AETNA INC /PA/
S-3, 2001-01-19
HOSPITAL & MEDICAL SERVICE PLANS
Previous: OIL STATES INTERNATIONAL INC, S-1/A, EX-23.9, 2001-01-19
Next: AETNA INC /PA/, S-3, EX-1.1, 2001-01-19




    As filed with the Securities and Exchange Commission on January 19, 2001
                                                      Registration No. 333-____
===============================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                    FORM S-3
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933

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

                                   AETNA INC.
             (Exact name of Registrant as specified in its charter)

             Pennsylvania                              23-2229683
    (State or other jurisdiction of                 (I.R.S. Employer
    incorporation or organization)               Identification Number)

                             151 Farmington Avenue
                          Hartford, Connecticut 06156
                                 (860) 273-0123
  (Address, including zip code, and telephone number, including area code,
                 of Registrant's principal executive offices)

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

                              L. Edward Shaw, Jr.
                          Executive Vice President and
                                General Counsel
                             151 Farmington Avenue
                          Hartford, Connecticut 06156
                                 (860) 273-0123
 (Name, address, including zip code, and telephone number, including area code,
                             of agent for service)

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

                                   Copies to:
      Richard J. Sandler                               William J. Casazza
     Davis Polk & Wardwell                       Vice President, Deputy General
     450 Lexington Avenue                       Counsel and Corporate Secretary
      New York, NY 10017                             151 Farmington Avenue
        (212) 450-4000                            Hartford, Connecticut 06156
                                                        (860) 273-0123

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

Approximate date of commencement of proposed sale to the public: From time to
time after this Registration Statement becomes effective.

     If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]

     If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]

     If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] _________

     If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

     If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

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

<TABLE>
                                                    CALCULATION OF REGISTRATION FEE
====================================================================================================================================
                                                           Proposed Maximum
         Title of Each Class             Amount to be     Offering Price Per       Proposed Maximum                Amount of
    of Securities to be Registered       Registered(1)         Security       Aggregate Offering Price(1)       Registration Fee
------------------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>                       <C>                <C>                             <C>
Debt Securities(2).................... $2,000,000,000(3)         100%               $2,000,000,000                  $500,000
====================================================================================================================================
</TABLE>

(1)  Estimated solely for the purpose of calculating the registration fee
     pursuant to Rule 457(o).
(2)  Such indeterminate amount of Debt Securities as may from time to time be
     issued at indeterminate prices.
(3)  If any Debt Securities are issued at an original issue discount, such
     greater amount as shall result in aggregate net proceeds not in excess of
     $2,000,000,000 to the Registrant or, if any Debt Securities are issued
     with an offering price payable in a foreign currency, such amount as shall
     result in an aggregate initial offering price equivalent to $2,000,000,000
     at the time of initial offering.

The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

===============================================================================
<PAGE>


The information in this prospectus is not complete and may be changed. These
securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and no one is soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.


                 SUBJECT TO COMPLETION, DATED JANUARY 19, 2001

PROSPECTUS

                                 $2,000,000,000

                                   Aetna Inc.

                                Debt Securities

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

     We may offer debt securities, which may be either senior debt securities
or subordinated debt securities, from time to time. We will provide specific
terms of these debt securities in supplements to this prospectus. You should
read this prospectus and the applicable supplement carefully before you invest.

     This prospectus may not be used to sell debt securities unless accompanied
by a prospectus supplement.

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

     Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

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




                  The date of this prospectus is _______, 2001


<PAGE>


     You should rely only on the information contained in or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
different information. No one is making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information contained in or incorporated by reference in this prospectus is
accurate as of any date other than the date on the front of this prospectus and
any supplement.

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

                               TABLE OF CONTENTS

                                                                           Page
                                                                           ----
The Company..................................................................3
Where You Can Find More Information..........................................3
Special Note About Forward-Looking Statements and Risk Factors...............4
Use of Proceeds..............................................................4
Ratios of Earnings to Fixed Charges......................................... 4
Description of Debt Securities...............................................5
Form of Debt Securities.....................................................12
Plan of Distribution........................................................13
Certain United States Federal Tax Consequences..............................14
Validity of the Securities..................................................20
Experts.....................................................................20
ERISA Matters...............................................................20


                             About This Prospectus

     This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission utilizing a "shelf" registration process.
Under this shelf process, we may sell the securities described in this
prospectus in one or more offerings up to a total dollar amount of
$2,000,000,000. This prospectus provides you with a general description of the
securities we may offer. Each time we sell securities, we will provide a
prospectus supplement that will contain specific information about the terms of
that offering. The prospectus supplement may also add, update or change
information contained in this prospectus. You should read both this prospectus
and the applicable prospectus supplement together with the additional
information described under the heading "Where You Can Find More Information."


                                       2


<PAGE>


                                  THE COMPANY

     Aetna Inc., formerly known as Aetna U.S. Healthcare Inc., is a health care
benefits company with approximately 19.2 million health members, 14.5 million
dental members and 11.4 million group life and disability insurance members at
September 30, 2000. At November 1, 2000, we had approximately 459,000 health
care providers participating in our networks nationwide, including more than
290,000 physicians and more than 3,100 hospitals. We provide a full spectrum of
health and dental products (ranging from managed care to indemnity products),
group insurance products (including life, disability and long-term care
insurance products) and certain specialty health products. These products are
offered on both an insured and employer-funded basis. We offer our products in
all 50 states, and focus on the commercial customer (ranging from small
employer groups to large, multi-site national accounts). We also have a large
case pensions business that manages a variety of retirement products for
qualified defined benefit and defined contribution plans of large customers.

     Prior to December 2000, we were a subsidiary of a Connecticut corporation
named Aetna Inc. During 2000, the former Aetna Inc. transferred a number of its
subsidiaries offering the products described above to our company and in
December 2000 the former Aetna Inc. spun our company off to its shareholders.
As part of the same transaction, the remaining entity, which contained the
former Aetna Inc.'s financial services and international businesses, was merged
into a subsidiary of ING Groep N.V. We changed our name to Aetna Inc.

     Our principal executive offices are located at 151 Farmington Avenue,
Hartford, Connecticut 06156, and our telephone number is (860) 273-0123.
Internet users can obtain information about Aetna and its services at
http://www.aetna.com. This text is not an active link and our website and the
information contained on that site, or connected to that site, is not
incorporated into this prospectus.

                      WHERE YOU CAN FIND MORE INFORMATION

     We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document that we file at
the Public Reference Room of the SEC at 450 Fifth Street, NW, Washington, D.C.
20549. You may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. You may also inspect our filings at the
regional offices of the SEC located at Suite 1400, Northwestern Atrium Center,
14th Floor, 500 West Madison Street, Chicago, Illinois 60661 and 7 World Trade
Center, New York, New York 10048 or over the Internet at the SEC's Web site at
http://www.sec.gov.

     The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
by us with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 until all of the securities covered by this prospectus are
sold:

      (a)  Registration Statement on Form 10, dated December 1, 2000; and

      (b)  Current Report on Form 8-K dated December 14, 2000.

     You may request a free copy of these filings by writing or telephoning the
office of the Corporate Secretary, Aetna Inc., 151 Farmington Avenue, Hartford,
Connecticut 06156, Telephone: (860) 273-0123.


                                       3


<PAGE>


         SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS AND RISK FACTORS

     We have made forward-looking statements in this prospectus and the
documents incorporated by reference in this prospectus that are based on our
management's beliefs and assumptions and on information available to our
management at the time the statements are or were made. Forward-looking
statements include the information concerning our possible or assumed future
results of operations, business strategies, financing plans, competitive
position, potential growth opportunities, potential operating performance
improvements, the effects of competition and the effects of future legislation
or regulations. Forward-looking statements include all statements that are not
historical facts and can be identified by the use of forward-looking
terminology such as the words "believe," "expect," "plan," intend,"
"anticipate," "estimate," "predict," "potential," "continue," "may," "will,"
"should" or the negative of these terms or similar expressions.

     Forward-looking statements involve risks, uncertainties and assumptions.
Actual results may differ materially from those expressed in these
forward-looking statements. You should not put undue reliance on any forward-
looking statements. We do not have any intention or obligation to update
forward-looking statements to reflect the eventual outcome of the facts
underlying the forward-looking statements.

     The risk factors discussed in "Risk Factors" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" (including under
the subsection "Outlook") in our Registration Statement on Form 10, and as
updated in any future filings with the SEC could cause our results to differ
materially from those expressed in forward-looking statements. There may also
be other risks that we are unable to predict at this time.

                                USE OF PROCEEDS

     Except as may otherwise be set forth in the applicable prospectus
supplement, the net proceeds from the sale of the debt securities will be added
to the Company's general funds and used for general corporate purposes,
including the repayment of indebtedness.

                      RATIOS OF EARNINGS TO FIXED CHARGES

     The following table sets forth Aetna's historical ratios of earnings to
fixed charges for the periods indicated.

<TABLE>
<CAPTION>

                                                      Nine Months                      Year Ended
                                                         Ended                        December 31,
                                                     September 30,   ------------------------------------------------
                                                          2000       1999      1998       1997       1996       1995
                                                     -------------   -----     -----      -----      -----      -----
<S>                                                  <C>             <C>       <C>        <C>        <C>        <C>
Ratio of Earnings to Fixed Charges.............           2.65x      3.31x     3.89x      4.41x      0.86x      3.21x

</TABLE>

     The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For this purpose, "earnings" represent consolidated earnings
from continuing operations before income taxes, cumulative effect adjustments
and extraordinary items plus fixed charges. "Fixed charges" consists of
interest expense (and the portion of rental expense deemed representative of
the interest factor).

     Pretax income from continuing operations used in calculating the ratios
reflects a severance and facilities charge of $815.7 million in 1996.
Additional pretax income from continuing operations necessary to achieve a
ratio of earnings to fixed charges of 1.0x was approximately $29.6 million in
1996.


                                       4


<PAGE>


                         DESCRIPTION OF DEBT SECURITIES

     This prospectus describes certain general terms and provisions of the debt
securities. When we offer to sell a particular series of debt securities, we
will describe the specific terms for the debt securities in a supplement to
this prospectus. The prospectus supplement will also indicate whether the
general terms and provisions described in this prospectus apply to a particular
series of debt securities.

     The senior debt securities are to be issued under an indenture (the
"Senior Indenture") between Aetna and State Street Bank and Trust Company, as
trustee. The subordinated debt securities are to be issued under a separate
indenture (the "Subordinated Indenture") also between Aetna and State Street
Bank and Trust Company, as trustee. The Senior Indenture and the Subordinated
Indenture are sometimes referred to individually as an "Indenture" or
collectively as the "Indentures."

     We sometimes refer below to specific sections of one or both of the
Indentures. When we do so, we indicate where you can find the relevant section
in the Indentures by noting the section number in parentheses. When we do refer
to specific sections contained in the Indentures or terms defined in the
Indentures, including important terms, which we capitalize here, we use them in
this prospectus in the same way we use them in the Indentures and you should
refer to the Indentures themselves for detailed, specific, legal descriptions.
In this section, "Description of Debt Securities," when we refer to "Aetna," we
refer to Aetna Inc., not including its consolidated subsidiaries.

     We have summarized some terms of the Indentures. The summary is not
complete. Forms of the Indentures were filed as exhibits to the registration
statement of which this prospectus is a part. You should read the Indentures
for a complete statement of the provisions summarized in this prospectus and
for provisions that may be important to you. The Indentures are subject to and
governed by the Trust Indenture Act of 1939, as amended.

Ranking

     The debt securities will be our direct, unsecured obligations. The senior
debt securities will rank equally with all of our other senior and
unsubordinated debt. The subordinated debt securities will have a junior
position to all of our senior debt.

     Since a significant part of our operations are conducted through
subsidiaries, a significant portion of our cash flow, and consequently, our
ability to service debt, including the debt securities, is dependent upon the
earnings of our subsidiaries and the transfer of funds by those subsidiaries to
us in the form of dividends or other transfers, supplemented with borrowing.

     Some of our operating subsidiaries may finance their operations by
borrowing from external creditors. Lending agreements between some of the
operating subsidiaries and external creditors may restrict the amount of net
assets available for cash dividends and other payments to us.

     In addition, holders of the debt securities will have a junior position to
claims of creditors against our subsidiaries, including policy holders, trade
creditors, debtholders, secured creditors, taxing authorities, guarantee
holders and any preferred stockholders, except to the extent that we are
recognized as a creditor of our subsidiary. Any claims of Aetna as the creditor
of its subsidiary would be subordinate to any security interest in the assets
of such subsidiary and any indebtedness of such subsidiary senior to that held
by us.

     In addition to general state law restrictions on payments of dividends and
other distributions to shareholders applicable to all corporations, HMOs and
insurance companies, including some of Aetna's direct and indirect
subsidiaries, are subject to further state regulations that, among other
things, may require those companies to maintain certain levels of equity, and
restrict the amount of dividends and other distributions that may be paid to
Aetna.


                                       5


<PAGE>


Terms of the Debt Securities to be Described in the Prospectus Supplement

     The Indentures will not limit the amount of debt securities that we may
issue under them. We may issue debt securities under the Indentures up to an
aggregate principal amount as we may authorize from time to time. The
prospectus supplement will describe the terms of any debt securities being
offered, including:

     o    whether the debt securities will be senior debt securities or
          subordinated debt securities;

     o    any limit on the aggregate principal amount;

     o    the date or dates on which the principal will be payable;

     o    the interest rate, if any, and the method for calculating the
          interest rate;

     o    the interest payment dates and the record dates for interest
          payments;

     o    our right, if any, to defer payment of interest and the maximum
          length of this deferral period;

     o    any mandatory or optional redemption terms or prepayment or sinking
          fund provisions;

     o    the place where we will pay principal, interest and any premium;

     o    the currency or currencies, if other than the currency of the United
          States, in which principal, interest and any premium will be paid;

     o    if other than denominations of $1,000 or multiples of $1,000, the
          denominations in which the debt securities will be issued;

     o    whether the debt securities will be issued in the form of global
          securities;

     o    additional provisions, if any, relating to the discharge of our
          obligations under the debt securities;

     o    whether the amount of payment of principal (or premium, if any) or
          interest, if any, will be determined with reference to one or more
          indices;

     o    the portion of the principal amount of the debt securities to be paid
          upon acceleration of maturity thereof;

     o    any authenticating or paying agents, registrars or other agents; and

     o    other specific terms, including any additional events of default,
          covenants or warranties. (Section 301)

Events of Default and Notice Thereof

     When we use the term "Event of Default" with respect to debt securities of
any series we mean:

     o    we fail to pay principal (including any sinking fund payment) of, or
          premium (if any) on, any debt security of that series when due;

     o    we fail to pay interest, if any, on any debt security of that series
          when due and the failure continues for a period of 30 days;

     o    we fail to perform in any material respect any covenant in an
          Indenture not specified in the previous two bullets (other than a
          covenant included in an Indenture solely for the benefit of a
          different series of debt


                                       7


<PAGE>


          securities) and the failure to perform continues for a period of 90
          days after receipt of a specified written notice to us;

     o    the acceleration of indebtedness for borrowed money in a principal
          amount in excess of $100,000,000 for which we or one of our Principal
          Subsidiaries (as defined below) is liable (other than acceleration of
          Non- Recourse Debt which does not exceed 4% of our total
          shareholders' equity), or default by us or any of our Principal
          Subsidiaries in the payment at final maturity of outstanding
          indebtedness for borrowed money in a principal amount in excess of
          $100,000,000 (other than a default by us in the payment, at final
          maturity, of our Non-Recourse Debt where such payment does not exceed
          4% of our total shareholders' equity), and such acceleration or
          default at maturity is not waived, rescinded or annulled within 30
          days after a specified written notice to us; provided that if such
          acceleration or default at maturity is remedied, cured, waived,
          rescinded or annulled, then the Event of Default under an Indenture
          shall also be remedied, cured, waived, rescinded or annulled; and

     o    certain events of bankruptcy, insolvency, reorganization,
          receivership or liquidation of Aetna (Section 501).

     An Event of Default with respect to debt securities of a particular series
may not constitute an Event of Default with respect to debt securities of any
other series.

     If an Event of Default under an Indenture occurs with respect to the debt
securities of any series and is continuing, then the Trustee or the holders of
at least 25% in principal amount of the Outstanding securities of that series
may require us to repay immediately the entire principal amount (or, if the
debt securities of that series are Original Issue Discount Securities, such
portion of the principal amount as may be specified in the terms of that
series) of all Outstanding securities of that series; provided, however, that
under certain circumstances the holders of a majority in aggregate principal
amount of Outstanding securities of that series may rescind or annul such
acceleration and its consequences. (Section 502)

     Each of the Indentures contains a provision entitling the Trustee, subject
to the duty of the Trustee during a default to act with the required standard
of care (Section 601), to be indemnified by the holders of debt securities
before proceeding to exercise any right or power under that Indenture at the
request of such holders. (Section 603) Subject to these provisions in the
Indentures for the indemnification of the Trustee and certain other
limitations, the holders of a majority in aggregate principal amount of the
debt securities of each affected series then Outstanding may direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the Trustee. (Sections
512 and 513)

     Each of the Indentures provides that the Trustee may withhold notice to
the holders of the debt securities of any default (except in payment of
principal (or premium, if any) or interest, if any) if the Trustee considers it
in the interest of the holders of the debt securities to do so. (Section 602)

     Each of the Indentures provides that holders of at least 25% in aggregate
principal amount of the Outstanding securities of any series may seek to
institute a proceeding with respect to the Indentures or for any remedy
thereunder only after they have made a written request, and offered an
indemnity reasonably satisfactory to the Trustee, to the Trustee to institute a
proceeding and the Trustee shall not have received from the holders of a
majority in aggregate principal amount of the Outstanding securities of that
series a direction inconsistent with such request and shall have failed to
institute such proceeding within 60 days. (Section 507) These limitations do
not apply, however, to a suit instituted by a Holder of a debt security for
enforcement of payment of the principal of (or premium, if any) or interest, if
any, on or after the respective due dates expressed in such debt security.
(Section 508)

     Each of the Indentures contains a covenant under which we are required to
furnish to the Trustee an annual statement as to the compliance with all
conditions and covenants of the Indentures. (Section 1004)

                                       7


<PAGE>


     "Principal Subsidiary" means a consolidated subsidiary of Aetna that, as
of the time of the determination of whether such consolidated subsidiary is a
"Principal Subsidiary," accounted for 10% or more of the total assets of Aetna
and its consolidated subsidiaries, in each case as set forth in the most recent
balance sheet filed by Aetna with the Securities and Exchange Commission.
(Section 101)

Modification and Waiver

     Each of the Indentures provides that we, together with the Trustee, may
enter into supplemental indentures without the consent of the holders of debt
securities to:

     o    evidence the assumption by another person of our obligations;

     o    add covenants for the benefit of the holders of all or any series of
          debt securities;

     o    add any additional Events of Default;

     o    add or change an Indenture to permit or facilitate the issuance of
          debt securities in bearer form;

     o    add to, change or eliminate a provision of an Indenture if such
          addition, change or elimination does not apply to a debt security
          created prior to the execution of such supplemental indenture or
          modify the rights of a Holder of any debt security with respect such
          provision;

     o    secure any debt security;

     o    establish the form or terms of debt securities of any series;

     o    evidence the acceptance of appointment by a successor Trustee;

     o    cure any ambiguity or correct any inconsistency in an Indenture or
          make other changes, provided that any such action does not adversely
          affect the interests of the holders of debt securities of any
          affected series in any material respect; or

     o    conform an Indenture to any mandatory provisions of law.

     Other amendments and modifications of an Indenture may be made with the
consent of the holders of not less than a majority of the aggregate principal
amount of each series of the Outstanding securities affected by the amendment
or modification. However, no modification or amendment may, without the consent
of the Holder of each Outstanding security affected:

     o    change the stated maturity of the principal of (or premium if any) or
          any installment of principal or interest, if any, on any such debt
          security;

     o    reduce the principal amount of (or premium, if any) or the interest
          rate, if any, on any such debt security or the principal amount due
          upon acceleration of an Original Issue Discount Security;

     o    change the place or currency of payment of principal of (or premium
          if any) or the interest, if any, on any such debt security;

     o    impair the right to institute suit for the enforcement of any such
          payment on or with respect to any such debt security;

     o    reduce the percentage of holders of debt securities necessary to
          modify or amend an Indenture;


                                       8


<PAGE>


     o    in the case of the Subordinated Indenture, modify the subordination
          provisions in a manner adverse to the holders of the subordinated
          debt securities; or

     o    modify the foregoing requirements or reduce the percentage of
          Outstanding securities necessary to waive compliance with certain
          provisions of an Indenture or for waiver of certain defaults.
          (Section 902)

     The holders of at least a majority of the aggregate principal amount of
the Outstanding securities of any series may, on behalf of all holders of that
series, waive our required compliance with certain restrictive provisions of an
Indenture and may waive any past default under an Indenture, except a default
in the payment of principal, premium or interest or in the performance of
certain covenants. (Sections 907 and 513)

Limitations on Liens on Common Stock of Principal Subsidiaries

     Each of the Indentures provides that so long as any of the debt securities
issued under that Indenture remains outstanding, we will not, and we will not
permit any of our Principal Subsidiaries to, issue, assume, incur or guarantee
any indebtedness for borrowed money secured by a mortgage, pledge, lien or
other encumbrance, directly or indirectly, on any of the Common Stock of a
Principal Subsidiary owned by us or by any of our Principal Subsidiaries,
unless our obligations under the debt securities and, if we so elect, any other
of our indebtedness ranking on a parity with, or prior to, the debt securities,
shall be secured equally and ratably with, or prior to, such secured
indebtedness for borrowed money so long as it is outstanding and is so secured.
(Section 1005)

     "Common Stock" means, with respect to any Principal Subsidiary, stock of
any class, however designated, except stock which is non-participating beyond
fixed dividend and liquidation preferences and the holders of which have either
no voting rights or limited voting rights entitling them, only in the case of
certain contingencies, to elect less than a majority of the directors (or
persons performing similar functions) of such Principal Subsidiary, and shall
include securities of any class, however designated, which are convertible into
such Common Stock. (Section 101)

Consolidation, Merger and Sale of Assets

     We may not consolidate with or merge with or into any other person (other
than in a merger or consolidation in which we are the surviving person) or sell
our property and assets as, or substantially as, an entirety to any person
unless:

     o    the person formed by the consolidation or with or into which we are
          merged or the person that purchases our properties and assets as, or
          substantially as, an entirety is a corporation, partnership or trust
          organized and validly existing under the laws of the United States of
          America, any State or the District of Columbia, and any such
          successor or purchaser expressly assumes Aetna's obligations on the
          debt securities under a supplemental indenture satisfactory to the
          Trustee;

     o    immediately after giving effect to the transaction no Event of
          Default shall have occurred and be continuing; and

     o    a specified officers' certificate and opinion of counsel are
          delivered to the Trustee. (Section 801)

Upon compliance with the foregoing provisions, the successor or purchaser will
succeed to, and be substituted for Aetna under the Indentures with the same
effect as if such successor or purchaser had been the original obligor under
the debt securities, and thereafter Aetna will be relieved of all obligations
and covenants under the Indentures and the debt securities. (Section 802).


                                      10


<PAGE>


Defeasance and Covenant Defeasance

     If we deposit, in trust, with the Trustee (or other qualifying trustee),
sufficient cash or specified government obligations to pay the principal of
(and premium, if any) and interest and any other sums due on the scheduled due
date for the debt securities of a particular series, then at our option and
subject to certain conditions (including the absence of an Event of Default):

     o    we will be discharged from our obligations with respect to the debt
          securities of such series (which we refer to in this prospectus as a
          "legal defeasance"), or

     o    we will no longer be under any obligation to comply with the
          covenants described above under "Limitations on Liens on Common Stock
          of Principal Subsidiaries" and "Consolidation, Merger and Sale of
          Assets", an Event of Default relating to any failure to comply with
          such covenants or an Event of Default pursuant to the fourth bullet
          under "Events of Default and Notice Thereof" (cross-acceleration and
          cross-payment default) will no longer apply to us and, for
          subordinated debt securities, the subordination provisions will no
          longer apply to us (which we refer to in this prospectus as a
          "covenant defeasance").

     If we exercise our legal defeasance option, payment of such debt
securities may not be accelerated because of an Event of Default. If we
exercise our covenant defeasance option, payment of such debt securities may
not be accelerated by reference to the covenants from which we have been
released or pursuant to Events of Default referred to above which are no longer
applicable. If we fail to comply with our remaining obligations with respect to
such debt securities under an Indenture after we exercise the covenant
defeasance option and such debt securities are declared due and payable because
of the occurrence of any Event of Default, the amount of money and government
obligations on deposit with the Trustee may be insufficient to pay amounts due
on the debt securities of such series at the time of the acceleration resulting
from such Event of Default. However, we will remain liable for such payments.
(Article Twelve)

     Under current United States federal income tax laws, a legal defeasance
would be treated as an exchange of the relevant debt securities in which
holders of those debt securities might recognize gain or loss. Unless
accompanied by other changes in the terms of the debt securities, a covenant
defeasance generally should not be treated as a taxable exchange. In order to
exercise our defeasance options, we must deliver to the Trustee an opinion of
counsel to the effect that the deposit and related defeasance would not cause
the holders of the debt securities to recognize income, gain or loss for
Federal income tax purposes.

Subordination of Subordinated Debt Securities

     Unless otherwise indicated in the prospectus supplement, the following
provisions will apply to the subordinated debt securities.

     The subordinated debt securities will, to the extent set forth in the
Subordinated Indenture, be subordinate in right of payment to the prior payment
in full of all Senior Debt (as defined below) of Aetna, including the senior
debt securities. Upon any payment or distribution of assets to creditors upon
any liquidation, dissolution, winding up, reorganization, assignment for the
benefit of creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of Aetna, the holders of Senior Debt of Aetna will first
be entitled to receive payment in full of principal of (and premium, if any)
and interest, if any, on such Senior Debt of Aetna before the holders of the
subordinated debt securities will be entitled to receive or retain any payment
in respect of the principal of (and premium, if any) or interest, if any, on
the subordinated debt securities. (Subordinated Indenture Section 1402)

      If the maturity of any subordinated debt securities is accelerated, the
holders of all Senior Debt of Aetna outstanding at the time of such
acceleration will first be entitled to receive payment in full of all amounts
due thereon before the holders of subordinated debt securities will be entitled
to receive any payment upon the principal


                                      10


<PAGE>


of (or premium, if any) or interest, if any, on the subordinated debt
securities. (Subordinated Indenture Section 1403)

     No payments on account of principal (or premium, if any) or interest, if
any, in respect of the subordinated debt securities may be made if there shall
have occurred and be continuing

     o    a default in the payment of principal of (or premium, if any) or
          interest on Senior Debt of Aetna, or

     o    an event of default with respect to any Senior Debt of Aetna
          resulting in the acceleration of the maturity thereof,

or if any judicial proceeding shall be pending with respect to any such
default. (Subordinated Indenture Sections 1404)

     "Debt" means (without duplication and without regard to any portion of
principal amount that has not accrued and to any interest component thereof
(whether accrued or imputed) that is not due and payable) with respect to any
person, whether recourse is to all or a portion of the assets of such person
and whether or not contingent:

     o    every obligation of such person for money borrowed;

     o    every obligation of such person evidenced by bonds, debentures, notes
          or other similar instruments;

     o    every reimbursement obligation of such person with respect to letters
          of credit, bankers' acceptances or similar facilities issued for the
          account of such person;

     o    every obligation of such person issued or assumed as the deferred
          purchase price of property or services (but excluding trade accounts
          payable or accrued liabilities arising in the ordinary course of
          business);

     o    every capital lease obligation of such person; and

     o    every obligation of the type referred to in the previous five bullets
          of another person and all dividends of another person the payment of
          which, in either case, such person has guaranteed or is responsible
          or liable, directly or indirectly, as obligor or otherwise.
          (Subordinated Indenture Section 101)

     "Senior Debt" means with respect to any person the principal of (and
premium, if any) and interest, if any (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to such
person to the extent that such claim for post-petition interest is allowed in
such proceeding), on Debt of such person, whether incurred on or prior to the
date of the Subordinated Indenture or thereafter incurred, unless, in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such obligations are not superior in right of
payment to the subordinated debt securities or to other Debt of such person
which is pari passu with, or subordinated to, the subordinated debt securities;
provided, however, that Senior Debt does not include (i) the subordinated debt
securities or (ii) any other debt securities issued to any other trusts,
partnerships or other entity affiliated with Aetna which is a financing vehicle
of Aetna ("Financing Entity") in connection with the issuance of preferred
securities of such Financing Entity. (Subordinated Indenture Section 101)

     The Subordinated Indenture does not limit or prohibit the incurrence of
additional Senior Debt of Aetna, which may include indebtedness that is senior
to the subordinated debt securities, but subordinate to other obligations of
Aetna. The senior debt securities, when issued, will constitute Senior Debt of
Aetna.

     At January 11, 2001, Aetna had $1.646 billion of Senior Debt outstanding
and no subordinated debt securities.

     The prospectus supplement may further describe the provisions, if any,
applicable to the subordination of the subordinated debt securities of a
particular series.


                                      11


<PAGE>


Concerning our Relationship with the Trustee

     The Trustee and/or certain of its affiliates participate in our credit
facilities and we maintain ordinary banking relationships with the Trustee
and/or certain of its affiliates.

Governing Law

     Each of the Indentures is governed by and shall be construed in accordance
with the internal laws of the State of New York.

                            FORM OF DEBT SECURITIES

     Each debt security will be represented either by a certificate issued in
definitive form to a particular investor or by one or more global securities
representing the entire issuance of securities. Certificated securities in
definitive form and global securities will be issued in registered form.
Definitive securities name you or your nominee as the owner of the security,
and in order to transfer or exchange these securities or to receive payments
other than interest or other interim payments, you or your nominee must
physically deliver the securities to the Trustee. Global securities name a
depositary or its nominee as the owner of the debt securities represented by
these global securities.

     We may issue the debt securities in the form of one or more fully
registered global securities that will be deposited with a depositary or its
nominee identified in the applicable prospectus supplement and registered in
the name of that depositary or nominee. In those cases, one or more global
securities will be issued in a denomination or aggregate denominations equal to
the portion of the aggregate principal or face amount of the securities to be
represented by global securities. Unless and until it is exchanged in whole for
securities in definitive registered form, a global security may not be
transferred except as a whole by and among the depositary for the global
security, the nominees of the depositary or any successors of the depositary or
those nominees.

     If not described below, any specific terms of the depositary arrangement
with respect to any securities to be represented by a global security will be
described in the prospectus supplement relating to those securities. (Sections
204 and 305) We anticipate that the following provisions will apply to all
depositary arrangements.

     Ownership of beneficial interests in a global security will be limited to
persons, called participants, that have accounts with the depositary. Upon the
issuance of a global security, the depositary will credit, on its book-entry
registration and transfer system, the participants' accounts with the
respective principal or face amounts of the securities beneficially owned by
the participants. Any dealers, underwriters or agents participating in the
distribution of the securities will designate the accounts to be credited.
Ownership of beneficial interests in a global security will be shown on, and
the transfer of ownership interests will be effected only through, records
maintained by the depositary, with respect to interests of participants, and on
the records of participants, with respect to interests of persons holding
through participants. The laws of some states may require that some purchasers
of securities take physical delivery of these securities in definitive form.
These laws may impair your ability to own, transfer or pledge beneficial
interests in global securities.

     So long as the depositary, or its nominee, is the registered owner of a
global security, that depositary or its nominee, as the case may be, will be
considered the sole owner or holder of the securities represented by the global
security for all purposes under the applicable Indenture. Except as described
below, owners of beneficial interests in a global security will not be entitled
to have the securities represented by the global security registered in their
names, will not receive or be entitled to receive physical delivery of the
securities in definitive form and will not be considered the owners or holders
of the securities under the applicable Indenture. Accordingly, each person
owning a beneficial interest in a global security must rely on the procedures
of the depositary for that global security and, if that person is not a
participant, on the procedures of the participant through which the person owns
its interest, to exercise any rights of a holder under the applicable
Indenture. We understand that under existing industry practices, if we request
any action of holders or if an owner of a beneficial interest in a global
security desires to give or take


                                      12


<PAGE>


any action that a holder is entitled to give or take under the applicable
Indenture, the depositary for the global security would authorize the
participants holding the relevant beneficial interests to give or take that
action, and the participants would authorize beneficial owners owning through
them to give or take that action or would otherwise act upon the instructions
of beneficial owners holding through them.

     Principal, premium, if any, and interest payments on debt securities
represented by a global security registered in the name of a depositary or its
nominee will be made to the depositary or its nominee, as the case may be, as
the registered owner of the global security. Neither Aetna nor the Trustee nor
any other agent of Aetna or the Trustee will have any responsibility or
liability for any aspect of the records relating to payments made on account of
beneficial ownership interests in the global security or for maintaining,
supervising or reviewing any records relating to those beneficial ownership
interests.

     We expect that the depositary for any of the securities represented by a
global security, upon receipt of any payment of principal, premium, interest or
other distribution of underlying securities or other property to holders of
that global security, will immediately credit participants' accounts in amounts
proportionate to their respective beneficial interests in that global security
as shown on the records of the depositary. We also expect that payments by
participants to owners of beneficial interests in a global security held
through participants will be governed by standing customer instructions and
customary practices, as is now the case with securities held for the accounts
of customers in bearer form or registered in "street name," and will be the
responsibility of those participants.

     If the depositary for any of these securities represented by a global
security is at any time unwilling or unable to continue as depositary or ceases
to be a clearing agency registered under the Securities Exchange Act of 1934,
and a successor depositary registered as a clearing agency under the Securities
Exchange Act of 1934 is not appointed by us within 90 days, we will issue
securities in definitive form in exchange for the global security that had been
held by the depositary. In addition, we may at any time and in our sole
discretion decide not to have any of the securities represented by one or more
global securities. If we make that decision, we will issue securities in
definitive form in exchange for all of the global security or securities
representing those securities. Any securities issued in definitive form in
exchange for a global security will be registered in the name or names that the
depositary gives to the Trustee or other relevant agent of ours or theirs. It
is expected that the depositary's instructions will be based upon directions
received by the depositary from participants with respect to ownership of
beneficial interests in the global security that had been held by the
depositary.

                              PLAN OF DISTRIBUTION

     We may sell all or any portion of the debt securities at any time and from
time to time in any of the following four ways or in any combination thereof:

     o    through underwriters;

     o    through dealers;

     o    directly to purchasers; or

     o    through agents.

     The prospectus supplement will set forth the terms of the offering of any
debt securities, including:

     o    the name or names of any underwriters, dealers or agents and the
          amounts of securities underwritten or purchased by each of them,

     o    the initial public offering price of the securities, the proceeds to
          us and any discounts, commissions or concessions allowed or reallowed
          or paid to dealers, and


                                      13


<PAGE>


     o    any securities exchanges on which the securities may be listed.

     Any initial public offering price and any discounts, commissions or
concessions allowed or reallowed or paid to dealers may be changed from time to
time.

     If underwriters are used in the sale of any debt securities, the
securities will be acquired by the underwriters for their own account and may
be resold from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price, market prices prevailing at the
time of sale, prices related to such prevailing market prices or at negotiated
prices, each determined at the time of sale. The securities may be offered to
the public through underwriting syndicates represented by managing
underwriters, or directly by underwriters. Generally, the underwriters'
obligations to purchase the securities will be subject to certain conditions
precedent. The underwriters will be obligated to purchase all of the securities
if they purchase any of the securities.

     We may sell the debt securities through agents. The prospectus supplement
will name any agent involved in the offer or sale of the securities and any
commissions we pay to them. Unless otherwise indicated in the prospectus
supplement, any agent will be acting on a best efforts basis for the period of
its appointment.

     We may authorize underwriters, dealers or agents to solicit offers by
certain purchasers to purchase the debt securities from us at the public
offering price set forth in the prospectus supplement pursuant to delayed
delivery contracts providing for payment and delivery on a specified date in
the future. The contracts will be subject only to those conditions set forth in
the prospectus supplement, and the prospectus supplement will set forth any
commissions we pay for solicitation of these contracts.

     Agents, dealers and underwriters may be entitled to indemnification by us
against certain civil liabilities, including liabilities under the Securities
Act of 1933, or to contribution with respect to payments which the agents,
dealers or underwriters may be required to make in respect thereof. Agents,
dealers and underwriters may be customers of, engage in transactions with, or
perform services for us in the ordinary course of business.

     All debt securities will be new issues of securities with no established
trading market. Underwriters involved in the public offering and sale of debt
securities may make a market in the debt securities. They are not obligated to
do so, however, and they may discontinue market-making activity at any time. We
cannot give any assurance as to the liquidity of any trading market for any
debt securities.

                 CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES

     The following discussion is the opinion of Davis Polk & Wardwell. It
accurately describes the principal U.S. federal income and certain estate tax
consequences of ownership and disposition of the debt securities. This
discussion only applies to debt securities held as capital assets. This
discussion does not describe all of the tax consequences that may be relevant
to a holder in light of its particular circumstances or to holders subject to
special rules, such as:

     o    certain financial institutions;

     o    insurance companies;

     o    tax-exempt organizations;

     o    dealers in securities or foreign currencies;

     o    persons holding debt securities as part of a hedging, integrated or
          conversion transaction, constructive sale or straddle;


                                      14


<PAGE>


     o    U.S. Holders (as described below) whose functional currency is not
          the United States dollar;

     o    traders in securities that elect the mark-to-market method of
          accounting for their securities holdings;

     o    partnerships or other entities classified as partnerships for U.S.
          federal income tax purposes; or

     o    persons subject to the alternative minimum tax.

     This summary is based on the Internal Revenue Code of 1986, as amended to
the date hereof (the "Code"), administrative pronouncements, judicial decisions
and final, temporary and proposed United States Treasury Regulations, changes
to any of which subsequent to the date of this prospectus may affect the tax
consequences described herein. Persons considering the purchase of debt
securities should consult their tax advisors with regard to the application of
the United States federal income tax laws to their particular situations as
well as any tax consequences arising under the laws of any state, local or
foreign taxing jurisdiction.

     Tax Consequences to U.S. Holders

     As used herein, the term "U.S. Holder" means an owner of a debt security
that is for United States federal income tax purposes:

     o    a citizen or resident of the United States;

     o    a corporation, or other entity taxable as a corporation for U.S.
          federal income tax purposes, created or organized in or under the
          laws of the United States or of any political subdivision thereof;

     o    an estate the income of which is subject to United States federal
          income taxation regardless of its source;

     o    a trust that (1) is subject to the supervision of a court within the
          United States and the control of one or more United States persons or
          (2) has a valid election in effect under applicable United States
          Treasury regulations to be treated as a United States person; or

     o    not otherwise a U.S. Holder but whose income from a debt security is
          effectively connected with such Holder's conduct of a United States
          trade or business.

     The term U.S. Holder also includes certain former citizens of the United
States.

     Payments of Interest

     Assuming interest is qualified stated interest (as defined below),
interest paid on a debt security will be taxable to you as ordinary interest
income at the time it accrues or is received in accordance with your method of
accounting for federal income tax purposes. Special rules governing the
treatment of interest paid with respect to original issue discount debt
securities, including certain floating rate debt securities, are described
under "Original Issue Discount" below.

     Original Issue Discount

     A debt security that is issued for an amount less than its stated
redemption price at maturity will be considered to have been issued at an
original issue discount for federal income tax purposes (and will be referred
to as an "original issue discount debt security") unless the debt security
satisfies a de minimis threshold (as described below) or is a short-term debt
security (as defined below). The "issue price" of a debt security will equal
the first price to the public (not including bond houses, brokers or similar
persons or organizations acting in the capacity of underwriters, placement
agents or wholesalers) at which a substantial amount of the debt security is
sold for money. The stated redemption price at maturity of a debt security will
equal the sum of all payments required under the debt


                                      15


<PAGE>


security other than payments of "qualified stated interest." "Qualified stated
interest" is stated interest unconditionally payable in cash or in property
(other than in debt instruments of the issuer) at least annually during the
entire term of the debt security and equal to the outstanding principal balance
of the debt security multiplied by a single fixed rate of interest or, subject
to certain conditions, based on one or more indices.

     If the difference between a debt security's stated redemption price at
maturity and its issue price is less than a de minimis amount, i.e., in the
case of a debt instrument that pays only qualified stated interest prior to
maturity, 1/4 of 1 percent of the stated redemption price at maturity
multiplied by the number of complete years to maturity, then the debt security
will not be considered to have original issue discount. Holders of a debt
security with a de minimis amount of original issue discount will generally
include such original issue discount in income, as capital gain, on a pro rata
basis as principal payments are made on the debt security.

     A U.S. Holder of original issue discount debt securities will be required
to include any qualified stated interest payments in income in accordance with
the Holder's method of accounting for federal income tax purposes. U.S. Holders
of original issue discount debt securities that mature more than one year from
their date of issuance will be required to include original issue discount in
income for federal income tax purposes as it accrues, in accordance with a
constant yield method based on a compounding of interest, before the receipt of
cash payments attributable to such income. Under this method, U.S. Holders of
original issue discount debt securities generally will be required to include
in income increasingly greater amounts of original issue discount in successive
accrual periods.

     A U.S. Holder may make an election to include in gross income all interest
that accrues on a debt security (including stated interest, acquisition
discount, original issue discount, de minimis original issue discount, market
discount, de minimis market discount and unstated interest, as adjusted by any
amortizable bond premium or acquisition premium) in accordance with a constant
yield method based on the compounding of interest. The election is to be made
for the taxable year in which the U.S. Holder acquired the debt security and
may not be revoked without the consent of the Internal Revenue Service. U.S.
Holders should consult their own tax advisors about this election.

     A debt security that matures one year or less from its date of issuance (a
"short-term debt security") will be treated as being issued at a discount and
none of the interest paid on the debt security will be treated as qualified
stated interest. In general, a cash method U.S. Holder of a short-term debt
security is not required to accrue the discount for United States federal
income tax purposes unless it elects to do so. U.S. Holders who so elect and
certain other U.S. Holders, including those who report income on the accrual
method of accounting for federal income tax purposes, are required to include
the discount in income as it accrues on a straight-line basis, unless another
election is made to accrue the discount according to a constant yield method
based on daily compounding. In the case of a U.S. Holder who is not required
and who does not elect to include the discount in income currently, any gain
realized on the sale, exchange or retirement of the short-term debt securities
will be ordinary income to the extent of the discount accrued on a
straight-line basis (or, if elected, according to a constant yield method based
on daily compounding) through the date of sale, exchange or retirement. In
addition, those U.S. Holders will be required to defer deductions for any
interest paid on indebtedness incurred to purchase or carry short-term debt
securities in an amount not exceeding the accrued discount until the accrued
discount is included in income.

     Under applicable regulations, if we have an unconditional option to redeem
a debt security prior to its stated maturity date, this option will be presumed
to be exercised if, by utilizing any date on which the debt security may be
redeemed as the maturity date and the amount payable on that date in accordance
with the terms of the debt security as the stated redemption price at maturity,
the yield on the debt security would be lower than its yield to stated
maturity. If this option is not in fact exercised, the debt security would be
treated as if it were redeemed, and a new debt security were issued, on the
presumed exercise date for an amount equal to the debt security's adjusted
issue price on that date.

     Special rules govern the tax treatment of debt obligations which are
treated under applicable Treasury Regulations as providing for contingent
payments ("contingent debt obligations"). These rules generally require accrual
of interest income on a constant yield basis at an assumed yield determined at
the time of issuance of the


                                      16

<PAGE>


obligation. Adjustments will be required to these accruals when any contingent
payments are made that differ from the payments calculated based on the assumed
yield. Any gain on the sale, exchange, retirement or other disposition of a
contingent debt obligation will be ordinary income.

     Sale, Exchange or Retirement of the Debt Securities

     Upon the sale, exchange or retirement of a debt security, a U.S. Holder
will recognize taxable gain or loss equal to the difference between the amount
realized on the sale, exchange or retirement and such U.S. Holder's adjusted
tax basis in the debt security. For these purposes, the amount realized does
not include any amount attributable to accrued interest on the debt security.
Amounts attributable to accrued interest are treated as interest as described
under "Payments of Interest" above.

     Gain or loss realized on the sale, exchange or retirement of a debt
security will be capital gain or loss and will be long-term capital gain or
loss if at the time of sale, exchange or retirement the debt security has been
held for more than one year. Exceptions to this rule apply to the extent of any
accrued market discount or, in the case of a short-term debt security, any
accrued discount not previously included in the U.S. Holder's taxable income.
See "Original Issue Discount" above and "Market Discount and Premium" below.
Long term capital gains of individuals may be eligible for reduced rates of
taxation. The deductibility of capital losses is subject to limitation.

     Market Discount and Premium

     If a U.S. Holder purchases a debt security (other than a short-term
original issue discount debt security) for an amount that is less than its
stated redemption price at maturity (or, in the case of an original issue
discount debt security, its "adjusted issue price") the amount of the
difference will be treated as "market discount" for federal income tax
purposes, unless such difference is less than a specified de minimis amount.
The adjusted issue price of an original issue discount debt security is defined
as the sum of the issue price of the debt security and the aggregate amount of
previously accrued original issue discount, less any prior payments other than
payments of qualified stated interest.

     Under the market discount rules of the Code, a U.S. Holder will be
required to treat any principal payment (or, in the case of an original issue
discount debt security, any payment that does not constitute qualified stated
interest) on, or any gain on the sale, exchange, retirement or other
disposition of, a debt security as ordinary income to the extent of the market
discount which has not previously been included in income (pursuant to an
election by the U.S. Holder to include such market discount in income as it
accrues) and is treated as having accrued on such debt security at the time of
such payment or disposition. If such debt security is disposed of in a
nontaxable transaction (other than as provided in Code Sections 1276(c) and
(d)), accrued market discount will be includible as ordinary income to the U.S.
Holder as if such U.S. Holder had sold the debt security at its then fair
market value. In addition, the U.S. Holder may be required to defer, until the
maturity of the debt security or its earlier disposition (including a
nontaxable transaction other than as provided in Code Sections 1276(c) and
(d)), the deduction of all or a portion of the interest expense on any
indebtedness incurred or maintained to purchase or carry such debt security.
Any market discount will be considered to accrue ratably during the period from
the date of acquisition to the maturity date of the debt security, unless a
U.S. Holder elects to accrue on a constant interest method. As noted above, a
U.S. Holder may elect to include market discount in income currently as it
accrues, on either a ratable or constant interest method, in which case the
rule described above regarding deferral of interest deductions will not apply.
A U.S. Holder's election to include market discount in income currently, once
made, applies to all market discount obligations acquired by such U.S. Holder
on or after the first taxable year to which such election applies and may not
be revoked without the consent of the Internal Revenue Service. U.S. Holders
are advised to consult their own tax advisors before making this election.

     A U.S. Holder who purchases an original issue discount debt security for
an amount that is greater than its adjusted issue price but less than or equal
to its stated redemption price at maturity will be considered to have purchased
such debt security at an "acquisition premium." Under the acquisition premium
rules of the Code, the amount of original issue discount which such U.S. Holder
must include in its gross income with respect to such debt


                                      17


<PAGE>


securities for any taxable year will be reduced by the portion of such
acquisition premium properly allocable to such year.

     Amortizable Bond Premium

     If a U.S. Holder purchases a debt security for an amount that is greater
than the amount payable at maturity, such U.S. Holder will be considered to
have purchased such debt security with "amortizable bond premium" equal in
amount to such excess, and may elect (in accordance with applicable Code
provisions) to amortize such premium, using a constant yield method, over the
remaining term of the debt security (where such debt security is not optionally
redeemable prior to its maturity date). If such debt security may be optionally
redeemed prior to maturity after the U.S. Holder has acquired it, the amount of
amortizable bond premium is determined with reference to the amount payable on
maturity or, if it results in a smaller premium attributable to the period of
the earlier redemption date, with reference to the amount payable on the
earlier redemption date. A U.S. Holder who elects to amortize bond premium must
reduce his tax basis in the debt securities by the amount of the premium
amortized in any year. An election to amortize bond premium applies to all
taxable debt obligations then owned and thereafter acquired by the taxpayer and
may be revoked only with the consent of the Internal Revenue Service.

     Debt Securities With Special Features

     Special rules governing the federal income tax treatments of debt
securities with special features, including debt securities denominated in a
currency or currency unit other than the United States dollar ("foreign
currency debt securities"), currency-indexed debt securities, will be provided
by Aetna in the applicable prospectus supplement.

     Backup Withholding and Information Reporting

     Information returns with respect to non-exempt beneficial owners will be
filed with the Internal Revenue Service in connection with payments on the debt
securities and the proceeds from a sale or other disposition of the debt
securities. You will not be subject to a 31% United States backup withholding
tax on these payments if you provide your taxpayer identification number to the
paying agent and comply with certain certification procedures. The amount of
any backup withholding from a payment to you will be allowed as a credit
against your United States federal income tax liability and may entitle you to
a refund, provided that the required information is furnished to the Internal
Revenue Service.

     Tax Consequences to Non-U.S. Holders

     As used herein, the term "Non-U.S. Holder" means an owner of a debt
security that is, for United States federal income tax purposes:

     o    a nonresident alien individual;

     o    a foreign corporation; or

     o    a nonresident alien fiduciary of a foreign estate or trust.

     Under present United States federal law, and subject to the discussion
below concerning backup withholding:

     o    payments of principal, interest (including original issue discount,
          if any) and premium on the debt securities by us or any paying agent
          to any Non-U.S. Holder will not be subject to United States federal
          withholding tax, provided that, in the case of interest, (i) such
          Holder does not own, actually or constructively, 10 percent or more
          of the total combined voting power of all classes of stock of Aetna
          entitled to vote, is not a controlled foreign corporation related,
          directly or indirectly, to Aetna through stock ownership, and is not
          a bank receiving interest described in Section 881(c)(3)(A) of the
          Code and


                                      18


<PAGE>


          (ii) the certification requirement set forth in Section 871(h) or
          Section 881(c) of the Code has been fulfilled with respect to the
          beneficial owner, as discussed below;

     o    a Non-U.S. Holder of a debt security will not be subject to United
          States federal income tax on gain realized on the sale, exchange or
          other disposition of such debt security, unless (i) such Holder is an
          individual who is present in the United States for 183 days or more
          in the taxable year of disposition, and certain other conditions are
          met or (ii) such gain is effectively connected with the conduct by
          such Holder of a trade or business in the United States.

     Sections 871(h) and 881(c) of the Code require that, in order to obtain
the portfolio interest exemption from withholding tax described in the first
bullet above in the case of a registered debt security, either the beneficial
owner of the debt security, or a securities clearing organization, bank or
other financial institution that holds customers' securities in the ordinary
course of its trade or business (a "Financial Institution") and that is holding
the debt security on behalf of such beneficial owner, file a statement with the
withholding agent to the effect that the beneficial owner of the debt security
is not a U.S. Holder. Under United States Treasury Regulations, such
requirement will be fulfilled if (A) the beneficial owner of a debt security
certifies on Internal Revenue Service Form W-8BEN, under penalties of perjury,
that it is not a U.S. Holder and provides its name and address, or (B) if the
Non-U.S. Holder holds its debt securities through certain foreign
intermediaries or certain foreign partnerships, it satisfies the certification
requirements of applicable United States Treasury Regulations. Special
certification rules apply to certain Non-U.S. Holders that are entities rather
than individuals. The portfolio interest exemption from withholding tax
described in the first bullet above will not apply to contingent interest if
the amount of such interest is determined with reference to the profitability,
income, sales, cash flow or certain other criteria of Aetna or a related
person. Unless otherwise provided in the applicable prospectus supplement, we
do not expect any interest on the debt securities to be subject to this
provision.

     If a Non-U.S. Holder of a debt security is engaged in a trade or business
in the United States, and if interest (including original issue discount) on
the debt security is effectively connected with the conduct of such trade or
business, the Non-U.S. Holder, although exempt from the withholding tax
discussed in the preceding paragraph, will generally be subject to regular
United States income tax on interest (including any original issue discount or
market discount) and on any gain realized on the sale, exchange or other
disposition of a debt security in the same manner as if it were a U.S. Holder.
See "Tax Consequences to U.S. Holders" above. In lieu of the certificate
described in the preceding paragraph, such a Holder will be required to provide
to Aetna or its paying agent a properly executed Internal Revenue Service Form
W-8ECI in order to claim an exemption from withholding tax. In addition, if
such Non-U.S. Holder is a foreign corporation, it may be subject to a branch
profits tax equal to 30% (or such lower rate provided by an applicable treaty)
of its effectively connected earnings and profits for the taxable year, subject
to certain adjustments. For purposes of the branch profits tax, interest
(including original issue discount or market discount) on and any gain
recognized on the sale, exchange or other disposition of a debt security will
be included in the effectively connected earnings and profits of such Non-U.S.
Holder if such interest or gain, as the case may be, is effectively connected
with the conduct by the Non-U.S. Holder of a trade or business in the United
States.

     Special rules may apply to certain Non-U.S. Holders, such as "controlled
foreign corporations," "passive foreign investment companies" and "foreign
personal holding companies," that are subject to special treatment under the
Code. Such entities should consult their own tax advisors to determine the U.S.
federal, state, local and other tax consequences that may be relevant to them.

     Federal Estate Tax

     Under Section 2105(b) of the United States federal estate tax law, a debt
security or coupon held by an individual who is not a citizen or resident of
the United States at the time of his death will not be subject to United States
federal estate tax as a result of such individual's death, provided that the
individual does not own, actually or constructively, 10 percent or more of the
total combined voting power of all classes of stock of Aetna entitled to vote
and, at the time of such individual's death, payments with respect to such debt
security would not have been effectively connected to the conduct by such
individual of a trade or business in the United States.


                                      19


<PAGE>


     Backup Withholding and Information Reporting

     In general, no information reporting or backup withholding will be
required in connection with payments on the debt securities and the proceeds
from a sale or other disposition of the debt securities if certain
certification requirements regarding your non-U.S. status have been satisfied.
The certification procedures required to claim the portfolio interest exemption
described above will satisfy the certification requirements necessary to avoid
the 31% backup withholding tax as well. The amount of any backup withholding
from a payment to you will be allowed as a credit against your United States
federal income tax liability and may entitle you to a refund, provided that the
required information is furnished to the Internal Revenue Service.

                           VALIDITY OF THE SECURITIES

     Unless otherwise indicated in the applicable prospectus supplement, the
validity of the debt securities offered hereby will be passed upon for Aetna by
Davis Polk & Wardwell, New York, New York, and for any agents or underwriters
by Simpson Thacher & Bartlett, New York, New York. Davis Polk & Wardwell and
Simpson Thacher & Bartlett may rely upon an opinion of Drinker Biddle & Reath
LLP, Philadelphia, Pennsylvania, special Pennsylvania counsel to Aetna, as to
certain matters governed by Pennsylvania law.

                                    EXPERTS

     The consolidated financial statements incorporated in this Prospectus by
reference to Aetna's Registration Statement on Form 10, filed December 1, 2000,
have been audited by KPMG LLP, independent certified public accountants, as
stated in their report, which is incorporated by reference herein, and have
been so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.

                                 ERISA MATTERS

     Aetna and certain of its affiliates, including Aetna Life Insurance
Company, may each be considered a "party in interest" within the meaning of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or a
"disqualified person" within the meaning of the Internal Revenue Code of 1986,
as amended (the "Code"), with respect to many employee benefit plans.
Prohibited transactions within the meaning of ERISA or the Code may arise, for
example, if debt securities are acquired by a pension or other employee benefit
plan with respect to which Aetna or any of its affiliates is a service
provider, unless such debt securities are acquired pursuant to an exemption for
transactions effected on behalf of such plan by a "qualified professional asset
manager" or pursuant to any other available exemption. Any such pension or
employee benefit plan proposing to invest in the debt securities should consult
with its legal counsel.


                                      20
<PAGE>


                                    PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution

     The following table sets forth the costs and expenses payable by the
Registrant in connection with the sale of the securities being registered
hereby. All amounts are estimates except the registration fee.

                                                                  Amount to be
                                                                      Paid
                                                                  ------------
Registration fee................................................   $  500,000
Printing and engraving fees ....................................      125,000
Legal fees and expenses (including Blue Sky fees)...............      300,000
Trustee fees....................................................       22,000
Accounting fees and expenses....................................       75,000
Miscellaneous...................................................       28,000
                                                                   ----------
  Total.........................................................   $1,050,000
                                                                   ==========

Item 15. Indemnification and Liability of Directors and Officers

     The Registrant is a Pennsylvania corporation. The Pennsylvania Business
Corporation Law provides, in general, that a corporation may indemnify any
person, including its directors, officers and employees, who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or proceeding, whether civil, criminal, administrative or investigative
(other than actions by or in the right of the corporation) by reason of the
fact that he or she is or was a representative of, or was serving at the
request of the corporation as a director, officer, employee, agent or fiduciary
of another corporation, partnership, employee benefit plan or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him or her in connection with
the action or proceeding unless the court determines that the act or failure to
act giving rise to the claim for indemnification constituted willful misconduct
or recklessness. The Business Corporation Law permits similar indemnification
in the case of actions by or in the right of the corporation. In any case, to
the extent that a representative of the corporation has been successful on the
merits or otherwise in defense of any claim, issue or matter, he or she shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith. The Business
Corporation Law also provides that the indemnification permitted or required by
the law is not exclusive of any other rights to which a person seeking
indemnification may be entitled, provided that indemnification may not be made
in any case where the act is determined by a court to have constituted willful
misconduct or recklessness. The Business Corporation Law also provides that a
corporation may pay expenses (including attorneys' fees), incurred by a party
in an action subject to indemnification in advance of the final disposition of
the action upon receipt of an undertaking by the party on whose behalf such
expenses are paid to repay all amounts to the corporation in the event it is
ultimately determined that the party is not entitled to be indemnified. Aetna's
Articles require indemnification of its directors and officers, and the
advancement of expenses, to the fullest extent permitted by the Business
Corporation Law (except with respect to the claims against the corporation
commenced by such a party) and permit, by action of the Board, indemnification
of, and advancement of expenses to, employees and agents of Aetna as determined
by the Board of Directors in a particular case.

     Aetna's Amended and Restated Articles of Incorporation provide that a
director will not be personally liable for monetary damages except to the
extent such liability may not by law be so limited. The Pennsylvania Business
Corporation Law precludes a limitation on liability (i) for any breach or
failure to perform such director's duties under law, which breach constituted
self-dealing, willful misconduct or recklessness; (ii) for responsibility or


                                      II-1
<PAGE>


liability of a director under any criminal statute; or (iii) for a director's
liability for the payment of taxes under any federal, state or local law.
Aetna's Articles contain a limitation on an officer's liability to the same
effect.

     While Aetna's Articles provide directors and officers with protection
against awards for monetary damages for breaches of their statutory
obligations, they do not eliminate such obligations. Accordingly, Aetna's
Articles will have no effect on the availability of equitable remedies such as
an injunction or rescission based on a director's or officers' breach of his or
her statutory obligations.

      The form of Underwriting Agreement filed as Exhibit 1.1 to this
Registration Statement provides for indemnification of directors and officers
of the Registrant by the underwriters against certain liabilities.

Item 16.  Exhibits

     (a) The following exhibits are filed as part of this Registration
Statement:

Exhibit No.                                   Document
-----------                                   --------
   1.1           Form of Underwriting Agreement.
   4.1           Form of Senior Indenture between Aetna and State Street Bank
                 and Trust Company.
   4.2           Form of Subordinated Indenture between Aetna and State
                 Street Bank and Trust Company.
   5.1           Opinion of Davis Polk & Wardwell.
  12.1           Computation of Ratios of Earnings to Fixed Charges.
  23.1           Consent of KPMG LLP.
  23.2           Consent of Davis Polk & Wardwell (included in Exhibit 5.1).
  24.1           Power of Attorney (included on the signature page of the
                 Registration Statement).
  25.1           Form T-1 Statement of Eligibility and Qualification under the
                 Trust Indenture Act of 1939, as amended, of State Street Bank
                 and Trust Company, as Trustee, under the Senior Indenture.
  25.2           Form T-1 Statement of Eligibility and Qualification under
                 the Trust Indenture Act of 1939, as amended, of State Street
                 Bank and Trust Company as Trustee, under the Subordinated
                 Indenture.


Item 17. Undertakings

      (a)  The undersigned Registrant hereby undertakes:

          (1) To file, during any period in which offers or sales are being
     made of securities registered hereby, a post-effective amendment to this
     Registration Statement:

               (i) to include any prospectus required by Section 10(a)(3) of
          the Securities Act of 1933;

               (ii) to reflect in the prospectus any facts or events arising
          after the effective date of this Registration Statement (or the most
          recent post-effective amendment thereof) which, individually or in
          the aggregate,

                                      II-2
<PAGE>


          represent a fundamental change in the information set forth in this
          Registration Statement. Notwithstanding the foregoing, any increase
          or decrease in volume of securities offered (if the total dollar
          value of securities offered would not exceed that which was
          registered) and any deviation from the low or high end of the
          estimated maximum offering range may be reflected in the form of
          prospectus filed with the Securities and Exchange Commission pursuant
          to Rule 424(b) if, in the aggregate, the changes in volume and price
          represent no more than a 20 percent change in the maximum aggregate
          offering price set forth in the "Calculation of Registration Fee"
          table in the effective Registration Statement;

               (iii) to include any material information with respect to the
          plan of distribution not previously disclosed in this Registration
          Statement or any material change to such information in this
          Registration Statement;

     provided, however, that paragraphs (i) and (ii) above do not apply if the
     information required to be included in a post-effective amendment by those
     paragraphs is contained in periodic reports filed by the Registrant
     pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
     1934 that are incorporated by reference in this Registration Statement.

          (2) That, for the purpose of determining any liability under the
     Securities Act of 1933, each such post- effective amendment shall be
     deemed to be a new registration statement relating to the securities
     offered herein, and the offering of such securities at that time shall be
     deemed to be the initial bona fide offering thereof.

          (3) To remove from registration by means of a post-effective
     amendment any of the securities being registered which remain unsold at
     the termination of the offering.

     (b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

     (c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.


                                      II-3
<PAGE>


                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Hartford, State of Connecticut, on January 19, 2001.

                                            AETNA INC.


                                            By:
                                               ---------------------------------
                                               Name:
                                               Title:


     KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints, jointly and severally, William
J. Casazza, L. Edward Shaw, Jr. and Alan J. Weber, and each of them, as her or
his attorney-in-fact, with full power of substitution, for her or him in any
and all capacities, to sign any and all amendments to this Registration
Statement (including post-effective amendments), and any and all Registration
Statements filed pursuant to Rule 462 under the Securities Act of 1933, as
amended, in connection with or related to the offering contemplated by this
Registration Statement and its amendments, if any, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorney to any and all amendments
to said Registration Statement.

     Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

          Signature                     Title                       Date
          ---------                     -----                       ----


  /s/ William H. Donaldson      Chairman and Director          January 19, 2001
---------------------------
    William H. Donaldson


   /s/ John W. Rowe, M.D.       President, Chief Executive     January 19, 2001
---------------------------     Officer and Director
      John W. Rowe, M.D.        (Principal Executive Officer)


    /s/ Alan J. Weber           Vice Chairman for Strategy     January 19, 2001
---------------------------     and Finance and Chief
       Alan J. Weber            Financial Officer (Principal
                                Financial Officer)


  /s/ Alan M. Bennett           Vice President and Corporate   January 19, 2001
---------------------------     Controller (Principal
     Alan M. Bennett            Accounting Officer)


   /s/ Betsy Z. Cohen           Director                       January 19, 2001
---------------------------
     Betsy Z. Cohen


                                      II-4
<PAGE>


          Signature                     Title                       Date
          ---------                     -----                       ----


/s/ Barbara Hackman Franklin           Director                January 19, 2001
----------------------------
  Barbara Hackman Franklin


   /s/ Jeffrey E. Garten               Director                January 19, 2001
----------------------------
     Jeffrey E. Garten


  /s/ Jerome S. Goodman                Director                January 19, 2001
----------------------------
    Jerome S. Goodman


   /s/ Earl G. Graves                  Director                January 19, 2001
----------------------------
     Earl G. Graves


   /s/ Gerald Greenwald                Director                January 19, 2001
----------------------------
     Gerald Greenwald


   /s/ Ellen M. Hancock                Director                January 19, 2001
----------------------------
     Ellen M. Hancock


  /s/ Michael H. Jordan                Director                January 19, 2001
----------------------------
    Michael H. Jordan


   /s/ Jack D. Kuehler                 Director                January 19, 2001
----------------------------
     Jack D. Kuehler


    /s/ Judith Rodin                   Director                January 19, 2001
----------------------------
       Judith Rodin


                                      II-5
<PAGE>


                                 EXHIBIT INDEX

Exhibit No.                             Document
-----------                             --------
   1.1           Form of Underwriting Agreement.
   4.1           Form of Senior Indenture between Aetna and State Street Bank
                 and Trust Company.
   4.2           Form of Subordinated Indenture between Aetna and State
                 Street Bank and Trust Company.
   5.1           Opinion of Davis Polk & Wardwell.
  12.1           Computation of Ratios of Earnings to Fixed Charges.
  23.1           Consent of KPMG LLP.
  23.2           Consent of Davis Polk & Wardwell (included in Exhibit 5.1).
  24.1           Power of Attorney (included on the signature page of the
                 Registration Statement).
  25.1           Form T-1 Statement of Eligibility and Qualification under the
                 Trust Indenture Act of 1939, as amended, of State Street Bank
                 and Trust Company, as Trustee, under the Senior Indenture.
  25.2           Form T-1 Statement of Eligibility and Qualification under
                 the Trust Indenture Act of 1939, as amended, of State Street
                 Bank and Trust Company as Trustee, under the Subordinated
                 Indenture.



Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sept | Oct | Nov | Dec

© 2019 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission