retirement plans, whose
     assets are not invested with the Company; investment advisory services and
     pension plan administrative services. Individual Products include deferred
     and immediate annuity contracts, both qualified and nonqualified, that are
     sold to individuals and provide variable or fixed investment options or a
     combination of both. Investment Management Services include: investment
     advisory services to affiliated and unaffiliated institutional and retail
     clients; underwriting; distribution for Company mutual funds and a former
     affiliate's separate accounts; and trustee, administrative and other
     services to retirement plans. Discontinued Operations include life
     insurance products. In 2001, Other includes consolidating adjustments,
     amortization of goodwill, ING corporate expense and taxes not allocated
     back to segment. In 2000, Other includes consolidating adjustments and
     taxes not allocated back to segment.

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

                                       14
<Page>


 Summarized financial information for the Company's principal operations for the
 nine months ended September 30, was as follows:

<Table>
<Caption>

                                                                               INVESTMENT
                                                WORKSITE       INDIVIDUAL      MANAGEMENT    DISCONTINUED
 (MILLIONS)                                   PRODUCTS (1)    PRODUCTS (1)    SERVICES (1)   OPERATIONS (1)   OTHER (1)    TOTAL
 --------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>             <C>             <C>            <C>              <C>        <C>
 2001
 Revenues from external customers               $  332.8        $  106.7         $   90.2      $      -       $  (27.5)  $  502.2
 Net investment income                             595.1            76.9              1.3             -          (11.2)     662.1
 --------------------------------------------------------------------------------------------------------------------------------
 Total revenue excluding net realized
   capital gains                                $  927.9        $  183.6         $   91.5      $      -       $  (38.7)  $1,164.3
 ================================================================================================================================
 Operating earnings (2)                         $  127.6        $   21.2         $   21.2      $      -       $  (55.9)     114.1
 Net realized capital gains, net of tax             13.8             5.8              0.1             -             -        19.7
 --------------------------------------------------------------------------------------------------------------------------------
 Net income (loss)                              $  141.4        $   27.0         $   21.3      $      -       $  (55.9)  $  133.8
 ================================================================================================================================
 2000
 Revenues from external customers               $  433.8        $   85.8         $  104.2      $      -       $  (38.2)  $  585.6
 Net investment income                             592.6            83.8              2.1             -            3.0      681.5
 --------------------------------------------------------------------------------------------------------------------------------
 Total revenue excluding net realized
   capital gains (losses)                       $1,026.4        $  169.6         $  106.3      $      -       $  (35.2)  $1,267.1
 ================================================================================================================================
 Operating earnings (2)                         $  124.2        $   25.6         $   25.7      $      -       $    2.5   $  178.0
 Net realized capital (losses) gains , net
   of tax                                          (12.8)           (2.3)             0.1             -             -       (15.0)
 --------------------------------------------------------------------------------------------------------------------------------
 Income  from continuing operations                111.4            23.3             25.8             -            2.5      163.0
 Discontinued operations, net of tax:
    Amortization of deferred gain on sale             -               -                -            4.7             -         4.7
 --------------------------------------------------------------------------------------------------------------------------------
 Net income                                     $  111.4        $   23.3         $   25.8      $    4.7       $    2.5   $  167.7
 ================================================================================================================================
</Table>

 (1) Worksite Products include deferred annuity contracts that fund defined
     contribution and deferred compensation plans; immediate annuity contracts;
     mutual funds; distribution services for annuities and mutual funds;
     programs offered to defined contribution plans and deferred compensation
     plans that package administrative and recordkeeping services along with a
     menu of investment options; wrapper agreements containing certain benefit
     response guarantees that are entered into with retirement plans, whose
     assets are not invested with the Company; investment advisory services and
     pension plan administrative services. Individual Products include deferred
     and immediate annuity contracts, both qualified and nonqualified, that are
     sold to individuals and provide variable or fixed investment options or a
     combination of both. Investment Management Services include: investment
     advisory services to affiliated and unaffiliated institutional and retail
     clients; underwriting; distribution for Company mutual funds and a former
     affiliate's separate accounts; and trustee, administrative and other
     services to retirement plans. Discontinued Operations include life
     insurance products. In 2001, Other includes consolidating adjustments,
     amortization of goodwill, ING corporate expense and taxes not allocated
     back to the segment. In 2000, Other includes consolidating adjustments and
     taxes not allocated back to segment.
 (2) Operating earnings is comprised of net income (loss) excluding net realized
     capital gains and losses. While operating earnings is the measure of profit
     or loss used by the Company's management when assessing performance or
     making operating decisions, it does not replace net income as a measure of
     profitability.

                                       15
<Page>


12.   COMMITMENTS AND CONTINGENT LIABILITIES

      COMMITMENTS

      Through the normal course of investment operations, the Company commits to
      either purchase or sell securities, money market instruments or commercial
      mortgages at a specified future date and at a specified price or yield.
      The inability of counterparties to honor these commitments may result in
      either higher or lower replacement cost. Also, there is likely to be a
      change in the value of the securities underlying the commitments between
      the time that the Company enters into the commitments and the specified
      future date on which the Company must purchase or sell the securities, as
      the case may be. As of September 30, 2001, there were off-balance sheet
      commitments of $41.8 million.

      LITIGATION

      In recent years, a number of life insurance companies have been named as
      defendants in class action lawsuits relating to life insurance sales
      practices. The Company is currently a defendant in one such lawsuit.

      A purported class action complaint was filed in the United States District
      Court for the Middle District of Florida on June 30, 2000, by Helen Reese,
      Richard Reese, Villere Bergeron and Allan Eckert against ALIAC (the "Reese
      Complaint"). The Reese Complaint seeks compensatory and punitive damages
      and injunctive relief from ALIAC. The Reese Complaint claims that ALIAC
      engaged in unlawful sales practices in marketing life insurance policies.
      ALIAC has moved to dismiss the Reese Complaint for failure to state a
      claim upon which relief can be granted. Certain discovery is underway. The
      Company intends to defend the action vigorously.

      The Company is also involved in other lawsuits arising, for the most part,
      in the ordinary course of its business operations. While the outcome of
      these other lawsuits cannot be determined at this time, after
      consideration of the defenses available to the Company, applicable
      insurance coverage and any related reserves established, these other
      lawsuits are not currently expected to result in liability for amounts
      material to the financial condition of the Company, although they may
      adversely affect results of operations in future periods.





                                       16
<Page>

                     INDEPENDENT ACCOUNTANTS' REVIEW REPORT



The Board of Directors
Aetna Life Insurance and Annuity Company

We have reviewed the accompanying condensed consolidated balance sheet of Aetna
Life Insurance and Annuity Company and Subsidiaries (the "Company") as of
September 30, 2001, and the related condensed consolidated statements of income,
changes in stockholder's equity and cash flows for the three-month and
nine-month periods then ended. These financial statements are the responsibility
of the Company's management. The financial statements of the Company for the
three and nine-month periods ended September 30, 2000 were reviewed by other
accountants whose report (dated October 31, 2000) stated that they were not
aware of any material modifications that should be made to those statements for
them to be in conformity with accounting principles generally accepted in the
United States.

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

Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements at
September 30, 2001, and for the three-month and nine-month periods then ended
for them to be in conformity with accounting principles generally accepted in
the United States.

                                               /s/ Ernst & Young LLP


Hartford, Connecticut
November 8, 2001


                                       17
<Page>


ITEM 2.      MANAGEMENT'S ANALYSIS OF THE RESULTS OF OPERATIONS

The following analysis presents a review of the Company for the three-month and
nine-month periods ended September 30, 2001 and 2000. This review should be read
in conjunction with the consolidated financial statements and other data
presented herein as well as the "Management's Analysis of the Results of
Operations" section contained in ALIAC's 2000 Annual Report on Form 10-K.

OVERVIEW

Sale of Aetna Financial Services and Aetna International

On December 13, 2000, ING America Insurance Holdings, Inc., an indirect wholly
owned subsidiary of ING Groep N.V. ("ING"), acquired Aetna Inc., comprised of
the Aetna Financial Services business, of which the Company is a part, and the
Aetna International business, for approximately $7.7 billion. The purchase price
was comprised of approximately $5.0 billion in cash and the assumption of $2.7
billion of outstanding debt and other net liabilities. In connection with the
acquisition, Aetna Inc. was renamed Lion Connecticut Holdings Inc. ("Lion"). At
the time of the sale, Lion entered into certain transition services agreements
with a former related party, Aetna U.S. Healthcare, which was renamed Aetna Inc.
("former Aetna"). Refer to Note 4 of Condensed Notes to Consolidated Financial
Statements.

As a result of ING's purchase of the Aetna Financial Services business, the
Company's Financial Products segment was realigned into two new segments,
Worksite Products and Individual Products. Accordingly, the financial results of
all prior periods were restated.

The Worksite Products segment offers annuity contracts that include a variety of
funding and payout options for employer-sponsored retirement plans qualified
under Internal Revenue Code Sections 401, 403, 408 and 457, as well as
nonqualified deferred compensation plans. Annuity contracts may be deferred or
immediate (payout annuities). These products also include programs offered to
qualified plans and nonqualified deferred compensation plans that package
administrative and recordkeeping services along with a menu of investment
options, including Company and nonaffiliated mutual funds and variable and fixed
investment options. The Worksite Products segment also includes wrapper
agreements entered into with retirement plans which contain certain benefit
responsive guarantees (i.e. liquidity guarantees of principal and previously
accrued interest for benefits paid under the terms of the plan) with respect to
portfolios of plan-owned assets not invested with the Company. The Worksite
Products segment also offers pension plan administrative services.

The Individual Products segment includes qualified and nonqualified annuity
contracts that are offered for sale to individuals and may provide variable or
fixed investment options, or a combination of both. These annuity contracts may
be deferred or immediate (payout annuities).

Investment Management Services provides investment advisory services to
affiliated and unaffiliated institutional and retail clients on a
fee-for-service basis; underwriting services to the Company funds; distribution
services for other Company products; and trustee, administrative and other
fiduciary services to retirement plans requiring or otherwise utilizing a
trustee or custodian.

                                       18
<Page>


CONSOLIDATED RESULTS

Consolidated results include results from continuing operations and discontinued
operations. Results of continuing operations are comprised of the results of the
Worksite Products, Individual Products and Investment Management Services
segments and certain items not directly allocable to the business segments.
Refer to Note 11 of Condensed Notes to Financial Statements.














                                       19
<Page>


Operating Summary
<Table>
<Caption>

                                                              THREE MONTHS ENDED SEPTEMBER 30,     NINE MONTHS ENDED SEPTEMBER 30,
                                                              --------------------------------------------------------------------
(MILLIONS)                                                          2001               2000              2001              2000
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>                <C>               <C>                <C>
Premiums (1)                                                $       22.2       $       41.8      $       83.1       $      117.1
Charges assessed against policyholders                              92.7              119.9             290.2              351.0
Net investment income                                              222.4              231.9             662.1              681.5
Net realized capital gains (losses)                                 10.0              (11.2)             30.3              (23.1)
Other income                                                        39.9               44.0             128.9              117.5
----------------------------------------------------------------------------------------------------------------------------------
       Total revenue                                               387.2              426.4           1,194.6            1,244.0
----------------------------------------------------------------------------------------------------------------------------------
Current and future benefits                                        181.8              199.8             547.2              598.3
Operating expenses:
    Salaries and related benefits                                   48.3               52.3             135.2              144.0
    Other                                                           43.2               60.1             151.4              166.4
Amortization of deferred policy acquisition costs and
  value of business acquired                                        30.6               36.8              89.3               96.4
Amortization of goodwill                                            14.4                -                43.3                -
----------------------------------------------------------------------------------------------------------------------------------
       Total benefits and expenses                                 318.3              349.0             966.4            1,005.1
----------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes               68.9               77.4             228.2              238.9
Income taxes                                                        27.1               22.7              94.4               75.9
----------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations                                   41.8               54.7             133.8              163.0
Discontinued operations, net of tax:
    Amortization of deferred gain on sale                            -                  1.5               -                  4.7
----------------------------------------------------------------------------------------------------------------------------------
Net Income                                                  $       41.8       $       56.2      $      133.8       $      167.7
==================================================================================================================================
Net realized capital gains (losses), net of tax
 (included above)                                           $        6.4       $       (7.3)     $       19.7       $      (15.0)
==================================================================================================================================
Deposits (not included in premiums above)
     Annuities -fixed options                               $      348.2       $      337.1      $    1,145.9       $    1,151.7
    Annuities -variable options                                    935.2            1,095.4           3,201.1            3,577.6
----------------------------------------------------------------------------------------------------------------------------------
    Total - deposits                                        $    1,283.4       $    1,432.5      $    4,347.0       $    4,729.3
==================================================================================================================================
Assets under management:
   Worksite Products                                                                             $   40,951.3       $   47,687.2
   Individual Products                                                                                7,442.1            8,871.2
   Investment Management Services (2)                                                                40,039.1           57,340.5
   Consolidating adjustment (3)                                                                     (22,797.8)         (36,985.8)
----------------------------------------------------------------------------------------------------------------------------------
        Total assets under management (4) (5)                                                        65,634.7           76,913.1
----------------------------------------------------------------------------------------------------------------------------------
Assets under administration:  (6)
   Worksite Products                                                                                  9,299.0            8,654.6
----------------------------------------------------------------------------------------------------------------------------------
Assets under management and administration                                                       $   74,933.7       $   85,567.7
==================================================================================================================================
</Table>

(1)  Includes $15.1 million and $29.3 million for the three months ended
     September 30, 2001 and 2000, respectively, and $61.1 million and $84.5
     million for the nine months ended September 30, 2001 and 2000,
     respectively, of annuity premiums on contracts converting from the
     accumulation phase to payout options with life contingencies.
(2)  Includes $3,851.9 million and $6,871.2 million as of September 30, 2001 and
     2000, respectively, of assets managed for Aetna Life Insurance Company, a
     former affiliate of the Company.
(3)  Certain assets under management that are reported in the Worksite Products
     and the Individual Products segments are also reported in the Investment
     Management Services segment, because Investment Management Services reports
     a different component of the revenue generated by these particular assets
     under management. A consolidating adjustment, which eliminates the
     duplication of such assets, is recorded in order to determine consolidated
     assets under management of the Company.
(4)  Includes $10,030.8 million and $15,439.3 million at September 30, 2001 and
     2000, respectively, of assets invested through the Company's products in
     unaffiliated mutual funds.
(5)  Excludes net unrealized capital gains of $423.0 million at September 30,
     2001 and net unrealized capital losses of $117.2 million at September 30,
     2000 on assets invested through annuities with fixed options.
(6)  Represents assets for which the Company provides administrative services
     only.

                                       20
<Page>


Continuing Operations

Income from continuing operations decreased $13 million for the three months
ended September 30, 2001 compared to the same period in 2000. Excluding goodwill
amortization of $14 million in 2001 and net realized capital gains and losses,
income from continuing operations for the three months ended September 30, 2001
decreased $12 million, or 20%, compared to the same period in 2000.

Income from continuing operations decreased $29 million for the nine months
ended September 30, 2001 compared to the same period in 2000. Excluding goodwill
amortization of $43 million in 2001 and net realized capital gains and losses,
income from continuing operations for the nine months ended September 30, 2001
decreased $21 million, or 12%, compared to the same period in 2000.

The decrease in net income, excluding goodwill and net realized capital gains
and losses, for the three-month and nine-month periods ended September 30, 2001
primarily reflects a decrease in charges assessed against policyholders
resulting from lower levels of assets under management and administration and an
increase in the effective tax rate partially offset by lower operating expenses.

Substantially all of the charges assessed against policyholders and other income
reported for continuing operations are derived from assets under management and
administration. Compared to September 30, 2000, assets under management and
administration at September 30, 2001 decreased 12% primarily due to a decline in
the stock market partially offset by additional net deposits (i.e., deposits
less surrenders).

Annuity deposits relate to annuity contracts not containing life contingencies.
Compared to the three months and nine months ended September 30, 2000, deposits
for the three months and nine months ended September 30, 2001 decreased 10% and
8%, respectively. The decreases for the three and nine month periods are
primarily due to a decrease in individual annuity sales.

Operating expenses decreased $21 million and $24 million for the three and nine
months ended September 30, 2001, respectively, compared to the same periods in
2000. These decreases primarily reflect management's continued focus on expense
reduction initiatives partially offset by a lower level of policy acquisition
expenses being deferred in the Individual Products segment in order to conform
with ING's deferral practice.

The increases in the effective tax rate for the three-month and nine-month
periods ended September 30, 2001 primarily relate to the disallowance of
goodwill amortization as a deduction and a decrease in the deduction for
dividends received.

Discontinued Operations

Results of discontinued operations for the three and nine months ended September
30, 2000 represent the amortization of the deferred gain relating to the sale of
the domestic individual life insurance business that occurred on October 1,
1998. In conjunction with the accounting for the acquisition of the Aetna
Financial Services business, of which the Company is a part, the deferred gain
was written off.


                                       21
<Page>


WORKSITE PRODUCTS

Operating Summary
<Table>
<Caption>
                                                                        THREE MONTHS ENDED               NINE MONTHS ENDED
                                                                            SEPTEMBER 30,                   SEPTEMBER 30,
                                                                ---------------------------------------------------------------
(MILLIONS)                                                              2001            2000            2001             2000
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>             <C>             <C>              <C>
Premiums (1)                                                       $     15.1      $     41.8      $      61.1      $     117.1
Charges assessed against policyholders                                   68.0            91.2            214.6            269.6
Net investment income                                                   203.0           200.5            595.1            592.6
Net realized capital gains (losses)                                       6.6           (10.6)            21.2            (19.8)
Other income                                                             17.8            18.8             57.1             47.1
-------------------------------------------------------------------------------------------------------------------------------
       Total revenue                                                    310.5           341.7            949.1          1,006.6
-------------------------------------------------------------------------------------------------------------------------------
Current and future benefits                                             156.2           180.7            468.5            540.8
Operating expenses:
    Salaries and related benefits                                        31.9            35.4             96.5             97.8
    Other                                                                35.7            53.2            118.2            144.5
Amortization of deferred policy acquisition costs and
  value of business acquired                                             16.4            20.3             48.3             52.2
-------------------------------------------------------------------------------------------------------------------------------
       Total benefits and expenses                                      240.2           289.6            731.5            835.3
-------------------------------------------------------------------------------------------------------------------------------
Income from operations before income taxes                               70.3            52.1            217.6            171.3
Income taxes                                                             24.7            18.2             76.2             59.9
-------------------------------------------------------------------------------------------------------------------------------
       Net income                                                        45.6            33.9            141.4            111.4
===============================================================================================================================
Net realized capital gains (losses), net of tax
  (included above)                                                        4.3            (6.8)            13.8            (12.8)
===============================================================================================================================
Deposits (not included in premiums above)
    Annuities -fixed options                                       $    189.0      $    120.5      $     565.3      $     456.6
    Annuities -variable options                                         892.9           977.8          2,995.8          3,112.2
-------------------------------------------------------------------------------------------------------------------------------
    Total - deposits                                               $  1,081.9      $  1,098.3      $   3,561.1      $   3,568.8
===============================================================================================================================
Assets Under Management (2)
    Annuities - fixed options  (3)                                                                 $  10,963.2      $  10,182.6
    Annuities - variable options (4)                                                                  21,133.3         29,991.8
-------------------------------------------------------------------------------------------------------------------------------
        Subtotal - annuities                                                                       $  32,096.5      $  40,174.4
    Plan Sponsored and Other                                                                           8,854.8          7,512.8
-------------------------------------------------------------------------------------------------------------------------------
    Total - assets under management                                                                   40,951.3         47,687.2
Assets under administration  (5)                                                                       9,299.0          8,654.6
-------------------------------------------------------------------------------------------------------------------------------
Total assets under management and administration                                                   $  50,250.3      $  56,341.8
===============================================================================================================================
</Table>

(1)  Includes $15.1 million and $29.3 million for the three months ended
     September 30, 2001 and 2000, respectively, and $61.1 million and $84.5
     million for the nine months ended September 30, 2001 and 2000,
     respectively, for annuity premiums on contracts converting from the
     accumulation phase to payout options with life contingencies.
(2)  Includes $20,426.2 million at September 30, 2001 and $32,517.8 million at
     September 30, 2000 of assets under management that are also reported in the
     Investment Management Services segment (refer to "Consolidated
     Results-Continuing Operations").
(3)  Excludes net unrealized capital gains of $368.6 million at September 30,
     2001 and net unrealized capital losses of $107.2 million at September 30,
     2000.
(4)  Includes $7,490.9 million at September 30, 2001 and $11,623.0 million at
     September 30, 2000 related to assets invested through the Company's
     products in unaffiliated mutual funds.
(5)  Represents assets for which the Company provides administrative services
     only.

                                       22
<Page>


Worksite Products' net income increased $12 million for the three months ended
September 30, 2001 compared to the same period in 2000. Excluding net realized
capital gains and losses, net income for the three months ended September 30,
2001 increased $1 million, or 1%, compared to the same period in 2000. Worksite
Products' net income increased $30 million for the nine months ended September
30, 2001 compared to the same period in 2000. Excluding net realized capital
gains and losses, net income increased $3 million, or 3%, compared to the same
period in 2000.

The increase in net income, excluding realized gains and losses, for the
three-month period ended September 30, 2001 is primarily the result of a
decrease in operating expenses and amortization costs substantially offset by a
decrease in charges assessed against policyholders. The increase in net income,
excluding realized gains and losses, for the nine-month period ended September
30, 2001 is primarily the result of a decrease in operating expenses and
amortization costs, a decrease in current and future benefits and an increase in
other income substantially offset by a decrease in charges assessed against
policyholders.

Operating expenses decreased $21 million and $28 million for the three and nine
months ended September 30, 2001, respectively, compared to the same periods in
2000. These decreases primarily reflect management's continued focus on expense
reduction initiatives.

Substantially all of the charges assessed against policyholders and a majority
of other income reported for the Worksite Products segment are calculated based
on assets under management and administration. Assets under management and
administration at September 30, 2001 decreased 11% compared to September 30,
2000. The decrease in 2001 is primarily due to a decline in the stock market
partially offset by additional net deposits (i.e., deposits less surrenders).

Annuity deposits relate to annuity contracts not containing life contingencies.
Compared to the three months ended September 30, 2000, deposits for the three
months ended September 30, 2001 decreased 1%. Compared to the first nine months
of 2000, deposits decreased slightly for the nine months ended September 30,
2001.




                                       23
<Page>


INDIVIDUAL PRODUCTS

Operating Summary
<Table>
<Caption>
                                                                    THREE MONTHS ENDED                 NINE MONTHS ENDED
                                                                       SEPTEMBER 30,                      SEPTEMBER 30,
                                                         ---------------------------------------------------------------------
(MILLIONS)                                                       2001               2000              2001               2000
------------------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>                <C>               <C>                <C>
Premiums                                                   $       7.0        $       -         $      21.9        $       -
Charges assessed against policyholders                            24.7               28.8              75.6               81.5
Net investment income                                             25.0               29.5              76.9               83.8
Net realized capital gains (losses)                                3.3               (0.7)              9.0               (3.5)
Other income                                                       1.8                1.8               9.2                4.3
------------------------------------------------------------------------------------------------------------------------------
       Total revenue                                              61.8               59.4             192.6              166.1
------------------------------------------------------------------------------------------------------------------------------
Current and future benefits                                       25.6               19.0              78.7               57.5
Operating expenses:
    Salaries and related benefits                                  8.7                6.0              15.9               17.1
    Other                                                         10.1                6.6              24.3               20.3
Amortization of deferred policy acquisition costs and
  value of business acquired                                      11.3               13.4              32.1               35.3
------------------------------------------------------------------------------------------------------------------------------
       Total benefits and expenses                                55.7               45.0             151.0              130.2
------------------------------------------------------------------------------------------------------------------------------
Income from operations before income taxes                         6.1               14.4              41.6               35.9
Income taxes                                                       2.2                5.1              14.6               12.6
------------------------------------------------------------------------------------------------------------------------------
       Net income                                          $       3.9        $       9.3       $      27.0        $      23.3
==============================================================================================================================
Net realized capital gains (losses), net of tax
  (included above)                                         $       2.1        $      (0.5)      $       5.8        $      (2.3)
==============================================================================================================================
Deposits (not included in premiums above)
     Annuities -fixed options                              $     159.2        $     216.6       $     580.6        $     695.1
    Annuities -variable options                                   42.3              117.6             205.3              465.4
------------------------------------------------------------------------------------------------------------------------------
       Total - deposits                                    $     201.5        $     334.2       $     785.9        $   1,160.5
==============================================================================================================================
Assets Under Management (1)
    Annuities - fixed options  (2)                                                              $   2,210.1        $   2,213.7
    Annuities - variable options (3)                                                                5,232.0            6,657.5
------------------------------------------------------------------------------------------------------------------------------
        Total - assets under management                                                         $   7,442.1        $   8,871.2
==============================================================================================================================
</Table>

(1)  Includes $2,371.6 million at September 30, 2001 and $4,468.0 million at
     September 30, 2000 of assets under management that are also reported in the
     Investment Management Services segment (refer to "Overview").
(2)  Excludes net unrealized capital gains of $54.4 million at September 30,
     2001 and net unrealized capital losses of $10.0 at September 30, 2000.
(3)  Includes $2,539.9 million at September 30, 2001 and $3,816.3 million at
     September 30, 2000 related to assets invested through the Company's
     products in unaffiliated mutual funds.

Individual Products' net income decreased $5 million for the three months ended
September 30, 2001 compared to the same period in 2000. Excluding net realized
capital gains and losses, net income decreased $8 million, or 82%, for the three
months ended September 30, 2001 compared to the same period in 2000. Net income
increased $4 million for the nine months ended September 30, 2001 compared to
the same period in 2000. Excluding net realized capital gains and losses, net
income decreased $4 million, or 17%, for the nine months ended September 30,
2001 compared to the same period in 2000. The decreases in earnings for the
three-month and nine-month periods ended September 30, 2001 are primarily due to
an increase in operating expenses and a decrease in charges assessed against
policyholders.

                                       24
<Page>


Operating expenses increased $6 million and $3 million for the three and nine
months ended September 30, 2001, respectively, compared to the same periods in
2000. Operating expenses for both periods were affected by a lower level of
policy acquisition expenses being deferred in order to conform with ING's
deferral practice. The resulting increase in operating expenses was partially
offset by lower overall operating expenses due to management's continued focus
on expense reduction initiatives.

Substantially all of the charges assessed against policyholders reported for the
Individual Products segment are calculated based on assets under management.
Assets under management at September 30, 2001 decreased 16% compared to
September 30, 2000. This decrease is primarily due to a decline in the stock
market partially offset by additional net deposits (i.e., deposits less
surrenders).

Annuity deposits relate to annuity contracts not containing life contingencies.
Compared to the same periods in 2000, deposits for the three and nine months
ended September 30, 2001 decreased 40% and 32%, respectively, due to a decrease
in individual annuity sales.






                                       25
<Page>


INVESTMENT MANAGEMENT SERVICES

Operating Summary
<Table>
<Caption>
                                                                    THREE MONTHS ENDED                 NINE MONTHS ENDED
                                                                       SEPTEMBER 30,                      SEPTEMBER 30,
                                                         ---------------------------------------------------------------------
(MILLIONS)                                                       2001               2000              2001               2000
------------------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>                <C>               <C>                <C>
Net investment income                                      $        0.4       $        0.9      $        1.3       $        2.1
Net realized capital gains                                          0.1                -                 0.1                0.2
Other income  (1)                                                  28.0               36.4              90.2              104.2
------------------------------------------------------------------------------------------------------------------------------
       Total revenue                                               28.5               37.3              91.6              106.5
------------------------------------------------------------------------------------------------------------------------------
Operating expenses:
   Salaries and related benefits                                   13.2               18.2              42.0               48.4
   Other                                                            5.6                5.0              16.2               17.5
------------------------------------------------------------------------------------------------------------------------------
       Total operating expenses                                    18.8               23.2              58.2               65.9
------------------------------------------------------------------------------------------------------------------------------
Income from operations before income taxes                          9.7               14.1              33.4               40.6
Income taxes                                                        3.5                4.9              12.1               14.8
------------------------------------------------------------------------------------------------------------------------------
       Net income                                          $        6.2       $        9.2      $       21.3       $       25.8
===============================================================================================================================
Net realized capital gains, net of tax
  (included above)                                         $        -         $        -        $        0.1       $        0.1
===============================================================================================================================
Assets under management:
   Plan sponsored (2)                                                                           $   13,659.6       $   16,724.0
   Collateralized bond obligations                                                                   1,617.6            2,023.2
   Retail mutual funds                                                                               1,964.1            1,607.5
------------------------------------------------------------------------------------------------------------------------------
        Subtotal                                                                                    17,241.3           20,354.7
------------------------------------------------------------------------------------------------------------------------------
   Invested through products offered by the Worksite
    Products and Individual Products segments:  (3)
     Variable annuity mutual funds                                                                  14,199.0           17,450.8
     Fixed annuities (4) (5)                                                                             -             12,396.4
     Plan sponsored and other                                                                        8,598.8            7,138.6
------------------------------------------------------------------------------------------------------------------------------
        Subtotal                                                                                    22,797.8           36,985.8
------------------------------------------------------------------------------------------------------------------------------
Total assets under management                                                                   $   40,039.1       $   57,340.5
===============================================================================================================================
</Table>

(1)  Primarily includes investment advisory fees earned on assets under
     management.
(2)  Includes $3,851.9 million and $6,871.2 million of assets managed for Aetna
     Life Insurance Company, a former affiliate of the Company, as of September
     30, 2001 and 2000, respectively.
(3)  The Investment Management Services segment earns investment advisory fees
     on these assets, which are also reported in either the Worksite Products or
     the Individual Products segments.
(4)  In accordance with a new advisory agreement effective April 1, 2001, ING
     Investment Management, LLC, an affiliate of the Company, manages the
     investments supporting the Company 's fixed annuity products.
(5)  Excludes net unrealized capital losses of $117.2 million at September 30,
     2000.

For the three months ended September 30, 2001, the Investment Management
Services segment's net income decreased $3 million, or 33%, compared to the same
period in 2000. For the nine months ended September 30, 2001, the Investment
Management Services segment's net income decreased $5 million, or 17%, compared
to the same period in 2000. The decrease in net income for the three and nine
month periods ended September 30, 2001 primarily reflects a decrease in
investment advisory fee income partially offset by a decrease in other operating
expenses.

Investment advisory fees are calculated based on assets under management. The
decrease in advisory fee income is due to lower levels of assets under
management. At September 30, 2001, assets under management decreased 30%
compared to those reported at September 30, 2000. This decrease was primarily
due to a change in the advisory agreements relating to the Company's fixed
annuity and collateralized bond obligation assets under management and a decline
in the stock market.

                                       26

<Page>


Effective April 1, 2001, ING Investment Management, LLC, an affiliate of the
Company, replaced Aeltus Investment Management, Inc. ("Aeltus"), an indirect
wholly owned subsidiary of the Company, as the advisor for the investments
supporting the Company's fixed annuity products. Aeltus, along with its
subsidiaries, comprises the Investment Management Services segment. Subsequent
to the effective date of the new advisory agreement, the Company no longer
received advisory fees relating to these assets under management.

Operating expenses decreased $5 million and $7 million for the three and nine
months ended September 30, 2001, respectively, compared to the same periods in
2000. The decreases in operating expenses are primarily due to the
implementation of new long-term compensation agreements by Aeltus at the
beginning of the year.

DISCONTINUED OPERATIONS - DOMESTIC INDIVIDUAL LIFE INSURANCE

 Results of discontinued operations represents the amortization of the deferred
gain relating to the sale of the domestic individual life insurance business to
Lincoln. The after tax amortization recognized during the three and nine months
ended September 30, 2000 was $1.5 million and $4.7 million, respectively. In
conjunction with the accounting for the acquisition of the Aetna Financial
Services business, of which the Company is a part, the deferred gain relating to
the sale of the domestic individual life insurance business was written off.

Individual life insurance coverage in force was approximately $37 billion at
September 30, 2001. The entire amount of this coverage in force has been ceded
to Lincoln under the indemnity reinsurance arrangement entered into as part of
the sale.

For more details about the transaction and the indemnity reinsurance
arrangement, refer to Note 3 of Condensed Notes to Consolidated Financial
Statements in the Company's 2000 Annual Report on Form 10-K.



                                       27
<Page>


GENERAL ACCOUNT INVESTMENTS

The Company's invested assets were comprised of the following:
<Table>
<Caption>

(MILLIONS)                                                       SEPTEMBER 30, 2001         DECEMBER 31, 2000
--------------------------------------------------------------------------------------------------------------
<S>                                                             <C>                         <C>
Debt securities, available for sale, at fair value (1)          $      13,948.6                $      11,371.4
Equity securities, at fair value:
    Nonredeemable preferred stock                                          23.5                          100.7
    Investment in affiliated mutual funds                                  24.8                           12.7
    Common stock                                                            4.7                            3.5
Short-term investments (2)                                                 20.7                          111.7
Mortgage loans                                                            192.9                            4.6
Policy loans                                                              334.7                          339.3
Other investments                                                          15.4                           13.4
--------------------------------------------------------------------------------------------------------------
     Total Investments                                          $      14,565.3                $      11,957.3
==============================================================================================================
</Table>

(1)  At September 30, 2001 and December 31, 2000, $822.3 million and $126.7
     million, respectively, of debt securities were pledged to creditors.
(2)  At December 31, 2000, $2.3 million of short-term investments were pledged
     to creditors; and, at September 30, 2001, there were no short-term
     investments pledged to creditors.


Debt Securities

At September 30, 2001 and December 31, 2000, the Company's carrying value of
available for sale debt securities including debt securities pledged to
creditors (herein after referred to as "total debt securities") represented 96%
and 95% of the total general account invested assets, respectively. At September
30, 2001 and December 31, 2000, $11.4 billion, or 82% of total debt securities,
and $8.9 billion, or 79% of total debt securities, respectively, supported
experience-rated contracts. The carrying value of the Company's total debt
securities included net unrealized capital gains of $423.0 million and $126.9
million at September 30, 2001 and December 31, 2000, respectively.

It is management's objective that the portfolio of debt securities be of high
quality and be well diversified by market sector. 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. The average quality rating of the Company's
debt security portfolio was AA- at September 30, 2001 and AA at December 31,
2000.


                                       28
<Page>


The percentage of total debt securities by quality rating category is as
follows:

<Table>
<Caption>

                                                SEPTEMBER 30, 2001                  DECEMBER 31, 2000
-----------------------------------------------------------------------------------------------------
<S>                                             <C>                                 <C>
AAA                                                        54.3%                              53.2%
AA                                                          6.9                                9.1
A                                                          20.7                               23.5
BBB                                                        13.0                                9.9
BB                                                          2.8                                1.5
B and Below                                                 2.3                                2.8
-----------------------------------------------------------------------------------------------------
   Total                                                  100.0%                             100.0%
=====================================================================================================
</Table>


The percentage of total debt securities by market sector is as follows:

<Table>
<Caption>

                                                SEPTEMBER 30, 2001                  DECEMBER 31, 2000
-----------------------------------------------------------------------------------------------------
<S>                                             <C>                                 <C>
U.S. Corporate                                             42.5%                              43.0%
Residential Mortgage-backed                                32.1                               27.1
Commercial/Multi-family Mortgage-backed                     9.5                                9.8
Foreign (1)                                                 8.5                                5.0
Asset-backed                                                6.1                                6.7
U.S. Treasuries/Agencies                                    1.3                                8.4
------------------------------------------------------------------------ -----------------------------
   Total                                                  100.0%                             100.0%
======================================================================================================
</Table>

(1)  Primarily U.S. dollar denominated

FORWARD-LOOKING INFORMATION/RISK FACTORS

The "Forward-Looking Information/Risk Factors" section of ALIAC's 2000 Annual
Report on Form 10-K contains discussions of important risk factors related to
the Company's businesses.


PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

In recent years, a number of life insurance companies have been named as
defendants in class action lawsuits relating to life insurance sales practices.
The Company is currently a defendant in one such lawsuit.

A purported class action complaint was filed in the United States District Court
for the Middle District of Florida on June 30, 2000, by Helen Reese, Richard
Reese, Villere Bergeron and Allan Eckert against ALIAC (the "Reese Complaint").
The Reese Complaint seeks compensatory and punitive damages and injunctive
relief from ALIAC. The Reese Complaint claims that ALIAC engaged in unlawful
sales practices in marketing life insurance policies. ALIAC has moved to dismiss
the Reese Complaint for failure to state a claim upon which relief can be
granted. Certain discovery is underway. The Company intends to defend the action
vigorously.

                                       29

<Page>


The Company is also involved in other lawsuits arising, for the most part, in
the ordinary course of its business operations. While the outcome of these other
lawsuits cannot be determined at this time, after consideration of the defenses
available to the Company, applicable insurance coverage and any related reserves
established, these other lawsuits are not currently expected to result in
liability for amounts material to the financial condition of the Company,
although they may adversely affect results of operations in future periods.


ITEM 5.      OTHER INFORMATION

RATINGS

The Company's financial strength ratings at November 9, 2001 and August 9, 2001
are as follows:

<Table>
<Caption>

                                                              RATING AGENCIES
                         -------------------------------------------------------------------------------------------
                                                                       MOODY'S INVESTORS        STANDARD & POOR'S
                            A.M. BEST                FITCH                  SERVICE
--------------------------------------------------------------------------------------------------------------------
<S>                         <C>                      <C>               <C>                      <C>    <C>    <C>
November 9, 2001               A+                       AA+                    Aa2                       AA+
August 9, 2001                 A+                       AA+                    Aa2                       AA+
--------------------------------------------------------------------------------------------------------------------
</Table>


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)  Exhibits
              4.   Instruments Defining the Rights of Security Holders,
                   Including Indentures (Annuity Contracts)

                   Incorporated by reference to the Registration Statement on
                   Form S-2 (File No. 33-64331), as filed on November 16, 1995.

                   Incorporated by reference to Pre-Effective Amendment No. 2 to
                   the Registration Statement on Form S-2 (File No. 33-64331),
                   as filed on January 17, 1996.

         (b)  Reports on Form 8-K.

              None



                                       30
<Page>


                                    SIGNATURE


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


                                  AETNA LIFE INSURANCE AND ANNUITY COMPANY
                                  ----------------------------------------
                                              (Registrant)



   NOVEMBER 13, 2001              By /s/ Deborah Koltenuk
----------------------               ---------------------------------------
        (Date)                       Deborah Koltenuk
                                     Vice President and Corporate Controller
                                     (Chief Accounting Officer)







                                       31