SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-K

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


For the fiscal year ended December 31, 1997    Commission file number   33-81010
                          -----------------                             --------

                       Aetna Insurance Company of America
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                Connecticut                                      06-1286272
--------------------------------------------------------------------------------
(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
                                                       ---------------

Securities registered pursuant to Section 12(b) of the Act:  None
Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X].

As of February 28, 1998 there were 1,275 shares of common stock outstanding, par
value $2,000 per share, all of which shares were held by Aetna Life Insurance
and Annuity Company.

Reduced Disclosure Format

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



<PAGE>


                       AETNA INSURANCE COMPANY OF AMERICA
     (A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
                           Annual Report on Form 10-K
                      For the Year Ended December 31, 1997

                                TABLE OF CONTENTS



PART I                                                                      PAGE
                                                                            ----

Item  1.   Business** ......................................................   3
Item  2.   Properties**.....................................................   8
Item  3.   Legal Proceedings................................................   8
Item  4.   Submission of Matters to a Vote of Security Holders*.............   8

PART II

Item  5.   Market for Registrant's Common Equity and Related
           Stockholder Matters..............................................   8
Item  6.   Selected Financial Data*.........................................   8
Item  7.   Management's Analysis of the Results of Operations**.............   8
Item  8.   Financial Statements and Supplementary Data......................  14
Item  9.   Changes in and Disagreements with Accountants on Accounting and
           Financial  Disclosure............................................  35

PART III

Item 10.   Directors and Executive Officers of the Registrant*..............  35
Item 11.   Executive Compensation*..........................................  35
Item 12.   Security Ownership of Certain Beneficial Owners and Management*    35
Item 13.   Certain Relationships and Related Transactions*..................  35

PART IV

Item 14.   Exhibits, Financial Statement Schedules,
           and Reports on Form 8-K..........................................  35

Index to Financial Statement Schedules......................................  38
Signatures..................................................................  41


 * Item omitted pursuant to General Instruction I(2) of Form 10-K.
** Item prepared in accordance with General Instruction I(2) of Form 10-K.



                                       2
<PAGE>


                       AETNA INSURANCE COMPANY OF AMERICA
     (A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
                           Annual Report on Form 10-K
                      For the year ended December 31, 1997


PART I

Item 1.    Business.

Aetna Insurance Company of America (the "Company") is a stock life insurance
company organized in 1990 under the insurance laws of Connecticut and is a
wholly owned subsidiary of Aetna Life Insurance and Annuity Company ("ALIAC").
ALIAC is a wholly owned subsidiary of Aetna Retirement Holdings, Inc.
("HOLDCO"). HOLDCO is a wholly owned subsidiary of Aetna Retirement Services,
Inc., whose ultimate parent is Aetna Inc. (together with its subsidiaries,
"Aetna"). The Company's Home Office is located at 151 Farmington Avenue,
Hartford, Connecticut 06156.

Products and Services

The Company's products principally include annuity contracts that offer a
variety of funding options for nonqualified annuity contracts and individual
retirement plans qualified under Internal Revenue Code Section 408. These
contracts may be deferred or immediate ("payout annuities").

Investment Options

The Company's products provide customers with variable and/or fixed investment
options. Variable ("non-guaranteed") options provide for full assumption by the
customer of investment risks. Assets supporting non-guaranteed variable options
are held in separate accounts that invest in Aetna mutual funds and/or
unaffiliated mutual funds. Aetna mutual funds include funds managed by Aeltus
and beginning in 1997, funds managed by outside investment advisors under
subadvisory arrangements. (Separate account assets reflected on the Balance
Sheets also include assets related to a fully guaranteed interest option.)
Non-guaranteed separate account investment income and realized capital gains and
losses are not reflected in the Company's results of operations.

Fixed options can be either "fully guaranteed" or "experience rated". Fully
guaranteed options provide guarantees on investment return, maturity values, and
if applicable, benefit payments, where the contract is held to maturity.
Experience rated options require the customer to assume investment (including
realized capital gains and losses) and other risks subject, among other things,
to certain minimum guarantees. The effect of such realized gains and losses (as
long as minimum guarantees are not triggered) does not impact the Company's
results.



                                       3
<PAGE>


Fees and Investment Margins

Insurance charges or other fees earned by the Company, vary by product and
depend, among other factors, on the funding option selected by the customer
under the product. For variable products where assets are allocated to variable
funding options, the Company charges the separate account an asset based
mortality and expense charge. In addition, when a customer selects an
unaffiliated mutual fund as a variable funding option, the Company receives
distribution fees and/or expense reimbursements. For fixed funding options, the
Company derives an investment margin, which is based on the difference between
income earned on the investments supporting the liability and interest credited
to customers. Other fees or charges, such as administrative fees, may be
assessed depending on the nature of the products.

Assets Under Management

The substantial portion of fees or other charges and investment margins are
based on assets under management. Assets under management are principally
affected by deposits, investment growth (i.e., interest credited to customer
accounts for fixed options or market performance for variable options) and
persistency (i.e., customer retention). Assets under management, excluding net
unrealized capital gains and losses related to market value adjustments required
under Financial Accounting Standard ("FAS") No. 115, were $819 million, $368
million and $44 million at December 31, 1997, 1996 and 1995, respectively.
Assets under management are available for contractholder withdrawal and are
subject to market value adjustments and/or deferred surrender charges.

To encourage customer retention and recover acquisition expenses, contracts
typically impose a surrender charge on policyholder balances withdrawn within a
period of time after the contract's inception. The period of time and level of
the charge vary by product. Existing tax penalties on annuity distributions
prior to age 59-1/2 provide further disincentive to customers for premature
surrenders of annuity balances, but generally do not impede transfers of those
balances to products of competitors.

Principal Markets and Method of  Distribution

The Company's products are offered to individuals through a managed network of
banks and broker/dealers.

Competition

Competition arises from other insurance companies, as well as an array of
financial services companies including banks, mutual funds and other investment
managers. Principal competitive factors are reputation for investment
performance, product features, service, cost and the perceived financial
strength of the investment manager or sponsor.

Competition may affect, among other matters, both business growth and the
pricing of the Company's products and services.



                                       4
<PAGE>


Reserves

Reserves for investment contracts (deferred annuities and immediate annuities
without life contingent payouts) are equal to cumulative deposits plus credited
interest less withdrawals and charges thereon. Of those investment contracts
which are experience rated, the reserves also reflect net realized capital
gains/losses (which the Company reflects through credited rates on an amortized
basis) and unrealized capital gains/losses related to FAS No. 115.

General Account Investments

Consistent with the nature of the contract obligations involved in the Company's
operations, the majority of the general account assets are invested in long-term
debt securities such as U.S. corporate debt securities, foreign government and
corporate debt securities, commercial and multifamily mortgage-backed
securities, other asset-backed securities and U.S. government securities. It is
management's objective that the portfolios be of high quality while achieving
competitive investment yields and returns. Investment portfolios generally match
the duration of the insurance liabilities they support. The general account of
the Company has been segmented to improve the asset/liability matching process.
The duration of investments is monitored and security purchases and sales are
executed with the objective of having adequate funds available to satisfy the
Company's maturing liabilities.

Aeltus Investment Management, Inc. ("Aeltus"), a wholly owned subsidiary of
HOLDCO and an affiliate of the Company, is the advisor of General Account
assets.

Please see General Account Investments on page 10 of the Management's Analysis
of the Results of Operations for a further discussion of investments.

Other Matters

Regulation

The Company's operations are subject to comprehensive regulation throughout the
United States. The laws of the various jurisdictions establish supervisory
agencies, including the state insurance and securities departments, with broad
authority to grant licenses to transact business and regulate many aspects of
the products and services offered by the Company, as well as solvency and
reserve adequacy. Many agencies also regulate investment activities on the basis
of quality, diversification, and other quantitative criteria. The Company's
operations and accounts are subject to examination at regular intervals by
certain of these regulators.

Operations conducted by the Company are subject to regulation by various
insurance regulatory agencies where the Company conducts business. Among other
matters, these agencies may regulate trade practices, agent licensing, policy
forms, underwriting and claims practices, the maximum interest rates that can be
charged on life insurance policy loans, and the minimum rates that must be
provided for accumulation of surrender value.

The Securities and Exchange Commission ("SEC") regulates the Company's annuity
products, which involve separate accounts and mutual funds registered under the
Investment Company Act of 1940.



                                       5
<PAGE>


A number of states, including Connecticut, regulate affiliated groups of
insurers such as the Company under holding company statutes. These laws place
certain restrictions on transactions between affiliates such as dividends and
other distributions that may be paid to the Company's parent.

Under insurance guaranty fund laws existing in all states, insurers doing
business in those states can be assessed (up to prescribed limits) for certain
obligations of insolvent insurance companies to policyholders and claimants. The
Company adopted Statement of Position 97-3, Accounting by Insurance and Other
Enterprises for Insurance-related Assessments. The after-tax cumulative effect
charge to net income, related to adoption of this statement for guaranty fund
obligations, was $520 thousand for the year ended December 31, 1997. For the
years ended December 31, 1996 and 1995, the Company has been assessed nominal
guaranty fund assessment fees. For information regarding certain other potential
regulatory changes relating to the Company's businesses, see Forward-Looking
Information in Management's Analysis of the Results of Operations.

Miscellaneous

The Company utilizes the employees of Aetna and its affiliates (primarily
ALIAC), and receives an expense allocation, at cost, based on the utilization of
these employees.

The Company uses ALIAC's computer facilities. Management believes that ALIAC's
computer facilities, systems and related procedures are adequate to meet its
business needs. ALIAC's data processing systems and backup and security
policies, practices and procedures are regularly evaluated by ALIAC's management
and internal auditors and are modified as considered necessary. See Management's
Analysis of the Results of Operations for information regarding the Company's
efforts to prepare its systems, applications and facilities to accommodate Year
2000 date-sensitive information.

The Company is not dependent upon any single customer and no single customer
accounted for more than 10% of revenue in 1997. In addition, the loss of
business from anyone, or a few, independent brokers or agents would not have a
material adverse effect on the earnings of the Company.

New Accounting Standards

See Note 1 of Notes to the Financial Statements for discussion of recently
issued accounting standards.

Forward-Looking Information

The Private Securities Litigation Reform Act of 1995 ("the Act") provides a
"safe harbor" for forward-looking statements, so long as those statements are
identified as forward-looking and are accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those discussed in the statement. The Company desires to
take advantage of these safe harbor provisions. Certain information contained
herein is forward-looking within the meaning of the Act or SEC rules, including,
but not limited to, the information that appears under the heading "General
Account Investment - Risk Management and Market Sensitive Instruments". Words
such as expects, projects, anticipates, intends, plans, believes, seeks or
estimates, or variations of such words and similar expressions are also intended



                                       6
<PAGE>

to identify forward-looking statements. These forward-looking statements are
subject to significant uncertainties and contingencies, many of which are beyond
the control of the Company. Set forth below are certain important factors that,
in addition to general economic conditions and other factors, some of which are
discussed elsewhere in this report, may affect forward-looking statements and
the Company's business generally.

Ratings. Adverse changes in the claims-paying ratings of the Company could have
the effect of decreasing new sales and deposits and increasing withdrawals and
surrenders in the Company's businesses, which would adversely affect the level
of asset-based fees and investment margins in those businesses and net spread on
fixed investment options.

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

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

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

Other Adverse Changes in Regulation. The Company's business is subject to
comprehensive regulation. This business could be adversely affected by: (i)
increases in minimum capital and other financial viability requirements for
insurance operations (ii) removal of barriers preventing banks from engaging in
insurance and mutual fund businesses, (iii) increases in the taxation of
insurance companies, and (iv) changes in the tax treatment of annuity insurance
products, such as those suggested in the President of the United States' recent
federal budget proposal.

Litigation and Year 2000. The Company could also be affected by adverse
litigation. See Note 10 of Notes to Financial Statements. The Company could also
be adversely affected by year 2000 issues. "See Year 2000."



                                       7
<PAGE>



Item 2.    Properties.
----------------------
The Company occupies office space that is owned or leased by Aetna Life
Insurance Company or other affiliates. Expenses associated with these offices
are allocated on a direct and indirect basis to the Company and the other
subsidiaries of Aetna.

Item 3.    Legal Proceedings.
-----------------------------
The Company is not currently involved in litigation.

Item 4.    Submission of Matters to a Vote of Security Holders.
---------------------------------------------------------------
Omitted pursuant to General Instruction I(2)(c) of Form 10-K.

PART II

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters.
--------------------------------------------------------------------------------
All of the Company's outstanding shares are owned by its parent company, ALIAC.
For the years ended 1997 and 1996, the Company did not pay dividends to ALIAC.
The Company received capital contributions of $20 million in cash from ALIAC in
1997 and 1996, respectively.

The amount of dividends which may be paid by the Company to ALIAC without prior
approval by the Insurance Commissioner of the State of Connecticut is subject to
various restrictions. Based upon these restrictions, the Company is permitted a
maximum of $4.1 million in dividend distributions in 1998.

Item 6.    Selected Financial Data.
-----------------------------------
Omitted pursuant to General Instruction I(2)(a) of Form 10-K.

Item 7.    Management's Analysis of the Results of Operations.
--------------------------------------------------------------
Management's narrative analysis of the results of operations is presented in
lieu of Management's Discussion and Analysis of Financial Condition and Results
of Operations, pursuant to General Instruction I(2)(a) of Form 10-K.




                                       8
<PAGE>



Item 7.    Management's Analysis of the Results of Operations

Results of Operations
<TABLE>
<CAPTION>
                                                                       1997             1996           1995
-------------------------------------------------------------------------------------------------------------
                                                                                        (thousands)
<S>                                                                <C>               <C>            <C>
Charges assessed against policyholders                             $  6,072.9        $  1,293.0     $  132.7
Net investment income                                                 7,083.2           1,556.9        721.0
Net realized capital gains (losses)                                     101.6             (11.2)         8.3
Other income                                                            243.2              66.4            -
-------------------------------------------------------------------------------------------------------------
  Total revenue                                                      13,500.9           2,905.1        862.0
-------------------------------------------------------------------------------------------------------------
Current and future benefits                                           6,534.5           1,651.9            -
Operating expenses                                                    3,675.6           2,430.4        481.8
Amortization of deferred policy acquisition costs                       809.0             242.0            -
-------------------------------------------------------------------------------------------------------------
  Total benefits and expenses                                        11,019.1           4,324.3        481.8
-------------------------------------------------------------------------------------------------------------
  Income (loss) before income taxes (benefits)                        2,481.8          (1,419.2)       380.2
Income taxes (benefits)                                                 768.7            (723.4)       212.3
-------------------------------------------------------------------------------------------------------------
  Net income (loss) before cumulative effect adjustment            $  1,713.1        $   (695.8)    $  167.9
-------------------------------------------------------------------------------------------------------------
Cumulative effect adjustment, net of tax                                520.0                 -            -
-------------------------------------------------------------------------------------------------------------
  Net income (loss) after cumulative effect adjustment             $  1,193.1        $   (695.8)    $  167.9
=============================================================================================================
  Net realized capital gains (losses), net of tax
    (included above)                                               $     66.0        $     (7.3)    $    5.4
=============================================================================================================

-------------------------------------------------------------------------------------------------------------
Deposits not included above:
    Annuities--fixed options                                       $  161,677        $  157,000     $ 13,000
    Annuities--variable options                                       230,999           151,300       29,800
                                                                   ------------------------------------------
    Total                                                          $  392,676        $  308,300     $ 42,800
=============================================================================================================
Assets under management:  (1)
    Annuities--fixed options  (2)                                  $  257,801        $  148,900     $ 10,600
    Annuities--variable options  (3)                                  560,662           218,900       33,200
                                                                   ------------------------------------------
    Total                                                          $  818,463        $  367,800     $ 43,800
=============================================================================================================
</TABLE>

 (1)  Excludes net unrealized capital gains of $2,068.3 thousand, $33.5
      thousand and $234.4 thousand at December 31, 1997, 1996 and 1995,
      respectively.
 (2)  Includes $114,210 thousand, $84,311 thousand and $10,600 thousand related
      to the assets supporting a guaranteed interest option at December 31,
      1997, 1996 and 1995, respectively.
 (3)  Includes $448,501 thousand, $203,600 thousand and $33,200 thousand at
      December 31, 1997, 1996 and 1995, respectively, of assets held and managed
      by unaffiliated mutual funds.

Net income in 1997 included a charge for a cumulative effect adjustment, net of
tax of $520 thousand related to a change in the accounting for guaranty fund and
other insurance related assessments (see Note 1 of Notes to Financial
Statements). Excluding net realized capital gains or losses and the 1997
cumulative effect adjustment, results for the year ended December 31,1997 were
$1,647 thousand, compared with a loss of $689 thousand at December 31, 1996.
Full year results reflect significant increases in revenues and current and
future benefits associated with the


                                       9
<PAGE>


Results of Operations (Continued)

Company's growth. Despite this growth in new business, the Company has been able
to maintain the growth in expenses at a lower rate than the growth in its
revenues, resulting in net income for the year ended December 31, 1997 compared
to a net operating losses for the same period a year ago.

General Account Investments

The Company's investment strategies and portfolios are intended to match the
duration of the related liabilities and provide sufficient cash flow to meet
obligations while maintaining a competitive rate of return. The duration of
these investments is monitored, and investment purchases and sales are executed
with the objective of having adequate funds available to satisfy the Company's
maturing liabilities. The risks associated with investments supporting
experience rated products are assumed by those customers subject to, among other
things, certain minimum guarantees.

The Company's invested assets were comprised entirely of debt securities
available for sale with a fair value of $137,918 thousand at December 31, 1997
and $24,770 thousand at December 31, 1996. At December 31, 1997 and 1996,
$129,288 thousand or 94% and $16,520 thousand or 67%, respectively, of total
debt securities supported experience rated products.

Risk Management and Market Sensitive Instruments

Interest rate risk is managed within a tight duration band, and credit risk is
managed by maintaining high average quality ratings and diversified sector
exposure within the debt securities portfolio. In connection with its investment
and risk management objectives, the Company also uses financial instruments
whose market value is at least partially determined by, among other things,
levels of or changes in domestic and/or foreign interest rate (short-term or
long-term), prepayment rates, equity markets or credit ratings/spreads.

Using financial modeling and other techniques, the Company regularly evaluates
the appropriateness of investments relative to its management-approved
investment guidelines and the business objective of the portfolios. The Company
operated within these investment guidelines by maintaining a mix of investments
that diversifies its assets and reflects the characteristics of the liabilities
that they support.

The risks associated with investments supporting experience rated annuity
products are assumed by those contractholders, not by the Company (subject to,
among other things, certain minimum guarantees). Risks associated with the
investments and liabilities related to experience rated annuity products are not
included in the sensitivity analysis presented below.



                                       10
<PAGE>


General Account Investments (Continued)

The following discussion about the Company's risk management activities includes
"forward-looking statements" that involve risk and uncertainties. Set forth
below are management's projections of hypothetical net losses in fair value of
shareholder's equity of the Company's market sensitive instruments if certain
assumed changes in market rates and prices were to occur (sensitivity analysis).
These instruments are not leveraged and are held for purposes other than
trading. While the Company believes that the assumed market rate changes are
reasonably possible in the near term, actual results may differ, particularly as
a result of any management actions that would be taken to mitigate such
hypothetical losses in fair value of shareholders' equity. Based on the
Company's overall exposure to interest rate risk and equity price risk, the
Company believes that these changes in market rates and prices would not
materially affect the consolidated near-term financial position, results of
operations or cash flows of the Company.

Interest Rate Risk

Assuming an immediate increase of 100 basis points in interest rates the net
hypothetical loss in fair value of shareholder's equity related to financial and
derivative instruments is estimated to be $214 thousand (after-tax), (.4% of
total shareholders equity at December 31, 1997). The Company believes that an
interest rate shift of this magnitude represents a moderately adverse scenario,
and is approximately equal to the historical annual volatility of interest rate
movements for the Company's intermediate term available for sale debt
securities. The Company has included corresponding changes in certain insurance
liabilities in this sensitivity analysis.

The effect of interest rate risk on potential near-term net income, cash flow
and fair value was determined based on commonly used models. The models project
the impact of interest rate changes on a wide range of factors, including
duration, prepayment, put options and call options. Fair value was estimated
based on the net present value of cash flows or duration estimates, using a
representative set of likely future interest rate scenarios.



                                       11
<PAGE>


General Account Investments (Continued)

Debt Securities

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 at December 31, 1997 and 1996 was AA-.

Debt Securities Quality Ratings
at December 31, 1997
-------------------------------------

AAA                       49.6%
AA                         6.0
A                         26.2
BBB                       17.7
B & Below                  0.5
                     ---------------
                         100.0%
                     ===============



Debt Securities Investments by Market Sector
at December 31, 1997
-----------------------------------------------------------------

U.S. Corporate Securities                             41.5%
U.S. Treasuries/Agencies                              28.2
Foreign Securities - U.S. Dollar
   Denominated                                         8.9
Asset-Backed Securities                                7.7
Residential Mortgage-Backed
   Securities                                          7.4
Commercial/Multifamily Mortgage-
   Backed Securities                                   6.3
                                               ---------------
                                                     100.0%
                                               ===============


Debt Securities Quality Ratings
at December 31, 1996
-------------------------------------

AAA                        47.3%
A                          25.4
BBB                        27.3
                     ---------------
                          100.0%
                     ===============






Debt Securities Investments by Market Sector
at December 31, 1996
----------------------------------------------------------------

U.S. Corporate Securities                             44.7%
U.S. Treasuries/Agencies                              33.3
Commercial/Multifamily Mortgage-
  Backed Securities                                   10.0
Foreign Securities - U.S. Dollar
  Denominated                                          8.0
Asset-Backed Securities                                4.0
                                               ---------------
                                                     100.0%
                                               ===============



                                       12
<PAGE>


Liquidity and Capital Resources

The Company's cash flow requirements for 1997 and 1996 were met by funds
provided by financing activities, primarily deposits and income received on
investments. The Company received a $20 million capital contribution from ALIAC
in both 1997 and 1996. Cash provided from these sources is used primarily for
operating expenses and contract withdrawals which were nominal in 1997 and 1996.

Debt securities have durations that were selected to approximate the durations
of the liabilities they support. The general account of the Company has been
segmented to improve the asset/liability matching process. The duration of these
investments is monitored, and investment purchases and sales are executed with
the objective of having adequate funds available to satisfy the Company's
maturing liabilities.

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

The Company has significant short-term liquidity supporting its business. At
year-end 1997, cash and cash equivalents were $12 million.

Given the high quality of the debt securities portfolio (see "General Account
Investments"), management expects the vast majority of the Company's investments
in debt securities to be repaid in accordance with contractual terms. In
addition, most of the debt securities in the portfolio are highly marketable and
can be sold to enhance cash flow before maturity. The Company has no debt.

The amount of dividends that may be paid to the shareholder in 1998 without
prior approval by the Insurance Commissioner of the State of Connecticut is
subject to various restrictions. Based upon these restrictions, the Company is
permitted a maximum of $4 million in dividend distributions in 1998. See
"Statements of Cash Flows" for additional information. The Company has entered
into support agreements with ALIAC under which ALIAC has agreed to cause the
Company to have sufficient capital to meet a certain capital and surplus level.

Year 2000

The Company shares the same systems as ALIAC and management has decided not to
allocate Year 2000 costs to the Company. ALIAC has developed and is currently
executing a comprehensive risk-based plan designed to make its computer systems,
applications and facilities Year 2000 ready. The plan covers four stages
including (i) inventory, (ii) assessment, (iii) remediation and (iv) testing and
certification. At the end of 1997, ALIAC had substantially completed the
inventory and assessments stages. The remediation process is currently underway
and targeted for completion by December 31, 1998. Testing and certification of
these systems and applications are targeted for completion by mid 1999.



                                       13
<PAGE>




Item 8.    Financial Statements and Supplementary Data.

                          Index to Financial Statements

                                                                         Page
                                                                         ----
Independent Auditors' Report                                               15
Financial Statements:

Statements of Income for the Years Ended
  December 31, 1997, 1996 and 1995                                         16

Balance Sheets as of December 31, 1997
  and 1996                                                                 17

Statements of Changes in Shareholder's Equity for
  the Years Ended December 31, 1997, 1996 and 1995                         18

Statements of Cash Flows for the Years
  Ended December 31, 1997, 1996 and 1995                                   19

Notes to Financial Statements                                              20



                                       14
<PAGE>


                          Independent Auditors' Report


The Shareholder and Board of Directors
Aetna Insurance Company of America:


We have audited the accompanying balance sheets of Aetna Insurance Company of
America as of December 31, 1997 and 1996, and the related statements of income,
changes in shareholder's equity, and cash flows for each of the years in the
three-year period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Aetna Insurance Company of
America at December 31, 1997 and 1996, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
1997, in conformity with generally accepted accounting principles.

As discussed in Note 1 to the financial statements, in 1997, the Company changed
its method for accounting for guaranty-fund and other insurance related
assessments.



                                                       /s/ KPMG Peat Marwick LLP




Hartford, Connecticut
March 25 , 1998



                                       15
<PAGE>


                       AETNA INSURANCE COMPANY OF AMERICA
    (A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)

                              Statements of Income
                                   (thousands)



<TABLE>
<CAPTION>
                                                                   Years Ended December 31,
                                                                   ------------------------
                                                          1997                1996               1995
                                                          ----                ----               ----
<S>                                                    <C>                 <C>                  <C>
Revenue:
  Charges assessed against policyholders               $ 6,072.9           $ 1,293.0            $ 132.7
  Net investment income                                  7,083.2             1,556.9              721.0
  Net realized capital gains (losses)                      101.6               (11.2)               8.3
  Other income                                             243.2                66.4               --
                                                       ----------         -----------         -----------
        Total revenue                                   13,500.9             2,905.1              862.0

Benefits and expenses:
  Current and future benefits                            6,534.5             1,651.9               --
  Operating expenses                                     3,675.6             2,430.4              481.8
  Amortization of deferred policy acquisition costs        809.0               242.0               --
                                                       ----------         -----------         -----------
       Total benefits and expenses                      11,019.1             4,324.3              481.8


Income (loss) before income taxes (benefits) and         2,481.8            (1,419.2)             380.2
  cumulative effect adjustment

  Income taxes (benefits)                                  768.7              (723.4)             212.3
                                                       ----------         -----------         -----------

Income (loss) before cumulative effect adjustments       1,713.1              (695.8)             167.9

Cumulative effect adjustment, net of tax                   520.0                --                 --
                                                       ----------         -----------         -----------

Net income (loss)                                      $ 1,193.1            $ (695.8)           $ 167.9
                                                       =========          ===========         ==========
</TABLE>



See Notes to Financial Statements.




                                       16
<PAGE>



                       AETNA INSURANCE COMPANY OF AMERICA
    (A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)

                                 Balance Sheets
                         (thousands, except share data)



<TABLE>
<CAPTION>
                                                                        December 31,
Assets                                                              1997            1996
------                                                              ----            ----
<S>                                                           <C>                 <C>
Investments:
  Debt securities, available for sale, at fair value:
     (amortized cost:  $135,850.1 and $24,736.8)              $ 137,918.4         $  24,770.3
Cash and cash equivalents                                        12,494.2            51,842.3
Deferred policy acquisition costs                                45,364.0            21,057.0
Accrued investment income                                         2,041.5               325.8
Deferred tax asset                                                2,139.2             1,289.7
Income taxes receivable                                           1,429.7             1,133.2
Other assets                                                      2,514.6               447.6
Separate Accounts assets                                        676,640.7           303,518.6
                                                              -----------         -----------

       Total assets                                           $ 880,542.3         $ 404,384.5
                                                              ===========         ===========


Liabilities and Shareholder's Equity
------------------------------------
Liabilities:
  Policyholders' funds left with the Company                    145,625.9            64,445.4
  Other liabilities                                               5,212.1             4,753.2
  Due to parent and affiliates                                      813.6               347.2
  Separate Accounts liabilities                                 676,640.7           303,518.6
                                                              -----------         -----------
       Total liabilities                                        828,292.3           373,064.4
                                                              -----------         -----------

Shareholder's equity:
  Common capital stock, par value $2,000 (1,275 shares
   authorized, issued and outstanding)                            2,550.0             2,550.0
  Paid-in capital                                                47,550.0            27,550.0
  Accumulated other comprehensive income                            155.4                90.3
  Retained earnings                                               1,994.6             1,129.8
                                                              -----------         -----------
       Total shareholder's equity                                52,250.0            31,320.1
                                                              -----------         -----------

         Total liabilities and shareholder's equity           $ 880,542.3         $ 404,384.5
                                                              ===========         ===========
</TABLE>


See Notes to Financial Statements.


                                       17
<PAGE>

                       AETNA INSURANCE COMPANY OF AMERICA
    (A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)

                  Statements of Changes in Shareholder's Equity
                                   (thousands)



<TABLE>
<CAPTION>
                                                                    Years Ended December 31,
                                                                    ------------------------
                                                                 1997         1996          1995
                                                                 ----         ----          ----
<S>                                                          <C>           <C>           <C>
Shareholder's equity, beginning of year                      $ 31,320.1    $ 12,133.0    $ 11,675.3

Comprehensive income
  Net income (loss)                                             1,193.1        (695.8)        167.9
  Other comprehensive income, net of tax
    Unrealized gains (losses) on securities ($100.2
    thousand, ($95.5) thousand and $371.8 thousand,
    pretax, respectively)                                          65.1         (62.1)        289.8
                                                             ----------    ----------    ----------
Total comprehensive income                                      1,258.2        (757.9)        457.7
                                                             ----------    ----------    ----------

Capital contributions                                          20,000.0      20,000.0          --

Other changes                                                    (328.3)        (55.0)         --
                                                             ----------    ----------    ----------

Shareholder's equity, end of  year                           $ 52,250.0    $ 31,320.1    $ 12,133.0
                                                             ==========    ==========    ==========
</TABLE>






See Notes to Financial Statements.


                                       18
<PAGE>

                       AETNA INSURANCE COMPANY OF AMERICA
    (A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)

                            Statements of Cash Flows
                                   (thousands)


<TABLE>
<CAPTION>
                                                                                           Years Ended December 31,
                                                                                           ------------------------
                                                                                       1997          1996          1995
                                                                                       ----          ----          ----
<S>                                                                                <C>           <C>           <C>
Cash Flows from Operating Activities:
         Net income (loss)                                                         $  1,193.1    $   (695.8)   $   167.9
         Adjustments to reconcile net income (loss) to net cash (used for)
          provided by operating activities:
            Increase in accrued investment income                                    (1,715.7)       (213.2)       (21.1)
            Increase in deferred policy acquisition costs                           (24,307.0)    (18,990.6)    (2,066.4)
            Net change in amounts due to/from parent and affiliates                     466.5         172.6        164.1
            Net increase (decrease) in other assets and liabilities                     924.1         (25.6)     1,915.9
            Net change in income taxes                                               (1,388.4)     (2,710.7)        60.2
            Net amortization of (discount) premium on debt securities                  (419.5)       (104.6)        22.2
            Net realized capital (gains) losses                                        (101.6)         11.2         --
                                                                                   ----------    ----------    ---------
               Net cash (used for) provided by operating activities                 (25,348.5)    (22,556.7)       242.8
                                                                                   ----------    ----------    ---------

Cash Flows from Investing Activities:
         Proceeds from sales of:
           Debt securities available for sale                                        16,576.8       2,510.0      3,000.0
         Investment maturities and repayments of:
           Debt securites available for sale                                          3,192.0          --           --
           Short-term investments                                                     1,000.0          --          500.0
         Cost of investment purchases in:
           Debt securities available for sale                                      (132,734.8)    (16,706.0)    (3,939.2)
           Short-term investments                                                    (1,000.0)         --         (492.1)
                                                                                   ----------    ----------    ---------
               Net cash used for investing activities                              (112,966.0)    (14,196.0)      (931.3)
                                                                                   ----------    ----------    ---------

Cash Flows from Financing Activities:
         Deposits and interest credited for investment contracts                     84,673.2      64,936.2         --
         Withdrawal of investment contracts                                          (5,706.8)       (385.4)        --
         Capital contribution                                                        20,000.0      20,000.0         --
                                                                                   ----------    ----------    ---------
               Net cash provided by financing activities                             98,966.4      84,550.8         --
                                                                                   ----------    ----------    ---------

Net (decrease) increase in cash and cash equivalents                                (39,348.1)     47,798.1       (688.5)
Cash and cash equivalents, beginning of year                                         51,842.3       4,044.2      4,732.7
                                                                                   ----------    ----------    ---------

Cash and cash equivalents, end of year                                             $ 12,494.2    $ 51,842.3    $ 4,044.2
                                                                                   ==========    ==========    =========


Supplemental cash flow information:
    Income taxes paid, net                                                         $  1,493.0    $  1,866.8    $    92.4
                                                                                   ==========    ==========    =========
</TABLE>


See Notes to Financial Statements.


                                       19
<PAGE>


                       AETNA INSURANCE COMPANY OF AMERICA
    (A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)

                          Notes to Financial Statements


1.   Summary of Significant Accounting Policies

     Aetna Insurance Company of America (the "Company") is a stock life
     insurance company organized in 1990 under the insurance laws of
     Connecticut. The Company is a wholly owned subsidiary of Aetna Life
     Insurance and Annuity Company ("ALIAC"). ALIAC is a wholly owned subsidiary
     of Aetna Retirement Holdings, Inc. ("HOLDCO"). HOLDCO is a wholly owned
     subsidiary of Aetna Retirement Services, Inc., whose ultimate parent is
     Aetna Inc. ("Aetna"). During the second quarter of 1995, the Company began
     marketing and servicing variable annuities to individuals in the qualified
     and non-qualified markets.

     Basis of Presentation

     These financial statements have been prepared in conformity with generally
     accepted accounting principles. Certain reclassifications have been made to
     1996 and 1995 financial information to conform to the 1997 presentation.

     New Accounting Standards

     Reporting Comprehensive Income

     As of December 31, 1997 the Company adopted Financial Accounting Standard
     ("FAS") No. 130, Reporting Comprehensive Income. This statement establishes
     standards for the reporting and presentation of comprehensive income and
     its components in a full set of financial statements. Comprehensive income
     encompasses all changes in shareholder's equity (except those arising from
     transactions with shareholders) and includes net income and net unrealized
     capital gains or losses on available-for-sale securities. As this new
     standard only requires additional information in a financial statement, it
     does not affect the Company's financial position or results of operations.

     Accounting by Insurance and Other Enterprises for Insurance-Related
     Assessments

     In 1997, the Company adopted the American Institute of Certified Public
     Accountants' Statement of Position ("SOP") 97-3, Accounting by Insurance
     and Other Enterprises for Insurance-Related Assessments, effective as of
     January 1, 1997. This statement required that the Company recognize a
     liability for guaranty-fund and other insurance related assessments when
     such assessments were probable and could be reasonably estimated. A
     cumulative effect charge of $520.0 thousand, net of taxes of $280.0
     thousand, related to the adoption of this statement is reflected in the
     1997 Statements of Income.





                                       20
<PAGE>

                       AETNA INSURANCE COMPANY OF AMERICA
    (A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)

                    Notes to Financial Statements (Continued)


1.   Summary of Significant Accounting Policies (Continued)

     Future Application of Accounting Standards

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

     Financial Accounting Standard ("FAS") No. 125 , Accounting for Transfers
     and Servicing of Financial Assets and Extinguishments of Liabilities, was
     issued in June 1996 and provides accounting and reporting standards for
     transfers of financial assets and extinguishments of liabilities. FAS No.
     125 is effective for 1997 financial statements; however, certain provisions
     relating to accounting for repurchase agreements and securities lending are
     not effective until January 1, 1998. Provisions effective in 1997 did not
     have a material effect on the Company's financial position or results of
     operations. The Company does not expect adoption of this statement for
     provisions effective in 1998 to have a material effect on its financial
     position or results of operations.

     Accounting for Internal Use Software

     In March of 1998, the AICPA issued SOP 98-1, Accounting for internal use
     software, which provides guidance for determining when internal use
     software costs (acquired or internally developed) are expensed as incurred
     or capitalized. This Statement is effective for 1999 financial statements
     with early adoption permitted. The Company has not determined, at this
     time, the impact on the financial statements of adopting this standard.

     Use of Estimates

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

     Cash and Cash Equivalents

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

     Investments

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



                                       21
<PAGE>



                       AETNA INSURANCE COMPANY OF AMERICA
     (A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)

                    Notes to Financial Statements (Continued)

1.   Summary of Significant Accounting Policies (Continued)

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

     The Company engages in securities lending whereby certain securities from
     its portfolio are loaned to other institutions for short periods of time.
     Initial collateral, primarily cash, is required at a rate of 102% of the
     market value of a loaned domestic security and 105% of the market value of
     a loaned foreign security. The collateral is deposited by the borrower with
     a lending agent, and retained and invested by the lending agent according
     to the Company's guidelines to generate additional income. The market value
     of the loaned securities is monitored on a daily basis with additional
     collateral obtained or refunded as the market value of the loaned
     securities fluctuates. At December 31, 1997 and 1996, the Company had no
     securities out on loan.

     Purchases and sales of debt securities are recorded on the trade date.

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

     Deferred Policy Acquisition Costs

     Certain costs of acquiring insurance business are deferred. These costs,
     all of which vary with and are primarily related to the production of new
     and renewal business, consist principally of commissions, certain expenses
     of underwriting and issuing contracts and certain agency expenses. Such
     costs are amortized in proportion to estimated gross profits and adjusted
     to reflect actual gross profits and are amortized over a period of up to
     twenty years. Deferred policy acquisition costs are written off to the
     extent that it is determined that future policy premiums and investment
     income or gross profits are not adequate to cover related losses and
     expenses.

     Reserves

     Policyholders' funds left with the Company include reserves for deferred
     annuity investment contracts and immediate annuities without life
     contingent payouts. Reserves on such contracts are equal to cumulative
     deposits less charges and withdrawals plus credited interest thereon (rates
     range from 4.85% to 7.00% for all years presented), net of adjustments for
     investment experience that the Company is entitled to reflect in future
     credited interest. Reserves on contracts subject to experience rating
     reflect the rights of contractholders, plan participants and the Company.



                                       22
<PAGE>

                       AETNA INSURANCE COMPANY OF AMERICA
    (A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)

                    Notes to Financial Statements (Continued)


1.   Summary of Significant Accounting Policies (Continued)

     Charges Assessed Against Policyholders and Other Income

     Charges assessed against policyholders' funds for surrender charges,
     actuarial margin and other fees are recorded as revenue when earned. Other
     amounts received for these contracts are reflected as deposits and are not
     recorded as revenue. Other income includes maintenance and surrender fees.

     Separate Accounts

     Assets held under variable annuity contracts are segregated in Separate
     Accounts and are invested, as designated by the contractholder, in shares
     of mutual funds that are managed by Aeltus or other selected mutual funds
     not managed by Aeltus.

     Separate Accounts assets and liabilities are carried at fair value except
     for those relating to a guaranteed interest option. Since the Company bears
     the investment risk where the contract is held to maturity, the assets of
     the Separate Account supporting the guaranteed interest option are carried
     at an amortized cost of $90.8 million for 1997 (fair value of $91.5
     million) and $82.5 million for 1996 (fair value of $82.9 million). Reserves
     relating to the guaranteed interest option are maintained at fund value and
     reflect interest credited at rates ranging from 4.1% to 8.0% for all years
     presented.

     Separate Accounts assets and liabilities are shown as separate captions in
     the Balance Sheets. Deposits, investment income and net realized and
     unrealized capital gains and losses of the Separate Accounts are not
     reflected in the Statements of Income (with the exception of realized
     capital gains and losses on the sale of assets supporting the guaranteed
     interest option). The Statements of Cash Flows do not reflect investment
     activity of the Separate Accounts.

     Income Taxes

     The Company is included in the consolidated federal income tax return of
     Aetna. The Company is taxed at regular corporate rates after adjusting
     income reported for financial statement purposes for certain items.
     Deferred income tax expenses/benefits result from changes during the year
     in cumulative temporary differences between the tax basis and book basis of
     assets and liabilities.



                                       23
<PAGE>


                       AETNA INSURANCE COMPANY OF AMERICA
    (A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)

                    Notes to Financial Statements (Continued)


2.   Investments

     Debt securities available for sale at December 31, 1997 were as follows:

<TABLE>
<CAPTION>
                                                              Gross           Gross
                                           Amortized       Unrealized       Unrealized        Fair
                                              Cost            Gains           Losses          Value
                                              ----            -----           ------          -----
                                                                     (thousands)
<S>                                         <C>            <C>            <C>            <C>
U.S. government and government              $ 37,839.6     $1,066.0       $    1.2       $ 38,904.4
agencies and authorities

U.S. corporate securities:
     Financial                                31,267.3        705.3           12.1         31,960.5
     Healthcare & consumer products            6,509.7        170.8           20.0          6,660.5
     Media & broadcast                           993.6        119.2              -          1,112.8
     Natural resources                         5,122.7         49.7              -          5,172.4
     Transportation & capital goods            5,334.6        134.1              -          5,468.7
     Utilities                                 6,049.0         66.2              -          6,115.2
     Other corporate securities                  764.2         45.9              -            810.1
                                            ----------     --------      ---------       ----------
  Total U.S. corporate securities             56,041.1      1,291.2           32.1         57,300.2

Foreign securities:
     Government                                  991.3            -          243.1            748.2
     Other                                    12,190.3        153.7          809.2         11,534.8
                                            ----------     --------      ---------       ----------
Total foreign securities                      13,181.6        153.7        1,052.3         12,283.0

Residential mortgage-backed
  securities:
  Pass-throughs                                1,152.1            -            3.0          1,149.1
  Collateralized mortgage obligations          8,602.9        399.3           12.1          8,990.1
                                            ----------     --------      ---------       ----------
Total residential mortgage-backed
  securities                                   9,755.0        399.3           15.1         10,139.2

Commercial/multifamily mortgage-
  backed securities                            8,555.3        165.3              -          8,720.6

Other asset-backed securities                 10,477.5         93.5              -         10,571.0
                                            ----------     --------      ---------       ----------

Total Debt Securities                       $135,850.1     $3,169.0       $1,100.7       $137,918.4
                                            ==========     ========      =========       ==========
</TABLE>



                                       24
<PAGE>



                       AETNA INSURANCE COMPANY OF AMERICA
    (A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)

                    Notes to Financial Statements (Continued)


2.   Investments (Continued)

     Debt securities available for sale at December 31, 1996 were as follows:

<TABLE>
<CAPTION>
                                                              Gross           Gross
                                           Amortized       Unrealized       Unrealized        Fair
                                              Cost            Gains           Losses          Value
                                              ----            -----           ------          -----
                                                                     (thousands)
<S>                                         <C>            <C>            <C>            <C>
U.S. government and government
      agencies and authorities              $ 8,111.1      $140.0         $  1.1         $ 8,250.0

U.S. corporate securities:
     Financial                                7,375.4           -           59.2           7,316.2
     Healthcare & consumer products           2,506.2           -            4.1           2,502.1
     Natural resources                        1,250.0         0.8              -           1,250.8
                                            ----------     --------      ---------       ----------
  Total U.S. corporate securities            11,131.6         0.8           63.3          11,069.1

Foreign securities - Other                    2,032.3           -           46.0           1,986.3

Commercial/multifamily mortgage-
     backed securities                        2,480.9         3.5              -           2,484.4

Other asset-backed securities                   980.9           -            0.4             980.5
                                            ----------     --------      ---------       ----------

Total Debt Securities                       $24,736.8      $144.3         $110.8         $24,770.3
                                            ==========     ========      =========       ==========
</TABLE>

     At December 31, 1997 and 1996 net unrealized appreciation of $2,068.3
     thousand and $33.5 thousand respectively, on available for sale debt
     securities included unrealized gains (losses) of $1,829.2 thousand and
     ($105.4) thousand, respectively, related to experience rated contracts,
     which were not reflected in shareholder's equity but in policyholders'
     funds left with the Company.



                                       25
<PAGE>


                       AETNA INSURANCE COMPANY OF AMERICA
    (A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)

                    Notes to Financial Statements (Continued)


2.   Investments (Continued)

     The carrying and fair value of debt securities for the year ended December
     31, 1997 are shown below by contractual maturity. Actual maturities may
     differ from contractual maturities because securities may be restructured,
     called or prepaid.

                                                     Amortized          Fair
                                                       Cost            Value
                                                       ----            -----
                                                             (thousands)

      Due to mature:
           After one year through five years        $ 55,170.9       $ 55,726.9
           After five years through ten years         26,682.4         26,824.3
           After ten years                            25,209.0         25,936.4
           Mortgage-backed securities                 18,310.3         18,859.8
           Other asset-backed securities              10,477.5         10,571.0
                                                    ----------       ----------
           Total                                    $135,850.1       $137,918.4
                                                    ==========       ==========

     At December 31, 1997 and 1996, debt securities carried at $5.0 million and
     $4.7 million, respectively, were on deposit as required by various state
     regulatory agencies.

     The Company does not have any investments in a single issuer, other than
     obligations of the U.S. government, with a carrying value in excess of 10%
     of the Company's shareholder's equity at December 31, 1997.



                                       26
<PAGE>



                       AETNA INSURANCE COMPANY OF AMERICA
     (A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)

                    Notes to Financial Statements (Continued)

3.   Financial Instruments

     Estimated Fair Value

     The carrying values and estimated fair values of certain of the Company's
     financial instruments at December 31, 1997 and 1996 were as follows:

<TABLE>
<CAPTION>
                                                           1997                                1996
                                                           ----                                ----
                                                Carrying            Fair             Carrying          Fair
                                                 Value              Value             Value            Value
                                                 -----              -----             -----            -----
                                                        (thousands)                         (thousands)
<S>                                          <C>                 <C>                <C>             <C>
       Liabilities:
       Investment contract liabilities:
            With a fixed maturity            $    279.4          $    275.6         $        -      $        -
            Without a fixed maturity         $145,346.5          $134,795.4         $ 64,445.4      $ 59,401.6
</TABLE>

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

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

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

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

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

     Off-Balance-Sheet and Other Financial Instruments
     The Company did not have transactions in off-balance-sheet instruments in
     1997 or 1996.


                                       27
<PAGE>


                       AETNA INSURANCE COMPANY OF AMERICA
     (A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)

                    Notes to Financial Statements (Continued)


4.   Net Investment Income

     Sources of net investment income were as follows:

                                        1997            1996           1995
                                        ----            ----           ----
                                                    (thousands)


       Debt securities                $ 6,009.4       $   547.6       $ 457.5
       Cash equivalents                 1,190.3         1,039.2         261.1
       Other                                3.2             2.4           2.4
                                      ---------       ---------       -------
       Gross investment income          7,202.9         1,589.2         721.0
       Less investment expenses           119.7            32.3          -
                                      ---------       ---------       -------
       Net investment income          $ 7,083.2       $ 1,556.9       $ 721.0
                                      =========       =========       =======

     Net investment income includes amounts allocable to experience rated
     contractholders of $6,997.2 thousand and $855.2 thousand for the years
     ended December 31, 1997 and 1996, respectively. There were no such amounts
     for the year ended December 31, 1995. Interest credited to contractholders
     is included in current and future benefits.

5.   Dividend Restrictions and Shareholder's Equity

     The amount of dividends that may be paid to the shareholder in 1998 without
     prior approval by the Insurance Commissioner of the State of Connecticut is
     $4.1 million.

     The Insurance Department of the State of Connecticut (the "Department")
     recognizes as net income and shareholder's capital and surplus those
     amounts determined in conformity with statutory accounting practices
     prescribed or permitted by the Department, which differ in certain respects
     from generally accepted accounting principles ("GAAP"). Statutory net
     income (loss) was $408.2 thousand, ($7,874.4) thousand and $378.9 thousand
     for the years ended December 31, 1997, 1996 and 1995, respectively.
     Statutory capital and surplus was $43.4 million and $23.5 million as of
     December 31, 1997 and 1996, respectively. The Company has entered into
     support agreements with ALIAC under which ALIAC has agreed to cause the
     Company to have sufficient capital to meet a certain capital and surplus
     level.

     As of December 31, 1997 the Company does not utilize any statutory
     accounting practices which are not prescribed by state regulatory
     authorities that, individually or in the aggregate, materially affect
     statutory capital and surplus.



                                       28
<PAGE>



                       AETNA INSURANCE COMPANY OF AMERICA
    (A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)

                    Notes to Financial Statements (Continued)


6.   Capital Gains and Losses on Investment Operations

     Realized capital gains or losses are the difference between the carrying
     value and sale proceeds of specific investments sold.

     Net realized capital gains (losses) on debt securities, as reflected in the
     Statements of Income for the years ended December 31, 1997, 1996 and 1995,
     were $101.6 thousand, ($11.2) thousand and $8.3 thousand, respectively.

     Net realized capital gains of $211.0 thousand allocable to experience rated
     contracts, were deducted from net realized capital gains and an offsetting
     amount was reflected in policyholders' funds left with the Company in 1997.
     Net unamortized gains were $206.6 thousand at December 31, 1997. There were
     no such amounts for 1996 and 1995.

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

                                      1997           1996            1995
                                      ----           ----            ----
                                                 (thousands)

       Proceeds on sales          $16,576.8     $2,510.0         $3,000.0
            Gross gains               104.7         12.7              8.3
            Gross losses                3.1         23.9               -

     Changes in shareholder's equity related to changes in accumulated other
     comprehensive income (unrealized capital gains and losses on securities),
     (excluding those related to experience rated contractholders in 1997 and
     1996), were as follows:

                                                        1997      1996      1995
                                                        ----      ----      ----
                                                                (thousands)

     Debt securities                                  $100.2    $(95.5)   $371.8

     Increase (decrease) in deferred income taxes
     (See Note 7)                                       35.1     (33.4)     82.0
                                                      ------    ------    ------
     Net change in accumulated other
     comprehensive income                             $ 65.1    $(62.1)   $289.8
                                                      ======    ======    ======

     Net unrealized capital gains (losses) allocable to experience rated
     contracts of $1,829.2 thousand and ($105.4) at December 31, 1997 and 1996,
     respectively, are reflected on the Balance Sheets in policyholders' funds
     left with the Company and are not included in shareholder's equity.



                                       29
<PAGE>



                       AETNA INSURANCE COMPANY OF AMERICA
    (A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)

                    Notes to Financial Statements (Continued)


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

     Shareholder's equity included the following accumulated other comprehensive
     income, which is net of amounts allocable to experience rated
     contractholders in 1997 and 1996, at December 31:

                                                     1997      1996      1995
                                                     ----      ----      ----
                                                           (thousands)

     Debt securities
          Gross unrealized gains                    $239.5    $140.0    $237.4
          Gross unrealized losses                     (0.4)     (1.1)     (3.0)
                                                    ------    ------    ------
                                                     239.1     138.9     234.4
     Deferred federal income taxes (see Note 7)       83.7      48.6      82.0
                                                    ------    ------    ------

     Net unrealized capital gains                   $155.4    $ 90.3    $152.4
                                                    ======    ======    ======


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

<TABLE>
<CAPTION>
                                                                           1997              1996             1995
                                                                           ----              ----             ----
                                                                                          (thousands)
 <S>                                                                     <C>              <C>              <C>
         Unrealized holding gains (losses) arising during the
            period (1)                                                  $ 404.1           $  (1.4)        $  280.8
         Less:  reclassification adjustment for gains and
            other items included in net income (2)                        339.0              60.7             (9.0)
                                                                        -------           -------         --------
         Net unrealized gains (losses) on securities                    $  65.1           $ (62.1)        $  289.8
                                                                        =======           =======         ========
</TABLE>

         (1)  Pretax unrealized holding gains (losses) arising during the period
              were $621.7 thousand, ($2.2) thousand and $432 thousand for 1997,
              1996 and 1995, respectively.
         (2)  Pretax reclassification adjustments for gains and other items
              included in net income were $521.5 thousand, $93.3 thousand and
              ($13.8) thousand for 1997, 1996 and 1995, respectively.


                                       30
<PAGE>



                       AETNA INSURANCE COMPANY OF AMERICA
    (A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)

                    Notes to Financial Statements (Continued)

7.   Income Taxes

     The Company is included in the consolidated federal income tax return of
     Aetna and combined Connecticut state income tax return of Aetna. Aetna
     allocates to each member an amount approximating the tax it would have
     incurred were it not a member of the consolidated group, and credits the
     member for the use of its tax saving attributes used in the consolidated
     returns.

     Income taxes for the years ended December 31, consist of:

<TABLE>
<CAPTION>
                                                       1997         1996         1995
                                                       ----         ----         ----
                                                                 (thousands)
<S>                                                 <C>           <C>          <C>
       Current taxes (benefits):
       Income taxes (benefits):
            Federal                                 $1,219.2      $    98.8    $ 635.2
            State                                        0.2          (58.4)     123.4
            Net realized capital gains (losses)        109.4           (3.9)       2.9
                                                    --------      ---------    -------
                                                     1,328.8           36.5      761.5
                                                    --------      ---------    -------
       Deferred tax benefits:
            Federal                                   (486.2)        (759.9)    (549.2)
            Net realized capital losses                (73.9)             -          -
                                                    --------      ---------    -------
                                                      (560.1)        (759.9)    (549.2)
                                                    --------      ---------    -------

            Total                                   $  768.7      $  (723.4)   $ 212.3
                                                    ========      =========    =======
</TABLE>

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

<TABLE>
<CAPTION>
                                                         1997         1996         1995
                                                         ----         ----         ----
                                                                  (thousands)
<S>                                                    <C>          <C>           <C>
            Income (loss) before income taxes and
            cumulative effect adjustment               $2,481.8     $(1,419.2)    $380.2
            Tax rate                                         35%           35%        35%
                                                       --------     ---------     ------
            Application of the tax rate                   868.6        (496.7)     133.1

       Tax effect of:
            State income tax, net of federal benefit        0.1         (37.9)      80.2
            Excludable dividends                         (129.5)       (190.5)         -
            Adjustment to prior year tax provision          3.7           2.1       (1.0)
            Other, net                                     25.8          ( .4)         -
                                                       --------     ---------     ------

              Income taxes (benefits)                  $  768.7     $  (723.4)    $212.3
                                                       ========     =========     ======
</TABLE>

                                       31
<PAGE>

                       AETNA INSURANCE COMPANY OF AMERICA
    (A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)

                    Notes to Financial Statements (Continued)

7.   Income Taxes (Continued)

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

<TABLE>
<CAPTION>
                                                                     1997           1996
                                                                     ----           ----
                                                                         (thousands)
<S>                                                                <C>            <C>
       Deferred tax assets:
            Policyholders' funds left with the Company             $14,242.8      $6,932.6
            Unrealized gains allocable to experience rated
            contracts                                                  640.2           -
            Postretirement benefits other than pensions                 21.8          41.7
            Guaranty fund assessments                                  146.0          ( .7)
            Pension                                                    163.5          52.6
            Other                                                       78.2           9.9
                                                                   ---------      --------
       Total gross assets                                           15,292.5       7,036.1

       Deferred tax liabilities:
            Deferred policy acquisition costs                       12,425.2       5,697.5
            Net unrealized capital gains                               723.9          48.6
            Other                                                        4.2           0.3
                                                                   ---------      --------
       Total gross liabilities                                      13,153.3       5,746.4
                                                                   ---------      --------
            Net deferred tax asset                                 $ 2,139.2      $1,289.7
                                                                   =========      ========
</TABLE>

     Net unrealized capital gains and losses are presented in shareholder's
     equity net of deferred taxes. Valuation allowances are provided when it is
     not considered more likely than not that deferred tax assets will be
     realized. As of December 31, 1997 and 1996, no valuation allowances were
     required.

     The Internal Revenue Service ("Service") has completed examinations of the
     consolidated federal income tax returns of Aetna through 1990. Discussions
     are being held with the Service with respect to proposed adjustments.
     Management believes there are adequate defenses against, or sufficient
     reserves to provide for, any such adjustments. The Service has commenced
     its examinations for the years 1991 through 1994.

8.   Benefit Plans

     The Company utilizes the employees of Aetna and its affiliates (primarily
     ALIAC). The benefit plan charges allocated to the Company in 1997, 1996 and
     1995 were immaterial.



                                       32
<PAGE>


                       AETNA INSURANCE COMPANY OF AMERICA
    (A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)

                    Notes to Financial Statements (Continued)

8.   Benefit Plans (Continued)

     As of December 31, 1996, Aetna transferred to the Company approximately
     $84.0 thousand of accrued liabilities, primarily related to the allocation
     of ALIAC pension and postretirement benefit plans that had been previously
     recorded by Aetna. The after tax amount of this transfer (approximately
     $55.0 thousand) is reported as a reduction in retained earnings. In 1997,
     other changes in shareholder's equity includes an additional $328.3
     thousand reduction reflecting revisions to the allocation of these accrued
     liabilities.

9.   Related Party Transactions

     Substantially all of the administrative and support functions of the
     Company are provided by Aetna and its affiliates. The financial statements
     reflect allocated charges, at cost, for these services based upon measures
     appropriate for the type and nature of service provided. Total charges
     allocated to the Company, including rent, salaries and other administrative
     expenses, were $7.3 million and $4.7 million for the years ended December
     31, 1997 and 1996, respectively, (of which $4.5 million and $2.7 million,
     respectively, were capitalized as deferred policy acquisition costs). Total
     charges allocated to the Company for the year ended December 31, 1995 were
     $.3 million.

     The Company is compensated by the Separate Accounts for bearing mortality
     and expense risks pertaining to variable annuity contracts. Under the
     insurance contracts, the Separate Accounts pay the Company a daily fee
     which, on an annual basis, is 1.40% of their average daily net assets. The
     amount of compensation and fees received from the Separate Accounts,
     included in charges assessed against policyholders, amounted to $5,565.4
     thousand, $1,293.0 thousand and $129.6 thousand for the years ended
     December 31, 1997, 1996 and 1995, respectively.

     The Company received capital contributions of $20.0 million in cash from
     ALIAC in both 1997 and 1996. The Company received no capital contributions
     in 1995.

     Since August 1996, Aeltus Investment Management, Inc. ("Aeltus"), a wholly
     owned subsidiary of HOLDCO and an affiliate of the Company, has been acting
     as adviser for the general account assets. The Company pays Aeltus a fee
     which, on an annual basis, is .06% of the average daily net assets under
     management. The amount of such fees for the years ended December 31, 1997
     and 1996 amounted to $119.7 thousand and $32.4 thousand, respectively.



                                       33
<PAGE>




                       AETNA INSURANCE COMPANY OF AMERICA
    (A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)

                    Notes to Financial Statements (Continued)

10.  Commitments and Contingent Liabilities

     Commitments
     At December 31, 1997 and 1996 the Company had no commitments or contingent
     liabilities.

     Litigation
     The Company is not currently involved in litigation.




                                       34
<PAGE>




                       AETNA INSURANCE COMPANY OF AMERICA
    (A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)


Item 9.         Changes in and Disagreements with Accountants on Accounting and
                Financial Disclosure.

                None

                                    PART III

Item 10.        Directors and Executive Officers of the Registrant.

                Omitted pursuant to General Instruction I(2) of Form 10-K .

Item 11.        Executive Compensation.

                Omitted pursuant to General Instruction I(2) of Form 10-K .

Item 12.        Security Ownership of Certain Beneficial Owners and Management.

                Omitted pursuant to General Instruction I(2) of Form 10-K .

Item 13.        Certain Relationships and Related Transactions.

                Omitted pursuant to General Instruction I(2) of Form 10-K .

                                     PART IV

Item 14.        Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a) The following documents are filed as part of this report:

1. Financial statements. See Item 8 on Page 14
2. Financial statement schedules. See Index to Financial Statement Schedules on
   Page 38.
3. Exhibits:

     3(i)  Certificate of Incorporation

           Incorporated herein by reference to Registration Statement on Form
           N-4, File No. 33-59749, as amended and filed electronically with the
           Securities and Exchange Commission on June 1, 1995 (Accession No.
           0000950109-95-001238).

     3(ii) By-Laws

           Incorporated herein by reference to Registration Statement on Form
           N-4, File No. 33-59749, as filed most recently on June 1, 1995
           (Accession No. 0000950109-95-002138).


                                       35
<PAGE>

Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K.
           (Continued)

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

           Incorporated herein by reference to Registration Statement on Form
           N-4, File No. 33-80750, as amended and filed most recently on April
           23, 1997 (Accession No. 0000950146-97-000634).

           Incorporated herein by reference to Registration Statement on Form
           N-4, File No. 33-59749, as amended and filed most recently on
           February 13, 1998 (Accession No. 0000950146-98-000207).

           Incorporated herein by reference to Pre-Effective Amendment No. 3 to
           the Registration Statement on Form S-2, File No. 33-63657, as filed
           electronically on January 17, 1996 (Accession No.
           0000908634-96-000004) and as amended and most recently filed on
           November 24, 1997 (Accession No. 0000950146-97-001786).

     10    Material Contracts (Management contracts / compensatory plans or
           arrangements)

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

           The Supplemental Pension Benefit Plan for Certain Employees of Aetna
           Services, Inc., incorporated herein by reference to Aetna Services,
           Inc.'s Form 10-Q filed on October 25, 1996.*

           Amendment No. 1 dated as of December 31, 1996 to the Supplemental
           Pension Benefit Plan for Certain Employees of Aetna Services, Inc. -
           Incorporated herein by reference to Aetna Inc.'s Form 10Q, as filed
           electronically on May 6, 1997.

           Amendment No. 2 dated February 28, 1998 to the Supplemental Pension
           Benefit Plans of Certain Employees of Aetna Services, Inc. -
           Incorporated herein by reference to Aetna Inc.'s Form 10Q, as filed
           electronically on May 6, 1997.

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

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

           Amendment dated as of July 22, 1996 to Employment Agreement dated as
           of December 19, 1995 between Aetna Services, Inc., and Daniel P.
           Kearney, incorporated herein by reference to Aetna Inc.'s Form 10-Q
           filed on May 6, 1997*



                                       36
<PAGE>

           Amendment dated as of September 8, 1997 to Employment Agreement dated
           as of December 19, 1995 between Aetna Services, Inc. and Daniel P.
           Kearney - Incorporated herein by reference to Aetna Inc.'s Form 10-Q
           filed on November 4, 1997*

           Employment Agreement, dated as of December 21, 1995, by and between
           Aetna Services, Inc. and Thomas McInerney, as amended - Incorporated
           herein by reference to Aetna Inc.'s Form 10-K filed on March 3, 1998
           (Accession No. 0000950123-98-002224).*

           *  Management contract or compensatory plan or arrangement.

     24    Power of Attorney

           Filed with this Report immediately after Signature page.

     27    Financial Data Schedule

     Exhibits other than these listed are omitted because they are not required
     or not applicable.


(b)  Reports on Form 8-K.

     None.




                                       37
<PAGE>




Index to Financial Statement Schedule


                                                                         Page
                                                                         ----
Independent Auditors' Report............................................. 39

III.   Supplementary Insurance Information as of and for the years
       ended December 31, 1997, 1996, 1995............................... 40

Schedules other than those listed above are omitted because they are not
required or are not applicable.







                                       38
<PAGE>


                          Independent Auditors' Report



The Shareholder and Board of Directors
Aetna Insurance Company of America:


Under date of March 25, 1998, we reported on the balance sheets of Aetna
Insurance Company of America as of December 31, 1997 and 1996, and the related
statements of income, changes in shareholder's equity, and cash flows for each
of the years in the three-year period ended December 31, 1997, as included
herein. In connection with our audits of the aforementioned financial
statements, we also have audited the related financial statement schedule as
listed in the accompanying index. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits.

In our opinion, such financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.

As discussed in Note 1 to the financial statements, in 1997, the Company changed
its method for accounting for guaranty-fund and other insurance related
assessments.


                                                       /s/ KPMG Peat Marwick LLP



Hartford, Connecticut
March 25, 1998



                                       39
<PAGE>


                       AETNA INSURANCE COMPANY OF AMERICA
     (A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)

                                  Schedule III

                       Supplementary Insurance Information

         As of and for the years ended December 31, 1997, 1996 and 1995

<TABLE>
<CAPTION>
====================================================================================================================================
(Thousands)
                                                                                                   Amortization
                  Deferred      Policyholders'                     Other Income                    of Deferred
                   Policy         Funds Left         Net            (Including        Current         Policy           Other
                 Acquisition       with the       Investment     Realized Capital    and Future    Acquisition       Operating
 Segment            Costs          Company        Income (1)    Gains and Losses)     Benefits        Costs          Expenses
------------------------------------------------------------------------------------------------------------------------------------

<S>              <C>            <C>              <C>                <C>             <C>                <C>          <C>
1997             $45,364.0      $145,625.9       $7,083.2           $6,417.7        $6,534.5           $809.0       $3,675.6
----
                --------------------------------------------------------------------------------------------------------------------


1996             $21,057.0      $ 64,445.4       $1,556.9           $1,348.2        $1,651.9           $242.0       $2,430.4
----
                --------------------------------------------------------------------------------------------------------------------


1995             $ 2,066.4      $       -        $  721.0           $  141.0        $   -              $  -         $  481.8
----
                --------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  The allocation of net investment income is based upon the investment year
     method or specific identification of certain portfolios within specific
     segments.



                                       40
<PAGE>



                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 INSURANCE COMPANY OF AMERICA
                                                         (Registrant)

Date  March 27, 1998                By   /s/ Deborah Koltenuk
      --------------                     --------------------
                                         Deborah Koltenuk
                                         Vice President, Treasurer and Corporate
                                         Controller

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on March 27, 1998.

     Signature                                     Title
         *
________________________                President and Director
  Thomas J. McInerney                   (Principal Executive Officer)

         *
________________________                Senior Vice President and Director
  Shaun P. Mathews

         *
________________________                Vice President, Treasurer, and Corporate
  Deborah Koltenuk                      Controller
                                        (Principal Accounting Officer)

         *
________________________                Director
  Catherine H. Smith


*By:  /s/ Maria McKeon
      ----------------
      Maria McKeon, Corporate Secretary and Counsel



                                       41
<PAGE>



                                POWER OF ATTORNEY


We, the undersigned directors and officers of Aetna Insurance Company of
America, hereby severally constitute and appoint Maria F. McKeon and Deborah
Koltenuk and each of them individually, our true and lawful attorneys, with full
power to them and each of them to sign for us, and in our names and in the
capacities indicated below, the 1997 Form 10-K and any and all amendments
thereto to be filed with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, hereby ratifying and confirming our signatures
as they may be signed by our said attorney to the Form 10-K and any and all
amendments thereto.

WITNESS our hands and common seal on this 27th day of March, 1998.


     Signature                               Title


/s/ Thomas J. McInerney              President and Director
-----------------------              (Principal Executive Officer)
Thomas J. McInerney


/s/ Shaun P. Mathews                 Senior Vice President and Director
----------------------
Shaun P. Mathews


/s/ Deborah Koltenuk                 Vice President, Treasurer and
-----------------------              Corporate Controller
Deborah Koltenuk                     (Principal Accounting Officer)


/s/ Catherine H. Smith               Director
-----------------------
Catherine H. Smith




                                       42
<PAGE>




                              SECRETARY CERTIFICATE


         I, Rose-Marie DeRensis, the duly appointed Assistant Corporate
Secretary of Aetna Insurance Company of America (the "Company"), hereby certify
that the attached resolutions adopted by the Board of Directors on April 18,
1996, are currently in full force and effect, and have not been amended,
restated, or superseded.

         IN WITNESS WHEREOF, I have affixed my name as Assistant Corporate
Secretary and have caused the corporate seal of said Company to be hereunto
affixed this 26th day of March, 1998.


                                        /s/     Rose-Marie DeRensis
                                        ------------------------------
   (corporate seal)                     Rose-Marie DeRensis
                                        Assistant Corporate Secretary
                                        Aetna Insurance Company of America



                                       43
<PAGE>



                       AETNA INSURANCE COMPANY OF AMERICA


April 18, 1996

RESOLVED:           That the following officers:

                    President
                    Senior Vice President
                    Vice President
                    General Counsel
                    Corporate Secretary
                    Treasurer
                    Assistant Corporate Secretary

                    (1) are hereby severally authorized to sign in the Company's
                        name:

                           (a)    insurance contracts of every type and
                                  description which the Company is authorized to
                                  write;
                           (b)    agreements relating to the purchase, sale, or
                                  exchange of securities including any consents
                                  and modifications given or made under such
                                  agreements;
                           (c)    conveyances and leases of real estate or any
                                  interest therein including any modifications
                                  thereof,
                           (d)    assignments and releases of mortgages and
                                  other liens, claims or demands;
                           (e)    any other written instrument which they are
                                  authorized to approve in the normal course of
                                  Company business; and
                           (f)    any other written instrument when specifically
                                  authorized by the Board of Directors or the
                                  President;

                  and are further severally authorized (i) to delegate all or
                  any part of the foregoing authority to one or more officers,
                  employees or agents of this Company, provided that each such
                  delegation is in writing and a copy thereof is filed in the
                  Office of the Corporate Secretary, or (ii) to designate any
                  attorney at law representing this Company on a matter under
                  their direction, to so sign this Company's name;

                  (2)    are hereby severally authorized to possess the
                         Company's duplicate seals and to affix the same to
                         items (a) through (f) above;

                  and are further severally authorized to designate any Company
                  officer under their direction to possess and to so affix the
                  Company's duplicate seals; and

                  that the Senior Vice President, Investments is hereby
                  authorized to designate any officer, employee or agent of this
                  Company under his direction to sign the Company's name and to
                  affix the Company's seal to any and all documents required in
                  connection with any investment transaction in which the
                  Company has an interest.






                                       44